Press release 1 April 2015

Financial position and risks of supervised entities 1/2015: Finnish financial sector in good health but must prepare for bursting of the asset price bubble

​According to end-December data published today by the Financial Supervisory Authority (FIN-FSA), the overall capital position of the Finnish banking and insurance sectors is good, the capital position having improved in most subsectors. 

– However, both banks and insurance companies face an increasingly challenging interest rate environment, says Anneli Tuominen, Director-General of the FIN-FSA. – At this juncture, financial sector participants must refrain from excessive risk taking in their search for yield. We should also be prepared for a bursting of a possible asset price bubble. 

Capital adequacy of banking sector strong and still improving

The profitability of the banking sector improved somewhat in response to higher fee income and net income from financial operations. Access to funding was good and the costs of funding were constrained by the low level of interest rates. The amount of nonperforming assets remained moderate.

Finnish banks' total capital adequacy ratio was 17.3% as of 31 December 2014 (30 June 2014: 15.3%) and the Common Equity Tier 1 was 15.8% (30 June 2014: 14.1%).  The improvement in capital adequacy ratios mainly reflects capitalisation and an increase in retained earnings. Financial and insurance conglomerates’ solvency position stood at 2.0 at the end of the year (30 June 2014: 1.9).

Stronger solvency in the employee pension sector due to investment income

Compared with the situation at the end of 2013, the solvency ratio of employee pension institutions strengthened to 30.3% (31 December 2013: 28.4%). The risk-based solvency position remained unchanged at 2.1. The solvency limit rose to 14.4% (31 December 2013: 13.5%), as market participants turned to higher risk investments in search of better yields.

Solvency good in life insurance sector, strong in non-life insurance sector

The risk-based solvency position of the life insurance sector strengthened, to 3.9 (31 December 2013: 3.7). The solvency position was 5.1, little changed from the year before (31 December 2013: 5.2). The volume of index-linked technical provisions continued to increase, which shifted more of the investment risk to policyholders.

The risk-based solvency position of the non-life insurance sector strengthened, to 2.7 (December 31, 2013: 2.3), which was the highest ratio recorded in the reference period starting in 2009. The solvency position improved, to 4.5 (December 31, 2013: 4.3). The combined ratio reflecting the profitability of non-life insurance weakened at the end of the year, as several companies reduced discount rates in order to cumulate technical provisions. 

For further information, please contact

  • Anneli Tuominen, Director General, tel. +358 10 831 5300
  • Marja Nykänen, Deputy Director General, tel. +358 10 831 5247
  • Jyri Helenius, Head of Prudential Supervision, tel. +358 10 831 5312