The Financial Supervisory Authority (FIN-FSA) has issued new Regulations and Guidelines 1/2025 setting minimum requirements for managing default risks in unsecured consumer lending, with the stated objective of preventing the granting of credit to consumers with an unreasonably high default risk. The framework enters into force on 1 June 2025 and applies to credit institutions and other supervised and registered credit providers operating or providing services in Finland that offer unsecured consumer credit within the scope of Chapter 7 of the Consumer Protection Act. The rules specify minimum requirements for the operating models of rating systems used to assess default risk at the point of credit granting. Supervised entities must measure the rating system operating model’s performance using the Gini coefficient and use the share of bad credits in the system’s highest-risk 5% bucket as a criterion for reasonable default risk, while no explicit thresholds are set at this stage for model reliability or for what constitutes reasonable default risk. The package also introduces periodic data reporting to the FIN-FSA via a default risk (MK) management report. The first reference period is 31 December 2025, with submission due by mid-February 2026, and the FIN-FSA notes that thresholds may be established later after analysis of the reported data.
Finanssivalvonta 2025-05-26
Finland's Financial Supervisory Authority issues default risk management rules for unsecured consumer lending effective 1 June 2025
The Financial Supervisory Authority (FIN-FSA) has issued Regulations and Guidelines 1/2025, setting minimum requirements for managing default risks in unsecured consumer lending, effective 1 June 2025. The rules apply to credit institutions and providers in Finland, mandating the use of rating systems to assess default risk, with performance measured by the Gini coefficient. Periodic data reporting to FIN-FSA is required, with potential future thresholds based on data analysis.