BERLIN: Germany’s banking sector proved its strength during the financial crisis, but needs to examine its business model to increase stability in the future, Bundesbank board member Andreas Dombret told AFP in an interview.
Dombret, in charge of banking and financial supervision at the German central bank, called on banks to diversify their revenue sources, which are currently too dependent on interest rates, and cut costs.
“Fundamentally speaking, German banks can’t all be lumped together in the same basket. Germany’s three-pillar banking sector model (private, public and cooperative) has proved its worth during the financial crisis and contributed to a stabilisation of the banking landscape,” Dombret said.
And German banks had increased their ability to withstand risks, he added.
“Even before last year’s stress tests, they significantly beefed up their own capital. The stress tests showed that all major German banks had sufficient own capital to withstand a substantial economic shock.”
Nevertheless, Dombret said he saw room for improvement in the profitability of many German banks.
“The frequently high dependence on interest income is a drag on banks’ profitability, particularly during a long period of low interest rates. For this reason alone, banks must take a look at their business models,” Dombret said.
He suggested banks should look for alternative sources of income or increase their commission income.
