FSB Report Reviews Macro-Prudential Framework and Tools in Germany
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany. The report also addresses how the authorities assess and manage financial stability risks from non-bank financial intermediation (NBFI). The review focuses on the steps taken by the authorities to implement reforms in this area, including by following up on the relevant Financial Sector Assessment Program (FSAP) and FSB recommendations. The review finds that the macro-prudential framework in Germany is well-established and is implemented through the Financial Stability Committee (FSC). Nevertheless, it makes recommendations for German authorities to further strengthen the macro-prudential framework.
The review finds that data collection, quality, and integration have improved. In addition, effective cooperation between the member authorities of FSC—Bundesbank, BaFin, and the Federal Ministry of Finance—has enhanced the analytical capabilities to assess financial stability risks. FSC has further developed the macro-prudential toolkit in recent years, with the establishment of two borrower-based tools designed to address potential financial stability risks stemming from the residential real estate market. These tools apply to both banks and non-bank financial institutions, but so far have not been activated. The efforts of the authorities to monitor and manage risks to financial stability from NBFI have increased as the importance of the sector has grown, most notably with respect to investment funds, while the set of liquidity management and pricing tools available to asset managers was recently extended. Notwithstanding this progress, the review concludes that further steps can be taken to strengthen the macro-prudential framework by:
- Enhancing data collection for macro-prudential analysis, in particular on residential real estate loans, NBFI, and interconnectedness
- Strengthening the FSC’s public communication and its analysis of non-bank and emerging risks
- Extending the policy toolkit to include income-based instruments for residential real estate financing and providing guidance on the use of liquidity risk management and pricing tools for investment funds, particularly in stressed market conditions
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Keywords: Europe, Germany, Banking, Peer Review, Macro-Prudential Framework, Macro-Prudential Tools, Residential Real Estate, Credit Risk, Liquidity Risk, Basel, NBFI, FSC, FSB
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