Financial sector has withstood well the challenges of a volatile operating environment – special attention must be paid to preventing fraud

Despite renewed optimism, Finland’s economic situation remained difficult. The expected economic growth did not start in the spring, while unemployment and bankruptcies have continued to rise and consumer confidence has been tested. 

 “Finnish financial sector participants have withstood well the challenges posed by the volatile operating environment at the beginning of the year. There are signs of improvement in the economy, but there is still good reason to be prepared for continued uncertainty,” says Tero Kurenmaa, Director General of the Financial Supervisory Authority (FIN-FSA). 

Market nervousness declined and share prices rebounded as clarity was obtained on US tariffs, and tensions between Israel and Iran eased. In Finland, industrial confidence in particular has improved, while confidence in services and the retail trade has remained positive. Consumers’ confidence in their own finances has also improved and consumers’ borrowing intentions have picked up. Housing transactions have increased.

The number of payment scams and frauds rose sharply last year. The FIN-FSA is conducting a thematic review of the implementation of features and controls in banks to improve payment security. 

 “Technological developments also present new opportunities for criminals, and payment scams and various types of fraud have been rising sharply. Financial sector participants must continue their work on preventing crime, but consumers’ own caution is also important when using digital services,” says Kurenmaa.

In the financial sector, the situation with regard to cyber threats and system disruptions has been calm during summer 2025. The FIN-FSA is currently investigating the ability of the most significant supervised entities to recover from a severe ransomware attack.

Banking sector’s capital position remains strong – continued decline in net interest income weakened profitability as expected

The capital position of the Finnish banking sector weakened in early 2025, but remained at a strong level, higher than the average for European banks. The sector’s Common Equity Tier 1 (CET1) capital ratio at the end of June 2025 was 17.8% (12/2024: 18.2%) and the total capital ratio was 20.8% (12/2024: 22.1%). The weakening was influenced by buybacks of own shares and instruments included in own funds, as well as a regulatory change that modified the calculation of credit institutions’ capital adequacy requirements at the beginning of 2025. The regulatory change had a mixed impact on banks’ capital ratios, with some banks even seeing a clear improvement in them. The profitability of the banking sector remained good in the early part of 2025 but, due to the general decline in interest rates, lower net interest income weakened, as expected, the operating profit compared with the comparison year.

The banking sector’s non-performing loans remained at a low level and among the lowest in Europe. There is still, however, significant variation between different lending segments and sectors in the credit risk development of the household and corporate loans of banks operating in Finland. The share of non-performing household loans decreased, while the share of non-performing corporate loans began to increase in the second quarter of 2025. The increase was mainly due to a deterioration in the quality of loans to the construction industry, which has been in difficulty for some time.

The banking sector’s liquidity situation and liquidity position remained stable. Household deposits grew to a record level in the early part of the year, and Finnish banks’ deposit rates and deposit funding costs continued to fall. The risk premiums of banks’ market-based funding have continued to fall after a brief rise seen in connection with the market volatility in the spring.

Employee pension institutions’ solvency remained strong

The employee pension sector’s solvency ratio improved slightly during the second quarter, reaching 128.9% at the end of June (12/2024: 129.3%). The solvency position remained unchanged at 1.6.

Despite the financial market turbulence in the first half of 2025, the sector’s overall return on investment was, after two quarters, positive at 1.8%. The weighting of equities in investment allocation rose again to a new record (53.1%).

The sector’s resilience to equity shocks remained moderate and at the previous quarter’s level. 

Situation of non-life and life insurance sectors stable

The solvency of the non-life and life insurance sectors remained at a strong level (non-life insurance sector: 6/2025: 248%, 12/2024: 254% and life insurance sector: 6/2025: 224%, 12/2024: 222%). The return on investment activities turned positive. All asset classes, except for real estate investments and other investments in the life insurance sector, achieved positive returns. 

In the non-life insurance sector, profitability improved moderately, due to, among other things, favourable development in large claims. 

Premium income from life insurance companies’ unit-linked insurance reached a record level. Growth has continued since late 2023, which is partly explained by favourable developments in the investment market. Growth has been strongest in individual savings products.

Fund management companies’ results slightly better than last year, no change in solvency of investment firms

The domestic fund sector recovered from the volatile market conditions of the spring, and in June fund net asset value (NAV) stood at nearly EUR 210 billion. Net asset value was last at this level in January, when it reached an all-time high. The market for open-end real estate funds continued to be challenging in the first half of the year, although some deferred redemptions were executed. The fund sector’s result for the first half of the year (EUR 112 million) was very close to the level of the corresponding period of the previous year (EUR 110 million).

Investment firms met the solvency and liquidity requirements in the first half of 2025, with no significant changes seen in the level of these requirements. Investment firms’ January–June result (EUR 106 million) fell short of the previous year (EUR 120 million) due to faster growth in expenses.

For further information, please contact:

Samu Kurri, Head of Department, Digitalisation and Analysis. Requests for interviews are coordinated by FIN-FSA Communications, tel. +358 9 183 5030, Mon-Fri 9.00–16.00.

Appendices

FIN-FSA website page ‘Financial position and risks of supervised entities’ (in Finnish)