1 Introduction

Ladies and gentlemen,

During our conference, we have talked about risks to financial stability, about macroprudential policy and specifically how to communicate it, and about the challenges of the past, present and future. In my closing remarks, I will summarise those discussions and give an outlook.

But first, and most importantly, I would like to thank all of the participants for their time and contributions. You have all made the conference a rewarding experience. I would also like to thank our audience here in the hall, who made for a lively discussion. My thanks also go to the Bundesbank staff who organised and made all the preparations for the conference.

2 Reflections on Panel 2

I’d like to begin with our last discussion in Panel 2.

We talked about what the current risk environment in financial markets looks like and what the implications are for central banks, supervisory authorities and market participants. To sum it up, both the risk environment and the regulatory setting look very different to how they did twenty years ago.

The role of non-banks and how they are interconnected with banks has changed significantly since our first Financial Stability Review. The NBFI sector has grown globally. NBFIs are also more interconnected with each other, across national borders and with banks than they once were. This makes it challenging for supervisory authorities and central banks to identify and analyse risks in the NBFI sector. I consider this an important point, and it was one that Steffen Kern touched on. In the Bundesbank’s latest Financial Stability Review, too, we have explored the interconnectedness of the NBFI sector in detail.

In Heiner Herkenhoff’s intervention, he showed how new risks present challenges for the banking sector. AI, cyber risk and quantum computing are putting pressure on banks’ IT infrastructures. Geopolitical risks can not only have a direct impact on banks’ credit risk, but also affect the security of data and IT. On the topic of geopolitical risks, Florian Heider explained how such risks can be quantified using stress test data. The regulatory setting in which banks operate is also a relevant factor.

From a macroprudential perspective, systemic risks must always be countered with sufficient resilience. For that to happen, we need effective regulation. I outlined my conclusion on this in my introductory statement. We need to reduce the complexity of banking regulation. This would benefit both macroprudential authorities and the supervised institutions. At the same time, we have to ensure that the financial system remains resilient, because a stable financial system is a prerequisite for economic growth. Financial market participants would be able to increasingly funnel freed-up resources into forward-looking risk management. Claudia Buch made it clear that looking ahead is all the more important when faced with new risks, because often in these cases we are unable to identify patterns from historical data. This is an important point from both the microprudential and macroprudential perspectives. That’s also why Claudia Buch emphasised the importance of looking at both perspectives in tandem.

In this context, Gaston Gelos pointed to current research using artificial intelligence to detect potential financial market disruption at an early stage.

3 Reflections on Panel 1

In the first panel, we reflected on the risk environment in which many of the financial stability reviews were produced and on the institutional changes that have taken place over time.

Financial stability reviews are an important tool for communicating the system-wide perspective. Our reviews have also moved with the times. Cornelia Holthausen pointed out that we now have access to much more data and that this opens up new possibilities, both for our analyses and for presenting the data in easily understandable graphics.

For me, the discussion also made something else clear. Our complex and uncertain environment makes it all the more important that our assessments are consistent over time and – in the case of supranational authorities such as the ECB – across countries.

Both panels confirmed that the microprudential and macroprudential perspectives complement one another. At the institutional level, we learnt from the global financial crisis that analysis of the system as a whole and analysis of individual market participants go hand in hand, and together lead to better supervision of the financial system. This symbiosis can be seen in action in the German Financial Stability Committee, as the contributions of Doreen Herms and Rupert Schaefer also showed. Current challenges, too, such as persistent uncertainty and geopolitical tensions, affect both market participants and microprudential and macroprudential supervision.

The contributions of Gaston Gelos and Reiner Martin made clear how important well-founded analysis and innovative research are to the evolution of macroprudential analysis, policy and communication – for example, analysing reports using AI. 

4 Conclusion

That brings us to the conclusion.

The Bank of England and the Swedish central bank were among the first central banks to publish a financial stability review – a response to the banking crises of the early 1990s, which revealed how important it is to systematically monitor financial stability.[1] The first German Financial Stability Review in 2005 was a response to international developments and past crises. 

Given the current geopolitical challenges, the resilience of the German and European financial system remains central to cushioning economic shocks and maintaining confidence in the financial markets. Macroprudential policy and close cooperation between national and European institutions play a key role. They are vital to identifying systemic risks at an early stage, taking preventive measures and strengthening the competitiveness of the European financial system in the long term.

We are constantly finetuning our macroprudential policy and communication. Our goal is to maintain a stable financial system, which is so enormously important in both economic and sociopolitical terms. Thank you for helping us achieve that goal by sharing your ideas and joining the discussions at this conference.

Footnote:

1. L. Heikensten, The Riksbank’s work on financial stability, speech at the University of Gothenburg, 25 November 2003. Bank of England (1996), Financial Stability Review, Issue 1.