FRANKFURT (dpa-AFX) - Financial regulator Bafin is urging banks to take sufficient precautions in the face of increasing risks. "The risk of insolvency has increased," said the president of the Federal Financial Supervisory Authority (Bafin), Mark Branson, in Frankfurt on Monday. This also increases the risk that companies can no longer service loans, he added. Banks must prepare for this.

At present, the German institutions' provisioning for possible loan defaults is low, Branson noted. Banks are increasingly demanding higher risk premiums and higher collateral from their customers. But Bafin must "examine very closely whether this risk provisioning is sufficient to cover the unfavorable scenarios," Branson said.

During the Corona pandemic, the feared wave of corporate bankruptcies in Germany failed to materialize. Last year, too, insolvencies rose only moderately thanks to government aid worth billions. Many banks had therefore scaled back their provisioning for possible setbacks.

One could almost get the impression that the German economy and banks were immune to credit defaults, Branson said. Government aid and the long period of low interest rates helped. Now the economy is cooling off, sales could collapse and certain sectors could get into trouble, the Bafin president said./ben/mar/DP/mis