Anxiety in the financial system is at an "unprecedented high", according to a survey that says the fragility of the world economy and a return to recession are the biggest risks facing the global banking industry.
But on a more positive note, local respondents rated the preparedness of this country's banks to handle the dangers better than the global average.
"This suggests New Zealand banks see themselves as among the better prepared," the survey said.
The Banking Banana Skins report, by PricewaterhouseCoopers (PwC) and the Centre for the Study of Financial Information, canvassed more than 700 respondents in 58 countries, including 22 in New Zealand, during November and December last year.
It highlights the risks facing the global banking system, as seen by bankers, regulators and observers of the industry.
PwC financial services partner Sam Shuttleworth said it was "unquestionably the bleakest response" in the 13-year history of the survey.
"[It] highlights the huge uncertainty over the near-term, but also the certainty that changes will be needed to restore stability and growth in the longer term," Shuttleworth said.
The top five concerns of New Zealand respondents, from highest to lowest, were credit risk, liquidity risk, the fragility of the economy, political interference and capital availability.
Shuttleworth said New Zealand responses were dominated by concerns about Europe's sovereign debt crisis and its potentially depressing impact on both the local and global economy.
"There is a high sense of vulnerability to conditions on international markets, and funding is also singled out should liquidity and access to capital become more difficult," he said. "This view was shared by global respondents with the results of the global survey highlighting the impact of the eurozone crisis and the mounting debt problems in many economies is very much front of mind for the global banking industry with flow-on consequences being the availability of liquidity and capital. This certainly paints a gloomy picture of challenging times ahead."
Shuttleworth said that in 2010, when the report was last done, political interference was the top concern of respondents around the world. Now, it is number four in New Zealand and the fifth-greatest concern globally.
"Back in 2010, the actions of overseas governments to rescue their banks from financial disarray may have restored the system, but it left the global banking industry deeply politicised," said Shuttleworth. "Moving forward to today, political interference is no longer considered such a concern by overseas banks because it's actually a reality, through providing financial support, stricter regulations and exerting pressure on banks' business decisions."
The survey also found there was concern about a rerun of the 2008 financial crisis, especially in the eurozone, with the potential for banks' funding markets to seize up again.
The report said: "While fears of a liquidity crunch are widespread, many global respondents said they were currently in a good liquidity position."