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.

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.

Several reforms improving banking and financial market regulation as well as supervision have been put through since summer 2013.

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.

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.

Increasing market uncertainty over the condition of banks in early 2016 was not due solely to concerns about global economic growth but also above all reflected concerns about banks’ non-performing loans and declining profitability amid low interest rates and subdued growth.