financial crisis. for they have not yet been completely overcome. our attention remains focused on two asset classes : commercial real estate and structured securities. bis central bankers ’ speeches it is particularly in the international commercial real estate markets that pressure could resurge, especially as a lot of commercial real estate is up for refinancing. the major german banks with an international focus have a current commercial real estate portfolio of €274 billion. half of this portfolio is accounted for by foreign business : 13 % by the united states and 7 % by the united kingdom. these banks are still holding a considerable volume – €150 billion as at the end of june – of exposure to structured products ( chart 4 ). €67 billion of this relates to residential mortgagebacked securities ( rmbs ) and €16 billion to commercial mortgage - backed securities ( cmbs ), whereas around €33 billion is in collateralised debt obligations ( cdos ). the portfolios of structured securities, however, have declined by €55 billion from last year – some €20 billion owing to maturities and redemptions, but also around €21 billion due to transfers to resolution agencies. the low - interest rate environment is still impacting on our financial system behind the scenes, entailing sizeable medium - term risks. this was discussed at length in last year ’ s financial stability review. however, risks contained in banks ’ balance sheet structure, such as overleveraging or excessive maturity transformation, are not so much at the current focus of our attention. our main worry at the moment relates to imbalances in a very short - termoriented financial system that can divert funds quickly between asset classes and thus contribute to market volatility. over the course of the year, this has become apparent particularly in the asset classes emerging market economies and commodities ( chart 5 ). part ii ( sabine lautenschlager ) germany ’ s financial system facing challenges germany ’ s banks are better equipped to tackle the crisis today than in 2008. the key drivers are : higher capital levels, stable earnings thus far and stabler funding through increased customer deposits. contrary to fears held in 2008 and 2009, german banks have lived up to their responsibility as financial intermediaries. there has not been a credit crunch in germany, nor do we see any signs at present of one occurring. one of the interesting details of the in - depth analysis is the medium - term comparison between the spring of 2008 and the summer of

’ s policymakers have taken measures to counter the crisis of confidence plaguing europe ’ s banking system. i shall say more about that later on. however, the negatives form a longer list. heading this list is the sovereign debt crisis, along with its widening and its contagion effects. developments in the financial markets should also be mentioned here. current tensions, such as impaired funding liquidity and market liquidity, but also new structural risks such as exchange - traded funds ( etfs ) and high frequency trading ( hft ), are at the centre of attention. let us now take a closer look at these negatives. the current setting : high sovereign debt is the biggest risk the sovereign debt crisis has widened and worsened. after greece and ireland in 2010, portugal was forced to accept financial assistance from the international community in may bis central bankers ’ speeches of this year. in the summer, the two large euro - area countries spain and italy were sucked into the sovereign debt crisis. the high levels of sovereign debt have generated massive contagion effects within the banking sector. the first casualties were the banking systems of the troika programme countries – greece, ireland and portugal. their access to the money and capital markets is meanwhile very limited. however, large european banks with an international focus are now likewise threatened with contagion. for example, the severe reactions in the equity markets and cds markets have hit the financial sector particularly hard ( chart 1 ). the bundesbank believes that the german financial system ’ s exposure to greece, ireland and portugal is, on the whole, manageable – not least because german banks have been doing better since 2009. as at end - june 2011, german banks ’ exposure to all greek debtors – by this i mean the public sector, the financial sector, corporates and households – totalled just under €28 billion, while german insurers ’ outstanding claims on greece totalled around €2 billion ( chart 2 ). balance sheet exposure to all borrowers from the two other troika programme countries – ireland and portugal – stands at €63 billion for german banks and a little over €10 billion for german insurance companies. exposure to borrowers in the major euro - area countries italy and spain is larger. german banks ’ exposure to the italian government sector is €42 billion, and that of german insurers €9 billion. exposure to the government sector of spain is €23 billion for german banks and nearly €6