Financial sector’s capital position as at 31 March 2018: Finland’s financial sector as a whole remained strong
According to end-March information released today by the Financial Supervisory Authority (FIN-FSA), Finland’s financial sector remains stable.
“The banking sector’s capital adequacy is strong, even though the capital ratio has weakened slightly from the situation at the end of the previous year. The decrease was mainly due to the 15% floor set for the average risk weight on residential mortgage loans from the beginning of the year,” says Samu Kurri, Head of Department, Financial Analysis and Operational Risks.
Banking sector’s capital position remains strong
The banking sector’s own funds decreased following the merger at the turn of the year of Danske Bank Plc with its Danish parent company and it becoming a branch. It is therefore no longer included in the Finnish banking sector’s key indicators. Comparable own funds still increased in the first quarter, and partly cushioned the decrease in capital ratio.
The capital position of financial and insurance conglomerates remained good, as the banking sector’s minimum capital requirement grew slightly and the insurance sector’s requirement decreased.
Employee pension sector’s solvency position is good
In terms of solvency ratio, the employee pension institutions’ solvency position weakened slightly from the previous quarter, but remained good. The solvency ratio weakened slightly, as quarterly investment returns were negative (-0.3%), for the first time in a long while.
The risk-based solvency position remained unchanged, as the solvency limit and solvency capital both declined proportionally. The proportion of shares in the investment portfolio grew slightly.
Life insurance sector’s solvency position remained good and strengthened from the end of the year
The life insurance companies’ solvency ratio (SCR) strengthened, both from the previous quarter and the year before. The solvency position remains good. The rise in interest rates has had a positive impact on the solvency position, because it has reduced the amount of technical provisions.
The investment return (-0.3%) was slightly in the red, due to the negative return on fixed income investments. Real estate investments yielded the best returns.
Non-life insurance sector’s solvency position good, but its strengthening was slowed by weaker profitability
The non-life insurance sector’s solvency position was good and strengthened slightly compared with the previous quarter. The sector’s aggregate own funds were more than double the solvency capital requirement. The solvency position was strengthened by a growth in own funds. The growth was weaker, however, than in January-March 2017, because investment activity did not yield a return and the profitability of the insurance business was poor. The solvency capital requirement did not change significantly compared with the previous quarter.
Samu Kurri, Head of Department, Financial Analysis and Operational Risks. Requests for interviews are coordinated by FIN-FSA Communications, tel. +358 9 183 5250, weekdays 9.00–16.00.
Appendices (Charts in English and Swedish have been added on 18 July 2018.)
- Capital position of banking sector and financial and insurance conglomerates as at 31 March 2018 (Excel)
- Solvency position of life and non-life insurance companies as at 31 March 2018 (Excel)
- Solvency position of earnings-related pension companies, industry-wide pension funds and earnings-related pension sector as at 31 March 2018 (Excel)