May 10, 2017 / 8:00 AM / 2 months ago

Household debt, bank moves raise Finland's financial sector risk - central bank

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HELSINKI, May 10 (Reuters) - Household debt growth and restructuring moves by banks have increased risks for Finland's financial sector though a crisis remains unlikely, the Bank of Finland said on Wednesday.

Household debt as a proportion of disposable income rose to a record high 127 percent last year, according to Statistics Finland.

"The near-term likelihood of serious disruptions relating to business and credit cycles is small. Even so, the financial system is structurally more vulnerable," the central bank said in a report.

It cited recent plans by Sweden's Nordea and Denmark's Danske Bank to convert their Finnish subsidiaries into branches.

"Such changes may have an impact on the spillover of stability risks and the availability of finance in Finland. With a strengthening of banks' Nordic linkages, disruptions in the financial system may spread more easily from one country to another," said central bank board member Marja Nykanen.

The bank has previously asked the European Union to tighten supervision of banks turning their euro zone subsidiaries into branches that are regulated outside the bloc. Sweden and Denmark are outside the euro zone.

The Bank of Finland said Finnish banks' capital adequacy rates were currently in order, though the prospect of serious disruptions emerging in the future could not be ruled out. (Reporting by Jussi Rosendahl; editing by John Stonestreet)

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