Finnish financial sector’s capital position remained strong, but significant uncertainties remain in the operating environment

The Finnish economy grew in January-March 2026 by 0.9% compared with the previous quarter, but the outlook for the economy continues to be overshadowed by the difficult cyclical conditions and geopolitical uncertainty. Unemployment remained high in April, and the number of bankruptcies increased from the year earlier. Consumer confidence is still weak, but business confidence has improved.

The rise in Euribor rates in the early months of the year was reflected in the pricing of new loans, but the interest rates on banks’ loan and deposit stocks have thus far changed only marginally. Compared with the first quarter of 2025, the interest rate spread between the loan and deposit stocks however narrowed and the loan stock grew modestly. This weakened the accumulation of net interest income in the first quarter of 2026. Geopolitical risks were reflected in early 2026 as drastic movements in markets, and the investment environment was difficult particularly in February-March 2026. Rapid advancements in AI models highlighted during the spring the concerns related to cyber security. Changes in the threat environment do not alter the fundamental regulatory requirements, but they further underline the importance of risk identification and of the effectiveness of controls and risk management measures.

“There are some cautious signs of improvement in the economy, but the risks in the operating environment are still exceptionally high. The outlook for the financial sector remains challenging due to geopolitical uncertainty, the weak labour market and the high level of market volatility,” says Tero Kurenmaa, Director General of the Financial Supervisory Authority (FIN-FSA).

Banking sector's capital position remained strong – financial performance weakened from the reference period

The Finnish banking sector's capital ratios remained solid and the Common Equity Tier 1 (CET1) capital ratio remained close to the level at the turn of the year. The sector's Common Equity Tier 1 (CET1) capital ratio at the end of March 2026 was 18.2% (12/2025: 18.3%) and the total capital ratio was 21.6 (12/2025: 22.2%). The capital ratios remained higher than the European average. In addition, banks have ample capital relative to the requirements. The decrease in net interest income and the subdued level of net investment income weakened the banking sector’s financial performance compared to the reference year. Profitability declined and was close to the average for EU banks as profitability varied significantly between the 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 however varies significantly between the various lender segments, industries and banks.

The Finnish banking sector's liquidity position and funding remained stable in the first quarter of 2026. The escalation of geopolitical tensions weakened market sentiment temporarily, which was reflected as a short-lived rise in Finnish banks’ risk premia on market-based funding. However, this did not deviate significantly from overall developments in the markets and in the funding costs of the other banks.

Employee pension sector's solvency weakened from the previous quarter

The employee pension sector's solvency capital declined in the first quarter due to the slightly negative return on investment (-0,2%). The solvency ratio, which indicates the ratio of solvency capital and technical provisions, decreased in the first quarter to 129.5%, but remained higher than a year ago (3/2025): 128.7%).

The solvency position, which refers to solvency capital divided by the solvency limit, declined (to 1.5) from the level at the end of 2025 as the decrease in solvency capital was accompanied by a slight rise in the solvency limit.

During the first quarter, the return on equity investments and fixed-income investments was negative. Real estate investments and other investments generated positive returns. The share of equities in the investment portfolio remained virtually unchanged compared with the previous quarter (56.2%). Employee pension institutions’ resilience to equity shock weakened from the previous quarter but was at a reasonable level.

Life and non-life insurance sector solvency remained strong

The life insurance sector's solvency strengthened and was 219% (12/2025: 212%). The decline in the investment markets was reflected in the solvency ratio as the solvency capital requirement decreased slightly more than own funds. Growth in premiums written slowed to 1.3% but remained nevertheless positive. The strongest growth in premiums written was recorded in endowment insurance.

Return on investment (excluding assets backing unit-linked policies) remained negative. The life insurance sector's return on investment was -0.7%.

The non-life insurance sector's solvency declined slightly, but remained nevertheless strong, at 250% (12/2025: 257%). As a result of the seasonal variation in technical provisions and developments in investment activity, own funds decreased slightly and the solvency capital requirement increased slightly in the first quarter of 2026.

Premiums written increased by 1.7% compared with the first quarter of 2025. Premiums written on health insurance continued to increase. The combined ratio improved compared with the corresponding period in 2025 and declined to 104% (3/2025: 107%). In the non-life insurance sector too, return on investment was slightly negative (-0.1%).

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 the banking sector and financial and insurance conglomerates as at 31 March 2026 (Excel, in Finnish)
• Solvency position of pension insurance companies, pension funds and the employee pension sector as at 31 March 2026 (Excel, in Finnish)
• Solvency position of life and non-life insurance companies as at 31 March 2026 (Excel, in Finnish)