Articles on the economy
The increase in household and investor indebtedness from housing company loans has been a concern to the authorities. Housing company loans still account for a considerable share of the financing for new homes, but new legislation will start to curb the level of debt incurred via housing company loans.
If prolonged, the war can weaken the profitability of the corporate sector. It will be harder for companies to service their debts, if energy continues to be expensive and their products and services do not earn as much as before.
Housing company loans are increasing household indebtedness and altering the structure of debt. A loan-to-value limit of 60% would reduce housing-purchasers’ substantial accumulation of debt via housing company loans.
COVID-19 has ravaged the banks less than feared. Growth in non-performing loans would weaken banks’ ability to extend credit. A number of methods have been suggested to reduce the number of non-performing loans.
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.
Negative interest rates have been an integral part of the ECB's overall monetary accommodation for just over five years now. Research indicates that the advantages of slightly negative interest rates outweigh the disadvantages.
Consumer credit can drive households into financial difficulties. New measures are needed to prevent increasing debt problems.
Foreign investment in the Finnish and other Nordic property markets has increased. As a consequence the Finnish market is more vulnerable to external risks.
Investment in IT will improve banks’ long-term profitability, while weakening short-term profitability.
An extensive materialisation of risks on the Swedish housing market could also have notable effects in the other Nordic countries.
Low risk premia and high valuations have increased global securities markets’ exposure to price corrections and abrupt shifts in risk premia.
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.
Finns are among the leaders in Europe in the use of digital financial services. Nordic banks have invested in digital services.
Investors’ optimism on the financial markets can rapidly turn to risk aversion if global economic or political uncertainty increases.
Finnish household debt is rapidly increasing also via consumer credit. Loans taken out from these new sources is difficult to monitor.
The uncertainty surrounding the outlook for global growth in general has also focused strongly on the banking and finance sectors, which are particularly sensitive to changes in the economic cycle.
Realisation of potential housing market risks would simultaneously increase loan and investment losses while also pushing up the price of funding.
Accommodative monetary policy is necessary for price stability and economic recovery. However, it may create risks for financial stability.
The term ‘shadow bank’ often evokes negative connotations. However, the importance of shadow banks to the financial markets is increasing.