Overview
- Publishing its 20th Financial Stability Review, the Bundesbank reports higher systemic risk driven by a worsened macro‑financial backdrop, erratic U.S. trade policy and structural weaknesses in Germany’s economy.
- The ratio of non‑performing loans has risen steadily since late 2022, starting in commercial real estate and now extending to other sectors, with banks increasing loan value adjustments.
- Elevated valuations in equities and corporate debt increase the likelihood of sudden market corrections that could generate sizable losses for financial intermediaries.
- Rising government debt ratios in Europe pose sustainability risks that, via the sovereign‑bank nexus and banks’ government bond exposures, could threaten the stability of Germany’s financial system.
- The review flags growing interconnectedness of non‑bank financial intermediaries and calls for easier cross‑border data access, while backing simpler banking rules and noting that the residential real‑estate systemic buffer was cut to 1% in April.