The Bundesbank published its annual Financial Stability Review on 24 November 2022. In the review the Bundesbank explains vulnerabilities in the German financial system and highlights risks to its stability.
The macro-financial environment has deteriorated substantially over the course of 2022. It has been shaped by subdued growth prospects, high inflation as well as rising interest rates and risk premia. Banks, insurers and investment funds have already recorded losses as a result of market corrections.
The report emphasises the need for sufficient resilience in the financial system in view of the existing macro-financial risks. Financial institutions should assess the impact of adverse scenarios. Given the high level of uncertainty, they should engage in prudent risk provisioning and be cautious about distributing profits.