Finnish financial sector's capital position as at 30 September 2021: only minor changes


The Finnish financial sector's capital position remained good across all sectors also in the third quarter of 2021. The banking sector's capital ratio decreased slightly, whereas in the employee pension, life and non-life insurance sectors solvency strengthened. The risks in the operating environment relate particularly to the COVID-19 pandemic, as insufficient vaccination coverage and new virus variants mean continued uncertainty.

Changes in the capital position of the Finnish financial sector in the third quarter were small but divergent across the various sectors. The banking sector's capital adequacy decreased slightly but performance remained good. In the employee pension sector, as well as in the case of life and non-life insurance companies, solvency strengthened.

‘Eventhough the overall economic situation has rebounded, both the insufficient vaccination coverage as well as the new Omicron variant mean continued uncertainty in Finland and globally. Financial asset price valuations are streched and risk premia low. The rise in consumer prices has also picked up. In the uncertain operating environment, it is essential that the financial sector’s capital position and liquidity remain strong,’ notes Anneli Tuominen, Director General of the Financial Supervisory Authority.

Banking sector capital ratios weakened but remained at a good level

The Finnish banking sector's capital ratios decreased in July–September 2021. The banking sector's Common Equity Tier 1 (CET1) capital ratio was 17.9% (6/2021: 18.5%) and the total capital ratio was 21.4% (6/2021: 21.5%). The decline in capital ratios was due to the decrease in CET1 capital, in response to banks’ profit distribution plans. The banking sector's continued strong profitability, however, boosted the level of retained earnings and slowed the decline in capital ratios. The Finnish banking sector's capital ratios are still stronger than the European average. At the end of June 2021, the average CET1 capital ratio of EU banks was 16.1% and the total capital ratio was 19.4%.

Finnish banks’ nonperforming loans and credit losses have remained moderate.

Employee pension sector solvency ratio high, driven by strong return on investment

The employee pension sector's solvency ratio continued to strengthen in the third quarter, as return on investment rose to 11.3%, from 9.2% at the end of June. At the end of September, the solvency ratio was at a record level, 135% (6/2021: 134%). The solvency position also strengthened slightly.

Equity investments account for a large portion of the employee pension sector's investment allocation. About half of the investments are equity investments. Despite the high level of risk taking, the sector's average resilience has remained reasonable. Premiums written will be higher than in 2019, following the dip in 2020.

Life insurance sector's solvency continued to strengthen

Life-insurance companies’ solvency ratio increased in the third quarter of 2021 and was 202.3% (6/2021: 196.3%), i.e. at the same level as at the onset of the COVID-19 pandemic. The rise in interest rates was reflected as a decrease in technical provisions relative to investment assets.

In the period January–September, life-insurance companies’ return on investment was 3.0%. The strong return on equity investments, in particular, compensated for the slight losses from fixed-income investments. Premiums written continued to increase strongly compared with the situation a year earlier.

Solvency was bolstered by return on investment and income from insurance business

Non-life insurance companies’ solvency ratio was 243.9% (6/2021: 231.2%), i.e. at its highest level since the introduction of Solvency II regulation. Solvency was strengthened by growth in own funds and a decrease in the solvency capital requirement. Own funds were bolstered by the return on equities and the good level of insurance business profitability. In addition, technical provisions decreased, reflecting seasonal fluctuations and favourable claims developments. Equity risk declined slightly, which was reflected as a decrease in the solvency capital requirement.

Return on investment in January–September totalled 3.5%. The bulk of the return was accrued from equities. The return on fixed-income investments was negative. Insurance business profitability, excluding the impact of changes in the calculation basis, improved compared with the period January–June. The COVID-19 pandemic dragged on and mobility decreased, which was reflected as a smaller number of damages and improved profitability.




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Finanssivalvonta, or the Financial Supervisory Authority (FIN-FSA), is the authority for supervision of Finland’s financial and insurance sectors. The entities supervised by the authority include banks, insurance and pension companies as well as other companies operating in the insurance sector, investment firms, fund management companies and the Helsinki Stock Exchange. We foster financial stability and confidence in the financial markets and enhance protection for customers, investors and the insured.

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