No imminent threats in financial sector, but stability must be ensured

Abstract

Euro area monetary policy and domestic fiscal and structural policies are supporting Finland’s slowly recovering economy. In a weak cyclical environment, there are no signs of acute threats to financial stability. The low level of interest rates has the potential to increase the risk of over-indebtedness and further feed asset prices. This sort of development could add risks to the Finnish financial system and reinforce structural vulnerabilities. Close monitoring is necessary to preserve the stability of the financial markets. Addressing stability threats requires access for the authorities to an adequate set of macroprudential instruments, which must be created in good time.