2017-06-22
The latest survey of the Bank of Lithuania shows that financial institutions in the country consider real estate (RE) market imbalances as an increasingly growing risk. However, market participants considered potential cybercrimes as the major risk.
‘In surveys this threat has never before been named as the leading threat. But such a signal did not take us by surprise – as increasingly more and varied services are provided electronically, threats grow as well. It is important for the market to be aware,’ said Tomas Garbaravičius, Member of the Board of the Bank of Lithuania. He also added that attention is still being focused on the heating of the RE market, especially when, in the opinion of market participants, the probability of the risk of RE imbalances is growing.
Last year, incidents in cyberspace increased by nearly one-fifth, compared to 2015. The rising threat posed by cybercrimes was emphasised by all participants of the survey, whereas insurance undertakings believe that its impact on the financial system would be the most painful. According to the surveyed, the probability of the emergence of this risk was increasing over the half-year. However, respondents most positively perceived the possibilities of managing this threat, claiming that it could be reduced by increasing investment in IT security.
The survey data also suggests the growing significance of risk related to credit or RE market imbalances. For already the third consecutive year this sentiment has been growing. Banks in particular emphasise that, once materialised, this risk could significantly harm financial stability. However, as in the case of cybercrimes, respondents perceived this risk as being managed the best.
According to the survey participants, the significance of geopolitical risk has abated over the half-year; other external risks have become less likely as well. The negative effects of imbalances in Scandinavia remain the major threat within this area, and it is complicated to reduce or manage this threat, as it arises outside of Lithuania.
Over two-thirds of financial institutions believe that their activities will, in the next five years, be negatively affected by worsening demographic trends in the country.
Banks, insurance undertakings, and other financial institutions operating in our country participated in the Bank of Lithuania survey – a total of 31 respondents.
Surveys of risks to Lithuania’s financial system are conducted by the Bank of Lithuania on a biannual basis.