Featured Product

    Bundesbank and BaFin Publish Regulatory Updates for Banks

    December 17, 2021

    The Federal Financial Supervisory Authority of Germany (BaFin) published “loss rates” for exposures secured by domestic residential real estate and commercial real estate for 2020 in accordance with the Capital Requirements Regulation (CRR). BaFin notes that the compliance determination made for 2020 for risk positions secured with residential real estate and commercial real estate continues to apply until the necessary information has been evaluated for the current and the following year. Additionally, Deutsche Bundesbank published the results of its financial stability review as well as Version 2.03 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.

    The report on financial stability review considers developments up to November 19, 2021 and highlights that the financial system has functioned well during the pandemic. However, vulnerabilities have continued to intensify as the pandemic progressed with the credit-to-GDP gap continuing to grow dynamically during the pandemic. Thus, the activation of the countercyclical capital buffer is warranted from a value of 2 percentage points and up. Macro-prudential supervisors in other European countries have already responded to the increased cyclical systemic risks in the financial system by activating the countercyclical capital buffer or announcing its activation, notes the report. For Germany, the available data currently provide no indication of an excessive loosening of lending standards for new residential real estate loans. Moreover, household leverage is still relatively moderate despite strong lending growth. In addition to strengthening resilience by building up capital buffers, the use of borrower-based macro-prudential instruments could then be called for. To counter a threat to financial stability, BaFin can impose restrictions on credit institutions concerning the granting of residential real estate loans. Against the backdrop of increased vulnerabilities, greater preventive action must be taken now to equip the financial system to deal with future risks.

    The report also studies the impact of climate risk, establishing that the German financial system appears to be only moderately vulnerable to valuation adjustments resulting from rising carbon prices. Risk assessment can be improved further through disclosure requirements for climate risks. Scenarios could arise in which policymakers take measures to combat climate change unexpectedly late in the day and these measures are much stronger than assumed in this analysis. In this case, the transition to a low-carbon economy would have to occur within an even shorter space of time. More extreme increase scenarios could then materialize, meaning that the shock to the financial system would be greater. This could ultimately lead to higher losses. This makes it all the more important, then, for intermediaries and financial market agents to consider transition risks in their risk management and to be sufficiently resilient. The central banks of the G7 member states will also discuss options for implementing the TCFD recommendations in their own disclosures. As the holder of the G7 presidency in 2022, Germany will be able to make a positive impact on the implementation of disclosure measures, the report highlights.


    Related Links (in German and English)

    Keywords: Europe, Germany, Banking, Reporting, Derivation Rules, Financial Stability Review, CRR, Residential Real Estate, Commercial Real Estate, Credit Risk, Basel, ESG, Climate Change Risk, Stress Testing, Disclosures, Low-Carbon Economy, Transition Risk, Lending, Bundesbank, BaFin

    Featured Experts
    Related Articles

    CFPB Finalizes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.

    March 30, 2023 WebPage Regulatory News

    BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023

    The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.

    March 23, 2023 WebPage Regulatory News

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    US Congress Report Examines Data Privacy and Cybersecurity Regulations

    The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    EU to Conduct One-Off Scenario Analysis to Assess Transition Risk

    The European authorities recently made multiple announcements that impact the banking sector.

    March 10, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8810