The Finnish banks OP and Nordea would remain above the capital requirements, even if their operating environment were to deteriorate significantly, according to a stress test conducted by the European Banking Authority.
Finns banks could withstand a significant deterioration of the operating environment, but their buffers are limited, says Finanssivalvonta in its release.
On Friday, the European banking authority EBA published the results of its EU-wide stress test, which is carried out once every two years. Finnish banks participating in EBA’s test are OP and Nordea.
The test covering the years 2023–2025 assesses how the banks would fare in the base scenario and the scenario of weaker development.
In a weak scenario, Nordea’s core solvency ratio would decrease by 3.3 percentage points to 13.1% at the end of 2025. According to Nordea, this would still clearly exceed the capital requirements and the bank’s own buffer.
In the weak scenario, OP’s core solvency ratio would decrease by 5.5 percentage points to 12.0% at the end of 2025, which would still exceed the ECB’s minimum capital requirement.
Financial Supervisory Authority according to the EBA stress test’s weak scenario was exceptionally harsh this time.
The industry association Finanssiala ry says in its own release that Finnish banks passed the test with good marks, even though the test method used by the European authorities was not favorable to them.
In the opinion of the financial sector, the EBA has not sufficiently taken into account in its tests the fact that a lot of loans with variable interest rates are granted in the Nordic countries, so when the interest level rises, the income received by the banks also increases, not only the expenses.
“In the countries of Central and Southern Europe, it is more common to grant fixed-rate loans, in which case the development of banks’ interest income is usually more stable than interest expenses,” the association’s press release says.
Financial Supervisory Authority conducted its own stress test in Finland for eight smaller banks and groups that are under Fiva’s direct supervision due to their size.
These included Alisa Pankki, Aktia, Oma Säästöpankki, POP Bank group, S-Pankki, Suomen Hypoteekkiyhdistys, Säästöpankkirhymm and Ålandsbanken.
According to Fiva, the solvency of smaller Finnish banks also remains good on average in a weak development scenario. The average core solvency decreased by 3.8 percentage points to 11.4 percent in the weak development scenario. According to Fiva, however, there were big differences between the banks.