GARP Risk Index Jumps on Concerns of Economic Slowdown, Sovereign Debt Issues, and Banking Fundamentals

By The Global Association Of Risk Professionals garp, PRNE
Thursday, September 15, 2011

NEW YORK and LONDON, September 16, 2011 -

- 79% of global risk managers place a high probability that European sovereign crisis will have a meaningful impact on the integrity of the US financial system.

- 58% of risk managers indicate a high level of concern about the capitalization of US financial institutions

- Risk managers in South Korea, China, and Hong Kong most concerned about US systemic risk

According to the latest quarterly Risk Index released today by the Global Association of Risk Professionals (GARP,, lingering structural imbalances and doubts about economic growth and financial system health combined to shift the risk perceptions of risk managers globally. The GARP Risk Index, which monitors current global perceptions of risk factors capable of triggering a systemic risk crisis in the US, jumped more than 2.5 points to 110.5 in Q2, closing in on the historical high reached in Q3 2010. Perceived risk associated with macro-indicators (+9.26%), banking health (+8.65%), credit spreads (+4.85%) and financial leverage (+3.48%) all contributed to the increase.  

Among macro-economic indicators, anxieties about the US current account deficit increased 11%, and risk managers expressed a strong view that US economic growth is stalling. Concerns about US banking fundamentals were reflected in the Risk Index, with nearly 58% of risk managers indicating a high level of concern about the capitalization of US financial institutions. Unresolved sovereign debt issues abroad also continued to the uptick in risk perceptions, with 79% of global risk managers surveyed now placing a high probability that the sovereign crisis in Europe will have meaningful impact on the integrity of the US financial system, a 16% increase.

Risk managers domiciled in Hong Kong, China, and South Korea appear to be more concerned about the prospects for US systemic risk then their global counterparts. “The divergence in risk perceptions by geography is an interesting trend we have observed in the survey recently,” said Chris Donohue, Managing Director, GARP Research Center.  ”Risk managers in Hong Kong, South Korea and China may be more attuned to structural imbalances abroad that could create a systemic risk threat in the US.”  

The GARP Risk Index found a 13% decline in risk managers ranking commodities in the two riskiest categories, a significant reversal from the previous Risk Index. “The improvement in perceptions associated with energy commodities likely stems from a combination of factors that have helped create a slow steady decline in oil prices. The perceived threat of slowing global economic growth is likely forcing a re-evaluation of global oil demand,” said Michael Sell, Editor of the GARP Risk Index and Manager of GARP’s Energy Risk Professional (ERP®) Program.

To complete the current Risk Index report, GARP researchers contacted over 500 global risk managers who hold the Certified Financial Risk Manager (FRM®) and Certified Energy Risk Professional (ERP®) professional designations between June 27 and July 8, 2011.

About The Global Association of Risk Professionals

The Global Association of Risk Professionals (GARP) is a not-for-profit membership organization dedicated to preparing professionals and organizations to make better-informed risk decisions. GARP’s membership represents more than 150,000 risk management practitioners and researchers at academic institutions, banks, corporations, government agencies, and investment management firms in 195 countries. GARP administers the Financial Risk Manager (FRM®) and Energy Risk Professional (ERP®) exams-certifications recognized by risk professionals worldwide. GARP is committed to advancing the role of risk management via education for professionals at all levels of expertise. Visit


Kathleen Alcorn
Global Association of Risk Professionals (GARP)

NOTE TO EDITORS: To obtain a copy of the 2011 Q2 Risk Index report and underlying data, please contact Kathleen Alcorn at kathleen.alcorn at

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