This peer review examines progress with data collection for macroprudential analysis and the availability and use of macroprudential tools in Germany; and how the authorities assess and manage risks to financial stability from non-bank financial intermediation (NBFI).
The review finds that Germany’s macroprudential framework is well established and operationalised through the Financial Stability Committee (FSC). Data collection, quality and integration have improved, and effective cooperation between the FSC’s member authorities – the Bundesbank, the Federal Financial Supervisory Authority (BaFin), and the Federal Ministry of Finance – has enhanced its analytical capabilities to assess financial stability risks. The FSC has further developed its macroprudential toolkit in recent years with the establishment of two borrower-based tools designed to address potential financial stability risks stemming from the residential real estate market. These tools apply to both banks and non-bank financial institutions, but so far have not been activated. The efforts of the authorities to monitor and manage risks to financial stability from NBFI have increased as the importance of the sector has grown, most notably with respect to investment funds, while the set of liquidity management and pricing tools available to asset managers was recently extended.
Notwithstanding this progress, the review concludes that further steps can be taken to strengthen the macroprudential framework by:
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Enhancing data collection for macroprudential analysis, in particular on residential real estate loans, NBFI and interconnectedness;
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Strengthening the FSC’s public communication and its analysis of non-bank and emerging risks; and
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Extending the policy toolkit to include income-based instruments for residential real estate financing and providing guidance on the use of liquidity risk management and pricing tools for investment funds, particularly in stressed market conditions.
The peer review report includes recommendations to the German authorities in order to address these issues.