## Finland: Financial System Stability Assessment

_IMF Staff Country Reports, January 23, 2023_

## Source details

**Canonical URL:** [Finland: Financial System Stability Assessment](https://www.imf.org/en/publications/cr/issues/2023/01/20/finland-financial-system-stability-assessment-528426)

## Other formats

- [Markdown version](/en/publications/cr/issues/2023/01/20/finland-financial-system-stability-assessment-528426/index.md)
- [Structured JSON version](/en/publications/cr/issues/2023/01/20/finland-financial-system-stability-assessment-528426/index.json)
- [Bundle manifest](/en/publications/cr/issues/2023/01/20/finland-financial-system-stability-assessment-528426/bundle-manifest.json)

## Bibliographic details
- Published: January 23, 2023
- Series: IMF Staff Country Reports

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### Executive summary and key findings
- 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.
- 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:
  - A large banking sector that is highly concentrated and dominated by a few institutions.
  - Interconnectedness with other financial systems in the Nordic region.
- Stress-test results:
  - The banking system appears resilient to severe macro-financial shocks.
  - The banking system remains vulnerable to liquidity shocks.
- Resolution and crisis management:
  - Should be supported by greater coordination of authorities’ preparation and management of future crises.

### Analytical observations
- Structural and institutional changes:
  - Continued strengthening of regulation and supervision since the 2016 Financial Sector Assessment Program.
  - European legislation and institutions have been a driving force behind reforms.
- Sector composition and vulnerabilities:
  - Significant expansion of banking sector size in 2018 due to Nordea’s redomicilation.
  - High concentration increases systemic importance of a few institutions and amplifies interconnectedness within the Nordic financial network.
- Recent shock performance:
  - Effective fiscal support and authority interventions contributed to relatively strong pandemic outcomes.
  - Current geopolitical shocks (war in Ukraine) and energy crisis have weakened the economic outlook and present new risks to financial stability, even with limited direct Russian exposures.

### Policy implications and recommendations
- Strengthen coordination among authorities for resolution and crisis management to improve preparedness and management of future crises.
- Monitor and address liquidity risk vulnerabilities in the banking sector, given stress-test indications of liquidity fragility despite resilience to macro-financial shocks.
- Continue supervisory and regulatory enhancements aligned with European frameworks to bolster sector stability and oversight.

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## Content in this bundle

- **Finland: Financial System Stability Assessment; IMF Country Report No. 23/39; January 3, 2023**
  - [Finland: Financial System Stability Assessment; IMF Country Report No. 23/39; January 3, 2023 (Markdown version)](/-/media/files/publications/cr/2023/english/1finea2023002.pdf.md){rel="alternate" type="text/markdown"}
  - [Finland: Financial System Stability Assessment; IMF Country Report No. 23/39; January 3, 2023 (PDF)](/-/media/files/publications/cr/2023/english/1finea2023002.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2023/01/20/finland-financial-system-stability-assessment-528426_