Overview

• BaFin President Mark Branson warns that erratic U.S. tariff policy continues to drive extreme market volatility with potential system-wide consequences.
• The regulator identifies high uncertainty and spillover risks from nonbank sectors to banks, despite prior resilience during earlier turbulence.
• Declining interest-rate income and rising corporate insolvencies are increasing the likelihood of loan defaults, posing further stress on the financial system.
• BaFin signals reduced implementation of European Banking Authority ESG guidelines for small banks, citing unnecessary complexity.
• Increased scrutiny will be directed at commercial real-estate financing and corporate lending as default provisions rise.