Press release 1 December 2016

Capital position of banking and employee pension sector 30 September 2016: Banks' capital adequacy still strong, employee pension sector's solvency ratio solid

According to end-September information published today by the Financial Supervisory Authority (FIN-FSA), capital adequacy in the Finnish banking sector remained strong. The solvency position of the employee pension sector strengthened slightly and is solid.

​Strong capital adequacy in the banking sector

Changes in the capital ratios have been small in 2016. At the end of September, the total capital ratio stood at 23.1%, i.e. the same level as at the turn of the year (31 Dec 2015: 23.1%). The Common Equity Tier 1 (CET1) capital ratio of the banking sector improved slightly in July–September, and at the end of September stood at 21.1% (31 Dec 2015: 21.0%). The higher CET1 ratio is due mainly to the growth in retained earnings.

The capital ratio of financial and insurance conglomerates remained unchanged at 1.6 in July–September, but it has weakened compared with the turn of the year (31 Dec 2015: 2.1) due to the Solvency II regulatory changes that entered into force at the beginning of the year.

Banking sector profits have been strengthened by one-off capital gains, but profitability has nevertheless weakened compared with 2015. The weaker expectations on income and expenses related to development projects will generate pressure on future profitability in the banking sector.

Capital levels of small banks remained good in the stress test

In early autumn 2016, the FIN-FSA conducted a stress test on the banks subject to its direct supervision. The stress test was based on the scenarios and methodology used in the European Banking Authority’s (EBA) 2016 stress test. The test covered the years 2016–2018 and included seven banks and conglomerates. Their capital levels remained good in the test. In the adverse scenario, the CET1 ratio fell at most from 17.6% to 16.0%, and in the baseline scenario it improved.

Solid solvency position in the employee pension sector

The solvency ratio of the employee pension sector increased to 28.2% (30 June 2016: 26%). The risk-based solvency position for the sector continued to strengthen and was 2.1, the highest figure since June 2015.

The solvency of the employee pension sector in the third quarter was boosted by investment return, which averaged 3% (30 June 2016: 0%).

As a result of the increase in equity risk, the solvency limit rose from the previous quarter, to 13.2%.

The life and non-life insurance sector's Solvency II data will be released later in December 2016.

For further information, please contact

  • Anneli Tuominen, Director General
  • Marja Nykänen, Deputy Director General

Requests for interviews 

FIN-FSA Communications, tel. +358 50 385 5154


Capital position of banking and employee pension sector as at 30 September 2016 (in Finnish)