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. Risks to financial stability increased in 2022 as a result of the energy crisis triggered by Russia’s war in Ukraine.
In 2022, the energy crisis posed a challenge to financial stability throughout Europe. Sharp fluctuations in the financial markets heightened interest in statistical data on the economy.
Bank of Finland renewed its statistics production in 2022 to provide more detailed information on financial markets
Compiling appropriate, up-to-date and comprehensive statistics is one of the statutory tasks of the Bank of Finland.
The Bank of Finland revised and harmonised its approach to compiling statistics on insurance and securities in 2022 to better correspond with the other statistics it compiles.
The collection of payment and fraud data was also revised in line with the Regulation of the European Central Bank (ECB) on payment statistics.
Risks to financial stability increased in 2022
Russia’s war in Ukraine and the energy crisis triggered by it in Europe posed a challenge to the Finnish economy and financial system in 2022.
Inflation rose, the economic outlook weakened and financing became more expensive. Growth in unavoidable expenses squeezed the finances of many households and businesses.
Financial stability risks were increased by the higher levels of household debt, for example.
Financial stability was also shaken by the increase in energy companies’ financing needs and liquidity challenges. The Bank of Finland considers it important to support liquidity in order to avoid extensive liquidity problems that would undermine financial stability.
Macroprudential policy strengthens financial system’s resilience
The purpose of macroprudential policy is to manage financial stability, the risk of financial crises and the resilience of the financial system. Macroprudential policy also ensures the capital adequacy of banks.
As a result of regulatory changes made earlier in Finland, the banks’ capital buffers were strong at the outbreak of Russia’s war in Ukraine and when the energy crisis began. The banks were therefore more resilient to the weaker economic outlook and were able to continue to intermediate finance to the real economy.
In 2022, the Bank of Finland contributed to the further development of macroprudential policy by updating risk indicators and producing research data for legislative reform purposes, for example.
The International Monetary Fund (IMF) completed an extensive assessment of Finland’s financial system stability and risks in 2022. Based on the assessment, the IMF then issues macroprudential policy recommendations on, for example, improvements to legislation, caps on borrowing and the development of recommendations and regulation.
Bank of Finland continued in 2022 to examine the impact of climate change on the financial system
In 2022, cyber risks and the geopolitical environment became increasingly important in the contingency preparations for possible financial system crises.
Climate change causes risks to the financial sector too, for example by putting collateral at risk and endangering debtors’ solvency. These risks are assessed and efforts made to mitigate them by increasing the sustainability of the financial system.
In 2022, the Bank of Finland continued its risk analysis of the structural changes in the economy associated with climate change and the green transition, and developed the analysis work further to better correspond with the changing conditions.