Five main recommendations to strengthen banking supervision

• Analytical, forward looking assessments of institutions need to be enhanced by firmly
embedding the use of rigorous stress testing in supervisory practices/capital adequacy
assessments (BCPs 6,7 and 19);

• Increase the scope and frequency of the German authorities’ own inspection work,
focusing on areas such as liquidity risk management, stress testing capabilities and
information technology (IT) infrastructure (BCP 7);

• Amend the German Banking Act to facilitate prior approval of acquisitions that may
have a material impact on the risk profile of an institution (BCP 5);

• Firmly embed the use of new powers to impose higher capital requirements in
supervisory practices and closely monitor the efforts of institutions to strengthen their
capital base in anticipation of Basel III (BCP 6);

• Extend reporting requirements and develop a standardised, comprehensive framework
that ensures timely and granular reporting of all material risks (BCP 21).