Finnish financial sector shocked by the Government’s stance on Basel III implementation – banks’ capacity to finance the economy and green transition at risk


The Finnish financial sector is frustrated by the Finnish Government’s stance regarding the EU implementation of the Basel III banking package. The Parliament’s Commerce Committee is currently deliberating Finland’s position on the Commission’s legislative proposal.

Finance Finland’s (FFI) Managing Director Piia-Noora Kauppi says the Finnish Government’s proposal does not take into account the fact that post-pandemic economic recovery and the green transition will require a large volume of private investments. “In Finland, banks are key sources of financing for such investment. The current proposal would unreasonably complicate especially the financing of low-risk targets such as SMEs and mortgages.”

The financial sector considers it important that the implementation of the regulation is carried out in a way that maintains banks’ financing capacity as much as possible. The Commission proposal has taken this aim into account to some extent. Kauppi is surprised to see the Finnish Government disregard banks’ role as an enabler of economic growth. “Banks’ ability to finance the society is largely dependent on the content of the regulation they are subject to.”

According to preliminary calculations by the Finnish Financial Supervisory Authority (FIN-FSA), the proposed implementation would raise Finnish banks’ capital requirements by an average of 15% compared to the present situation.

“Banks’ ability to finance the society is largely dependent on the content of the regulation they are subject to.”

PIIA-NOORA KAUPPI, Managing Director

The stress tests conducted by European supervisory authorities show that the Finnish banking sector is in a robust condition with a low ratio of non-performing loans. The FIN-FSA’s latest assessment also shows the Finnish banking sector has strong capital adequacy. According to FFI, the supervisors’ tests and assessments prove that there is no need to raise the already high capital requirements.

FFI considers it important that the position now submitted by the Government is supplemented by the Parliamentary Committee so that securing the financing of economic growth receives the same priority as strengthening banks’ resilience does.

The position also needs further clarification. It is difficult to tell what is meant with certain points as they have been left too vague and indeterminate. The Finnish financial sector considers it important that the Commerce Committee’s statement clarifies the Finnish position so that it works as clear guidelines for negotiators when the Commission proposal is discussed in EU negotiations.

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