German Banks Vulnerable to Housing Bubble; Should Build Buffers: Bundesbank

German Banks Vulnerable to Housing Bubble; Should Build Buffers: Bundesbank
Dark clouds hang over the financial district as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany on March 16, 2021. Kai Pfaffenbach/Reuters
Reuters
Updated:

FRANKFURT—Germany’s banks are increasingly vulnerable to an overvalued property market and finance authorities should force lenders to build up capital buffers, the Bundesbank said on Thursday in a regular stability report.

Germany cut the so-called countercyclical buffer for banks to zero at the start of the pandemic but economic growth is now robust and bank lending is rapid, so they should be forced to hold more capital in preparation for a rainy day, the central bank said.