Risks to German financial stability remain elevated, the Deutsche Bundesbank said in its Financial Stability Review 2026. Executive Board member Michael Theurer presented the review, saying the times are challenging and look set to remain so.
Real estate lending draws scrutiny
Almost 40 percent of new residential real estate loan volume in the second quarter of 2026 carried a loan-to-value ratio above 90 percent of the property value. Loans where the amount exceeded the property value accounted for almost 11 percent of new residential lending volume.
The Bundesbank pointed to these shares as a vulnerability. The countercyclical capital buffer and a sectoral systemic risk buffer for residential real estate loans are meant to strengthen the banking system’s loss absorption, and the review describes existing macroprudential capital requirements as appropriate.
Debt and valuations weigh on outlook
Theurer said the potential for setbacks is considerable. He described the mix of high and rising government debt with low economic growth as toxic.
The review also cites high valuations in financial markets, especially in US technology, and rising credit risk. Non-performing loans in the German banking sector have risen since the middle of last year.
Funds and private credit under watch
German open-end real estate funds have seen rising outflows since mid-2023, and some have suspended redemptions or introduced restrictions. Commercial real estate non-performing loans continued to rise, with low transaction volumes and a risk of price falls.
Theurer called for better data exchange in Europe and stronger reporting in less transparent segments such as private credit. He also said households remain robust overall.
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Source: Deutsche Bundesbank
