The Finnish Financial Supervisory Authority (FIN-FSA) announced that it will conduct a national stress-test exercise for the Finnish banking sector alongside the European Banking Authority’s (EBA) EU-wide stress test in the first half of 2025. The national extension, separate from the EBA exercise, will cover the eight banks under FIN-FSA’s direct supervision and will support its assessment of banks’ capital adequacy. The exercise is designed to assess resilience under very adverse but plausible conditions by measuring profits and loss-absorbing capacity. Baseline and adverse scenarios are based on projections by the European Central Bank and national central banks and reflect key risks identified by the European Central Bank and the European Systemic Risk Board, including a recession spanning 2025–2027. In the adverse scenario, a hypothetical severe escalation of geopolitical tensions drives supply and demand shocks and increased trade fragmentation, with Finland’s GDP assumed to contract cumulatively by 7.3% over three years, unemployment to rise by 5.6 percentage points, residential real estate values to fall by 8.1% and commercial real estate values by 23.2%. Each bank will use a common framework and methodology applied to end-2024 figures, following instructions based on the EBA methodology and incorporating simplifying assumptions and constraints that may not hold in reality.
Finanssivalvonta2025-02-20
Finnish Financial Supervisory Authority to run national bank stress-test extension for eight directly supervised banks
The Finnish Financial Supervisory Authority (FIN-FSA) will conduct a national stress-test for eight banks in early 2025, alongside the European Banking Authority's EU-wide test. This aims to evaluate banks' capital adequacy and resilience under adverse conditions, including severe geopolitical escalation and recession. The test will use a common framework based on the EBA methodology, with scenarios projecting GDP contraction, rising unemployment, and declining real estate values.