Survey of Risks: the rise of inflation raises highest concern of financial institutions
The results of the Survey of Risks to Lithuania’s Financial System conducted by the Bank of Lithuania for the first time show that stability of the domestic financial system increased and the growth of the risk premia related to the public debt is not expected.
“Financial institutions are concerned about the rise of inflation, unstable political environment, ensuring continuity of the undertaken reforms and public finance consolidation”, the results of the survey were commented by Mr. Vaidotas Tamulėnas, Economist of the Financial Stability Division, Economics Department, Bank of Lithuania.
According to the assessment of financial market participants, the most probable risk currently is the rising inflation. Still, the direct impact of inflation on stability of the domestic financial system is not very large. Responses of survey participants allow making a conclusion that the financial institutions of Lithuania pay much attention to the economic development trends of the key export partners, with which the pace of the economic recovery in Lithuania is particularly closely related.
The situation in the labour market remains complicated; however, it has been observed that certain risks are diminishing: the credit risk of businesses and households poses smaller danger and it is not expected that the real estate prices will continue to decline.
The Bank of Lithuania conducted the Survey of Risks to Lithuania’s Financial System on the basis of the experience of the central banks of England, Sweden and other central banks in ensuring efficient cooperation with financial institutions of their countries. The objective of the Survey is to identify the most important sources of threats to Lithuania’s financial system, to assess the probability of the occurrence of unfavourable events and their potential impact on the domestic financial system. Twenty nine out of forty four (66%) members of the board, managers, heads of risk management of companies with the experience in the field of financial markets of over 11 years responded to the questions asked during the survey.
Comprehensive report of the survey is available on the website of the Bank of Lithuania.
Such surveys will be conducted two times per year.