At the Bundesbank, we have a mandate under the Financial Stability Act (Finanzstabilitätsgesetz) to monitor the stability of the German financial system. 1 It is our task to identify and assess risks to financial stability. We understand financial stability as a state in which the financial system is able to perform its economic functions at all times. The financial system is made up of financial intermediaries, securities markets and market infrastructures. Our annual Financial Stability Review documents relevant developments. We identify vulnerabilities within the German financial system and highlight risks that could endanger its stability.
A well-functioning financial system is of crucial importance to economic development. The financial system is where lending and saving takes place, and where it is possible to insure against risks and make payments. Unforeseen events can jeopardise the stability of the financial system. The financial system should neither cause a downturn in overall economic activity, nor should it excessively amplify one. That is why the financial system needs to be sufficiently resilient – in other words, able to absorb unexpected, abrupt changes rather than intensifying them.
Systemic risks that could jeopardise the stability of the financial system are particularly relevant here. If one or more market participants run into difficulties, for example, the financial system’s ability to function might be reduced. That could happen if market participants are very large or closely interconnected with other players. If market participants are interconnected, those links could enable adverse developments to spread throughout the financial system, impairing its stability. Systemic risks can also emerge if there are many market participants exposed to similar or highly correlated risks.
We also share our analytical findings with the German Financial Stability Committee, which is the central body for macroprudential oversight in Germany. We provide this Committee with our assessment of the general risk situation. If we identify systemic risks, we can submit proposals to the Committee for warnings and recommendations to address them. Afterwards, we evaluate how far those recommendations have been implemented.
We also contribute our analyses and perspectives at the European and global levels. We use bodies like the European Systemic Risk Board (ESRB) and the global Financial Stability Board (FSB) to advance our primary topics in European and global forums.
This year’s Financial Stability Review takes account of developments up to 3 November 2025.
