IMF Staff Country Reports

This paper presents Finland’s Financial System Stability Assessment report. Finland has further improved the regulation and supervision of its financial sector since the 2016 Financial Sector Assessment Program, in part driven by European legislation and institutions. The size of the banking sector increased significantly in 2018 with the redomicilation of Nordea. Finland weathered the coronavirus disease 2019 pandemic well relative to other economies, with fiscal support and interventions from the authorities. However, Finland is now navigating a weaker economic outlook given the war in Ukraine and ensuing energy crisis, despite limited direct financial exposures to Russia. Risks to financial stability come from a large banking sector, which is highly concentrated and dominated by a few institutions, and is interconnected with other financial systems in the Nordic region. Stress tests indicate that the banking system appears resilient to severe macro-financial shocks but remains vulnerable to liquidity shocks. Resolution and crisis management should be supported by greater coordination of authorities’ preparation and management of future crises.