Emmanuel Thomas I Wednesday, May 10, 2023
BERLIN – After the recent instability of the international banking market, Germany’s financial supervisory authority on Tuesday warned institutions in Germany to be careful.
“The German banking system has so far proven to be stable and resilient,” said the President of the Federal Financial Supervisory Authority (BaFin), Mark Branson.
“Nevertheless, we have to be vigilant.” He said it was “not certain that this difficult phase is behind us. Stress phases often develop in spurts.”
In the US, three regional banks collapsed since the beginning of March after huge withdrawals of funds due to liquidity concerns.
In Europe, Swiss bank Credit Suisse, which had previous problems, was saved from going under thanks to a state-organised emergency takeover by the bigger UBS.
The institutions are struggling with rapidly rising interest rates after years of zero and negative interest rates.
“Since March, the global financial system has been going through a kind of stress test in real time,” Branson said.
He warned the financial industry in Germany that having “an attitude of ‘something like this couldn’t happen in Europe’ would be totally misplaced in my view.”
Rising interest rates had a positive effect on banks’ earnings, Branson said. However, several smaller institutions in Germany have used up their hidden reserves to cushion interest rate risks, he said.
Although they are monitoring a handful of small institutions closely, Branson said there had been no “big increase in the number of distressed banks” in Germany.
Looking at the German banking market as a whole, the Bafin president stressed, “So far, we see no danger of a systemic crisis here.”
