The Bank of Finland's banking sector forecast model

This article documents the present "state of the art" of the Bank of Finland's banking sector forecast model. The purpose of the model is to assist in forecasting the aggregate profitability and solvency of the Finnish banking sector over a two- to three-year horizon. The banking sector forecast procedure is an integral part of the Banks' macroprudential and financial stability analysis. It incorporates into one framework both the supervisory information of the Finnish Financial Supervisory Authority and the forecast for the Finnish economy based on the Bank's macroeconomic model. Further development of bank analysis models is one of the Bank's key development projects. This is a long-term process in which several alternative approaches can be put forward