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With monetary policy normalisation proceeding, the ECB has begun a review of how it will implement monetary policy in the future.

Last December, the ECB announced that it will review how it is to control interest rates in the future. The outcome of the review will also impact the size and composition of the Eurosystem’s balance sheet in the future.

The need to rapidly reduce carbon dioxide emissions will adversely impact the operations of many companies, and may make old operations unprofitable. Loan portfolio risks can be assessed by combining company-specific information on technologies and emissions with corporate loan portfolio data.

For households with outstanding loans, interest payments are now taking a larger slice of their income. Savings and a strong labour market have helped households cope with the rise in the cost of living.

Companies do not appear to have sought to benefit from high inflation by increasing their prices and boosting profits.

Fewer new housing loans have been taken out with interest rate hedging. Hedging products are used least by the most highly indebted.

The increase in household and investor indebtedness from housing company loans has been a concern to the authorities. Housing company loans still account for a considerable share of the financing for new homes, but new legislation will start to curb the level of debt incurred via housing company loans.

Capital buffer requirements imposed on banks are among the most important instruments available in the macroprudential policy toolkit. They protect the ability of banks to withstand losses and provide credit during severe economic and financial crises.

In Finland, it should be possible to impose a countercyclical capital buffer requirement on banks before the credit cycle overheats. This would allow the authorities, as necessary, to lower the capital requirements for banks during a crisis situation on a more flexible basis than at present.

In 2022, a backup system was put in place for safeguarding daily payments during exceptional situations affecting society. The authorities and the financial sector should continue to enhance their preparedness for coping with severe disruptions in society that threaten the availability of normal banking and financial services.

Data on the demand for and supply of bank loans in Finland is obtained four times a year through the euro area bank lending survey.

Finland’s general government revenue and expenditure are chronically out of balance. Population ageing is adding to health and social services spending and at the same time public debt service payments are growing. A fiscal correction will require significant spending cuts and tax increases in future parliamentary terms. The Bank of Finland estimates that the sustainability gap is about 4% of GDP.

Climate change is forcing the economy to transit towards a more sustainable future. Transition risks are related to the process of adjustment to a low-carbon economy. Granular data are needed to analyse the transition risks.

The surge in inflation has prompted central banks to normalise their monetary policy. This means they are tightening financing conditions by raising key interest rates.

The euro area imports a major share of the energy it consumes. Research shows that abrupt changes in import prices lead to rapid increases in consumer prices but affect the real economy more slowly.

Finland’s cost competitiveness has strengthened in recent years, but it has yet to fully recover to the level attained before the financial crisis. Improving cost competitiveness is especially important now, when companies are searching for new markets to replace lost trade with Russia.

Over recent decades, Finnish households have constantly accumulated debt in relation to their income. The household DTI ratio is projected to stabilise in the immediate years ahead as the growth in the housing loan stock abates.

Manufacturing industries, in particular, are suffering from supply chain problems and rising costs. The results of a business survey show that the majority of companies believe they can replace the lost volume of exports to Russia with new markets.

Housing loans are larger and of longer duration than previously. Borrowers should not take on too much debt, so that a rise in interest rates or everyday expenditure will not squeeze their finances too tightly.

If prolonged, the war can weaken the profitability of the corporate sector. It will be harder for companies to service their debts, if energy continues to be expensive and their products and services do not earn as much as before.