Suomen Pankki

European Systemic Risk Board recommends new measures to Finland to address household indebtedness


The European Systemic Risk Board (ESRB) has published a recommendation issued to Finland on measures to address medium-term risks related to mortgage lending. The vulnerabilities identified by the ESRB for Finland are, in particular, the high and, in fact, increased level of household indebtedness, rapid growth in loans taken out by housing companies and relaxation of mortgage lending standards. The ESRB also issued a recommendation or a warning concerning vulnerabilities in the residential real estate market to 10 other countries in the European Economic Area.

The most significant recommendation to Finland is the inclusion into Finnish law of a limit to the amount of debt a borrower can have relative to income (debt-to-income ratio, DTI) or, alternatively, a limit to a borrower’s debt-servicing costs relative to income (debt-service-to-income ratio, DSTI). The ESRB also recommends a maturity limit for mortgage loans. Furthermore, authorities should recommend lenders comply with these limits already before they are introduced into national law.

The ESRB is responsible for identifying risks to the stability of the financial system, and vulnerabilities therein, with the potential of leading to financial crises or other severe disruptions in EU economies. In November 2016, the ESRB issued a warning to Finland on vulnerabilities in the residential real estate sector. With the recommendation now published, the ESRB supplements the previous warning and specifies the measures it deems appropriate in addressing the vulnerabilities.

The Bank of Finland has long paid attention to the same risks associated with household indebtedness and has proposed measures for their mitigation. ‘The ESRB’s recommendation supports our assessment that the risks related to household indebtedness need to be addressed with new macroprudential tools targeted at mortgage lending and loans to housing companies,’ notes Marja Nykänen, Deputy Governor of the Bank of Finland.

The content of the ESRB’s recommendation to Finland is discussed in the related blog post by Jukka Vauhkonen. The risks on the basis of which the ESRB issues country-specific warnings and recommendations are discussed in the related blog post by Hanna Putkuri.

• The European Systemic Risk Board ESRB’s recommendation 
• Hanna Putkuri’s blog post: Asuntomarkkinat Euroopassa – missä riski, sinne varoitus tai suositus (in Finnish)
• Jukka Vauhkonen’s blog post: Rahoitusvakauden vahtikoira murisee suomalaisten kotitalouksien velkaantumisesta (in Finnish) 



For further information, please contact Marja Nykänen, Deputy Governor of the Bank of Finland, tel. +358 9 183 2007, or Katja Taipalus, Head of Department, tel. +358 9 183 2345.



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The Bank of Finland is the national monetary authority and central bank of Finland. At the same time, it is also a part of the Eurosystem, which is responsible for monetary policy and other central bank tasks in the euro area and administers use of the world’s second largest currency – the euro.

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