Press release 20 December 2018 – 32/2018

Macroprudential decision: Countercyclical capital buffer rate and loan cap unchanged, importance of assessing financial margin underlined

The Board of the Financial Supervisory Authority (FIN-FSA) will not impose a countercyclical capital buffer (CCyB) requirement on credit institutions; the CCyB rate will remain at zero. The decision to lower the maximum loan-to-collateral (LTC) ratio, or loan cap, will also remain in force. High household indebtedness combined with historically low interest rates underline the importance of the appropriate assessment of financial margin with respect to loan applicants.

In its meeting on 20 December 2018, the FIN-FSA Board decided not to impose a countercyclical capital buffer (CCyB) requirement on credit institutions; the CCyB rate will remain at zero.

The domestic private sector credit-to-GDP gap, used as the primary indicator for setting a CCyB requirement, continues to give a reference value of 0% for the CCyB requirement. Overall, the indicators of credit growth or other supplementary risk indicators are not signalling such a build-up of financial system risks as would necessitate an immediate increase in the CCyB requirement.

The decision made by the FIN-FSA Board on 19 March 2018 and effective since 1 July 2018 to lower by 5 percentage points the maximum LTC ratio for residential mortgage loans other than first-home loans is still justified in terms of containing household indebtedness.

“The decisions made by the FIN-FSA Board during 2018 have strengthened the risk resilience of Finland’s credit institution sector. We are now assessing the effects of these decisions and the potential need for additional measures. In the future, there will be a need to develop tools to take into account household loan repayment capacity in order to address the risks more effectively, says Marja Nykänen, Chair of the FIN-FSA Board.

This year, the FIN-FSA Board has decided on a number of macroprudential measures. In March, it decided to lower by 5 percentage points to 85 per cent the maximum LTC ratio for residential mortgage loans other than first-home loans. For first-time home buyers, the loan cap was kept at 95 per cent. In June, the Board decided to impose a systemic risk buffer on all Finnish credit institutions and institution-specific additional capital requirements on larger credit institutions. In addition, a decision on a risk weight floor of 15 per cent for residential mortgage loans, made at the end of 2017, came into force at the beginning of 2018.

“High household indebtedness combined with historically low interest rates underline the importance of the appropriate assessment of financial margin with respect to loan applicants. The most common loan periods for new home loans are 20 and 25 years. During that time, the economy will experience both good periods and bad,” says Anneli Tuominen, Director General of the FIN-FSA.

On 1 November 2018, the Swedish Financial Supervisory Authority (Finansinspektionen) sent to the FIN-FSA a request that the risk weight floor of 25 per cent for residential mortgage loans it has imposed be applied as of 31 December 2018 to Finnish credit institutions with a housing loan stock in Sweden in excess of SEK 5 billion. The FIN-FSA Board approved the request in its meeting on 20 December 2018.

For further information, please contact

  • Marja Nykänen, Chair of the Board of the Financial Supervisory Authority, tel. +358 9 183 2007
  • Anneli Tuominen, Director General of the Financial Supervisory Authority

Requests for interviews are coordinated by FIN-FSA Communications, tel. +358 9 183 5030, weekdays 9.00–17.00.

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