The financial system is stronger today than during earlier crises, but banks will inevitably see a rise in their loan losses. Government and the financial sector must continue their exceptional measures to support businesses and households.
The coronavirus pandemic will further weaken the short-term profitability of banks. Government and central bank policy measures are mitigating the rise of funding costs and are bolstering lending capacity.
Regulatory reform has made banks more resilient than they were during the previous crisis. A robust lending capacity is now needed to help Finnish firms through the coronavirus crisis.
The coronavirus pandemic has the potential to aggravate long-standing vulnerabilities in the Nordic housing market. Housing market disturbances can increase credit risk for banks and interfere with their access to funding.
The poor outlook for the economy is weighing on banks, households and firms. Banks have accumulated buffers for a rainy day that should be deployed now as the coronavirus buffets the economy.
Financial institutions' solvency and liquidity positions have been strengthened since the global financial crisis. A well-functioning banking sector together with government relief measures will bolster the economy's outset for growth once the crisis subsides.
