First macroprudential decision: FIN-FSA sets no further requirements for banks
The Board of the Financial Supervisory Authority (FIN-FSA) today made its first decision on macroprudential instruments. The Board has not imposed a countercyclical capital buffer requirement on banks, nor has it otherwise tightened macroprudential policy.
‘The adoption of macroprudential instruments and the overall analysis this requires provide a new important addition to the authorities’ toolkit. However, the current cyclical situation does not necessitate the setting of a countercyclical capital buffer requirement or the activation of other measures aimed at tightening macroprudential policy,’ notes Pentti Hakkarainen, Chairman of the FIN-FSA Board.
The Board made its macroprudential decision upon proposal by the Director General and after consultation with the Bank of Finland, the Ministry of Finance and the Ministry of Social Affairs and Health. All the parties involved were unanimously behind the decision. In accordance with the regulations governing the Single Supervisory Mechanism, prior to the final decision, the European Central Bank was notified and offered no objections. Such decisions will be taken on a quarterly basis.
The Act on credit institutions and the related Ministry of Finance Decree describe the practice applied in setting countercyclical capital buffer requirements. The main indicator for setting a countercyclical capital buffer requirement is the trend deviation of the credit-to-GDP ratio. A mechanistic application of this indicator would have led to a 0.75% countercyclical capital buffer requirement.
However, other risks relevant to the decision do not signal growth in factors jeopardising the stability of the financial system, thus not requiring the activation of a countercyclical capital buffer requirement. Supplementary risk factors include:
- pace of credit growth
- housing price developments
- household indebtedness
- overall economic and current account developments
- risks related to credit institutions
- risk pricing in lending or in the securities market.
An overall analysis of the risks suggests that the credit cycle is subdued and does not need containment. The trend deviation of the credit-to-GDP ratio is forecast to decrease in the course of this year and next.
For further information, please contact
- Pentti Hakkarainen, Chairman of the Board of the Financial Supervisory Authority, tel. +358 10 831 2002
- Decision by the Board (pdf)
- Proposal for decision by the Director General of the Financial Supervisory Authority (in Finnish, pdf)
- Opinions (in Finnish, pdf)