Nevertheless, the German banking system still has vulnerabilities and structural shortcomings. Above all, the revised regulatory provisions for more capital and for a more appropriate liquidity reserve will bring about a longer-term gain in stability. One key challenge that still has to be resolved, however, is how to deal with systemically important financial institutions. II.
Risks of high sovereign debt and persistent low interest rates  The European debt crisis has been the crucial event of the past few months. Its onset in the early summer of this year placed European financial stability in acute danger. The response of governments and central banks was rapid and on a massive scale, thus preventing an escalation of the crisis.