Bafin: financial stability and consumer protection are equally import

Political uncertainty and the resulting pressure on the economy are heightening the risks facing the financial sector and having a tangible impact on the general public in Germany: rising prices and more expensive loans are taking their toll on people’s wallets.

For Bafin President Mark Branson, protecting consumers is therefore a vital part of Bafin’s work. “The financial market is always in the end about people. And about the security that a stable, well-functioning and fair financial system offers them,” Branson told journalists today in Frankfurt am Main. “Supervising the stability of financial institutions and consumer protection go hand in hand.”

Growing threat posed by cyber risks

Bafin currently sees a growing risk of cyberattacks on IT infrastructure. Such attacks threaten the stability of businesses and the availability of their services to consumers. And the number of attacks is rising. Criminals are increasingly using artificial intelligence in their attacks. “The new AI models can identify and even exploit many vulnerabilities in IT systems with remarkable speed,” Branson said. Companies must prepare for an increase in the number of potential points of attack. “And they must patch these vulnerabilities far more quickly.” Bafin is therefore strengthening its supervision of cyber risks by allocating additional resources for inspections at financial firms.

Private debt in the financial sector and for private individuals

Bafin also sees vulnerabilities in the private debt market. According to Bafin’s President, the lack of transparency and the interconnected nature of private debt funds are a problem. As banks finance these private debt providers, risks in this market could find their way into the traditional banking sector. Insurers have also increasingly invested in alternative investments such as private debt in recent years. “Alternative investments place special demands on risk management,” Branson said. “We as supervisors must keep a close eye on these risks.” Bafin is thus glad to see the Financial Stability Board examining this issue in depth. “We need a better understanding of these markets, greater transparency and effective international cooperation.”

Bafin also takes a cautious view of the increasing sale of private-market products to retail customers in Germany, for example in the form of European Long-Term Investment Funds (ELTIFs). Branson emphasised that assets in these funds can hardly be sold quickly without a significant loss in value. In addition to the liquidity risk, the funds often involve high costs and investments that are difficult to value and sometimes lack transparency. Bafin therefore advises investors not to blindly trust the risk indicators of ELTIFs. Branson explained: “We know from the example of open-ended real estate funds that these indicators do not always take all relevant risk information into account. For this reason, we are encouraging the European authorities to bring more order to this market.”

Risky residential property loans

Bafin is also paying close attention to the German residential real estate market. The proportion of residential property loans with high loan-to-value is comparatively high in new lending in Germany. For every seventh new loan, the loan amount exceeds the value of the residential property being financed. “We find this concerning,” Branson said. Such loans carry an elevated risk of loss for credit institutions and can also prove problematic for consumers. The Bafin President did not rule out supervisory measures: “Today’s risky new loans mustn’t become tomorrow’s problem loans.”

Successes in the fight against unauthorised business activities

Bafin has recently stepped up its supervisory efforts against unauthorised business activities. Working closely with law enforcement agencies, it has achieved major successes in recent months. In this context, Branson referred to measures taken against organised money launderers and cybercriminals. “Such successes are vital for protecting the German financial market as well as consumers,” Branson declared.

Equally important, he noted, were the more than 800 warnings that Bafin published in 2025 regarding unauthorised offers on fraudulent websites and messaging services. Branson highlighted the importance of enforcing the authorisation requirement: “First, this is the only way to ensure fair competition between providers subject to the same regulations. And second, it enables us to protect consumers.”