In order to prevent crises, authorities should have a more flexible range of means at their disposal to strengthen banks’ risk resilience and contain excessive growth in credit and household indebtedness.
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The systemic risk buffer is an additional capital requirement that can bolster Finland’s structurally vulnerable banking sector.
A range of instruments could be deployed to restrain dangerous growth in lending for house purchase and household debt.
The authorities should be equipped with new tools for ensuring the banking sector’s capital adequacy and preventing overheating on the housing market.