30 June 2015

The Financial Stability Committe adopts annual report to the German Bundestag and recommends creation of new macroprudential instruments

In addition, the Financial Stability Committee (FSC) adopted the second annual report to the German Bundestag on the Committee’s activities. The Committee was also briefed on the current status of the preparatory work for an additional countercyclical capital buffer for banks. As of 2016, supervisors will generally be able to begin levying a capital surcharge to build up this buffer. In the future, the Committee will discuss the question of the appropriate size of this buffer on a regular basis.

German Finance Ministry State Secretary Thomas Steffen commented: "It is the task of the FSC to observe the development of risks in the German financial system. The risks from the latest developments in Greece are important for Greece. However, for the German financial system, few contagion channels remain. That is why we consider risks to be minor.

The Committee furthermore has to watch medium and long term risks resulting from the current low interest rate environment. It has to act, if necessary. This is why we decided today to supplement supervisors` macroprudential toolkit."

Irrespective of the current developments in Greece, the FSC regards the low interest rate environment as the most important factor influencing the current risk situation. In this context, the Committee discussed, in particular, the effects of low interest rates on the German residential property market, German banks and German life insurers. The results of analytical studies and stress tests indicate that supervisors should continue to keep a close eye on macroeconomic risks.

Claudia Buch, Deputy President of the Deutsche Bundesbank, commented: "The current low interest rates continue to pose risks to financial stability. There are also additional risks arising from the European and international sphere. German banks and life insurers should therefore build up sufficient capital reserves and, if necessary, retain profits to ensure that they are well-equipped to deal with macroeconomic risks."

The Committee recommends that the federal government initiates, by the end of 2016, the creation of a legal basis which would allow BaFin to introduce minimum requirements for the credit-based financing of residential property purchases (including, among other things, the minimum amount of equity that must be provided and minimum debt repayment rates), should such rules be regarded as necessary in the future. In this way, risks to financial stability arising from excessive debt and price bubbles on the real estate market can be limited.

BaFin President Felix Hufeld commented: "I want to make one thing clear once again: The Committee is recommending that the federal government creates new macroprudential instruments. We have to be well prepared and capable of taking action, if and when that becomes necessary, i.e. when risks become acute. However, we are not going to take any action at this stage."

Full press release

Full recommendation (in German only)

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