ZCZC
BCN-18
GERMANY-ECONOMY-BANKING
Downturn could threaten German financial stability: Bundesbank
FRANKFURT AM MAIN, Nov 15, 2018 (BSS/AFP) – A sharp economic downturn
could hit weak spots in the German financial system that have developed in
times of low interest rates and strong growth, the Bundesbank (central bank)
warned Wednesday.
The alert comes on the same day as data showing Europe’s top economy went
into reverse in the three months to September, shrinking for the first time
since early 2015.
Blamed on one-off factors such as new tougher emissions tests slowing the
mighty car industry, the slowdown is so far not troubling economists and
policymakers.
But in its annual financial stability report, the Bundesbank pointed out
that a graver economic downturn could be amplified through financial markets,
with risks to the global economy such as trade tensions with the United
States and Brexit also casting a shadow.
“In recent years the German financial system has become more vulnerable”
as players have neglected the risks from non-repayment of loans or possible
changes in asset prices and interest rates, vice-president Claudia Buch said
in a Frankfurt speech.
“Every single market participant should build up their capacity to resist
unexpected events.”
She highlighted “positive” developments too, including the fact that many
banks have increased the capital cushions they keep on hand to help weather
economic shocks.
But German banks along with UK institutions were among the worst
performers in a recent round of “stress tests” by European regulators, which
put lenders through their paces in a simulated economic crisis.
BSS/AFP/HR/1012