Capital position of Finnish financial sector is strong – many uncertainties remain in operating environment

The Finnish economy fell into recession in the third quarter of this year, even though business confidence has improved, private investments and exports have grown, and new orders in industry are increasing. Household confidence has also improved compared with a year ago, despite unemployment continuing to weigh on sentiment. At the same time, however, consumers’ expectations about their own finances one year from now exceeded the long-term average in November. Borrowing intentions are also close to average, but purchasing intentions for durable goods and housing have remained low.

The financial sector’s capital position has remained strong, despite uncertainties. The list of risks in the operating environment continues to include geopolitical and trade risks as well as concerns about sovereign indebtedness. In addition, doubts about the valuation levels of US technology companies have unsettled stock prices.

 “The uncertainty surrounding the financial sector’s operating environment underlines the need for a strong capital position and risk management. Finnish financial sector actors must continue to ensure that these fundamental pillars remain strong,” says Tero Kurenmaa, Director General of the Financial Supervisory Authority (FIN-FSA).

Banking sector’s capital position remains strong – decline in net interest income weakened financial result

The capital position of the Finnish banking sector improved in the third quarter, returning to nearly the level at the end of 2024. Capital ratios remained strong, above the average for European banks. The sector’s Common Equity Tier 1 (CET1) capital ratio at the end of September 2025 was 18.2% (12/2024: 18.2%) and the total capital ratio was 21.9% (12/2024: 22.1%). In the third quarter of this year, the total amount of own funds increased, in addition to retained earnings, by issuances included in own funds. The profitability of the banking sector remained at a good level. Due to the general decline in interest rates, lower net interest income weakened, as expected, the operating profit compared with the corresponding period of the previous year. On the other hand, positive development in impairments in the banking sector offset the deterioration in earnings due to the decline in net interest income.

The banking sector’s non-performing loans remained at a low level and were among the lowest in Europe. In the third quarter, slight signs of improvement in the quality of the credit stock were evident in a number of credit segments. There is still, however, significant variation between different lending segments, sectors and banks in the credit risk development of the household and corporate loans of banks operating in Finland.

The banking sector’s liquidity situation and liquidity position remained stable. Banks’ deposit and market funding costs continued to decline.

Employee pension institutions’ solvency ratio strengthened

The employee pension sector’s solvency ratio strengthened during the third quarter of 2025, reaching 129.9% at the end of September (12/2024: 129.3%). The sector’s solvency capital increased by EUR 2.1 billion. During the quarter, the solvency limit grew faster than the solvency capital, but the solvency position remained at the level in the previous quarter (1.6). The solvency limit was increased by growth in equity and currency risks.

The employee pension sector’s overall return on investment was 4.7% in January–September. Equity investments performed best (6.0%). The return on fixed-income investments was 3.6%. The employee pension sector’s risk-bearing capacity against falling equity prices remained at a moderate level, although it declined slightly during the quarter.

Life and non-life insurance sectors’ solvency strong

The solvency of the life insurance sector remained at a good level at 222% (12/2024: 222%), with slight increases in both own funds and the solvency requirement. Premiums written developed positively, with an average increase of 17%, but there were large variations between companies. The growth in premiums written was strongest in capital redemption policies and group pension insurance.

Return on investment (excluding assets backing unit-linked policies) remained modest at 2.3% for the life insurance sector as a whole.

The solvency of the non-life insurance sector remained at a strong level of 251% (12/2024: 254%), with own funds growing slightly more than the solvency requirement. At the end of the third quarter, the sector’s own funds amounted to just over EUR 9 billion.

Premiums written increased by 4.6% compared with the corresponding period of the previous year, with the largest increase being in medical expenses insurance. The combined ratio improved and fell to 97.8%. Return on investment recovered in the third quarter to 3.2% (6/2025: 1.3%).

For further information, please contact:

Samu Kurri, Head of Department, Digitalisation and Analysis. Requests for interviews are coordinated by FIN-FSA Communications, tel. +358 9 183 5030, Mon-Fri 9.00–16.00.

Appendices

• Capital position of banking sector and financial and insurance conglomerates as at 30 September 2025 (Excel)
• Solvency position of employee pension companies, industry-wide pension funds and employee pension sector as at 30 September 2025 (Excel)
• Solvency position of life and non-life insurance companies as at 30 September 2025 (Excel)