We are now at a critical juncture, and we need to set the course for dealing with future uncertainties. For me, three aspects are at the forefront. First, we need strong retail banks. We need banks that can absorb interest rate risk and credit risk on their own and reliably supply the economy with credit.
This will allow the financial sector to fulfil its function for the real economy – and this is exactly what we mean by “financial stability”. Second, this requires solid risk management and good governance among banks. The German economy is in a period of upheaval. Credit risk can rise, and banks and the economy will need to cope with higher interest rates.