2 - 2. 5 % of gross credit to about 0. 5 % ( figure 1 ). this reflects the good state of the german economy, but might be inadequate in terms of risks going forward. in addition, credit growth has been strong – roughly 5 % recently – and the credit - to - gdp gap has been closing quickly ( figure 2 ). • overvaluation of collateral : the growth rate of loans to domestic households for house purchase has risen continuously since 2010 ( figure 3 ). prices for residential real estate have been rising rapidly in recent years ( figure 4 ). to some extent, this reflects a catching up as german real estate values have not inflated much over the past decades. however, bundesbank estimates suggest that property prices in urban areas might be overvalued in the range of 15 % to 30 % compared to macroeconomic fundamentals. • interest rate risk : banks as well as other financial intermediaries might be hit by an abrupt increase in market rates. german banks have, for instance, increased the share of mortgage loans with a maturity of over ten years from 30 % to 45 % between 2014 and 2018 ( figure 5 ). given that mortgage loans in germany are mostly fixed - interest rate loans, banks have thus increased their exposure to interest rate risks ( figure 6 ). but interest rates that stay low for even longer are also problematic, as they provide incentives to “ search for yield ”. german life insurers with nominal payment obligations are particularly affected. these vulnerabilities pose a potential threat to financial stability because the associated risks are highly correlated, might materialize simultaneously and reinforce each other. our analytical work focussed on an unexpected and severe economic downturn as the main risk scenario. such an economic slump is likely to entail a considerable correction of asset prices, and it might expose several vulnerabilities at the same time. rising losses from credit defaults would mean falling values of assets and loan collateral. these losses would eat into banks ’ available capital buffers. in sum, there is a risk of many banks responding to such unforeseen developments at the same time in order to meet the capital requirements imposed by the supervisory authorities or the market. however, banks are barely able to build up capital internally in an economic downturn. in addition, raising new capital on the market would probably not be possible either. the only remaining option for banks would be to scale back liabilities ( deleveraging ) in order to stabilize

macroprudential policy in europe : the german countercyclical capital buffer ( ccyb ) panel statement at the seminar “ financial stability and central banks ” bank of mexico 01. 11. 2019 | mexico city | claudia buch 1 in europe, macroprudential policy is a national task that calls for close collaboration at the european level. 2 cyclical risks have built up in the german financial system. 3 the ccyb is the appropriate instrument to address cyclical systemic risks. 4 summing up 5 references 6 figures the global economy is at a crossroads : trade tensions and geopolitical conflicts are leaving their mark in global trade and investment, growth forecasts are being revised downward, and uncertainties abound. whether and to what extent risks to the growth outlook will materialize is unclear, and there is uncertainty about the longer - term growth potential. the global financial system is more resilient to these risks and uncertainties because the banking system is better capitalized now than in the period prior to the global financial crisis. however, the global economy remains highly leveraged, risks may have migrated to the non - bank financial system, and vulnerabilities might become exposed unexpectedly. central banks are attentive observers of these trends, as the conduct of monetary policy depends on a stable financial system. hence, i very much welcome the initiative of the bank of mexico in organizing this seminar on financial stability and central banks. given the close interlinkages in the global economy – both real and financial – it is important to learn from each other and to share experiences. there are three experiences and insights that i would like to share with you today : • first, i would like to stress the importance of international policy coordination. in europe, macroprudential policy is essentially a national task, but with close coordination at the european level. this accounts for the fact that the european financial system is highly integrated and that financial shocks might easily spill over across borders. • second, i would like to update you on our current assessment of financial stability risks in germany. until very recently, the german economy saw an exceptionally long spell of positive growth rates – one of the longest in the post - war years. during the long period of robust growth and low interest rates, cyclical risks have built up in the german financial system. at the current juncture, the slow - down of global growth is certainly being felt in the german economy. hence, we are concerned that a further (