In its latest report, the Bundesbank revealed that although writedowns from bad loans are expected to be relatively low over the coming months, the state-owned Landesbanks remain fraught with vulnerability.
"More than three years after its onset, the financial crisis is far from being resolved," the organisation stated. "The most vulnerable segments of foreign credit exposures remain commercial real estate funding and structured securities."
Bundesbank executive board member Dr Andreas Dombret explained that Germany's "favourable" economic outlook has boosted the standing of financial firms in recent months, but stressed the importance of cutting "excess capacity" to a sustainable level.
The study came after British Bankers' Association chief executive Angela Knight told Bloomberg Television that it is key banks across Europe learn the lessons of the ongoing crisis in Ireland.
By Asim Shah