German banks show resilience in joint stress test

A joint stress test conducted by the Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank has found that the majority of small and medium-sized German banks and savings banks remain resilient. Nikolas Speer, the top bank controller at BaFin, stated that the institutions are “overall solidly positioned” despite a simulated three-year global economic downturn.

The simulation modeled severe scenarios, including geopolitical escalations, trade barriers, supply chain disruptions, rising raw material prices, and significant corrections in stock and bond markets. Under these conditions, the aggregate common equity tier 1 ratio of the tested banks would decrease by approximately 3.8 percentage points to 14.6 percent.

However, several dozen institutions failed to meet the required capital levels in the simulation. Speer noted that the number of institutions showing irregularities is roughly half of what was reported in a similar test two years ago. BaFin indicated it is closely monitoring these specific institutions and will take supervisory measures if necessary.