Stressed out: Concern over financial risks has grown sharply.
Remarking on the findings, John Hitchins, UK banking leader at Pricewaterhouse-Coopers, said they indicated a “marked drop” in confidence over the quality of bank risk management processes, which is a reverse from trends witnessed in previous surveys. Risk management techniques moved from a top-10 risk in the previous poll to a top-six risk in the latest findings. Only 24% of respondents felt that banks were well prepared for the risks identified, compared with 64% in the previous survey. “Respondents clearly believe the credit crunch provides a wake-up call for the industry to reassess the effectiveness of its risk oversight,” Hitchins commented.
The survey showed different perceptions of risk between banks and regulators, with bankers saying that market risks such as sharp movements in the credit, derivatives and equity markets posed the greatest risk, and non-bankers placing more emphasis on “poor risk management” and generous bonus schemes within banks.
According to the survey, the fast-rising risks are the threat of global recession, led potentially by a downturn in the United States, and a collapse in overpriced equity markets. All major markets surveyed shared concerns about the general macro-economic picture.