Sovereign borrowers have been engulfed by crisis and securities markets have registered profound doubts about the depth and durability of the recovery.

Nevertheless, risk managers in 44 countries polled by the Global Association of Risk Professionals in July rated the chances of another upheaval in the U.S. financial system at about the same level that they did in February.

But while GARP's composite risk index held steady at 109 in the organization's second quarterly survey, which is scheduled to be published Sept. 30, modest but notable shifts were apparent in assessments of component risk categories (see charts).

Leverage was still viewed as the area of foremost concern, but its rating fell 7 points, to 120, perhaps reflecting ongoing declines in household and financial sector borrowing, though federal borrowing has continued to soar. (A higher score indicates higher estimations of risk. About 56% of roughly 300 respondents identified current leverage as "risky" or "very risky," 33% said it was "somewhat risky" and 12% said it carried "little" or "very little" risk.)

The two other factors that moved the most were "market volatility," which gained 7 points from the original survey, to 115, and "banking health," which fell 4 points, to 110.

About 70% of risk executives said "overreliance on leverage" had a high impact on the buildup of systemic risk within the banking system itself, more than for any of four other categories. More than half of respondents said that insufficient capital was highly associated with the buildup of risk, but the group still expressed greater worry over "illiquid asset portfolios" and "counterparty exposures."

Globally, respondents gave high marks to certain elements of regulatory reform, with about 65% saying that efforts to oversee derivatives would have a great impact on improving the stability of the banking system. About 53% said the same about a systemic risk regulator, as did 48% about "too big to fail" legislation. But only 40% said the Volcker Rule, a part of the Dodd-Frank Act designed to sharply curtail banks' proprietary trading and involvement in private-equity funds and hedge funds, would have a significant impact, compared with 44% who rated its impact as average.

But respondents in North America were far more skeptical. About 46% said derivatives regulation would have a major impact, with smaller proportions saying the same about the other initiatives, down to 32% for the Volcker Rule.

The survey showed that respondents' direct assessment of the overall risk of another systemic crisis in the U.S. had eased a bit since February — by 1 point, to 114. Like before, respondents in the U.S. registered more concern in response to that question than most counterparts elsewhere in the world.


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