March 28, 2017 / 8:42 AM / 9 months ago

Finnish bank watchdog sets higher risk weights on housing loans

HELSINKI, March 27 (Reuters) - Finland’s Financial Supervisory Authority (FSA) will set higher risk weights next year on housing loans in banks’ capital adequacy calculations because of growing household debt, it said on Tuesday.

The watchdog said it plans to raise the minimum risk weight to 15 percent of banks’ own funds on their balance sheet, up from the current 10 percent, by January 2018.

However, it said the Finnish banking sector remains strong, and it saw no need for further requirements for the banks.

Finnish households’ debt relative to disposable income has almost doubled since 2000 to around 125 percent and the European Systemic Risk Board warned Finland about the high level of household indebtedness in November.

“It is, above all, a question of preparing for medium-term systemic risks,” Olli Rehn, chairman of the FSA board, said in a statement about the risk weight change.

“Indebted households reduce strongly their consumption in crisis situations, which leads to a deepening of the crises,” he said.

Finland’s economic growth is picking up pace after a decade-long stagnation. The central bank lifted its growth forecasts for the coming years in March, citing strong consumer confidence, recovering exports and investments.

Finland’s biggest banks include OP Financial Group, Sweden-based Nordea and Denmark’s Danske Bank . (Reporting by Tuomas Forsell; Editing by Tom Heneghan)

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