From the perspective of financial stability, this means that cyclical risks are continuing to accumulate within the German financial system. These risks are not directly visible as low interest rates are keeping valuations high in some cases, the markets are liquid, and asset  prices and loans are still experiencing dynamic growth.
At the same time, the vulnerabilities of the German financial system to unexpected macroeconomic developments are growing further. We have described these vulnerabilities in past years:  • After ten years of positive economic development, future credit risks are potentially being underestimated. • Meanwhile, the recoverability of loan collateral such as real estate is potentially being overestimated.