Bundesbank Vice President: No reason for deregulation tagesschau.de

Status: 08.05.2023 12:55 p.m

The banking crisis is not over yet, experts warn. Bundesbank Vice President Claudia Buch has warned against more lax financial market rules. Rising interest rates could cause problems for institutions.

In view of the recent turbulence in the banking industry, Bundesbank Vice President Claudia Buch warned against underestimating risks. “Right now is not the time for a big deregulation debate,” said Buch at a bank conference of the “Börsen-Zeitung” in Frankfurt.

“Especially now it is important that the classic interest rate and credit risks are well managed,” said the economist in view of the current environment for the banking market. Since the financial crisis of 2008/2009, stricter rules and thicker capital buffers have made the financial sector more resilient.

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Now the rapid increase in interest rates after years of zero and negative interest rates is causing problems for the sector. In the USA, three regional banks had collapsed since the beginning of March after enormous withdrawals of funds due to liquidity concerns. In Europe, the major bank Credit Suisse, which had previously had problems, was saved from collapse thanks to a state-organized emergency takeover by the larger UBS.

unclear economic outlook

“In the end, these developments are examples of how the financial system as a whole has become more vulnerable. More vulnerable to higher interest rates, more vulnerable to what is, after all, a very high level of international macroeconomic uncertainty,” said Buch, who is responsible for banking and financial supervision on the Bundesbank’s Executive Board .

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In itself, rising interest rates are good for banking. In particular, this makes it easier to increase the difference between interest rates on deposits and lending rates. “But in the short term it can be the case that the pressure initially arises on the cost side and on the credit side the options for passing on higher interest rates are limited,” explained Buch.

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