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CC-Transcript

  • 00:00You were warning about a low interest rate environment. Who is affected and what are the risks. Yeah. First of all it's important to note where the low interest rates are coming from . And one important contributing factor is of course the low growth environment which we have worldwide but also in areas in Europe. And then it's of course expansionary monetary policies . Both of these factors growth and policies are contributing to the low interest rates. Who's affected. We're certainly looking into banks and insurers and Germany because these are the most important players on financial markets. But in general we have the tendency is that whenever interest rates are low for a continued period of time then all kinds of investors have incentives to search for yield which is a normal behavior on markets but they may engage until excessive risk taking and this is why we're looking into this issue in particular. And that means you're worried about asset bubbles down the line or you're just sort of monitoring it right now. Yeah. So we are we are monitoring it and I think we also I mean the declaration of whether that's an asset bubble or not of course it's very model dependent. So the additional factor that would take into consideration is what is the risk bearing capacity of investors . So we are running different scenarios with regard to asset prices but then we also compare it to the risk bearing capacity and that's most important the equity capital that's in banks and insurers. And also that other investors hold. Well you mentioned sort of accommodative policy. It looks like we're going to be in a kind of a policy at least within the eurozone for some time. Does that mean the risks persist as long as we're in a quantitative easing situation. Yeah. So that's a general finding that we have from many empirical studies that the longer low interest rate environment last the higher the risk taking incentives. This does not mean that we should if a change in the current accommodative stance of monetary policy should become necessary from monetary policy point of view that we should extend the period of low interest rates because of financial stability risk because that would make it even worse given what we just said. So I think it's important now that everybody first of all monetize the risk that every individual player on the market is assessing what his or her risk bearing capacity is. And then of course we also have to have instruments available at macro prudential instruments that would allow us to to mitigate risks once they become apparent as long as we're talking about instruments and mitigating risks. What do you see in terms of risks in the housing market and what can be done about it. So the demand housing market if we'd just talk about Germany because of course the situation in other European countries might be different the situation in the German housing market is such that of course if you're talking to people and if you listen to anecdotal evidence there is a perception that we have maybe even an asset price bubble building up. Now if we look at it countrywide we don't see that . So we don't. We do see over valuations in certain metropolitan area which which ones. Well I wouldn't I wouldn't do neighborhood number of cities now because I don't want to give recommendations for buying or selling. So I don't think this is all a role here. No it's again it's not a countrywide phenomenon. It's of course also driven by demographics and other factors. The second important factor that we look at is to what extent our purchases of houses credit financed and there we don't see any any major risks building up. So we do have growth rates of mortgage loans which are still below the historic average. So in that sense we don't think there's need for action now. Now what we did. There's a council which is called the German Council for Financial Stability and we advise the government to create a legal basis to have a macro prudential instruments for the real estate market in case our assessment of the situation would change. Earlier today we heard from European Central Bank. They don't see much risk for financial stability out there when they look at where they look the world is right now. They're not overly concerned. What I'm hearing from you is a little slightly more concern about the low interest rate environment. Would that be a fair way to characterize it . Yeah I think the viewpoint that the ECB has is to some extent different than ours because we are in charge of financial stability in Germany which of course is linked to the international financial system as well. The ECB is financial stability report of course has to look at the euro area as a whole and there are some issues which are which are different from ours. But I think in terms of the DNA indicators that I look at and the general assessment of the situation I think it's very similar to what we are saying. So I wouldn't see that much of a difference of course it has to do with the fact that we are looking at different regions. If I could get your views on inflation versus the European Central Bank do you see that much inflation. Do you see a real risk in Germany and do you see a risk of maybe overshooting . So first of all when we look at nation in the euro area. We should look at inflation in the euro area as a whole. So if you take a very purist view of it there's not inflation in Germany or inflation in other countries. But it's really the euro area for the euro area of course we have a low inflation rate which also has to do with low oil prices. And we certainly don't see a risk of a deflationary scenario .
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Bundesbank’s Buch Warns Low Rates Could Bring Investors Risks

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