Press release 9 September 2016

Financial position and risks of supervised entities 2/2016: Finnish banking sector's profitability weaker, solvency ratio of employee pension sector remained solid – challenges remain

According to end-June information released today by the Financial Supervisory Authority (FIN-FSA), capital adequacy remained strong in the Finnish banking sector and the solvency ratio of the employee pension sector remained solid. 

​‘Despite the slight pick-up in economic growth, banks’ operating environment is still challenging,’ points out FIN-FSA Director General Anneli Tuominen. ‘The low level of interest rates, uncertainty on the financial markets and the high level of household debt underlie the importance of risk management by financial sector entities. Digitalisation and fintech companies are also challenging established entities to renew their business models.’

The solvency position of the employee pension sector weakened, but risk-bearing capacity remained strong. Investment return did not reach the target level in January–June. Likewise, in the coming years, it will be difficult to reach the target level if interest rates remain at their current low level.

Strong capital adequacy in the banking sector

There was a weakening of banking sector profitability, due mainly to lower returns, but also to an increase in costs. The weaker income performance is explained mainly by a considerable decrease in net income from securities trading and investment, from exceptionally high levels the previous year. Impairments and the amount of nonperforming assets remained low, despite the weakness of the Finnish economy.

The Common Equity Tier 1 (CET1) capital ratio of the banking sector was 20.9% (31 Dec 2015: 21.0%) and the total capital ratio stood at 22.9% (31 Dec 2015: 23.1%). The cause of the slight weakening in capital ratios was the slightly higher growth in risk-weighted assets compared with own funds. At the end of June, the capital ratio of financial and insurance conglomerates stood at 1.6% (31 December 2015: 2.1%). The deterioration in the capital ratio was due to regulatory changes.

Good risk-bearing capacity in employee pension sector

The investment return for the employee pension sector was zero. A positive return in the second quarter covered the losses generated in the first quarter.

The average solvency ratio of the employee pension sector at the end of June was 26.0% (31 Dec 2015: 28.6%). The decrease in equity risk in the investment portfolio was reflected as a decline in the solvency limit. The risk-based solvency position for the sector was 2.1 (31 Dec 2015: 2.0).

Data on the non-life and life insurance sectors will be released on 11 October 2016.

For further information, please contact

  • Anneli Tuominen, Director General
  • Marja Nykänen, Deputy Director General
  • Jyri Helenius, Head of Department, Prudential Supervision

Request for interviews: FIN-FSA Communications, tel. +358 50 385 5154.


Position of banking and employee pension insurance sectors as at 30 June 2016: Articles (in Finnish).