Germany’s Federal Financial Supervisory Authority (BaFin) published its 2026 “Risks in Focus” assessment, warning that financial markets remain fragile and that the potential for sudden market and price corrections is high despite record valuations. The report sets out six market risks for closer scrutiny, three structural trends reshaping finance (digitalisation, sustainability and geopolitical upheaval) and, for the first time, three top risks that directly affect consumers. BaFin attributes the elevated correction risk to factors including trade and military conflicts, high sovereign debt in major industrial countries, uncertainty over whether artificial intelligence-driven market optimism is supported by fundamentals, and political pressure on institutions that could impair crisis response. Supervisory priorities for 2026 include intensified monitoring of credit risk at banks and insurers as corporate insolvencies rise and non-performing loans increase, and closer attention to growing links between regulated firms and non-bank financial intermediaries via private-debt funds, where banks’ funding can enable leveraged investing and increase contagion risks. On consumer risks, BaFin highlights rising over-indebtedness, particularly from consumer credit such as “buy now, pay later” and small loans under EUR 200 that are often granted without creditworthiness checks, alongside social media-driven retail investment in crypto-assets and costly capital-building life insurance; the watchdog plans stricter monitoring of compliance for consumer credit, expanded consumer information, and stronger supervision of crypto providers combined with warnings and consumer education.

Original source View in tracker