Thirteenth AFS Report on Financial Stability in Germany – Geopolitical Tensions Increase Uncertainty for the Financial System

01.07.2026

Thirteenth AFS Report on Financial Stability in Germany – Geopolitical Tensions Increase Uncertainty for the Financial System

The Committee for Financial Stability ( AFS ) presents its thirteenth report to the German Bundestag for the reporting period from 1 April 2025 to 31 March 2026. The AFS addressed the development of the risk situation and resilience in the German financial system as well as the appropriateness of the macroprudential policy package. In doing so, it discussed in detail possible risks to financial stability from the real estate and corporate sectors as well as the non-bank financial sector. Furthermore, the AFS addressed geopolitical risks, cyber risks, and risks arising from high public debt in some countries. Possible risks from the use of artificial intelligence and Stablecoins were also discussed within the AFS .

The macro-financial environment during the reporting period was characterized by high economic and geopolitical uncertainty. Against this background and due to structural challenges, the German economy recorded only modest growth. Despite interim declines in stock markets, valuation levels remained high. The German banking sector proved resilient and achieved solid profits. Non-bank financial intermediaries ( NBFI ) in Germany also proved robust overall. Liquidity risks increased in open-ended real estate funds. The situation in the commercial real estate sector remained tense. Vulnerabilities in the residential real estate market continued to decrease overall. However, the AFS sees possible new risks given a relatively high proportion of new residential mortgages with high loan-to-value ratios. The Committee will continue to analyze developments.

"The German financial system has proven to be stable overall – banks showed resilience in an environment characterized by high uncertainty. The economic consequences of the Iran conflict are difficult to assess. In the event of an unfavorable development in energy prices and growth, credit risks in the banking sector, particularly in the corporate sector, could increase. Financial market participants should strengthen their resilience against cyber risks and hybrid threats. We will continue to monitor developments closely."

© Alexandra Lechner

Theurer, Michael

Michael

Theurer

Member of the Board of the Deutsche Bundesbank

The current risk situation in the German financial system is largely shaped by the economic consequences of the Iran conflict and high uncertainty. The economic upturn originally expected for 2026 is likely to be weaker as a result of the conflict. High energy prices and weaker growth expectations pose the risk of economic stagnation accompanied by rising inflation. In an unfavorable scenario, credit risks in the banking sector could increase noticeably. Corporate loans would be particularly affected. The consequences of the Iran conflict and the uncertain economic outlook are increasingly burdening German companies. Advances in artificial intelligence, combined with increasing geopolitical tensions and hybrid threats, are increasing risks for the financial system, e.g. through cyberattacks.

The current risk environment and high uncertainty underscore the need to preserve the resilience of the German financial system. An important contribution to this is made by the macroprudential policy package of the Federal Financial Supervisory Authority ( BaFin ). The package consists of the countercyclical capital buffer of 0.75% of domestic risk positions and the sectoral systemic risk buffer on residential mortgage loans of 1.0%. The AFS considers both buffers to be appropriate. The AFS will continue to observe and evaluate developments. If necessary, the AFS can recommend flexibly adapting the measures to a changed risk situation. The member institutions of the AFS are also continuously reviewing whether further measures need to be taken to maintain financial stability.