Solvency II regulation has just come into effect in the EU. This was a necessary change, but its timing is awkward for insurance undertakings, as the current low interest rates and economic uncertainty are placing a strain on their solvency.
The regulation of banks’ capital adequacy was only recently reformed. Assessment and monitoring of the effects of regulation will ensure a level playing field for the banks and the capacity of the financial system to support sustainable economic growth.
In a securities trade, a central counterparty functions as a buyer in relation to the seller, and as a seller in relation to the final buyer. Key to the stability of the financial system is that all aspects of central counterparties’ risk management are sound.
Since the turn of the millennium, investment funds have become a significant financial intermediary in Finland. From the financial stability perspective, the risks surrounding them are similar to those that are usually related to banking.
In Finland, the volume of housing loans is large compared with other bank lending and the capital requirements on the banks. Vulnerability is further increased by the relative size of household debt and the tendency for assets to be held in housing.
Nordea Group is merging its large Nordic subsidiaries into the Swedish parent, which is supervised by Sweden’s supervisory authority. In Finland, the significance of the change is increased by Nordea’s large market share.
Finland’s financial system has functioned without serious problems during the difficult economic situation of recent years. However, the concentrated and interlinked nature of the financial sector means that the consequences of a financial crisis could be extremely serious for Finland.
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