Capital position of banking and insurance sector 31 March 2013: Finnish financial sector stable, low interest rates reduce banking and insurance sector profitability
According to end-March data published today by the Financial Supervisory Authority (FIN-FSA), the capital position of the Finnish banking and insurance sectors has remained good.
Low interest rates pose a challenge to both the banking and the insurance sector. –Banking sector profitability is still at a reasonable level but remains under pressure, notes Anneli Tuominen, FIN-FSA's Director General. –For insurance sector entities it is a challenge to allocate investments profitably, at a controlled risk level.
Capital position of banking sector and financial and insurance conglomerates has remained sound
The banking sector’s capital adequacy ratio was 16.4% at the end of March (31 December 2012: 17.0%). The quality of Finnish banks' own funds was still sound. Own funds were mainly composed of Tier 1 capital (95%). The ratio for the highest-quality common equity (Core Tier 1 capital) remained nearly unchanged at 15.0% (31 December 2012: 15.5%).
The total solvency ratio of financial and insurance conglomerates remained at 1.9 (31 December 2012: 1.9).
Solvency of pension providers improved further, risk level rose
Pension providers' total solvency capital rose in the early months of the year by EUR 1.1 billion. The risk-based solvency position decreased to 2.1 (31 December 2012: 2.5), due partly to a change in legislation that took effect at the turn of the year, and partly to the higher level of risk of the investment portfolios.
Solvency of life and non-life insurance companies remained sound
The solvency of life insurance companies remained sound even though the return on investment averaged at only 1.7 in January–March (31 March 2012: 4.0%). The solvency margin remained at the level of the previous year and was 5.4 times (31 December 2012: 5.4 times) the statutory minimum. The risk-based solvency position strengthened, to 3.3 (31 December 2012: 3.0).
The non-life insurance sector's solvency margin remained strong. The solvency margin was unchanged compared to the turn of the year and was 4.3. times the statutory minimum. The solvency margin of non-life insurance companies however differed considerably. The risk-based solvency position continued to strengthen, to 2.3 (31 December 2012: 2.1).
For further information, please contact
- Anneli Tuominen, Director General, tel. +358 10 831 5300
- Jukka Vesala, Deputy Director General, tel. +358 10 831 5374
- Capital position of banking and insurance sector, 31 March 2013 (in Finnish, pdf)