Eero Savolainen

Finnish banks have granted relatively little credit to those industries most vulnerable to bankruptcies. This has helped minimise banks’ corporate credit risks.

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.

The Finnish, Swedish, Norwegian and Danish banking sectors are large and concentrated and there are systemic risks relating to lending for the residential and commercial real estate markets.

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.

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

Insurance companies’ role as major investors can cause market disruptions if the companies have to resort to forced sales.

The consequences of a banking crisis could be severe in the exceptionally concentrated Finnish banking system.