- German banks had a strong third quarter: Deutsche Bank posted a net profit of 1.031 billion euros ($1.13 billion) and Commerzbank more than tripled its net profit from a year earlier.
- Buch noted that provisions for bad loans had not increased as much as the central bank would have liked given the sharp rise in interest rates and the “very uncertain environment” for the economy.
The headquarters of the German banks Deutsche Bank (L) and Commerzbank in Frankfurt, Germany.
FRANK RUMPENHORST | DPA | Getty Images
Germany’s major banks need to increase their provisions for bad loans as corporate bankruptcies and credit risks increase, according to Bundesbank Vice President Claudia Buch.
Europe’s largest economy has been dubbed the “sick man of Europe” by some economists after it entered a technical recession earlier this year, while economic activity faced further downward pressure from a slump in construction.
Berlin lawmakers, meanwhile, are seeking solutions to a developing budget crisis that could threaten the future of the country’s coalition government.
Like the rest of the euro zone, the German economy is grappling with a rapid rise in interest rates as the European Central Bank raised its main deposit facility to a record high of 4% from a record low of -0.5% in September 2019. in September 2023.
“I have to say that the financial sector has actually coped with this rise in interest rates quite well. At the same time, the effects are not yet fully visible, so they haven’t really sunk into banks’ balance sheets yet.” “And that’s why we’re warning the banks as we always do,” Buch told CNBC’s Annette Weisbach on Wednesday.
“Resilience is truly of utmost importance in the current situation. The banks are currently highly profitable, and I think it’s good if they use this profitability to increase their resilience – sufficient capital, sufficient liquidity, but also investments in IT to protect against cyber attacks. “Risks.”
German banks had a strong third quarter: Deutsche Bank posted a net profit of 1.031 billion euros ($1.13 billion) and Commerzbank more than tripled its net profit from a year ago to 684 million euros.
Still, Buch noted that provisions for bad loans had not increased as much as the central bank would have liked, given the sharp rise in interest rates and the “very uncertain environment” for the economy.
“Provisions have increased somewhat, but if you compare them to historical averages they are still at relatively low levels and the same is actually true for corporate bankruptcies, so corporate bankruptcies, which have actually fallen over the last 20 years, have increased slightly “But “are still well below the historical average,” she said.
“In all likelihood, given the structural change that we’re experiencing, given the uncertainty that surrounds us, corporate bankruptcies are likely to increase, credit risk is likely to increase, and that’s why we – on both sides, from the macro- The regulatory side and the microprudential side – really make banks aware of these risks and ask them to increase their resilience as best they can.”