Germany underwent an FSAP update in 2011

Germany underwent an FSAP update in 2011 3 that included assessments 4 of the Basel
Committee on Banking Supervision’s (BCBS) Core Principles for Effective Banking
Supervision, the International Association of Insurance Supervisors (IAIS) Insurance Core
Principles, the International Organisation of Securities Commissions (IOSCO) Principles and
Objectives of Securities Regulation, and the Committee on Payment and Settlement Systems
(CPSS)-IOSCO Recommendations for Central Counterparties.

The FSAP concluded that the German financial system had stabilised and was recovering
after parts of it were hit hard during the global financial crisis. While banks were found to be
robust against many shocks, important vulnerabilities remained – such as balance sheet
weaknesses in some banks (e.g. Concentration risks, wholesale funding exposures) and
widespread low profitability that made it more challenging to build up stronger capital
buffers. The FSAP commended the high standard of financial sector regulation and
supervision, but it also identified areas of specific weakness in the crisis and it stressed that
structural reforms (particularly for Landesbanken) 5 were overdue.

Finally, the FSAP noted that the framework to manage financial crises had been enhanced significantly, particularly
with the introduction of a new bank resolution regime, but that deposit protection schemes
needed to be rationalised and that specific strategies for exiting from government support to
banks should be finalised.