Overview
- The Bundesbank says the macrofinancial backdrop has worsened over the past year due to policy uncertainty, geopolitical tensions and weak growth.
- Non‑performing loans have climbed since late 2022, first in commercial real estate and now more broadly, prompting a push for stronger loan‑loss buffers despite solid reported capital.
- High equity and corporate bond valuations raise the danger of abrupt price corrections with potential losses for banks, insurers and funds, as recent market jolts showed.
- Rising public debt in parts of the euro area heightens risks via the sovereign‑bank nexus, with banks exposed to sudden moves in sovereign bond prices and a need for credible fiscal frameworks.
- The report cautions that low risk weights may overstate the resilience of large banks, calls for better oversight and data on NBFIs and private credit, notes regulatory simplification aims, and highlights a fragile commercial property sector alongside a recovering housing market.