Press release 30 September 2014

Financial position and risks of supervised entities 2/2014: Finnish financial sector in good health, risks in the operating environment still on the increase

According to end-June data published today by the Financial Supervisory Authority (FIN-FSA), the overall capital position of the Finnish banking and insurance sectors is good. The sectors’ profitability improved slightly during the first half of the year.

‘However, banks and insurance companies need to be prepared for the adverse effects of the weak economic situation,’ says Anneli Tuominen, Director General of the FIN-FSA. ‘Our supervised entities must also be ready to face the possibility of declining share prices and even *rapid reversal of bond spreads. Such risks underscore the importance of adequate capital buffers and high-quality, proactive risk management processes.’

Capital adequacy of the banking sector is still strong

The profitability of the banking sector improved despite the weak economic situation. The moderate recovery in net interest income has continued, and fee income has also increased. The impairment losses have increased, marking an end to a long-standing downward trend, but the losses have remained at low levels.

Finnish banks’ combined capital adequacy ratio was 15.3% as of 30 June 2014 (31 December 2013:  16.0%). The Common Equity Tier 1 capital ratio averaged 14.1% (31 December 2013: 14.8%). Given the change in capital regulations for banks at the beginning of 2014, capital ratios are not fully comparable with earlier ones. Financial and insurance conglomerates’ solvency position remained unchanged at 1.9.

Strong risk bearing capacity in the employee pension sector, high levels of risk

The sector’s solvency ratio strengthened and was 30.5% as of 30 June 2014 (31 December 2013: 28.4%). The risk-based solvency position improved slightly, to 2.2 (31 December 2013: 2.1). The improved solvency is based on investment returns that are higher than the return requirement on technical provisions. The risk bearing capacity of employee pension institutions is on average strong, and the investment risks are diversified. The risk levels are, however, high. The impaired outlook for the Finnish real economy and the uncertainties of the investment markets have increased the risks of the operating environment.

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

The risk-based solvency position of life insurance companies remained unchanged at 3.7. The life insurance sector’s solvency margin rose to 5.9 times the statutory minimum (31 December 2013: 5.2). Assets covering unit-linked insurance policies exceeded for the first time investments on the companies’ own account.

The non-life insurance sector’s risk-based solvency position was 2.5 (31 December 2013: 2.3), which was the highest level seen since the beginning of 2009. The solvency position of 4.5 (31 December 2013: 4.2) also reflected an improvement. The balance on technical account has increased relative to the companies’ total result, compared with investment returns.

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 Department, tel. +358 10 831 5312.


The press release has been corrected on 30 September 2014: *rapidly increasing risk premia in interest rates > rapid reversal of bond spreads