BaFin Introduces Countercyclical and Sectoral Systemic Risk Buffer

DBRS Morningstar has released a commentary on the German residential real estate market.

Key highlights include:

• On 31 January 2022 the German banking regulator, BaFin, announced a 0.75% countercyclical buffer (CCyB) on all domestic risk-weighted assets (RWA) starting on 1 February 2022 to be fully implemented by 1 February 2023.

• On 12 January 2022 the BaFin also announced its intention to introduce a 2.0% sectoral systemic risk buffer (sSyRB) on RWAs related to loans collateralised by residential real estate to be phased in starting on 1 April 2022.

• Similar to other countries, the price increase for residential real estate prices in Germany measured on an absolute as well as a relative basis has been significant.

“DBRS Morningstar considers the introduction of the buffers to be a precautionary measure. However, at this point we do not see mortgage loan books representing a major risk to the banking system, as the debt-service capacity has remained intact due to the low interest rate level and the relatively stable level of household debt as a percentage of GDP and disposable income” said Sonja Förster, Vice President, Global Financial Institutions at DBRS Morningstar.