Press release 28 September 2015

Financial position and risks of supervised entities 2/2015: Finnish financial sector in good condition, but banks' income structure increasingly risky

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 strong.

The operating profits of the banking sector improved. However, the share of net interest income in total income generation in banks has decreased and banks’ dependency on other sources of income has increased, says Anneli Tuominen, Director General of FIN-FSA. –These other income items are more vulnerable to changes in the market situation. In our supervisory work, we also take this into account.

The Solvency II regime, which enters into force at the beginning of 2016, together with low interest rates form a challenging combination for life and non-life insurance companies. These companies should consider the impact of the new regulation and at the same time they need to earn enough income on investments to cover the income promised to policyholders.

Capital adequacy of the banking sector strong

The banking sector profitability improved mainly due to an increase in income from trading and investment activities. Interest expense was low as a result of low-cost funding. The level of non-performing assets is still low.

The banking sector's total capital adequacy ratio as of 30 June 2015 was 19.0% (31 December 2014: 17.3%) and the Common Equity Tier 1 ratio 17.5% (31 December 2014: 15.8%). The improved capital adequacy ratios have mainly been based on new equity issues, accumulated profits and decreased risk weights. At the end of June the solvency position of financial and insurance conglomerates was 1.9 (31 December 2014: 2.0).

Strong risk bearing capacity in the employee pension sector

At the end of June the average solvency ratio of employee pension insurance companies was 32.0% (31 December 2014: 29.8%). The solvency ratio of employee pension institutions improved from the previous year. The falling stock market prices at late spring and particularly late summer clearly showed up in the solvency figures. In calculated terms all institutions would, based on June figures, survive a fall in stock prices of more than 35%.

The risk-based solvency position improved slightly and was 2.3 for the entire sector (31 December 2014: 2.1). The solvency limit of the companies remained virtually unchanged at 14.3% (31 December 2014: 14.4%).

Solvencies in life and non-life insurance sectors practically unchanged

The risk-based solvency position of the life insurance sector continued to strengthen, to 4.3 (31 December 2014: 3.9). The proportion of unit-linked products continued to increase, so that investment risks were shifted to policyholders.

The risk-based solvency position of the non-life insurance sector deteriorated slightly, to 2.6 (31 December 2014: 2.7). Growth in premiums written slowed to half of the rate in the previous year.

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