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DTCC: Growing Concerns Over Brexit's Systemic Implications

December 13, 2018

Cyber security and geopolitical risk continue to dominate as the top risks to the financial services industry

Excessive global debt cited as a growing concern

The slower than expected negotiating progress between the United Kingdom and the European Union and the ongoing uncertainty of the outcome has positioned Brexit as a top systemic risk concern for 2019, although cybersecurity and other geopolitical risks around the globe continue to dominate the risk landscape, according to a new survey published by The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry.

Close to half of respondents (49%) cited concerns around the significant risks attributed to Brexit as one of the top 5 risks for industry in the coming year, as the March 2019 Brexit date quickly approaches. The Brexit ranking represents an 11% increase over last year’s survey results, making it the most significant year-over-year change in the findings.

As with previous surveys, cyber risk remained the number one threat to the financial industry, with more than a third of respondents (37%) citing it as the most significant risk and 69% ranking it within the top five risks. In addition:

  • Geopolitical risk, including risks in areas such as the Middle East, China and in emerging markets, maintained its position as the second most frequently cited threat to the industry, with 55% of respondents including it in their top five risks for 2019.
  • Excessive global debt rose in importance and was cited by 28% of respondents within their top five risks. Respondents highlighted the impact of global growth on increased debt levels as well as how changes in central bank monetary policies and quantitative easing (QE) programs could affect large debt balances.
  • Fintech risk, along with the potential impact of economic slowdowns across all regions, also increased in importance with respondents.

“The broad perspective of these survey results shows that while economic indicators continue to appear strong, pockets of weakness are starting to appear across numerous components of the financial system as geographic flash points continue to materialize and intensify,” stated Michael Leibrock, DTCC’s Chief Systemic Risk Officer. “It is critical that firms continue to remain vigilant to anticipate and prepare for not only these emerging risks, but the potential cascading effects that may arise from an increasingly interconnected financial system.”

DTCC has conducted Systemic Risk Barometer Surveys across the global financial services industry since 2013, with the last survey published in December 2017.

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