Risks for German finance revolve around rates

The new president of Germany’s financial watchdog BaFin said that the greatest risks for the financial sector revolve around interest rates. BaFin President Mark Branson, also outlined 10 new medium-term goals for the supervisor. These goals range from promoting stability to preventing money laundering. BaFin’s reputation was battered last year.

Failure to spot wrongdoing ahead of the collapse of the German payments company Wirecard, is the reason behind that. And this company was a former blue-chip hailed as a German success story and once worth $28 billion. This resulted in new leadership at BaFin with Branson at the top. In a banking conference and in an in-house BaFin publication, Branson said that years of low interest rates can be problematic for certain bank business models and for life insurance.

He said in the in-house publication, BaFin Journal, that the risk of bubbles forming is increasing in various markets. Also, in a conference he added that if rates rise abruptly, it will be turbulent. Branson said that banks need to work on improving profitability. This can be the first line of defence in troubled times.

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