predict where the economy is heading, or what shocks the system will yet have to endure. we will work with scenarios and will keep needing to react to crises at short notice. it is all the more important, then, that we have a reliable compass to provide a sense of direction. our institutional framework serves to stake out this regulatory frame of reference. sound banking regulation and supervision are important elements of this compass. with regard to regulation, the recent turmoil in financial markets has made it clear that this is not the time to talk about deregulation. quite the opposite : the reforms brought in over the past 15 years are precisely what has made the banking sector more resilient and allowed it to make it through the crisis years relatively unscathed. resilience means being able to cope well with unexpected developments without external assistance. so what can banks, supervisors and regulators actually do, in practice, to maintain resilience? 3. 1 gear risk management and governance of institutions to negative scenarios the backbone of a stable, resilient financial sector is the risk management of the institutions themselves. a properly functioning set - up for the monitoring, management and control of internal processes reduces those risks over which banks themselves have some influence. that ’ s the best shield against risks coming in from the outside – particularly in times of intense uncertainty. when it comes to operational matters, we are witnessing a significant rise in risks from the virtual environment, not least through cyberattacks. this is exactly the time when sound management of the classics – interest rate risk, credit risk – is called for. the banks themselves cannot directly influence the macroeconomic setting. at the same time, strong changes in market interest rates impact considerably on interest margins, the present value of own funds, and credit risk. when assessing future risks, it must be borne in mind that interest rates have already risen significantly. the higher interest rates are, the weaker the impact of a 200 basis point increase appears to be – in relative terms. that ’ s why the basel coefficient is currently pointing to diminishing risks for many institutions. but the actual risks in the stock of loans certainly haven ’ t got any smaller. you see, the interest rate hikes that have already happened harbour risks and looming losses that are not yet fully reflected on balance sheets. and even if banks stand to benefit from rising interest rates in the longer term, interest margins could narrow initially. on the deposits side, there is mounting pressure from customers wanting higher interest rates

gov / news / pressreleases / 2023 / pr23033a. pdf 3. see financial stability board ( 2019 ), p. 9. 4. see the results of the bank lending survey https : / / www. bundesbank. de / en / tasks / monetary - policy / economic - analyses / - / banklending - survey - for - germany - 618070 [ https : / / www. bundesbank. de / en / tasks / monetary - policy / economic - analyses / - / bank - lending - survey - for - germany - 618070 ] 5. see grimm, jora, schularick and taylor ( 2023 ). 6. according to reis ( 2022 ), inflation volatility in the united kingdom was lower in the period from 1997 to 2016 than in the eight preceding centuries. 7. see federal statistical office, fachserie 2, reihe 4. 1. the comparison is based on the years 2001 - 06 and 2009 - 13. 8. see deutsche bundesbank ( 2020 ), p. 49. 9. see deutsche bundesbank ( 2021 ), p. 46. 10. see https : / / www. fsb. org / multimedia / safersimplerfairer / ; https : / / www. fsb. org / work - of - the - fsb / assessing - the - effects - of - reforms / [ https : / / www. fsb. org / work - of - the - fsb / assessing - the - effects - of - reforms / ] 11. the most recent information available on enterprises ’ capitalisation is from 2021. see deutsche bundesbank ( 2023 ), p. 71. 12. see imf world economic outlook. in 2020, the decline in gdp was 3. 7 % in germany and 2. 8 % worldwide ( https : / / www. imf. org / external / datamapper / ngdp _ rpch @ weo / oemdc / advec / weoworld ). 13. see deutsche bundesbank ( 2021 ), p. 24. 14. see deutsche bundesbank ( 2020 ), p. 41. 15. see buch ( 2023 ). 16. see deutsche bundesbank ( 2023 ) and federal statistical office for the current value based on the change in the harmonised index of consumer prices ( hi