Annual Report 2012: Strong risk management essential in weak economic conditions
The Finnish financial sector has so far withstood the financial crisis relatively well. However, profitability in the sector is exposed to significant threats stemming from the weak economic conditions, the persistent low level of interest rates and upcoming new regulation.
In her Director General’s review of the FIN-FSA Annual Report published today, Anneli Tuominen states that maintaining a sound level of operating profits may, in fact, require cost-cutting and a rethink of existing business models. In such an environment, sound corporate governance has become increasingly important.
– In the Finnish financial sector as a whole, risks are relatively well managed.
The FIN-FSA has conducted a number of on-site inspections relating to sound corporate governance and risk management and addressed with vigour any shortcomings detected. – Supervised entities with well-functioning governance arrangements usually also manage their business well. Market participants with problems in profitability and capital adequacy also often have the biggest need for improvements in risk management, adds Tuominen.
In the review, Anneli Tuominen also addresses the negative feedback loop between banks and sovereigns: – The aim of the Single Supervision Mechanism as well as the crisis resolution mechanism still under negotiation is to help break this connection. But regulation continues to include elements that, on the contrary, actually strengthen the link between banks and sovereigns. Anneli Tuominen regrets that future regulation will continue to encourage banks and insurance companies to favour sovereign risk in their investments.
For further information, please contact
- Anneli Tuominen, Director General, tel. +358 10 831 5300
- Annual Report 2012 (in Finnish, pdf)
The English version of the FIN-FSA Annual Report will be published in April 2013