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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.

Under the European Deposit Guarantee System proposed by the European Commission, responsibility for guaranteeing deposits would be gradually transferred from national level to the new system.

Market infrastructures are assumed to function reliably, and their crucial role is not noticed until they do not work.

This appendix describes the method applied, the results of which are reported in the article ‘Investment funds have grown significantly in Finland – do their operations involve stability risks?’

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.

The uncertainty surrounding the outlook for global growth in general has also focused strongly on the banking and finance sectors, which are particularly sensitive to changes in the economic cycle.

Neighbouring countries’ loan ceiling regulations are tighter than the loan ceiling that comes into force in Finland in summer 2016.

Realisation of potential housing market risks would simultaneously increase loan and investment losses while also pushing up the price of funding.

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.

Digitalisation is presenting traditional financial sector actors with new competitors.

In Finland, banks’ most important source of earnings, the interest margin, is now under pressure from a number of directions.

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.