Germany's financial sector is solidly placed to withstand crises, but risks persist, the Bundesbank said today.
In its latest financial stability report, the German central bank also called for more transparency in the $1.1 trillion hedge fund industry and said a reassessment of global risks could lead to upsets on financial markets.
But overall, German banks and financial institutions had benefited from favourable economic conditions.
"The stability of the German financial system improved further this year," the report said, noting strengthened profits and better corporate loan quality.
Interest rates remained accommodative, inflation was moderate and German growth had been robust, the Bundesbank said, upgrading expectations for growth this year to 2.5 per cent from 2.25 per cent.
Macroeconomic risks included an unwinding in global trade imbalances and a sharper-than-expected slowdown in United States growth or in the value of the dollar, which has fallen about 11 per cent against the euro so far this year.