2017-12-28
Survey: Increasing concerns over possible cyberattacks and unsustainable development of the RE market
According to financial institutions, risks to the domestic financial system posed by cyberattacks and unsustainable development of the real estate (RE) market remain the key ones. In recent years, the importance of these risks has increased. These trends are revealed by the latest survey of financial institutions conducted by the Bank of Lithuania.
‘Ensuring the safety of the cyberspace has become one of the major concerns for financial institutions this year. The unsustainable development of the RE market in Lithuania is also a source for concern as its importance has been increasing over the last two and a half years. Both Banks and other financial institutions closely monitor not only the domestic RE market but also the Scandinavia’s RE market that shows signs of adjustment. If a significant decline in RE prices started on the other side of the Baltic, it would also affect the financial system of our country,’ said Tomas Garbaravičius, Member of the Board of the Bank of Lithuania.
He noted that the probability of an event that could have a major negative impact on the financial system decreased. Unlike during the few recent years, when the main share of respondents saw the risk of a high-impact event in the financial system as heightened, in H2 2017 there were many more respondents who saw this risk as lower.
The risk related to an abrupt rise in risk premia in global financial markets has also remained among major risks. Leasing companies, financial brokerage firms and management companies attached most importance to this risk. Management companies saw this risk as potentially having the strongest impact on the financial system, and the probability of its realisation as the highest, compared to other specified risks.
The importance of risks (multiplication of the probability of such risk and its potential impact) to financial system participants arising in the Lithuanian market has increased. The risk of deterioration in the financial health of non-financial institutions has been the source of the greatest concern to the financial system participants. The importance of the risk of deterioration in the financial health of households has increased as well. Insurance undertakings attached the greatest importance to deterioration in the financial health of households and enterprises or unsustainable credit development.
As a major risk for themselves, the surveyed financial market participants mainly named the risk of a drop in profitability during a prolonged period of low interest rates.
Detailed review of the survey is presented on the website of the Bank of Lithuania.
The Bank of Lithuania conducts the Survey of Risks to Lithuania’s Financial System to assess the views of Lithuania’s financial institutions towards the domestic financial system and likely challenges to its sustainable future development. The survey is conducted on a biannual basis. Banks, insurance undertakings, leasing companies, investment management companies and other financial institutions assess the sources of major risks to Lithuania’s financial system, the probability of adverse events and their potential impact on the domestic financial system over the next 6 months.