One stress test exercise reveals that an economic slump and shrinking real estate prices would in some cases take a heavy toll on the real estate lending portfolios of German banks. 4 Interest rate risk as a result of maturity transformation Finally, the German banking system has become more vulnerable to an abrupt increase in risk premia and thus in interest rates.
The share of newly granted loans with an fixed-term interest rates of over ten years has risen from 26% at the beginning of 2010 to 45% at last count. If interest rates were to quickly spike higher, this would instantly drive up the costs of funding these loans. But interest income would only increase with a time lag.