Ritakallio: Government’s economic package is highly necessary – Finnish financial sector shoulders its responsibilities

The Finnish financial sector welcomes the economic package approved by Sanna Marin’s government on 20 March as an absolutely essential measure for relieving the financial distress of Finnish households and businesses.

“The financial sector is in a key role in the measures which will help us survive the current financial crisis together. The wheels of the economy will not keep turning without banks, insurers and pension companies. The government’s decisions support the financial sector and ensure that banks can continue to provide lending to distressed households and businesses”, emphasises Timo Ritakallio, Chairman of the Board of Finance Finland (FFI).

The Finnish financial sector is very pleased with the government’s decision to substantially increase the financial powers of state-owned specialised financing company Finnvera. These powers enable Finnvera to guarantee large volumes of bank lending. ”The guarantees keep banks’ corporate lending going, and businesses in need of financing can get help quickly. This relieves businesses’ liquidity crisis and prevents a wave of bankruptcies and unemployment”, Ritakallio says.

Finnvera’s financial powers are increased to €12 billion. The maximum level of a corporate loan guarantee granted by Finnvera will be 80 percent of the credit. This aims to secure the access to funding for previously healthy SMEs who have fallen into temporary distress due to the pandemic.

Finnvera guarantees also support the use of premium lending provided by statutory employee pension insurance, which the financial sector considers another important financing channel. FFI regards it justified to temporarily suspend statutory employee pension insurance premiums and temporarily lower employers’ social security payments as crisis resolution measures.

The Board of the Finnish Financial Supervisory Authority (FIN-FSA) have already decided to lower banks’ capital buffer requirements. The European Central Bank and the European Banking Authority have also relieved banking regulation due to the crisis. Together with the Finnish government’s decisions today, these measures will support the continuation of bank lending significantly. The Bank of Finland and the State Pension Fund have also made decisions to purchase commercial papers from the market, which will also support businesses’ liquidity.

Finance Finland expresses its thanks to the government, the ministries, the Bank of Finland and FIN-FSA for their close cooperation and swift preparation of crisis measures together with the financial sector and Finnish businesses as a whole. “In these difficult times, the close partnership of Finnish public and private sectors shows its true strength, and cooperation will continue”, Timo Ritakallio reminds everyone.

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Financial and Prudential Regulation

Veli-Matti Mattila

Director, Chief Economist