FIN-FSA Examines Capital Position of Banking Sector Amid Pandemic
FIN-FSA assessment reveals that the Finnish banking sector faced the COVID-19 pandemic with strong capital buffers. The capital ratios of the banking sector—that is, the ratio of own funds to total risk exposure—weakened in early 2020, due in particular to strong volatility in market prices. However, the decisions taken in Spring to lower the additional capital requirements, with the purpose of ensuring lending capacity, increased the surplus of own funds in the banking sector. The macro-prudential decisions increased the imputed lending capacity of the banking sector to Finnish businesses and households by nearly EUR 30 billion.
The capital ratios of the banking sector declined in the first quarter of 2020 compared with the situation at the end of 2019. At the end of March, the Common Equity Tier 1 (CET1) capital ratio was 16.8% (December 31, 2019: 17.6%) and the total capital ratio was 20.2% (December 31, 2019: 21.3%). The weakening of capital ratios reflected, in particular, strong volatility in market prices at the end of March, which increased the risk-weighted assets for market risk and decreased the amount of own funds, due to negative value changes in financial assets measured at fair value. Capital ratios were also weakened by changes to the definitions used for the purpose of calculating own funds requirements (application of the definition of default in accordance with the new EBA Guidelines) by some of the banks.
In March, ECB allowed the directly supervised banks with a flexibility in the fulfillment of certain additional capital and liquidity requirements, due to the exceptional situation created by the COVID-19 pandemic. The measures announced in the decision supported banks’ ability to provide credit to the real economy. The measures provided by ECB are for the most part available also to banks directly supervised by FIN-FSA, if necessary. ECB and FIN-FSA also issued a recommendation to banks to refrain from dividend distribution until October 01, 2020. The FIN-FSA Board also decided to lower the additional capital requirements that are within the scope of national decision-making. These decisions removed the systemic risk buffer of Finnish credit institutions. The FIN-FSA Board also decided to lower the additional capital requirement for other systemically important institutions (the O-SII buffer) in the case of OP Financial Group. The Finnish banking sector’s additional capital requirements were also decreased by decisions taken by other Nordic supervisors to ease the countercyclical capital buffer requirements.
Related Links
Keywords: Europe, Finland, Banking, Regulatory Capital, Basel, COVID-19, Own Funds, Macro-Prudential Measures, FIN-FSA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
BCRA Updates Capital Requirements and Information Regime RulesRelated Articles
EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
EBA Publishes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance
The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks
EC Publishes Results on Review of Web Accessibility Directive
The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.
NGFS Report Explores Quantification of Climate Risk Differentials
The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations
MAS Consults on Adjustment Spreads for Conversion of SOR Contracts
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.