Overall, German banks have weathered the shock waves on the financial markets well so far. But the banking supervisors of Bafin do not want to give the all-clear yet.
Frankfurt/Main - Following the recent turbulence in the international banking market, the financial supervisory authority Bafin is warning institutions in Germany against carelessness. "The German banking system has so far proven to be stable and resilient," said the President of the German Federal Financial Supervisory Authority (Bafin), Mark Branson, on Tuesday in Frankfurt. "Nevertheless, we have to be vigilant." Overall, it is "not certain that this difficult phase is behind us. Phases of stress often develop in spurts."
In the U.S., three regional banks had collapsed since the beginning of March after huge withdrawals of funds due to liquidity concerns. In Europe, the major bank Credit Suisse, which had already had problems before, had been saved from collapse thanks to a state-organized emergency takeover by the larger UBS. One problem for the institutions: the rapid rise in interest rates after years of zero and negative interest rates.
Bafin in Frankfurt: The bank quake is not yet completely over. © Boris Roessler/dpa
"Since March, the global financial system has been undergoing a kind of real-time stress test," Branson said, warning the financial industry in Germany: "An attitude of 'something like this could not happen in Europe, would be totally out of place in my view.'
Several small banks are supported by Bafin
Overall, rising interest rates have had a positive impact on banks' earnings, Branson said. However, several smaller institutions in Germany have used up their hidden reserves to cushion interest rate risks. "We are working particularly closely with a handful of small institutions with low reserves and capital buffers and currently high interest rate risks," Branson said. However, there has been no "large increase in the number of distressed banks" in this country. With regard to the entire German banking market, the Bafin President emphasized: "So far, we do not see any danger of a systemic crisis here."
According to Bafin, social networks are proving to be an accelerant for crises: "Bank runs and liquidity crises arise much faster these days than they used to," Branson noted. "Within seconds, information and rumours can be spread via social media. And withdraw deposits via online banking. At any time of the day and in almost any place in the world. As a result, some banks ran into a liquidity crisis in a short period of time."
Bank quakes: Irrational fears play a major role
In the case of German institutions, there are "no rational reasons for a liquidity crisis," the Bafin boss emphasized. "But there are also irrational fears," Branson said: "No system is immune to the contagion risks from nervousness in the markets."
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Since the financial crisis of 2007/2008, the global financial system has become more stable. "We've already done a lot, but we're far from done," Branson said. "From my point of view, we have to make sure that the difficulties of a small or medium-sized institution no longer trigger unnecessary fears of infection."
Even large, systemically important banks should be able to be wound up in the event of an imbalance. "This was a central concern of the reforms after the 2007/2008 crisis. Never again should an institution be too big to fail. We must not abandon this goal," Branson said. (dpa/row)
