However, given the strong upward pressure on prices in recent years, it cannot be ruled out that the value of loan collateral is being overestimated. The value of loan collateral will probably turn out to be lower, particularly in the event of an economic downturn. This increases the risk of unexpected losses arising as a result of defaults on loans.
One key macroeconomic risk that the German financial system is exposed to is interest rate risk. In recent years, banks have sharply increased the share of new loans with long interest rate lock-in periods.