Finnish financial sector’s capital position remains strong – regulatory simplification must not weaken resilience

Geopolitical and trade policy risks materialised in 2025 and in early 2026 in many ways. The United States’ military strikes on Venezuela and Iran, the dispute on the status of Greenland, as well as uncertainty over US tariff policy fuelled uncertainty in the financial markets. In early 2026, the weaker market sentiment also spilled over to the Nordic stock markets. Despite the uncertainty and the strong decline in share prices in spring 2025, share prices ended in 2025 at a higher level than the year earlier, which supported the financial sector's return on investment.

Finland's economy moved out of recession at the end of 2025. Business confidence and expectations have improved and the decline in Euribor rates has eased the situation of borrowers. The business cycle is still weak, however. A prolongation or spreading of the war in Iran could increase upward pressure on inflation and weaken the outlook for GDP growth. A combination of high inflation and economic recession would in the long term be particularly unfavourable for the financial sector.

In public debate, calls for easing financial sector regulation have increased recently.

“The regulatory and supervisory reforms introduced after the financial crisis have strengthened resilience and, partly due to the reforms, the financial sector has in recent years coped very well in the turbulent operating environment. Simplification of regulation is justifiable to enhance efficiency and clarity, and the Financial Supervisory Authority (FIN-FSA) supports the proposals by EU authorities to simplify the regulatory framework. Simplification must not, however, weaken the resilience of the financial sector or threaten stability,” says Tero Kurenmaa, Director General of the FIN-FSA.

The financial sector's cyber incident situation has been calm during the winter, but payment fraud continued to grow in 2025. 

Banking sector's capital position remained strong – decrease in net interest income slowed towards the end of the year

The Finnish banking sector's capital ratios remained strong in 2025 and were slightly higher than in 2024. The sector's Common Equity Tier 1 (CET1) capital ratio at the end of 2025 was 18.3% (12/2024: 18.2%) and the total capital ratio was 22.2% (12/2024: 22.1%). Capital ratios remained higher than the European average. Banks still have ample capital relative to the requirements. The decrease in net interest income weakened the banking sector’s financial performance from the reference year. Profitability was nevertheless still good, and return on equity remained stronger than the average for EU banks.

The banking sector's non-performing loans remained moderate. The development of credit risks in the household and corporate loans granted by banks operating in Finland varies significantly, however, between the various lender segments, industries and banks.

The banking sector's liquidity situation and liquidity position remained stable despite the uncertainties in the operating environment. Investor demand was stable in 2025 and deposits from the public reached a record high level.

Employee pension sector's solvency ratio strengthened due to positive investment returns

The solvency capital of the employee pension sector grew in 2025 due to positive returns on investment (7.7%). The solvency ratio, which indicates the ratio of solvency capital and technical provisions, strengthened during the year as solvency capital grew faster than technical provisions.

The solvency position, which refers to solvency capital divided by the solvency limit, remained at the level in the previous year (1.6) as solvency capital rose at the same pace as the solvency limit. The solvency limit was raised by the growth in investment assets and the higher equity allocation.

All the investment classes generated a positive return in 2025. The highest returns were generated by equity investments, the weight of which in the investment allocation rose to 56.3%. Employee pension institutions’ resilience to equity shock remained broadly unchanged from the previous year, and was at a reasonable level.

Non-life and life insurance sector solvency remained strong

The life insurance sector’s solvency ratio decreased in 2025 and was 212.1% (12/2024: 222.4%) as the solvency capital requirement increased more than own funds. 

In 2025, life insurance companies’ return on investment was positive (2.8%) for the sector as a whole. Return on investment was positive in fixed-income investments, equity investments and other investments. The highest returns were generated by equity investments (10.6%), whereas for real estate investments, the return was slightly negative. Premiums written increased from the year earlier period reflecting, in particular, a rise in the sales of endowment insurance policies and capital redemption contracts. The amount of claims paid increased slightly compared with the previous year.

The non-life insurance sector’s solvency ratio at the end of 2025 was good, at 256.5%, and slightly higher than in the previous year (12/2024: 254.4%). Own funds grew at a slightly higher rate than the solvency capital requirement.

The non-life insurance sector's return on investment in 2025 was 4.5%. Return on equity investment was 9.6%, whereas in fixed-income investment and real estate investment, the return was significantly lower but nevertheless positive. Premiums written on non-life insurance increased slightly on the previous year. Growth was recorded particularly in health insurance and land vehicle insurance. Claims incurred were almost unchanged from the previous year.

The sector's claims ratio improved slightly from 2024, and the balance on technical account was higher but, for the sector as a whole, profitability was lower in 2025 than in the previous year, due to the weaker return on investment.

Fund capital continued to grow at historical rate – financial result of management companies and investment firms improved on the previous year

Fund capital continued to grow at a historical rate in 2025 and totalled EUR 226 billion at the end of the year (12/ 2024: EUR 205 billion). Subscriptions in UCITS and non-UCITS investment funds at the end of 2025 were made by households, in particular, both directly and via unit-linked insurance policies. Management companies’ financial result EUR 307 million (2024: EUR 178 million) was considerably stronger than in the previous year, even though comparability between the years is weakened by the business activities of individual companies.

Investment firms fulfilled the capital adequacy and liquidity requirements, and no significant changes were witnessed in the levels of the requirements. Investment firms’ financial result was EUR 289 million (2024: EUR 242 million) and stronger than in the previous year, due to higher income from asset management.

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

FIN-FSA website page ‘Financial position and risks of supervised entities’ (in Finnish)