Admin l Friday, November 25, 2022
GERMANY – The risks facing the real economy have risen, Germany’s central bank said on Thursday as it called on the banking sector to have adequate buffers in place to deal with losses on its loans.
“To ensure that potential stress is not amplified via the financial system, financial institutions must be sufficiently resilient on their own,” Bundesbank Vice President Claudia Buch said in presenting the bank’s 2022 Financial Stability Review in Frankfurt.
The Bundesbank board member responsible for banking supervision, Joachim Wuermeling, added that, given high levels of uncertainty, banks “should engage in prudent risk provisioning and exercise caution when distributing profits.”
He expressed concern that so few additional provisions for risk were being accumulated by the German financial sector.
The Bundesbank pointed to a worsening energy crisis, a sharp economic slump, with German economists forecasting a recession, and sharply rising interest rates as placing the domestic financial situation under pressure.
Buch also warned that the data used by financial institutions to estimate future risk could be overoptimistic.