The financial crisis has increased our understanding of cross-border stability threats. Overheating on the international financial markets would push up asset prices and possibly also increase the supply of loans.
According to the Bank of Finland’s stability report, the financial system has remained stable despite the lack of improvement in the Finnish economy. Weak developments of the Finnish economy and risks building up on the financial markets, such as growing search for yield and low interest rates, could expose the system to risks.
The basic operations of the Finnish financial markets are increasingly vulnerable to disruptions spreading from international systems. Preparation for disruptions in basic services must take place at national level.
The crisis is affecting banks’ business models. In the euro area, bank profitability has been eroded by the path of the economy, weak credit developments and the prolonged period of low interest rates.