Investment funds have grown significantly in Finland – do their operations involve stability risks?
Leino, Topias (07.06.2016)
JulkaisusarjaBank of Finland. Bulletin
JulkaisijaBank of Finland
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi:bof-201606131193
Investment funds have emerged as significant financial intermediaries in Finland since the turn of the millennium. In this role, they supplement traditional deposit banking. However, from the perspective of financial stability, investment funds may also involve risks reminiscent of banking. One such key risk is if assets invested in funds are converted into significantly less liquid (less cash-convertible) form. Why can such liquidity transformation in a worst-case scenario pose a risk to financial stability, and how extensively is it performed among Finnish investment funds?