Nordic financial sector vulnerable to housing market risks

Household indebtedness is high in the Nordic countries. Housing loans are a significant part of banks' business, and covered bonds are important for banks both as sources of funding and as investments. The large size of the Nordic banking sector, its high degree of concentration and its interconnectedness with insurance companies increase the importance of housing market-related risks for the financial system and the economy as a whole. The materialisation of threats would increase losses in lending and investment activities and the cost of funding.