The Finnish Financial Supervisory Authority (FIN-FSA) published an assessment of real estate-related vulnerabilities in Finland’s financial sector, noting that banks, insurers and real estate funds have significant exposures that could translate into higher credit, investment and liquidity risks if the operating environment deteriorates more than expected. It also concluded that sector-wide buffers, including solid capital positions and risk management, strengthen overall risk-bearing capacity, and confirmed that monitoring real estate risks was a supervisory focus in 2024 across banking, insurance and fund supervision. The FIN-FSA highlighted that the property market downturn that began in mid-2022 has reduced transaction volumes and prices and sharply weakened construction, with only limited recent signs of improvement as interest rates ease while downside risks remain. In June 2024, housing loans and other real estate-secured lending accounted for 59% of Finnish banks’ total household and corporate lending; while realised credit losses and non-performing loans remained low, the share of loans with significantly increased credit risk has risen, particularly in construction. Banks’ exposure is also amplified by collateral values, and the FIN-FSA’s thematic review found shortcomings in banks’ real estate collateral valuation practices. For insurers and pension institutions, real estate represented around 10% of insurers’ investments in June 2024 and recent returns have been negative, but resilience was described as supported by strong capital positions, conservative leverage and long investment horizons. Real estate funds were characterised as a smaller segment at about 7% of the net asset value of funds registered in Finland, with open-ended funds facing higher redemptions and responding by reducing redemption frequency from 2023 and, in some cases, restricting or suspending redemptions to avoid large-scale forced sales.

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