High uncertainty, weak growth and declining interest rates shaped the macro-financial environment in the reporting period. The German economy was weak in 2024. Valuations in financial markets remained high until March 2025. The German banking sector proved resilient and benefited from sound profits. Non-bank financial intermediaries (NBFIs) remained resilient. Vulnerabilities in the commercial real estate market remained elevated. In the residential real estate sector, vulnerabilities have eased in an orderly manner, but have not yet completely dissolved. Therefore, the FSC, at the end of April 2025, welcomed the intention of the Federal Financial Supervisory Authority (BaFin) to lower the sectoral systemic risk buffer for loans secured by residential real estate from 2% to 1%. 

At present, the risk environment is dominated by events after the end of the reporting period. At the beginning of April 2025, the announcement of US tariffs led to severe disruptions in global financial markets – especially in the US bond and equity markets. Although financial markets subsequently recovered, uncertainty and the potential for corrections remain high. Trade tensions also led to a significant downward revision of the global economic outlook. The German financial system proved robust during the turmoil. The outlook for the German economy is uncertain at present. It will also depend on the tariff negotiations. 

Ongoing vulnerabilities and high uncertainty highlight the need to preserve the resilience of the German financial system. The package of macroprudential measures adopted by BaFin is making an important contribution to this objective. The package consists of the countercyclical capital buffer of 0.75% of risk-weighted assets for domestic exposures and the sectoral systemic risk buffer of now 1.0% of risk-weighted assets for loans secured by residential real estate. The FSC considers both buffers appropriate. The FSC will continue to monitor and assess developments. If necessary, the FSC can recommend that the measures be adjusted flexibly to a change in the risk situation. In addition, the FSC’s member institutions are assessing on an ongoing basis whether further measures will need to be taken to preserve financial stability.