Complex financial instruments – in particular credit derivatives – are the greatest risk currently facing banks, according to the latest Banana Skins survey by the Centre for the Study of Financial Innovation and PricewaterhouseCoopers.  

The annual poll of top financial practitioners, regulators and analysts reveals widespread concern about the burgeoning use of derivatives to transfer risk, as well as the lack of information on residual concentrations of risk.  One analyst said, “There is a daunting lack of transparency in reporting, and it is not readily apparent who holds the risk or what concentrations of risk exist.”

This is the first time that complex financial instruments have topped the poll, now in its eighth year.   

The CSFI/PricewaterhouseCoopers Banana Skins survey has been tracking banking risks since the early 1990s.  This year’s survey is based on a record 231 responses from bankers, regulators and analysts in 31 countries.