The German banks have to build an additional buffer in order to be prepared for possible crises. The financial regulator Bafin announced on Wednesday. Bafin boss Mark Branson said in a video conference that the so-called countercyclical capital buffer would be reactivated. The buffer is intended to ensure the stability of the financial markets. In April 2020, due to the pandemic, it was set to zero percent and then no longer touched. Because lending is still expansive despite Corona, the Bafin now wants to increase it to 0.75 percent of the banks’ assets.
In addition, the Bafin wants to introduce an extra buffer for residential property loans, which should be two percent. Bundesbank Vice President Claudia Buch warned in the same video conference that the prices for residential property had been ten to 30 percent above the values justified by the fundamental data for several years; lending also continues to grow at an above-average rate. The problem: Should real estate prices collapse, the collateral deposited would not be sufficient to compensate for loan defaults.
In total, the banks will have to hold an additional 22 billion euros through the two buffers. You act with a sense of proportion, so Branson, the banks are not overburdened. In addition, they would have until February 1, 2023 to meet the requirement. Few banks would need to raise additional capital; According to Branson, the gap is only 200 million euros. According to the Bafin boss, it is the role of the supervisory authority to preventively ensure greater resistance. Every cycle comes to an end at some point, then the financial system must be able to withstand it.