The Bundesbank has highlighted several risks facing German banks amid current economic and geopolitical challenges. Executive Board member Michael Theurer notes concerns over a potential economic downturn, trade tensions with the US following President Trump's election, and his proposed tariffs on European imports.
Furthermore, declining office real estate prices, the shift towards remote working, and the rise of online shopping contributing to empty retail spaces pose additional threats. While the financial system has adapted well to recent ECB interest rate hikes, forthcoming rate cuts may introduce new difficulties.
Despite showing resilience with stable capital ratios, banks are urged to remain vigilant. The Bundesbank emphasizes the importance of preparing for "very negative scenarios" due to geopolitical instability and a weak economy.
The potential impact of Trump's trade policies is a significant concern, with the need for Europe to assert its strength without resorting to "subservience." However, some argue that the Trumpflation could eventually benefit the US economy, suggesting that the complex interplay of global economic factors may mitigate the risks.
Overall, maintaining a robust financial system remains a priority amid these uncertainties.
