Debt must be measured against repayment capacity The current loan-to-value cap on housing loans urgently needs to be accompanied by a new, more comprehensive cap on debt. This would take into account all a loan applicant’s debt relative to their income. Share Email Twitter Facebook Linkedin Google+
Debt risks amplified by housing company loans The macroprudential toolkit needs to be replenished with borrower-based instruments that take into account loan applicants’ repayment ability and are able to curtail household indebtedness as a whole. Share Email Twitter Facebook Linkedin Google+
The highly indebted cut spending as the economy slows The more debt households take on during an economic upswing, the more likely they are to cut consumption when the economy begins to run out of steam. Share Email Twitter Facebook Linkedin Google+
Capping debt-to-income ratios complementary to housing loan cap The indebtedness of Finnish households relative to income has grown considerably since the turn of the millennium. A proportion of new residential mortgage holders have a heavy debt burden relative to their income. Share Email Twitter Facebook Linkedin Google+
New methods needed to rein in consumer credit Consumer credit can drive households into financial difficulties. New measures are needed to prevent increasing debt problems. Share Email Twitter Facebook Linkedin Google+
Corporate credit risk affected by business cycles and industry factors Finnish banks have granted relatively little credit to those industries most vulnerable to bankruptcies. This has helped minimise banks’ corporate credit risks. Share Email Twitter Facebook Linkedin Google+
Finnish commercial property market increasingly intertwined with foreign markets Foreign investment in the Finnish and other Nordic property markets has increased. As a consequence the Finnish market is more vulnerable to external risks. Share Email Twitter Facebook Linkedin Google+
The impact of digitalisation on bank profitability Investment in IT will improve banks’ long-term profitability, while weakening short-term profitability. Share Email Twitter Facebook Linkedin Google+
Household debt burden worryingly large – we must take a variety of measures to guard against the risks The accessible summary sums up the solutions presented in the Bank of Finland’s stability assessment that can get a grip on households’ excessive debt levels. Share Email Twitter Facebook Linkedin Google+
Risks on the Swedish housing market also a cause for concern in other Nordic countries An extensive materialisation of risks on the Swedish housing market could also have notable effects in the other Nordic countries. Share Email Twitter Facebook Linkedin Google+
Repricing of securities markets’ risk premia still most significant threat to global financial stability Low risk premia and high valuations have increased global securities markets’ exposure to price corrections and abrupt shifts in risk premia. Share Email Twitter Facebook Linkedin Google+
Lowering the loan cap will reduce the risks associated with debt 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. Share Email Twitter Facebook Linkedin Google+
Wide regional disparities in Finnish house prices and household 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. Share Email Twitter Facebook Linkedin Google+
The Finnish real estate investment market 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. Share Email Twitter Facebook Linkedin Google+
Household indebtedness contributing to corporate loan losses When indebted households cut their spending during an economic downturn, this also increase the financial difficulties of non-financial corporations. Share Email Twitter Facebook Linkedin Google+
Instruments designed to mitigate indebtedness 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. Share Email Twitter Facebook Linkedin Google+
Progress in work to complete Banking Union A single European Deposit Insurance Scheme would reduce the risk of deposit runs. Share Email Twitter Facebook Linkedin Google+
Nordic banks go digital Finns are among the leaders in Europe in the use of digital financial services. Nordic banks have invested in digital services. Share Email Twitter Facebook Linkedin Google+
Systemic risk buffer protecting the banking sector under difficult conditions The systemic risk buffer is an additional capital requirement that can bolster Finland’s structurally vulnerable banking sector. Share Email Twitter Facebook Linkedin Google+
Effects of the revised Payment Services Directive: first assessment 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. Share Email Twitter Facebook Linkedin Google+
Digitalisation poses new security challenges for payment systems 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. Share Email Twitter Facebook Linkedin Google+
Construction of a risk-based European Deposit Insurance Scheme Single deposit insurance is an important part of the completion of Banking Union. The deposit insurance fund needs to be sufficiently large to credibly withstand possible problem situations. Banks’ deposit insurance contributions should be calibrated based on risks. Share Email Twitter Facebook Linkedin Google+
