Bundesbank's Financial Stability Warning: Risks Have Increased

Bundesbank's 2025 Financial Stability Report Released

The German Central Bank (Bundesbank) has published its Financial Stability Report for 2025. The report highlights that geopolitical tensions, trade wars, and rising national debt levels are beginning to pose a serious threat to the German financial system.

Risks in German Banks Are Increasing

The report notes that the risks associated with loans in German banks have been increasing over the last few months. It is expected that economic and structural challenges may further exacerbate these risks in the upcoming period. The high public debt levels in some EU countries, such as France and Italy, are posing an additional threat to financial stability in Europe.

Rising Rate of Troubled Loans

Since 2022, the rate of problematic loans has been steadily increasing. Initially, the commercial real estate sector was particularly affected, but economic weakness has started to spread to other sectors as well.

Risks in Stock and Bond Markets

Bundesbank Executive Board Member Michael Theurer emphasized in the report that the German economy is struggling to cope with structural challenges. High valuation levels in stock and bond markets could lead to significant market corrections in the near future.

Threats of High Debt and Low Growth

Theurer indicated that high national debt and low economic growth are harmful to financial stability in Europe. Although Germany's fiscal situation is relatively strong, other Eurozone countries face greater risks concerning debt sustainability.

Bank of England Also Issues Warning

The Bank of England (BoE), in a report published on October 8, emphasized that an economic collapse triggered by artificial intelligence or concerns regarding the independence of the U.S. Federal Reserve (Fed) could lead to sudden corrections in global markets.