Finnish Banks Struggle With Profits Amid Low Rates, FSA Says

Banks operating in Finland are struggling to sustain profits as low interest rates and slow growth erode income, the country’s financial regulator said.

“There are great differences among banks and insurance companies,” Anneli Tuominen, director general at the Financial Supervisory Authority in Helsinki, said in a statement today. “Especially small banks have had difficulties in keeping their operations profitable.”

Smaller lenders, which lack the means to increase the share of fee-based business including fund managing and bond underwriting, are resorting to consolidation. Mergers include asset manager FIM Group Oyj and mortgage provider LaehiTapiola Bank Oy becoming part of S-Bank Oy.

The aftermath of the global financial crisis and structural shifts in main export industries are hurting Finland’s economy, which stagnated in June after contracting for 15 consecutive months, according to the nation’s statistics office.

“Good solvency and risk management have helped in a difficult economic situation,” Tuominen said. “As the outlook continues to be weak, it’s essential to preserve strong solvency.”

Banks are struggling to boost income as rates hover close to record lows amid central bank efforts to stimulate demand. The European Central Bank earlier this month held its benchmark rate at a record low of 0.5 percent while Sweden’s Riksbank kept its main lending rate at 1 percent.

Lenders’ ratio of the highest-quality common equity, or core Tier 1 capital, weakened to 14.3 percent at the end of June from 15.5 percent on Dec. 31. Finland is the only Nordic country to use the single currency.

To contact the reporter on this story: Kasper Viita in Helsinki at

To contact the editor responsible for this story: Christian Wienberg at

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