The European Commission’s proposals for implementing the new tighter capital requirements for banks are a topic of public debate. Critics say the additional requirements will hit small and medium-sized enterprises in particular. The Bundesbank, meanwhile, sees no impediments to SME funding. Executive Board member Joachim Wuermeling says the legislative proposal would not involve any changes for most of the 1,300 institutions.

Bundesbank Executive Board member Sabine Mauderer will spend two years as Vice-Chair of the Network for Greening the Financial System (NGFS), before serving as Chair for the following two years.

According to the Federal Statistical Office (Destatis), gross domestic product (GDP) in 2021 was 2.7% higher than in 2020 (in price-adjusted terms). “Economic activity in 2021 was once again highly dependent on coronavirus infection rates and the associated containment measures,” said Georg Thiel, President of the Federal Statistical Office, at a press conference in Wiesbaden.

“Stability is the Bundesbank’s mission and its core,” Bundesbank President Joachim Nagel emphasised in his inaugural speech at the change of office ceremony in Frankfurt am Main. “The German public expect, and rightly so, that the Bundesbank will make its voice heard as an advocate for a culture of stability. I can reassure them that it will continue to do so,” he said. At the same time, the Bundesbank should rise to the challenges that change brings and harness the opportunities it offers.

At first the euro was mistrusted, with many calling it the “teuro” (“expensive euro”). Around 20 years ago, 70% of the participants in a survey by the Institut für Demoskopie responded that they had “little or no trust” in the euro, which had been introduced in cash form on 1 January 2002. Today, 82% of Germans support the euro. The Bundesbank played a key role in the introduction of euro cash in January 2002.

Despite the massive shock triggered by the coronavirus pandemic and what were, at times, very stringent containment measures, the number of corporate insolvencies dropped substantially in 2020, the Bundesbank writes in its Monthly Report. This was due in part to the temporary suspension of the obligation to file for insolvency, which is subject to certain conditions. German enterprises’ sales fell far less significantly than they had done during the financial and economic crisis of 2009, the Bank’s economists explain.

There was a steep rise economic output in Germany in the third quarter of 2021, the Bundesbank writes in its Monthly Report. Gross domestic product was up by 1.8%, therefore falling 1.1% short of its pre-crisis level in the fourth quarter of 2019. The Bundesbank’s experts expect that the economic recovery will probably take a breather in the fourth quarter. The Bundesbank takes a critical view of imposing a minimum wage of €12 per hour, which is an idea considered in the coalition talks. Inflation could temporarily rise to just under 6% in November.

The German financial system has functioned well during the pandemic; the extensive government measures have shielded the financial sector from losses. This is the conclusion reached by the Bundesbank in its Financial Stability Review 2021. At the presentation of the report, Bundesbank Vice-President Claudia Buch noted that, at the same time, vulnerabilities to adverse macroeconomic developments had built up continually, especially risks associated with real estate financing. “Now is the right time to take preventive action against future risks,” stressed Ms Buch.

Bundesbank President Jens Weidmann reiterated his call for monetary policy as a whole to be normalised if required to achieve the objective of price stability. “Ultimately, that also means reducing large bond holdings,” he said at the ceremony to mark the change of office at the Bundesbank’s Regional Office in North Rhine-Westphalia. Speaking at the hybrid event, Mr Weidmann bid farewell to Margarete Müller, who has headed the Regional Office for eight years. She is being succeeded by Jochen Metzger, who was most recently Director General Payments and Settlement Systems.

Bundesbank President Jens Weidmann says central banks shouldn’t become harnessed to fiscal policy or financial markets. “One of the secrets of success for an independent monetary policy has always been recognising and respecting one’s own limitations,” he explained. Turning to the question of how stubborn the high price pressures will be, he said the elevated inflation rates will probably take longer than previously projected to recede again. “We should not ignore the risk of too high inflation and instead remain watchful.”