- The assessments of the profitability and resilience of small and medium-sized banks (less significant institutions, LSIs) published by Deutsche Bundesbank and the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) [German Federal Financial Supervisory Authority] attest to the robust health of banks in Germany. “The findings show that the approximately 1,100 institutions that were tested are well prepared for potential stress situations,” says Daniel Quinten, member of the Board of Managing Directors of the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) [National Association of German Cooperative Banks], on behalf of the German Banking Industry Committee (GBIC). The institutions’ capitalization remains high and is significantly in excess of the minimum requirements.
The same stress scenario was used in the test across Europe. In this scenario, the supervisory authorities assumed a strong decline in economic activity and considerable market turbulence.
Based on these stress test results, the supervisory authorities will make an individual recommendation for each institution’s own funds, which the institution must adhere to going forward. In light of the persistently challenging economic conditions, the GBIC advises the supervisory authorities to be cautious with their recommendations in order to avoid unnecessarily impairing a bank’s ability to lend. At the same time, the institutions’ high level of resilience should be adequately taken into account when reviewing the general capital requirements that are in place. The GBIC is therefore reiterating its call for the removal of the sectoral systemic risk buffer for residential real estate finance and the countercyclical capital buffer.
The Committee is pleased that the supervisory authorities reduced the scope of the 2026 LSI stress test compared with the 2024 test. “That was an important step in relieving the burden on banks, although the administrative effort involved in participation and implementation remains high,” adds Quinten. The simplifications already made should therefore be re-examined. Through constructive dialogue with the supervisory authorities, the GBIC is advocating for further reductions in the cost and effort involved in future tests without compromising the accurate modeling of risk.
Bundesverband der deutschen Volksbanken und Raiffeisenbanken e.V. (BVR) Bundesverband der deutschen Volksbanken und Raiffeisenbanken e.V. (BVR)