We analysed how the simultaneous occurrence of various macroeconomic shocks over the next three years might affect the German banking system. To this end, we assumed a sudden rise in short-term interest rates and a sharp fall in stock prices, the real economy and real estate prices: all things considered, an exceedingly severe scenario.
As far as German institutions’ profits are concerned, this extreme scenario would have a considerable impact. Pre-tax results would fall into negative territory for almost half of the small and medium-sized banks. The average annual profit of the small and medium-sized institutions would drop by 91 % at its most extreme.