Finnish financial sector's risk-bearing capacity good – continued uncertainties in operating environment despite pickup in the economy

The risk-bearing capacity of the Finnish financial sector remained good in the first half of the year, despite the uncertain operating environment. The recovery in the economy and strengthening of consumer and business confidence have stabilised the financial sector's risk landscape. The robust performance of the stock markets has supported the financial sector's return on investment and demand for investment products and endowment insurance policies, particularly in the second quarter. The economic operating environment of supervised entities remains difficult in Finland, however, due to high unemployment, the increase in bankruptcies year-on-year, and the low level of households’ home purchase intentions.

“The improved outlook for the economy has stabilised the risk landscape, but supervised entities still need to prepare for abrupt changes in the operating environment. Negative economic news and a prolongation of conflicts may still have effects on the financial markets that are difficult to foresee and increase the risk of abrupt market movements. It is therefore important that the financial sector maintains strong risk-bearing capacity also when there are signs of improvement in the economic outlook,” says Tero Kurenmaa, Director General of the Financial Supervisory Authority (FIN-FSA).

In addition to geopolitical and trade policy risks, the latest risk assessment highlights operational risks and cyber risks, in particular. European authorities, for example the European Systemic Risk Board (ESBR) and the European Central Bank (ECB), have also issued warnings on threats to financial stability stemming from cyber risks and new technologies.

“The ability of Frontier AI Models to detect vulnerabilities and to support their exploitation has changed the cyber-threat landscape this year. The cyber incident situation in the Finnish financial sector has remained calm in 2026, however, and the FIN-FSA has not received reports on significant service disruptions caused by foreign interference,” says Tero Kurenmaa.

Banking sector's capital position remained strong – second quarter financial performance favourable

The Finnish banking sector's Common Equity Tier 1 (CET1) capital increased as a result of earnings retained in the first half of the year, and capital ratios remained strong. The sector's CET1 capital ratio at the end of June 2026 was 18.1% (12/2025: 18.3%) and the total capital ratio was 21.7% (12/2025: 22.2%). The capital ratios remained higher than the European average. In addition, banks have ample capital relative to the requirements.

The banking sector's operating profit declined in January-June compared with the corresponding period of the previous year, due to the decrease in net interest income and in net income from trading and investment activities, as well as growth in expenses. The weakening of financial performance was dampened, however, by the increase in net fee income, and growth in fee income was strong, particularly in asset management and payments. The prolonged downward trend in net interest income levelled off in the second quarter.

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. Funding costs rose in the first half of the year, reflecting the increase in the general level of interest rates. In the case of Finnish banks, funding costs have followed market trends and do not differ those of banks in other countries.

Employee pension sector’s solvency ratio improved significantly

The solvency capital of the employee pension sector grew strongly in the second quarter due to positive returns on investment. The solvency ratio, which indicates the ratio of solvency capital and technical provisions, increased at the end of the second quarter to 132.5% and was higher than at the end of the year 2025 (12/2025: 130.7%).

The solvency position, which refers to solvency capital divided by the solvency limit (1.5), was lower than at the end of the year 2025 (12/2025: 1.6). Like solvency capital, the solvency limit also rose, but the relative change in the solvency limit was larger, as a result of which the solvency position decreased in the first half of the year.

Return on investment for the first half of the year was 5.6%. Return on equity investments in January-June was 8.3%. The other investment classes, too, generated positive returns. The share of equities in the investment portfolio continued to grow and reached a new record level (58.7%). The previous peak in the share of equities was recorded at the end of 2025 (56.3%). Employee pension institutions’ resilience to equity shock was weaker than at the end of 2025, but was at a reasonable level.

The first amendments related to the pensions reform entered into force on 1 July 2026 as the amended provisions on, for example, the Act on the calculation of the solvency limit of pension institutions and the diversification of investments (315/2015) and the related Government Decree (447/2015) took effect. These amendments have an impact on, for example, the calculation of the solvency limit. As a result of the reform, with the current share of equities in the investment portfolio, employee pension institutions’ resilience to equity shock will in future be stronger. Solvency calculations and solvency figures for the first half of 2026 were prepared in accordance with the provisions of the law and decree that were in effect on 30 June 2026.

Life and non-life insurance companies’ solvency remained stable

The life insurance sector's solvency ratio (own funds divided by the solvency capital requirement) remained virtually unchanged from the end of 2025 and was 213% (12/2025: 212%). The non-life insurance sector's solvency declined slightly and was 248% (12/2025: 257%). Equity investments developed strongly in the second quarter of the year, as a result of which the solvency capital requirements increased relatively more than own funds. In the life insurance sector, premiums written increased in January-June by 11.0% compared with the situation in the first half of 2025, reflecting in particular the strong growth in premiums written on endowment insurance (+26.8 %). Return on investment (excluding assets backing unit-linked policies) returned positive after the first months of the year and was 2.3%.

In the non-life insurance sector, growth in gross premiums written was subdued (+0.1%) in the first half of the year. Premiums written on health insurance continued to increase (+8.6%), reflecting demand for insurance policies and higher prices, whereas premiums written on workers’ compensation insurance declined (-5.3%). The sector's combined ratio improved compared with the corresponding period in 2025 and decreased to 100% (6/2025: 102%). In the non-life insurance sector, too, return on investment turned positive and was 4.3%.

Strong performance of investment markets reflected in financial results of management companies and investment firms

The domestic fund sector's capital totalled EUR 247.6 billion in June. Fund capital grew by over EUR 20 billion on December 2025, despite the geopolitical uncertainty. The negative impact of the closure of the Strait of Hormuz on the global stock markets was short-lived, and already in April fund capital returned to the level recorded before March. The aggregate result of domestic management companies and branches operating in Finland for the first half of 2026 was EUR 134.5 million, which is approximately EUR 20 million higher than in the first half of 2025.

The own funds and liquidity of domestic investment firms remained compliant with the prudential requirements for investment firms also in the first half of 2026. The aggregate result of domestic investment firms and foreign branches for the first half of 2026 was EUR 125.2 million, which is approximately EUR 20 million higher than in the first half of 2025.

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, weekdays 9:00–16:00.

Appendices

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

Finnish financial sector’s solvency figures