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Bafin Frankfurt: The Federal Financial Supervisory Authority (Bafin) sees an increased risk of loan default.
The Federal Financial Supervisory Authority (Bafin) sees a higher risk of loan default. © Boris Roessler / dpa

Financial regulator Bafin warns banks to be careful and cautious. The risk of insolvency has risen, but current guarantees are quite low, warns Bafin boss Branson.

Frankfurt am Main – Financial regulator Bafin warns banks to take appropriate precautions in the face of increased risks. “The risk of insolvency has increased,” said the chairman of the Federal Financial Supervisory Authority (Bafin), Mark Branson, on Monday in Frankfurt. This also increases the risk that companies will no longer be able to repay the loans. Banks should prepare for this.

Branson noted that German institutions are currently making little provision for possible loan defaults. Banks are increasingly demanding higher risk premiums and greater guarantees from their clients. However, Bafin must “very carefully check whether this risk provision is sufficient to cover unfavorable scenarios,” Branson said.

Germany has been spared massive insolvencies in recent years

In it crown-pandemic, the feared wave of company bankruptcies in Germany did not materialize. Insolvencies rose only moderately last year thanks to billions worth of state aid. Therefore, many banks had reduced their provisions for possible setbacks.

One could almost get the impression that the German economy and banks are immune to loan defaults, Branson explained. Government aid and low long-term interest rates helped. The economy is now cooling off, sales could collapse and certain sectors could struggle, the Bafin president said.

Meanwhile, the Bafin wants stricter. Guidelines for Overvalued Life Insurance Introduce. However, the proposals do not go far enough for consumer advocates.(dpa, yes)

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