The German financial system remains vulnerable to adverse economic developments. Future credit risk could be underestimated and the recoverability of loan collateral such as real estate overestimated. “An unexpected economic downturn and abrupt rise in risk premia could hit Germany’s financial system hard,” Bundesbank Vice-President Claudia Buch explained, adding that a stable financial system should be able to cushion such shocks rather than amplifying them.

Risks to the stability of Germany’s financial system have continued to build over the course of 2019. “An unexpected economic downturn and abrupt rise in risk premia could hit Germany’s financial system hard,” explained Bundesbank Vice-President Claudia Buch at the press conference on the Financial Stability Review.