Financial stability assessment : Rise in interest rates is testing the resilience of borrowers, investors and the financial system

Abstract

The Finnish financial system has remained stable despite the spring turbulence in the international financial markets. The rapid and steep rise in interest rates has led to an increase in financial stability risks in Finland as well. The increase in loan servicing costs is a strain on households, housing companies, residential property investors and businesses. The credit and liquidity risks of banks are also expected to increase. Occasional crises should not prevent the promotion of regulatory initiatives, however. A statutory ceiling on borrowers’ debt servicing expenditure should be introduced in Finland, and completion of the EU’s banking union should be expedited.