Macroprudential decision: Uncertain economic outlook continues, housing loan cap and banks’ additional capital requirements remain unchanged


In Finland, the housing market and mortgage lending have recovered from the spring downturn, but the outlook for the real economy remains uncertain due to the pandemic. In this situation, the Board of Financial Supervisory Authority (FIN-FSA) will maintain the housing loan cap at its standard level and will not impose a countercyclical capital buffer (CCyB) requirement on banks and other credit institutions.

The FIN-FSA Board restored the maximum LTC ratio, i.e. loan cap, to its statutory standard level in June 2020.At its standard level, the ratio of the housing loan and the collateral accepted in calculating the loan cap is a maximum of 90% for other than first-home loans and 95% for first-home loans.

Since the June decision, there have been no significant changes in the outlook for the economy and the housing market that would justify deviating from the standard levels of the loan cap.

In the current exceptional and highly uncertain situation, careful assessment of borrowers’ ability to pay is of prime importance.Lenders are justified in exercising restraint in granting loans that are very large with regard to the borrowers’ income and have a longer than usual repayment period.

“Household indebtedness relative to disposable income continued to increase in July-September.Long repayment periods of new housing loans also became more common, which increases the amount of debt and is therefore a risk to stability in the long term,” Marja Nykänen, Chairman of the FIN-FSA Board.

Countercyclical capital buffer (CCyB) will not be imposed on banks and other credit institutions

The credit stock grew rapidly in the first half of the year, particularly in the business sector.Growth was supported by instalment-free periods granted by banks and support measures for businesses.However, the uncertainty surrounding the pandemic and economic development is expected to weaken demand for corporate credit in the latter part of the year.

Conditions in the credit market favour maintaining the countercyclical capital buffer rate at zero.The primary risk indicator for setting a CCyB requirement – the credit-to-GDP gap – has remained negative and supplementary risk indicators are not signalling an overheating of lending.

The Board of the Financial Supervisory Authority assesses quarterly the short- and long-term risks to the stability of Finland’s financial system.If necessary, the Board may tighten or relax the so-called macroprudential instruments, which promote stability.The Board decides quarterly on the levels of the countercyclical capital buffer requirement and the maximum LTC ratio for housing loans.The levels of the systemic risk buffer and the additional capital requirements for nationally systemically important institutions (O-SII buffers) are reviewed annually.

View this link to access the appendices listed below

  • Board’s decision on the application of macroprudential instruments (pdf)
  • Proposal of the Director General of the FIN-FSA, circulated for comment, on the application of macroprudential instruments (pdf, in Finnish)
  • Opinions on the Director General’s proposal on the application of macroprudential instruments (pdf, in Finnish)
  • Bank of Finland
  • Ministry of Finance
  • Ministry of Social Affairs and Health
  • Macroprudential report 2/2020 (in Finnish)



For further information, please contact

Marja Nykänen, Chair of the Board of the Financial Supervisory Authority, tel. +358 9 183 2007

About Finanssivalvonta

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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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