Financial position and risks of supervised entities as at 30 June 2017: Financial sector stable, risk management increasingly important
According to end-June information released today by the Financial Supervisory Authority (FIN-FSA), the Finnish banking sector's capital position is strong and the insurance sector’s solvency position is good. The decision of the Nordea Bank AB Board of Directors to initiate re-domiciliation of the parent company to Finland will create a more equal playing field for banking in Finland. If the plan is materialised, a larger share of Finnish banking would be subject to harmonised supervision and regulation.
Common European regulation does, however, still leave a lot of scope for national interpretations by supervisory authorities. ‘For the transparency of financial markets it would be desirable to have capital requirements that are comparable across countries’, says the FIN-FSA’s Director General Anneli Tuominen.
Banking sector capital adequacy remains strong – structure of the sector changed significantly in 2017
The banking sector's Common Equity Tier 1 (CET1) capital ratio was 20.1% (31 December 2016: 22.1%) and the total capital ratio as at 30 June 2017 was 22.6% (31 December 2016: 24.6%). The Common Equity Tier 1 capital ratio was weakened by the conversion of Nordea Bank Finland Plc into a branch, as a result of which, as of the turn of the year, it was no longer included in the Finnish banking sector’s key indicators. The Common Equity Tier 1 capital ratio, calculated on the basis of comparable figures, declined by only 0.2 percentage points. The decline in the capital adequacy ratios was moderated by an increase in own funds by some EUR 700 million.
Banking sector profitability weakened slightly, but remained good. The earnings performance of the sector was burdened by business development projects, but earnings were nevertheless supported by securities-related fee income and net trading and investment income.
Investment return for employee pension institutions exceeded the return requirement, reflecting positive share market sentiment
In the first half of the year, the investment return for employee pension institutions was 4.2%, i.e. clearly higher than the return requirement. As a result, their solvency position strengthened in the first half of the year. The ratio of the employee pension sector's pension assets to technical provisions was 130.4% at the end of the second quarter.
Life and non-life insurance companies’ solvency position stronger due to higher interest rates
The solvency position of life and non-life insurance companies strengthened, despite slightly lower investment return compared with a year earlier. The life insurance sector's solvency ratio was 213%, and the non-life insurance sector's was 226%.
- Anneli Tuominen, Director General
- Jyri Helenius, Deputy Director General
- Samu Kurri, Head of Department, Institutional Supervision
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