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Executive Summary (partial) "The Financial Policy Committee assesses the outlook for financial stability by identifying the risks faced by the financial system and weighing them against the resilience of the system. Part A of this Report identifies the major risks which, in the Committee’s judgement, are facing the UK financial system and Part B reports on the resilience of the system. The composition of risks has shifted and the resilience of the system has continued to improve since the December Report. Overall, the Committee judges that challenges remain. It judged the outlook for financial stability to have been broadly unchanged over much of the period since December but, as risks associated with Greece began to crystallise in recent days, the outlook had worsened. The Financial Policy Committee (FPC) has identified the main risks facing the financial system in the United Kingdom as: the global environment; the reduction in market liquidity in some markets; the United Kingdom’s current account deficit; the housing market in the United Kingdom; consequences of misconduct in the financial system; and cyber attack. … The FPC has completed its annual review of risks beyond the core banking sector by considering the channels through which activities undertaken by the non-bank financial system could affect UK financial stability. It has concluded on evidence currently available not to recommend a change in how these activities are regulated. But as discussed below it has concerns over market liquidity and it intends to undertake a regular deep analysis of a range of activities. This will start over the next year with the investment activity of investment funds and hedge funds, the investment and non-traditional, non-insurance activities of insurance companies, and securities financing and derivatives transactions."

Additional Nematrian Commentary The Financial Stability Review is regular Bank of England publication. This particular issue includes discussion of the potential systemic risks arising from misconduct issues and from cyber risk. For example, on misconduct risk it notes that "Misconduct has undercut public trust and hindered progress in rebuilding the banking sector after the crisis. It has also posed risks to systemic stability, with direct economic consequences. The fines and redress costs paid by UK banks, at £30 billion, are equivalent to around all of the capital that they have raised privately since 2009." On cyber risk it notes that: "While in some areas the financial sector is leading efforts to combat cyber crime, the adaptive nature of the threat means that ways of managing this risk must evolve. As well as looking to build defensive resilience to threats, firms must build the capability to recover quickly from cyber attack, given the inevitability that attacks will occur. The evolving nature of the threat means that strong governance at the most senior levels of banks is required to build this capability in defensive resilience and recovery across technology and personnel."

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