Financial Supervisory Authority (FIN-FSA) published information on the financial position and risks of supervised entities: In Finland, the financial sector is stable, but households’ growing indebtedness has increased risks.
“The loosening of criteria for granting consumer credits, shortcomings in regulatory compliance and the continuous rise in household indebtedness over the past two decades constitute an alarming combination. Supervision of consumer credits is therefore one of the FIN-FSA’s priorities for the current year,” says FIN-FSA Director General Anneli Tuominen.
The capital adequacy of the Finnish banking sector is strong and clearly stronger than the European average level. The comparable result of the banks increased slightly from the situation at the end of the previous year. Through Nordea’s domicile decision, the Finnish banking sector will grow to over three times the size of gross domestic product.
An increase in banks’ operational development costs was compensated for by securities-related income, particularly from asset management and investment funds. Growth in net interest income was supported by inexpensive funding. Interest expenses declined in euro terms more than interest income.
Costs continued to grow. Personnel expenses remained unchanged, so the increase is attributable to other operating expenses such as development projects and IT costs.
Domestic insurance sector has remained stable
The solvency ratio of employee pension institutions improved in 2017. The sector consolidated further through the merger of the Ilmarinen and Etera mutual pension insurance companies. The level of private and public earnings-related pension assets has continued to grow, and is already close to the EUR 200 billion milestone. Assets have grown due to good investment returns, even though pension costs exceeded premiums.
The solvency position of life and non-life insurance companies improved and in both sectors was more than double the requirement at the end of the year. Solvency was strengthened by a rise in interest rates, which reduced the level of technical provisions, and particularly by a good return on equity investments.
Growth of consumer credit accelerated
The accelerated growth in consumer credit partly explains the growing indebtedness of households. During 2017, annual growth of unsecured consumer credit exceeded at highest more than 14 per cent, and annual growth of secured credit rose to over 5 per cent at the end of the year.
New operators have entered the Finnish market, offering consumer credit in Finland from abroad, for example via online services. Norwegian operators, in particular, have strongly increased the supply of credit to Finland.
Credit institutions have increased the supply of consumer credit by introducing new products to the market and by improving marketing. Growth has been pursued by loosening the criteria for granting consumer credits, raising the maximum amounts of credit and extending loan periods.
- Anneli Tuominen, Director General
- Jyri Helenius, Deputy Director General
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Financial position and risks of supervised entities 1/2017 (in Finnish)