Report finds Australasian lenders are far more wary of mistakes going viral.

Brand damage from social media websites such as Facebook and Twitter is of far greater concern to New Zealand and Australian banks than it is for their global counterparts, according to new research.

PwC and the Centre for the Study of Financial Innovation's latest Banking Banana Skins report found Australasian lenders considered social media the seventh-biggest risk they faced, while it was the 19th-ranked risk globally.

Sam Shuttleworth, PwC's banking and capital markets leader, said banks on both sides of the Tasman were "ahead of the pack" in terms of embracing social media.

"If you look at [banks in] the Northern Hemisphere, they are not embracing the digital age as quickly."


Shuttleworth said that while local banks' engagement on social media was providing value to customers, it was also a double-edged sword because it opened them up to potential reputational damage.

"In the world we are in, customer experiences can be shared real-time through Facebook, Twitter and the like, with no predictability on what will become a story or not," Shuttleworth said. "The majority of the risk ... is the reputational damage that could occur if [social media] campaigns don't go as planned."

He said banks had little control over "what goes viral" on social media.

ANZ, for example, faced a wave of criticism on Facebook last year over funding it had provided to a controversial Australian coal mine.

Read the report here:

The chief risk officer of an Australasian bank was quoted in the report as saying: "The fastest increasing risk revolves around a range of threats categorised as cyber-crime coupled with the broadcasting of the event through social media."

Shuttleworth, however, said Australasian banks had indicated they were well prepared to deal with social media slip-ups.

Meanwhile, regulation was the top-ranked risk for banks in Australasia and around the world, according to the report.

Shuttleworth said this showed regulations aimed at avoiding another global financial crisis were being seen as a burden.

"While it is clear regulation was needed, getting the right balance is important, especially once you overlay the cost of regulation," Shuttleworth said.

Australasian banks considered political interference the third-biggest risk they faced, the report said.

Top 10 risks facing Australasian banks

1. Regulation
2. Pricing of risk
3. Political interference
4. Macro-economic environment
5. Sales and business practices
6. Technology risk
7. Social media
8. Shadow banking
9. Interest rate markets
10. Emerging markets

Source: Banking Banana Skins 2014.