Times of strong growth and low interest rates have seen vulnerabilities build up in the German financial system. In addition, the probability of an economic downturn has increased.

Given the upbeat prospects for the economy as a whole, there is little risk to the stability of the German financial system at present. Yet with interest rates sitting at low levels for years now and the economy in such robust shape, there is a danger that market participants might underestimate the risks to financial stability, the Bundesbank cautions.

The March 2019 edition of the Bundesbank’s Monthly Report sheds light on Germany’s balance of payments for 2018 and it analyses the demand for cash in the shadow economy.

Exceptionally low interest rates remain a salient feature of the financial system setting in Germany. They reflect the global low real economic growth and expansionary monetary policy stance.