advantage in terms of cost structure and overheads, and they are burdened by less red tape. however, they cannot effectively operate without the existence of traditional banks, nor can their business model be sustained without banks. bank 1 / 3 bis - central bankers'speeches accounts and customer deposits are a basic pillar for the functioning of the payments ecosystem. therefore, the co - existence of these institutions and traditional banks, is at the same time competitive and interdependent. competitive, because fintechs have gained market share from traditional banks, particularly in payment services, and interdependent because they rely on traditional banks in order to provide these services. incumbent institutions have recognised the opportunities presented by fintechs and have started embracing collaboration and partnerships. a few of them even established their own innovation labs or invested in fintech start - ups in order to leverage their expertise and drive digital transformation within their organisations. banks and fintech companies can collaborate in various ways in order to leverage their respective strengths and offer better services to customers. there are benefits to be reaped when combining the network reach and regulatory expertise of incumbent banks, with the versatile and innovative operating model of fintechs. this could include : ( i ) the formation of partnerships or takeovers that would enable banks to benefit from the innovative technology and agility of fintechs, while leveraging their own infrastructure, regulatory knowledge, and customer base. ( ii ) another benefit is access to capital : fintechs often require capital to scale their operations. banks can provide funding or invest in fintech start - ups, allowing them to grow and innovate. in return, banks can benefit from the potential upside of successful fintech ventures and gain exposure to emerging technologies and business models. ( iii ) finally, banks possess a wealth of customer knowledge. by collaborating with fintechs, perhaps on an anonymised customer basis, banks can enhance the experience they offer to customers, and fintechs may further refine their offering and improve their risk assessment. however, new opportunities come with challenges and risks. the supervisory and regulatory community remains vigilant against these to ensure laws and regulations are followed, irrespective of business models and the levels of technological advancement. on the legislative and regulatory front, the european parliament and the council reached a political agreement last week on the capital requirements package, crd 6, implementing the basel 3 framework in the eu. also last week, the european commission proposed new rules in

however, such crises cannot be ruled out entirely in the future either. therefore, third, it will be necessary to establish a crisis management and resolution mechanism as a prudent and necessary supplement to the existing regulatory framework. given strict compliance with the “ no bail - out ” principle, assistance to individual member states linked to strict conditionality and a very limited timeframe should be possible if stability of monetary union as a whole is at risk. in a well - regulated crisis mechanism of this kind, private debtors should not be allowed to escape their responsibility. it should be stated explicitly, however, that such a mechanism should be established only after the end of the crisis and not interfere with existing agreements and obligations. in addition to the risks of the debt crisis, it is crucial not to lose sight of the risks inherent in an extended period of low interest rates. this includes, in particular, the possibility of new bubbles being formed in some markets for assets as part of a resurgent “ search for yield ”. this is not a problem at present, but could become an issue in the medium term. persistently low interest rates incite, furthermore, the entering of liquidity risks and thus put banks at the whim of market sentiment. expanding banks ’ short - term refinancing was more or less unavoidable in periods of strong mistrust ; the correction of this expansion has not taken place so far. this means that the banks may be on a collision course with the large financing needs of general government, since large issuances of government bonds are to be expected over the next few months. finally, an abundant supply of liquidity may incite banks to defer a necessary clearing - up of their balance sheets. major legacy problems in the loan portfolios may lead to banks holding back longer in granting new loans. iii. aspects of the risk situation in the german banking system beyond the risks emanating from the global setting, the risk and stability situation in the german financial system looks more positive than it did a year ago. banks ’ profitability has recovered since its slump in 2008 and their capital adequacy has improved. between the first quarter of 2008 and the second quarter of 2010, large complex financial institutions increased their tier 1 capital ratio, on average, by 2. 4 percentage points to 10. 4 %. finally, the german banking system has remained fully functional at all times and the credit crunch that was feared for a time did not materialise.