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    FIN-FSA Outlines Focus Areas and Publishes Annual Report for 2019

    March 16, 2020

    FIN-FSA published the annual report for 2019, highlighting digitalization, climate change, and anti-money laundering as special issues in its activities. These are also prominent objectives in the FIN-FSA strategy for 2020–2022, which was updated during the review year. As an Annex to the annual report, FIN-FSA also published the list of entities it supervises.

    In the Director's review section, the FIN-FSA Director Anneli Tuominen highlighted that a supervisor must understand not only the benefits of digitalization for the business but also the risks associated with digitalization, whether it uses data and artificial intelligence applications or addresses cyber risks. She also mentioned that, from the point of view of financial stability, it is important to consider the impact of climate change and climate policy on supervised persons' risk in assessing the activities of supervised entities. In its work as a supervisor, FIN-FSA is also involved in determining which investments can be considered green. It is also important that green investment is not promoted by easing the capital requirements of operators, as capital requirements must continue to be risk-based. All in all, the impact of climate change on the risk management and risk taking of the supervised entities is significant.

    Ms. Tuominen also highlighted that the insurance sector is currently assessing the impact of the Solvency II regulatory reform on the supervised area. In particular, the discount rate assumption used in the capital adequacy calculations requires modernization, as the discount rate is currently too high compared to market rates. This means that companies' technical provisions have been underestimated, especially for long-term liabilities. Similarly, the treatment of interest rate risk in the capital adequacy calculation should be corrected to take into account the current interest rate environment. If the goal is not to increase regulatory requirements, then it should be carefully evaluated what parameters and how to adjust the Solvency II calculations to achieve equilibrium. It is important that regulation is as risk-based as possible and that it promotes the principle of proportionality. Also, FIN-FSA published a supervised release on the management of disability risk allowed to pension insurance companies. This is important because companies were slipping past their authorized industry—that is, social insurance—in providing well-being services. FIN-FSA will continue to audit this matter this year to ensure that all companies operate within the regulatory framework.


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    Keywords: Europe, Finland, Banking, Pensions, Climate Change Risk, AML/CFT, ESG, Capital Requirements, Basel III, Solvency II, Annual Report, Fintech, FIN-FSA

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