© BaFin/Matthias Sandmann
Foreword by the President
BaAdvances in digitalisation are making the German financial sector faster, more efficient and more competitive – but also more vulnerable: the risk of cyberattacks is increasing, and dependency on a few major IT service providers is growing.
The direct and indirect impacts of geopolitical tensions can affect companies’ balance sheets, operational processes and supply chains. This too makes the financial system more vulnerable.
Companies in the financial sector need to mitigate these risks and take action to increase their resilience.
German banks and insurers were able to weather the abrupt increase in interest rates and have, on the whole, proven stable. They are currently benefitting from increasing rates. At the same time, the full effects of the recent rate increases are not yet clear. Financial institutions must prepare themselves for this.
BaFin analyses the risks facing all market participants and consumers on an ongoing basis and takes action in response to these risks.
This year’s “Risks in BaFin’s Focus 2024” report is BaFin’s third annual compilation of the risks that are most capable of jeopardising the financial stability or the integrity of the financial markets in Germany. These risks will be our primary focus in 2024. This year, we have added to the list concentration risks from outsourcing.
In 2024, we will focus on a total of seven risks:
Main Risks in BaFin’s Focus
1. Risks arising from significant increases in interest rates
2. Risks arising from corrections on the real estate markets
3. Risks arising from significant corrections on the international financial markets
4. Risks arising from defaults on loans to German companies
5. Risks arising from cyberattacks with serious consequences
6. Risks arising from inadequate money laundering prevention
7. Risks arising from market concentration due to the outsourcing of IT services
The risks are not listed in order of priority. The trend arrows reflect the development of each risk (increasing, constant, decreasing).
The specific steps BaFin will take to mitigate the seven major risks are detailed following the individual risk descriptions. With these planned measures, BaFin pursues its medium-term objectives for the years 2022 to 2025.
In addition to the seven major risks, the way in which the companies under BaFin’s supervision deal with longer-term trends will be significant. These trends include sustainability, the digitalisation of the financial industry and the aforementioned risks of geopolitical turmoil.
As in previous years, it should be noted that not all of the scenarios described in this report will materialise, and new risks may emerge. BaFin looks to identify such emerging risks at an early stage and react quickly.
Trends
1. Digitalisation
2. Sustainability
3. Geopolitical turmoil
