The financial system of Finland has remained stable despite the increased risks in the international economy and financial system due to events such as the conflict in Ukraine and Gaza. This is according to the Bank of Finland, which attributes the stability of Finland’s financial system to long-term improvements in financial regulation and supervision as well as macro stability policy. However, domestic risks have also increased, particularly in the housing and real estate markets.
The freezing of these markets has led to decreased apartment sales, halted construction of new apartments, and an increase in bankruptcies in the construction industry. Despite these challenges, household indebtedness has decreased, which has helped alleviate some risks in the financial system. The Bank of Finland highlights the importance of preparing for new and unpredictable threats posed by digitalization and climate change, which can impact financial stability in both the short and long term.
Financial markets anticipate that the European Central Bank will lower key interest rates in June, which could potentially revive the housing market. Additionally, the Bank of Finland emphasizes the need for a unified and functioning capital market in the European Union to support the growth of companies and maintain competitiveness in the global economy.
In conclusion, careful planning and development in financial regulation are crucial to addressing evolving risks in the digital and climate change landscape. By anticipating changes and adopting proactive measures, the financial system can better withstand future crises and disruptions.