The Bank of Finland contributes to maintaining financial stability in Finland. It assesses risks to the financial system, compiles financial statistics and prepares macroprudential policy. In 2021, the Bank of Finland promoted domestic financial stability particularly via measures that curb excessive indebtedness. The financial sector's role in the mitigation of climate change became increasingly important.

Financial stability prevails when the financial system, consisting of financial intermediators, markets and financial infrastructure, is able to cope with disruptions and the unwinding of financial market imbalances.

In an environment of financial stability, there are no severe disruptions in financial intermediation that could disturb the real economy significantly.

Financial stability is a prerequisite for a stable society. The maintenance of financial stability is one of the key tasks of the Bank of Finland.

In 2021 the Bank of Finland paid close attention to risks of household debt accumulation

Financial stability risks can be mitigated by addressing the problems on time through macroprudential policy measures, i.e. by preventing the financial sector's risks, promoting its resilience and developing regulation.

The Bank of Finland has stressed for a long time now that the vulnerabilities related to housing loans and housing company loans as well as the continued upward trend in household indebtedness are large in Finland.

Household debt relative to disposable income continued to rise during the COVID-19 pandemic.

In 2021, the Bank of Finland thus emphasised that new targeted instruments should be introduced without delay to curb household debt accumulation. These instruments could include, for example, a maximum debt-to-income ratio, i.e. a debt cap and a limit on the maturities of housing and housing company loans.

The instruments should apply to all types of credit provision, including lending by non-banks.

Topical themes reflected in the development of financial market regulation and statistics

In 2021, the Bank of Finland prepared macroprudential decisions, analysed the operational environment, assessed policy impacts and the impacts of decisions and participated in the development of macroprudential policy.

The topical themes were reflected also in the development of Bank of Finland statistics. Statistics were expanded with new data on household debt accumulation and housing market developments.

The Bank of Finland also continued to monitor the digitalisation of financial intermediation and to analyse the impacts of the changes. In 2021, the scope of the work was expanded with a survey on the use of digital channels in the provision of credit.

The Bank of Finland developed the monitoring and analysis of corporate finance by launching, together with Statistics Finland, a data academy initiative and by starting work on the development of sustainability indicators.

The Bank of Finland worked in the field of regulation and the development of statistics, both in Finland and internationally, in line with European guidelines.

Financial sector plays a significant role in climate change mitigation

Climate change is a threat also to financial stability. A cause for concern were both the material damage caused by extreme weather events as well as the transition risks resulting from climate policy, i.e. the decline of asset value in carbon-intensive sectors in connection with transition to a low-carbon economy.

In 2021, the Bank of Finland participated in international cooperation and developed further its own analysis preparedness and data, for the assessment of domestic climate risks in the financial sector. It also launched a project to calculate the carbon footprint of the corporate loan stock of banks.

Major steps were taken also on the European level in 2021, as the EU defined sustainable activities and introduced climate risk management into legislation.

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A curb on household debt accumulation supports financial stability