{
  "title": "Germany: Financial Sector Assessment Program-Technical Note-Stress Testing, Interconnectedness, and Risk Analysis",
  "publication": "IMF Staff Country Reports, August 16, 2022",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2022/08/10/germany-financial-sector-assessment-program-technical-note-stress-testing-522095",
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  "summary": "The financial sector weathered COVID relatively well on the back of high pre-crisis capital and liquidity buffers, strong public and private sector balance sheets, and unprecedented public and ECB support.",
  "sections": [
    {
      "heading": "Executive summary and key findings",
      "content": "- The financial sector weathered COVID relatively well on the back of high pre-crisis capital and liquidity buffers, strong public and private sector balance sheets, and unprecedented public and ECB support.\n- Immediate risks to Germany’s financial stability from Russia’s invasion of Ukraine appear to be manageable due to the banks’ limited direct exposures to Russia.\n- Risks associated with the economic fallout could impact some individual financial institutions, non-performing loans, and house prices.\n- Real GDP growth was projected to regain momentum from mid-2022 onwards, but the war could hinder the recovery through:\n  - supply constraints,\n  - higher-than-expected above-target inflation (with higher energy prices and supply constraints),\n  - a tightening of financial conditions,\n  - shifts in investors’ confidence."
    },
    {
      "heading": "Risks, channels, and vulnerabilities",
      "content": "- Direct exposure channel: Banks’ limited direct exposures to Russia mitigate immediate systemic risk.\n- Indirect macro-financial channels that could transmit and amplify the shock:\n  - deterioration in asset quality (non-performing loans),\n  - house price corrections affecting collateral values,\n  - higher inflation driven by energy price increases and supply constraints,\n  - tightening of financial conditions that could stress funding and liquidity positions at individual institutions,\n  - investor confidence shifts that can affect market funding and valuations."
    },
    {
      "heading": "Stress testing, interconnectedness, and risk analysis (implications)",
      "content": "- The assessment emphasizes the role of pre-crisis capital and liquidity buffers and policy support (public and ECB) in absorbing shocks.\n- Stress-testing and interconnectedness analysis should focus on:\n  - idiosyncratic impacts on individual institutions despite manageable immediate systemic exposures,\n  - scenarios with prolonged supply constraints and sustained above-target inflation,\n  - the interaction between macroeconomic shocks and financial sector vulnerabilities (asset quality, house prices, funding conditions)."
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      "heading": "Subjects and keywords (as listed)",
      "content": "- Subject: Asset and liability management, Commercial banks, Cooperative banks, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, International organization, Liquidity, Liquidity requirements, Monetary policy, Stress testing\n- Keywords: building and loan association, cash flow, Commercial banks, Cooperative banks, ECB support, FSAP solvency, Global, hurdle rate, Liquidity, Liquidity requirements, Stress testing, swap line\n\nSource: Germany: Financial Sector Assessment Program-Technical Note-Stress Testing, Interconnectedness, and Risk Analysis (IMF Staff Country Reports 2022, 272).\n\n---\n\n Content in this bundle\n\n- 1deuea2022009\n  - 1deuea2022009 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1deuea2022009 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: August 16, 2022",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400218019.002",
    "The financial sector weathered COVID relatively well on the back of high pre-crisis capital and liquidity buffers, strong public and private sector balance sheets, and unprecedented public and ECB support.",
    "Immediate risks to Germany’s financial stability from Russia’s invasion of Ukraine appear to be manageable due to the banks’ limited direct exposures to Russia.",
    "Risks associated with the economic fallout could impact some individual financial institutions, non-performing loans, and house prices.",
    "Real GDP growth was projected to regain momentum from mid-2022 onwards, but the war could hinder the recovery through:",
    "Direct exposure channel: Banks’ limited direct exposures to Russia mitigate immediate systemic risk.",
    "Indirect macro-financial channels that could transmit and amplify the shock:",
    "The assessment emphasizes the role of pre-crisis capital and liquidity buffers and policy support (public and ECB) in absorbing shocks.",
    "Stress-testing and interconnectedness analysis should focus on:",
    "Subject: Asset and liability management, Commercial banks, Cooperative banks, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, International organization, Liquidity, Liquidity requirements, Monetary policy, Stress testing",
    "Keywords: building and loan association, cash flow, Commercial banks, Cooperative banks, ECB support, FSAP solvency, Global, hurdle rate, Liquidity, Liquidity requirements, Stress testing, swap line",
    "**1deuea2022009**"
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