is to say claims with a maturity of more than five years – at german banks has risen from 60 % in 2007 to just under 70 %. the ratio among institutions in the savings bank and cooperative bank sector is especially high. at 83 %, it is significantly higher than the 47 % ratio for commercial banks. thus, we are in a situation in which banks and savings banks are holding many long - term, lowyielding investments in their books. moreover, valuations for many investments are extremely high. by contrast, risk provisioning in the german banking system is very low, at 0. 6 % of total assets. this makes banks vulnerable to unexpected macroeconomic developments, such as an abrupt hike in interest rates or an unforeseen deterioration in economic activity. at the same time, they have shortened the maturities of their liabilities. the ratio of overnight deposits to total liabilities towards non - banks has risen within ten years from 36 % to around 60 %. an important aspect in this context is that customers are parking their funds in deposits because interest rates on investments are so low. it is difficult to predict how these funds will be shifted as soon as more attractive investments become available. historical experience gives us a rough idea, but in view of the extreme situation of the current low - interest - rate environment it is of only limited use as a guide for the future. the bottom line here is that we see an increased vulnerability of banks to changing interest rates. this is why we have been keeping a very close eye on the topic of interest rate risk. our low - interest - rate survey 2017 focused on this very issue, simulating the implications of possible shocks for small and medium - sized banks and savings banks. one scenario entailing an abrupt rise in the yield curve by 200 basis points highlights banks ’ short - term vulnerability. in such a scenario, profits would initially plummet by around 55 % before staging a recovery in the medium term. this means that the speed at which interest rates are raised is crucial. the stress test carried out as part of our low - interest - rate survey combined several risks at once. besides an abrupt rise in the yield curve of 200 basis points, it simulated a simultaneous increase in credit and market risk. on aggregate, in such a case the tier 1 capital ratio would drop from around 16 % to around 13 %, which is to say by some three percentage points. yet a more detailed look reveals the positive impact of substantially improved capital levels

other banks in the euro area. all of them are now selling the same basic product : in other words, the euro. besides that, credit institutions are faced with increasing competition from direct banks, online brokers, insurance companies, free investment companies, and so on. possible responses to the new competitive situation are either consolidation – including hostile takeovers – or specialisation. as we have had to learn from some examples from the recent past, the merging of long - established banks is not an easy undertaking : at the time when the mergers are to be implemented, at the latest, there is a clash of different corporate cultures, and problems could emerge. this applies all the more in the case of cross - border mergers. at present, consolidation in the financial sector is taking place mainly at the national level. however, the situation may well change in the future. the euro has the effect of promoting competition. it ensures transparency and makes comparisons within the euro area easier. those involved in the legislative process in germany are nowadays aware that the underlying statutory and regulatory conditions are crucial to a financial centre ’ s success. since the early nineties, the german legislature has passed three special acts for promoting the financial market. a fourth is to enter into force in this legislative period. so far, the main points of emphasis of the legislation have been the reorganisation of stock exchange supervision and the establishment of the federal supervisory office for securities trading here in frankfurt. in particular, the securities trading act provides the federal supervisory office for securities trading with instruments for investigating insider offences. the fourth financial market promotion act is intended to strengthen further the integrity of the financial markets and broaden the scope of action available to stock exchanges and investment companies. the supervisory system for financial markets in germany and some other european countries is reformed to meet the challenges of globalisation and securitisation. in addition the trend towards a more capital market orientation will be met by the requirements for banking supervision as set up in the basle ii agreement. overall, the financial sector in europe and germany as a financial centre are well equipped to face the challenges and make use of the opportunities that the euro presents. moreover the european monetary union has led to a region of stability unprecedented in european history. currently, the area of stable money goes from the atlantic ocean to the aegean sea, and from the strait of gibraltar to the arctic ocean. inflation as well as interest rates have gone down to levels hitherto unexperienced in many participating countries. growth and