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Federal Financial Supervisory Authority President: Mark Branson
Photo: Arne Dedert / picture alliance / dpa
The head of the financial supervisory authority Bafin, Mark Branson, sees a possible recession coupled with an interest rate shock as a threat to the financial system.
“There are dark clouds on the horizon.
Everyone sees them.
But we don't know how severe the storm will be and where the lightning will strike," he told the Süddeutsche Zeitung.
Now it's about being as well prepared as possible for the storm.
He does not see an acute short-term threat to financial stability, said Branson.
“But ask me again in three to six months.
Then it can look different.«
Financial system currently robust
An energy crisis would affect almost the entire economy, across the board, especially industrial companies, Branson said.
"The state can't absorb everything." The banks would then have to deal with loan defaults.
At the moment the financial system is robust.
"The banks have much more capital than they used to as a loss buffer." But there is a point at which it becomes dangerous.
"Because you cannot capitalize the financial system in such a way that it is prepared for any horror scenario," said the Bafin boss.
Branson has a particular eye on the »shadow banking sector«, which has grown rapidly since the financial crisis.
Such financial companies include hedge funds, money market funds, alternative investment funds, and specialty stockbrokers, among others.
This sector is dangerous, he said.
"We just don't know which funds might be about to implode because many are largely unregulated." Collapsing shadow banks could always create turbulence.
The crucial question is how strongly the two worlds are intertwined.
No connection to cryptocurrencies
The sharp fall in the price of many cryptocurrencies has so far triggered almost nothing in the traditional financial system because there were apparently hardly any connections.
Even the severe stock price slumps have so far not led to a chain reaction.
"Of course we're very worried about this sector," Branson said.
The former head of the Swiss financial market supervisory authority Finma took over the helm at Bafin in August 2021.
He sets the goal for supervisors to be bolder in the future and act faster and take more risks in order not to intervene too late.
Branson's predecessor Felix Hufeld had to vacate his post after the Wirecard financial scandal became known in 2021.
Yep/Reuters
