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Lowering the loan cap will mitigate household indebtedness and strengthen mortgage borrowers’ risk resilience. It will not, however, remove the risks relating to the record-high level of indebtedness.

Housing debt has grown, both in absolute terms and relative to income, especially in growth centres, where housing is more expensive and subject to greater pressures from demand than elsewhere.

The Finnish real estate investment market is lively and large in proportion to the size of the economy, foreign investment and high valuations may expose the Finnish market to economic shocks from abroad. The risks may reflect on banking particularly via lending.

When indebted households cut their spending during an economic downturn, this also increase the financial difficulties of non-financial corporations.

The aim of the loan cap is to rein in household indebtedness and prevent housing price bubbles. Finland badly needs other instruments that can also restrict indebtedness.

A single European Deposit Insurance Scheme would reduce the risk of deposit runs.

Finns are among the leaders in Europe in the use of digital financial services. Nordic banks have invested in digital services.

The systemic risk buffer is an additional capital requirement that can bolster Finland’s structurally vulnerable banking sector.

In retail banking, the two key services are the provision of credit and management of payment transfers. The revised Payment Services Directive (PSD2), which entered into force in Finland in January 2018 may revolutionise the operating environment for banks.

Reliable payment and settlement systems are basic requirements for maintaining financial stability and fostering economic activity. Financial services providers must ensure the safe holding and preservation of data in their possession and recovery from problem situations within a digital environment.

The risks relating to high household indebtedness are realised when indebted households respond to the threat of payment difficulties by sharply reducing their consumption.