Germany’s Federal Financial Supervisory Authority (BaFin) issued a general administrative act cutting the sectoral systemic risk buffer for residential real estate financing from 2% to 1%, effective 1 May 2025. The buffer must be met with Common Equity Tier 1 capital. The 1% buffer applies to risk positions, or parts of risk positions, to natural and legal persons where mortgages on residential property located in Germany are recognised as credit risk mitigation when calculating own funds requirements. It is addressed to institutions under the German Banking Act, as well as relevant institution groups, financial holding groups and mixed financial holding groups, and institutions within the meaning of Article 22 of Regulation (EU) No 575/2013, subject to specified exemptions in the Banking Act. BaFin cited a material stabilisation of the housing market and a reduction in overvaluation, alongside still-present residual risks and macroeconomic uncertainty, as the basis for lowering but not fully removing the buffer. BaFin indicated it will ask the European Systemic Risk Board to recommend reciprocal application of the reduced buffer by relevant European Economic Area states to limit circumvention via cross-border financing. Objections to the administrative act can be filed within one month of notification.
BaFin 2025-04-30
German Federal Financial Supervisory Authority lowers systemic risk buffer for residential real estate financing to 1% from 1 May 2025
Germany’s Federal Financial Supervisory Authority (BaFin) reduced the sectoral systemic risk buffer for residential real estate financing from 2% to 1%, effective 1 May 2025, due to housing market stabilization and reduced overvaluation. The buffer, to be met with Common Equity Tier 1 capital, applies to risk positions involving German residential property mortgages. BaFin will request the European Systemic Risk Board to recommend reciprocal application by European Economic Area states to prevent circumvention through cross-border financing.