Global: German central bank warns against excessive application of Russian sanctions

Germany’s central bank has criticised the country’s financial institutions for interpreting punitive measures against Russia too rigidly.

“We see here and there that sanctions are being over-fulfilled,’’ central bank board member Joachim Wuermeling told financial daily Handelsblatt on Wednesday.

Institutions should not, for example, be excluding citizens with a Russian background simply for fear of violating sanctions, he said.

“Financial institutions must be careful to keep a sense of proportion and not unintentionally disadvantage anyone.’’

On future financial risks, Mr Wuermeling expressed concern about mortgages, which have become riskier for banks due to rising prices.

The market was becoming increasingly vulnerable, he said.

Mortgages with interest rates fixed for more than 10 years account for half of the non-commercial mortgages in Germany.

“So in the middle of an interest rate turnaround, banks would still have very low interest rate loans on their balance sheets for a few years, but would already have to pay higher interest rates for refinancing.’’

The central bank reserved the right to adjust the capital buffers for banks if the financial risks continued to grow, Mr Wuermeling said.