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Rising risks: banks should put capital buffers back into place

Wednesday, 01/12/2022 10:41 AM from

dpa-AFX

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BERLIN (dpa-AFX) – Due to increasing risks on the financial market, the German banks are to create additional capital buffers again. This is a preventive measure, the financial sector is currently still very resilient, said Bundesbank Vice President Claudia Buch on Wednesday. The head of financial supervision Bafin, Mark Branson, emphasized: “With a view to financial stability, it is now time to switch to prevention mode.” That was the conclusion of the Financial Stability Committee.

Specifically, the banks are to build a so-called countercyclical capital buffer of 0.75 percent. This buffer was reduced to zero percent in the wake of the pandemic, before it was 0.25 percent. In principle, the capital buffer is intended to increase the resilience of banks in times of crisis. In addition, a new buffer is to be introduced that specifically protects residential property loans. Here the banks are supposed to put 2 percent aside.

The real estate market is currently threatening to overheat, said Branson. Prices for houses and apartments have risen significantly recently, there are many loans with long terms that make the financial system vulnerable to changes in interest rates. The Bafin boss announced that one will closely monitor how the standards of lending develop.

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