Germany's Federal Financial Supervisory Authority (BaFin) published its “Risks in Focus 2026” report, warning that financial markets remain fragile despite record-high valuations and that the risk is rising of a severe test of financial stability, with a high potential for sudden market and price corrections. The assessment sets out six risks for financial firms, three structural trends reshaping the sector, and for the first time identifies three top risks that directly affect consumers. BaFin notes that banks and insurers are generally profitable and well capitalised and that the interest-rate environment is stable, while also highlighting stabilty-threatening factors including trade and military conflicts, high indebtedness of major sovereigns, uncertainty over whether artificial-intelligence-driven optimism is supported by fundamentals, and political pressure on institutions that could weaken international crisis response. Supervisory priorities for 2026 include intensified monitoring of credit risk in banks and insurers as corporate insolvencies rise and non-performing loans increase, and closer scrutiny of banks’ and insurers’ links to non-bank financial intermediaries via private-debt funds due to contagion risks from leveraged structures outside the traditionally regulated banking sector. On the consumer side, BaFin points to over-indebtedness, retail investing driven by social media particularly in crypto-assets, and capital-forming life insurance with excessive costs, and it signals stricter oversight of consumer-credit requirements including buy-now-pay-later and small loans under EUR 200 often granted without creditworthiness checks, alongside expanded consumer information and enhanced supervision and warnings targeting crypto providers.

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