In a speech given at the European Banking Congress in Frankfurt am Main, Bundesbank President Jens Weidmann spoke out in favour of banks building up higher levels of capital, arguing that having more own funds would enable banks to better absorb losses. "This makes the entire financial system more stable and more resilient to crises," remarked Weidmann.
The situation in the international financial markets is characterised by low interest rates and low volatility. The longer the period of low interest rates lasts, the greater the risk of exaggerations in certain market segments, Claudia Buch, Deputy President, and Andreas Dombret, Executive Board member, said at the presentation of the Deutsche Bundesbank's 2014 Financial Stability Review.
Fewer people are unemployed in Spain, Portugal and Ireland according to the Deutsche Bundesbank’s latest Monthly Report. Bundesbank economists believe that the reforms implemented in these countries are suited to "reducing structural unemployment". Further topics include the economic situation in Germany and the overestimation of global growth forecasts in recent years.
"The importance of the renminbi as a trade and investment currency is constantly growing," stated Joachim Nagel, a Bundesbank Executive Board member, at a conference during Euro Finance Week. The creation of the first renminbi trading centre in the euro area means that renminbi payments in the Frankfurt financial centre are now significantly easier.
Bundesbank President Jens Weidmann has warned of the potential adverse effects of quantitative easing. Speaking at an event in Passau, Weidmann said that purchases of government bonds by the Eurosystem might ultimately create new incentives to run up debt, besides adding to the reform fatigue in a number of countries. Nor was it certain that quantitative easing would have the desired positive impact on the economy, he noted further.
The Single Supervisory Mechanism (SSM) has created a new framework for banking supervision in Europe, under which the European Central Bank (ECB) has assumed, with effect from 4 November 2014, responsibility for supervising the 120 largest banking groups in the euro area. National authorities such as the Bundesbank and BaFin will cooperate closely with the ECB.
Bundesbank Executive Board member Andreas Dombret has warned German banks not to rest on their laurels following their good showing in the comprehensive assessment (CA). At a conference in Mainz, he noted that their profitability, by international standards, was sub-par. He added that German banks would therefore be well advised to rethink their business models and to gear them towards the objective of sustainable strong profitability.
The 25 largest banks in Germany have passed the European Central Bank's comprehensive assessment with good results. The asset quality review (AQR) revealed no major provisioning needs. The stress test identified a capital shortfall at only one bank. However, the institution has already covered its shortfall this year.
The Single Supervisory Mechanism will be launched on 4 November 2014. Before the ECB assumes responsibility for the supervision of the 120 largest banking groups in Europe, they are being subjected to a comprehensive assessment. The results will be presented on 26 October 2014. Those that do not pass the test will have to react quickly.
The Bundesbank believes that the German economy has made very little headway in the course of the third quarter of 2014. According to the current issue of the Monthly Report, Bundesbank economists expect growth to remain subdued in the fourth quarter thanks to the slight decline in new orders received by industry and the gloomy prevailing sentiment.