claudia buch : the deutsche bundesbank's 2020 financial stability review speech by prof claudia buch, vice - president of the deutsche bundesbank, at the press conference to unveil the financial stability review, frankfurt am main, july 2020. * * * ladies and gentlemen, i would like to welcome you to the presentation of the deutsche bundesbank ’ s financial stability review. this year ’ s report focuses on the impact of the coronavirus pandemic on the financial system. “ the financial system should neither cause nor amplify a downturn in overall economic activity, and should perform its functions even in periods of stress. ” our definition of “ financial stability ” may have sounded abstract up until now – but the pandemic has shown in very tangible terms how important a functioning financial system is for the economy. when infection rates surged in the spring and a lockdown was imposed, averting a liquidity crisis and a rise in insolvencies was necessary. enterprises and households were supported by extensive government measures. this largely shielded the financial system from the impact of the crisis – and this was a major reason why it has continued to perform its functions. in the phase of the pandemic that now lies ahead of us, corporate insolvencies are likely to increase. banks currently have capital buffers to absorb higher losses. however, they need to use those buffers to ensure that the credit market continues to function. and : both the public and private sectors need to prepare for an increase in insolvencies. in the medium term, dealing as well as possible with the impending structural change will be one of the main priorities. a well - capitalised and well - functioning financial system will play a crucial role in this. vulnerabilities that existed before the pandemic and which are being further amplified need to be kept in check. phase 1 : liquidity crisis averted parallels are often drawn between the pandemic and the global financial crisis, but these two episodes are not entirely comparable. when the financial crisis hit more than ten years ago, it affected advanced economies more than emerging market economies. the coronavirus pandemic, on the other hand, is affecting the global economy in its entirety. in germany, gdp plummeted by almost 10 % in the second quarter of 2020. the services sector was hit harder than it was during the financial crisis. the first signs of economic recovery are now beginning to emerge, but that recovery

create positive spillovers. innovative digital financial services can contribute to well - functioning financial markets. fintech firms and innovations such as crowd - funding and distributed - ledger technologies are at the center of this debate. fintechs can facilitate access to financial services. these innovations can foster competition, lower transaction costs, and improve risk sharing – thus promoting innovation and growth. but financial innovations might also affect systemic risks. they might induce procyclical behavior. risks posed by cyber - crime need to be monitored closely and, where necessary, addressed. this is to say that digital innovations should not undermine secure, transparent, and stable financial markets. 5. conclusion there is no lack of short - and long - term challenges facing europe and the world. under the german g20 presidency, we will be addressing two important issues : resilience and digitization. strong real economies are the basis for resilience. economic growth is therefore not an end in itself. strong growth is rather the basis for inclusive growth, as it opens up space for redistributional policies. strong growth is also built on innovation, which can contribute to sustainable growth. robust financial markets are the second pillar of resilience. as we are completing the reform agenda, we are gradually moving from policy implementation to ( ex post ) impact assessments. we need impact assessments to demonstrate the long - term benefits of the reforms – benefits in terms of financing innovation, growth, and the allocation of risk in the economy. we need to look at the effectiveness of individual reforms, the interaction between reforms, and their aggregate 4 / 5 bis central bankers'speeches affect. at the global level, maintaining a dialogue on economic policy is crucial. the g20 as well as the g7 are fora that play an important part in addressing the above challenges. they allow countries to learn from best practice across countries and to develop their policy framework. the member countries have diverse experience with regard to stability issues and national policy discussions. every financial crisis may be different, but core elements and mechanisms repeat themselves. therefore, by sharing experiences, policymakers can collectively learn from each other and improve their policy responses. 6. references balli, f., kalemli - ozcan, s. and b. e. sørensen ( 2012 ). risk sharing through capital gains. canadian journal of economics 45 ( 2 ), 472 – 492. bonfiglioli, a. ( 2008 ). financial integration, productivity and capital accumulation. journal