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German central bank defends introduction of 0.25% countercyclical buffer

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German central bank defends introduction of 0.25% countercyclical buffer

The introduction of a 0.25% countercyclical buffer is a moderate measure which the German banking system would be capable to absorb, Bundesbank executive board member Joachim Wuermeling was cited by Reuters as saying.

The central bank plans to introduce the buffer from July and give domestic credit institutions one year to comply with the new requirement. Currently, there is no such buffer for German banks.

The industry has sharply criticized the Bundesbank for its decision to impose a buffer, saying it comes at a time when there are no indications of serious risk to financial stability, according to the May 29 report. Wuermeling defended the move by expressing confidence in the banks' ability to withstand a recession or a significant increase in interest rates in the future, Reuters said.