Michael Theurer: The Deutsche Bundesbank's 2024 Financial Stability Review

Statement by Mr Michael Theurer, Member of the Executive Board of the Deutsche Bundesbank, at the presentation of the Deutsche Bundesbank's 2024 Financial Stability Review, Frankfurt am Main, 21 November 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
28 November 2024
by Michael Theurer
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  |  13 pages

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Ladies and gentlemen,

I warmly welcome you to the presentation of the Bundesbank's Financial Stability Review this year. In our Financial Stability Review, we assess the state of the German financial system. In doing so, we take a holistic view rather than approaching it from the individual institution level.

We are currently experiencing a period of strong structural change in the economy, accompanied by technological progress, geopolitical shifts and high levels of uncertainty. A stable and resilient financial system is intrinsic to the real economy's ability to handle all of these changes and challenges well.

So what is the current state of the financial system? In order to assess this, it is helpful to take another brief look back at how the German financial system has fared up to this point.

The period up to the start of 2022 was marked by very low interest rates, high credit growth and extremely low credit defaults. Along the way, a number of vulnerabilities had built up within the German financial system. These were exposed, to some extent, by the sharp rise in interest rates since 2022.

We will then turn our attention to the present day to examine how the German financial system is currently faring. Interest rates have passed their peak. The ECB Governing Council has already lowered interest rates three times. The financial system has weathered the earlier period of exceptionally strong interest rate rises well. Vulnerabilities have been decreasing in an orderly fashion – albeit only gradually.

However, the path ahead is an arduous one: geopolitical tensions continue to harbour risks to the future stability of the financial system. Not only that, but the financial system must confront the structural change I mentioned earlier.