Mark Branson, President of the Federal Financial Supervisory Authority (BaFin), attends vdp’s annual reception

Berlin, December 2, 2022

  • BaFin’s President, Mark Branson: “The phase we are currently in is complex, risky and dynamic; banks should be careful and preserve their resilience”
  • vdp’s President, Dr Georg Reutter: “Inappropriate regulation will burden the real economy”

The Association of German Pfandbrief Banks (Verband deutscher Pfandbriefbanken, vdp) welcomed around 250 guests to its annual reception for 2022 in Berlin on Thursday evening. Guests included representatives from the German Bundestag, various ministries, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin), the Bundesbank and vdp member institutions. BaFin’s President, Mark Branson, gave the keynote address.

In his opening speech, vdp’s President, Dr Georg Reutter, discussed the numerous issues that are currently putting a strain on the economy and testing social cohesion in Germany, including the difficult situation in the domestic housing market, which is very sensitive from a socio-political standpoint. He noted that inappropriate regulation will burden the real economy and will also have socio-political consequences.

“We need a regulatory framework that makes lending possible”

“Germany needs every new apartment it can build. Regulations that limit lending and make it more expensive will not help in that regard,” Dr Reutter said by way of explaining his critical stance towards the capital buffers that will go into effect on 1 February 2023. “In general, what we need is a regulatory framework that is robust, but which at the same time will enable us to fulfil our core mission – lending.”

The situation in the German real estate market will definitely require even greater attention from all market players in 2023 than it did this year, Dr Reutter noted. Among other things, he pointed to residential property prices, which for the first time in twelve years declined slightly during the third quarter of this year.

“The golden age in the real estate market has likely ended, for the time being.”

However, he noted that there were no signs of a price collapse. Indeed, overall, the German real estate market is robust and banks continue to follow solid lending practices.

In the keynote address that followed, BaFin’s President, Mark Branson, stressed that German banks are currently relatively well positioned – in part because they are basically well capitalised and resilient. However, BaFin's President went on to say: “The phase we are currently in is complex, risky and dynamic.” Regarding the recent decrease in risk provisions, he warned:

“We do not know whether the real estate market and German companies will have a hard or soft landing. For that reason, banks need to set as much money aside as possible.”