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Fourth Fi­nan­cial Sta­bil­i­ty Com­mit­tee re­port to the Ger­man Bun­destag on the fi­nan­cial sta­bil­i­ty sit­u­a­tion and trends

In its fourth annual report to the German Bundestag, the Financial Stability Committee addressed the divergence between US and EU monetary policy and the impact of cyberattacks on the German financial system.

During the reporting period from April 2016 to March 2017, the Financial Stability Committee found that the German financial system remained robust despite risks posed by low interest rates. Although several factors were creating uncertainties, there were no destabilising dynamics. The uncertainty surrounding the UK’s withdrawal from the EU and the US Federal Reserve’s monetary policy – which runs counter to the EU’s – were important factors in this context.

The Financial Stability Committee analysed German financial intermediaries in detail with regard to low interest rates, but did not find any acute signs of excessive risk-taking among them. The Financial Stability Committee believes that the German banking system has further increased its resilience since the previous report. The Financial Stability Committee also welcomed regulatory measures to strengthen the resilience of IT structures in the financial sector. Frequent cyberattacks are increasingly posing a risk to financial stability.

The Financial Stability Committee also noted the need to strengthen incentives for behaviour that is consistent with stability. Although market participants have primary responsibility for ensuring that sufficient risk-bearing capacity is available, the regulatory environment is also of immense importance. In addition, reforms to financial market regulations should be examined using objective, ex ante procedures, as there is little experience with the use of macroprudential tools to date. A sufficient pool of data is a prerequisite for this type of examination. It is also important to consider the timeframe in which such reforms are intended to take effect. In turn, such evaluations can serve as a basis for future macroprudential decisions.