Shortcomings in the macroprudential toolkit and changes in the banking sector increase financial system risks

Abstract

There is no indication of growth in cyclical risks to the financial system in Finland. Finnish banks and insurance companies are financially sound. The financial system is, however, structurally vulnerable against the backdrop of households’ high and unevenly distributed indebtedness. To ensure households’ debt-servicing capacity, a more diverse macroprudential toolkit is needed than the one currently in place. Structural changes in the banking sector may have an impact on risk spillovers between the Nordic countries.