Press release 28 September 2023

Macroprudential decision: Housing loan cap and countercyclical capital buffer (CCyB) requirement for banks unchanged – housing loan cap to also cover other lenders transferred under FIN-FSA supervision

At its meeting on 27 September 2023, the Board of the Financial Supervisory Authority (FIN-FSA) decided to keep the housing loan cap, i.e. the maximum loan-to-collateral (LTC) ratio, at its previous level of 85%. Henceforth, the lowered level will apply, besides credit institutions, also to other firms granting consumer credit. In addition, the Board decided to keep the CCyB requirement for banks at its baseline level and reciprocated the risk-weight floors imposed by the Swedish Finansinpektionen on Swedish real estate-backed corporate credit, so that they also apply to Finnish credit institutions.

The growth prospects of the world economy remain sluggish. In the second quarter of 2023, Finland's real GDP expanded by 0.6% on the previous quarter. Inflation remains relatively high but the growth of prices in Finland has slowed down throughout the spring. According to the Bank of Finland's September interim forecast, the Finnish economy will contract by 0.2% this year. In 2024, economic growth is forecasted to turn positive, albeit less so than in the previous forecast (+0.2%). Economic growth will accelerate in 2025 (+1.4%) as the number of the employed also starts rising.

The slump of the housing markets continued in the summer of 2023, largely in the same vein as in early 2023 and towards the end of 2022. Housing sales were clearly below their normal levels. House prices declined year-on-year throughout the country, and the decline steepened particularly in Helsinki and the Helsinki metropolitan area from the beginning of the year. In the summer, there was a large stock of dwellings for sale and lease. The number of new construction projects launched was lower than those completed, as measured by the number of dwellings. The stock of housing loans contracted, which reduced household indebtedness relative to income.

– Household indebtedness has hovered at a historically high level for a protracted period. According to recent estimates, indebtedness relative to income is decreasing due to the contraction of the housing loan stock and nominal income growth. If these developments continue in an orderly manner, they will reduce concerns about risks associated with household indebtedness. The slowdown of the housing markets is affecting the cyclical prospects of the construction sector, states Marja Nykänen, Chairman of the FIN-FSA Board.

Level of the loan cap unchanged

The FIN-FSA Board has decided to keep the maximum LTC ratio for new non-first home loans, or the loan cap, unchanged at 85% until further notice. Due to the still-high household indebtedness and uncertainty in the housing market, the loan cap will limit the growth of housing loans that are large relative to collateral as well as ascertain the resilience of new borrowers.

Loan cap to also cover other lenders

The Board's decision of 28 June 2021 to reduce the maximum LTC ratio and the FIN-FSA’s principles concerning the maximum LTC ratio were extended beyond credit institutions to also cover other lenders1, which were transferred under FIN-FSA supervision on 1 July 2023, when they are granting housing loans. The decision will enter into force on 1 January 2024 and its objective is to ensure a level playing field for all parties.

Countercyclical capital buffer (CCyB) requirement for banks to remain unchanged

The financial cycle has continued to deteriorate, and an overall assessment indicates low risks of overheating in the financial system. Neither the primary risk indicator, the credit-to-GDP gap, nor the supplementary risk indicators show any discernible signs of overheating in the credit system. Hence, there are no grounds to apply a countercyclical capital buffer.

Risk weight floors for Swedish corporate exposures to also apply to Finnish credit institutions

In May, Finansinspektionen, the Swedish macroprudential authority, announced it would impose a credit institution-specific floor of 35 percent for the weighted average of the risk weights for corporate exposures secured by commercial properties and a floor of 25 percent for the weighted average of the risk weights for corporate exposures secured by residential properties. The risk weight floors apply to such corporate credits granted by credit institutions applying internal models that are secured by properties located in Sweden. The FIN-FSA Board decided at its meeting to adopt the risk weight floors for credit institutions registered in Finland.

The Board of the Financial Supervisory Authority assesses on a quarterly basis the short- and long-term risks to the stability of Finland’s financial system. If necessary, the Board may tighten or relax its macroprudential instruments to promote stability. The Board decides on a quarterly basis the levels of the countercyclical capital buffer (CCyB) and the maximum loan-to-collateral (LTC) ratio for housing loans. The levels of the additional capital requirements for nationally systemically important institutions (O-SII buffers) are reviewed at least annually and the level of the systemic risk buffer (SyRB) at least every second year.

For further information, please contact:

Marja Nykänen, Chair of the Board of the Financial Supervisory Authority, tel. +358 9 183 2007

View this link to access the appendices listed below

  • Board’s decision on the application of macroprudential instruments (pdf)
  • Proposal of the Director General of the FIN-FSA, circulated for comment, on the application of macroprudential instruments (pdf, in Finnish)
  • Opinions on the Director General’s proposal on the application of macroprudential instruments (pdf, in Finnish)
    • Bank of Finland
    • Ministry of Finance
    • Ministry of Social Affairs and Health
  • FIN-FSA principles for tightening the maximum loan-to-value ratio and restricting the collateral used in calculating the loan-to-value ratio


About Finanssivalvonta

Finanssivalvonta, or the Financial Supervisory Authority (FIN-FSA), is the authority for supervision of Finland’s financial and insurance sectors. The entities supervised by the authority include banks, insurance and pension companies as well as other companies operating in the insurance sector, investment firms, fund management companies and the Helsinki Stock Exchange. We foster financial stability and confidence in the financial markets and enhance protection for customers, investors and the insured.