FIN-FSA: Financial sector in stable condition

The overall position of the Finnish banking and insurance sectors is strong. Banking sector profitability weakened slightly, but capital adequacy was strong and continued to improve. Solvency positions also remained good throughout the year in both the life and non-life insurance sectors, FIN-FSA announced.

The Finnish Financial Supervisory Authority (FIN-FSA) released end-December information on the overall capital positions of the Finnish banking and insurance sectors on 28 March. The earnings performance of the banking sector is burdened by the low level of interest rates and the investment required by digitalisation. The figures of both sectors were nevertheless mostly good.

The banking sector’s total capital ratio at 31 December 2016 was 23.9% and the Common Equity Tier 1 capital ratio was 27.1%.

The solvency positions and investment return for life and non-life insurance companies were good in spite of new business on life insurance policies decreasing towards the end of the year. Non-life insurance companies’ premium income has not grown since the start of 2015. This, in turn, is the result of tighter price competition and the entry onto the market of foreign service providers. The profitability of non-life insurance was at a record high.

Regulation of the sale of investment products will tighten in many respects at the start of 2018, and will also be extended to cover the insurance sector. The changes will affect, for example, staff competence requirements and remuneration.

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Financial and Prudential Regulation

Veli-Matti Mattila

Director, Chief Economist