Finnish banks offer extra grace periods – opportunity already taken by 63,000 households and 12,000 companies

To help businesses and households struggling in the coronavirus crisis, Finnish banks offer extra flexibility for loan repayments. As many as 63,000 private customers and 12,000 companies have already sent banks applications for extra grace periods. The figures are based on a survey sent to Finnish banks by the FFI on 6 April 2020.

“Financial sector companies have a key role in carrying us through the crisis. Banks have extended a hand to households and companies that are in financial distress due to the coronavirus situation. Lay-offs, job terminations and reduced income for entrepreneurs have caused many Finns financial distress”, observers Veli-Matti Mattila, director and chief economist at FFI.

According to the survey, nearly all the applications for grace periods have been accepted. “A rejected application typically means that the client was in financial trouble already before the pandemic. Grace periods and any other loan detail flexibilities are voluntary, bank-specific decisions”, Mattila points out.

Finnish banks reported that the grace periods for corporate loans were mainly taken by small companies, who do not have financial buffers for unexpected circumstances of this magnitude.

Focus on rebuilding

FFI has been extremely pleased that the Finnish government decided to substantially increase the financial powers of state-owned specialised financing company Finnvera. Finnvera guarantees also support the use of premium lending provided by statutory employee pension insurance, which the financial sector considers another important financing channel.

”Raising Finnvera’s loan guarantee capacity up to €12 billion was a very important decision that helps banks continue their corporate lending. Lowering banks’ capital buffer requirements also improved their lending capacity. We already need to start shifting our focus to the times after the pandemic: Finland’s economy needs to be rebuilt, and the decline in employment and growth must be reversed – but in order for all of this to happen, healthy companies must survive this financial slump”, Mattila emphasises.

Finnvera made more than 5,300 financing decisions regarding existing and new SMEs this March. This is five times the month’s figure last year. According to Finnvera’s press release on 6 April, new crisis funding has been granted to more than a thousand companies, and repayment arrangements to more than 4,000 companies. In April the numbers are expected to double.


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Financial and Prudential Regulation

Veli-Matti Mattila

Director, Chief Economist