Fears of a cataclysmic crisis subside

Financial risk managers believe the chances of a cataclysmic crisis have fallen back to their lowest level for five years, the Bank of England said yesterday.

Its twice-yearly Systemic Risks Survey of managers at UK-based banks, insurers and investment funds found less than a quarter of respondents – 24 per cent of financial institutions surveyed – are braced for a "high-impact event" to hit Britain's financial system over the next three years. This compares with nearly half, or 43 per cent, when the Bank last carried out the survey in October.

The improvement in sentiment comes with declining fears of a sovereign default in the troubled eurozone, after the European Central Bank moved to quell debt market fears nearly a year ago.

More risk managers now consider an economic downturn the main threat – cited by 79 per cent of respondents – compared to 76 per cent whose chief worry is the eurozone. "Concerns about sovereign risk have dropped back to the level last seen in the second half of 2011," the Bank said.

But a trio of new threats has emerged on the radar. One in four risk managers are now worried about over-inflated property prices, following the Government's raft of initiatives to boost the property market. Fears over cyber-security are also concerning risk managers, while 24 per cent are now concerned over artificially low interest rates creating distortions and inflating the price of riskier assets.

Interest rates have been held at their current 0.5 per cent record low since March 2009.