Firms rate foreign country default as biggest risk

The risks of a foreign country defaulting on its loans and an economic downturn are the two greatest risks to financial institutions, according to a biannual survey.

The Bank of England's 'Systemic Risk Survey' found that these seven risks were the most commonly cited by respondents from 73 institutions including banks, building societies and insurers:

  • 'Sovereign risk' (foreign country defaulting) cited by 79% of respondents
  • Economic downturn - 79%
  • Funding risk - 45%
  • Risks around regulation/taxes - 40%
  • Risk of financial institution failure/distress - 25%
  • Financial market disruption/dislocation - 21%
  • Property price falls - 21%

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Spain debt remains high

Spanish government bonds were trading at around around 6.75%, slightly lower than yesterday but remaining near levels considered unsustainable to borrow from capital markets.