According to Branson, as things currently stand, it can be expected that the German financial system will be able to weather the direct impacts of the war and of the sanctions imposed on Russia and Belarus. The direct ties to these countries and to Ukraine are limited, he explained. However, in Branson’s view, the second and third-round effects, which are difficult to predict, could be problematic: “For example, we are currently seeing how the war is curbing economic growth around the world, how it is disrupting trade relations, driving up the prices of gas, oil and other raw materials, and how it is further exacerbating the problem of supply chain shortages, which has been affecting the German economy since the beginning of the COVID-19 pandemic. We are also seeing a continued rise in inflation as a result, which makes an increase in interest rates, including in the eurozone, ever more likely.” According to Branson, BaFin is also aware that there could be a major military escalation, or a political escalation in relation to trade and energy supply, at any time. This would inevitably result in market turbulence.

He emphasised that BaFin is also mindful of the fate of those seeking safety in Germany. "It was important to us to provide fast and unbureaucratic help for these people, which we did by simplifying the process of opening a basic payment account,” he explained in his opening statement.

Risk-based supervision

“As financial supervisors, we must align our actions with the risk environment,“ said Branson. “We must try to determine, in advance, where and under what circumstances the financial system is especially vulnerable.” He explained that BaFin’s focus is directed at these primary risks. And because BaFin wants its work to be transparent, it will be publishing its risk assessment every year from now on.

Alongside the short-term impacts of the war in Ukraine, BaFin’s primary focus is currently directed towards six short-term risks and two future risks.

1. The persistently low interest rate environment and the increasing interest rate risk brought about by inflation
2. The risks on the real estate market
3. The risk of significant corrections
4. The health of corporate loan portfolios
5. The risk that companies in the financial sector could be victims of cyber attacks
6. The risk the these companies may be misused for the purposes of money laundering

The future risks in the financial sector are the risks associated with digitalisation and sustainability risks.

At the end of his statement, Branson spoke about BaFin’s foundation: BaFin was established around 20 years ago, on 1 May 2002 – as Germany’s integrated financial supervisory authority. The authority was formed out of three federal supervisory offices: the Federal Banking Supervisory Office (BAKred), the Federal Securities Supervisory Office (BAWe) and the Federal Insurance Supervisory Office (BAV). According to Branson, now is not the right time to commemorate this anniversary with a detailed retrospective. “At the moment we first need to show what we are made of. The expectations towards BaFin are high – and with good reason.”

On 3 May 2022, BaFin also published its annual report 2021. The report is available to download on the BaFin website.