Handelsblatt Exclusive Bundesbank Executive: Banks Should Set Aside Capital for Interest Rate Rise

Andreas Dombret, chair of the Bundesbank's regulatory body, said rising inflation is a sign that record-low interest rates could soon increase.

Andreas Dombret, a member of the Bundesbank’s board, writes in a guest column for Handelsblatt that German banks should increase their capital buffers to prepare for rising interest rates.

Rising inflation in Germany and the euro zone is a sign that interest rates currently at record lows could soon increase, writes Mr. Dombret, who is responsible for financial regulation at the Bundesbank.

“The longer the low interest rate phase goes on, the greater the risks in the event that interest rates increase,” Mr. Dombret writes.

An increase in rates would help the banking sector stabilize and recover over the long term, Mr. Dombret writes, but in the short to medium term banks have to make sure that their capital buffers are sufficient to deal with a rate hike.

“For the affected institutions, it is more than time for them to further strengthen their capital base,” Mr. Dombret writes.

Read the full column in Friday's Handelsblatt Global.