Central banks have made a significant turnaround in interest rates since spring 2022. With the rise in interest rates, the prices of bonds traded on stock exchanges have automatically fallen sharply, otherwise investors would only buy new bonds with the now higher interest coupons. In Germany, the price losses are hitting many regional cooperative banks and savings banks, which usually invest their liquidity in bonds. The Apotheker- und Ärztebank (Apobank) is no exception. So far, it has not offset price losses of 450 million euros against its equity because it is counting on holding the bonds until maturity and the price losses proving to be temporary. There is a lot to be said for this.

But such silent burdens are also a latent issue that threatens trust. In the Apobank balance sheet, there are at least 2 billion euros of equity liable for losses. This bank thus looks safe. However, it would promote confidence for the financial sector as a whole: Supervisors require all banks to finally have to hold equity capital as a buffer even for government bonds with strong credit ratings. After all, no bond is risk-free.