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.
We can debate how much of that decline in liquidity is a result of regulation – and certainly some of it is – and how much simply owes to large players deciding to alter the way they run their businesses independently of regulatory changes. 1 There is at least some evidence that market liquidity is more costly than it used to be.