New regulations and guidelines on the management of default risks in consumer lending enter into force on 1 June 2025
The Financial Supervisory Authority (FIN-FSA) has issued new regulations and guidelines 1/2025 on the management of default risks in consumer lending. The objective of the regulations and guidelines is to prevent the granting of credit to consumers with an unreasonably high default risk.
The regulations and guidelines apply to all credit institutions operating or providing services in Finland, traders subject to the registration obligation under section 4 of the Act on the Registration of Certain Credit Providers and Credit Intermediaries (186/2023), other supervised entities referred to in section 4, and other financial market participants referred to in section 5 of the Act on the Financial Supervisory Authority, which provide unsecured consumer credits falling within the scope of chapter 7 of the Consumer Protection Act.
The regulations and guidelines specify the minimum requirements for operating models of rating systems used by supervised entities to assess default risks in consumer lending. In accordance with the regulations and guidelines, supervised entities shall measure the performance of the operating model of the rating system in the assessment of default risks on the credit granting date using the so-called Gini coefficient. Supervised entities shall use the percentage share of bad credits in the rating system's highest-risk 5% bucket relative to all credits in that bucket at a given point in time as a criterion for reasonable default risk. The regulations and guidelines do not currently set thresholds for the reliability of the rating system’s operating model or for reasonable default risk. These may be established at a later stage once data from periodic reporting has been analysed.
The regulations and guidelines also include an obligation to submit data to the FIN-FSA in the default risk (MK) management report. The first reference period is 31 December 2025, with data submission due by mid-February 2026.
Entry into force
The regulations and guidelines will enter into force on 1 June 2025.
For further information, please contact
- Torsten Groschup, Chief Specialist, torsten.groschup(at)finanssivalvonta.fi or telephone +358 9 183 5333
- Katariina Kulpakko, Supervisor, katariina.kulpakko(at)finanssivalvonta.fi or telephone +358 9 183 5464