​Finnish monetary financial institutions have been increasing their margins on new housing loans and loans to non-financial corporations since summer 2011. Margins have increased the most on housing loans and small corporate loans. In January 2013, the imputed margin on new housing loans stood at 1.4 percentage points on average and on new loans to non-financial corporations at 1.8 percentage points on average. The widest margins are found on new loans of up to EUR 250,000 to non-financial corporations, in January at 2.6 percentage points on average. This information is based on the Bank of Finland’s Financial Market Report 1/2013, released today in Finnish.

However, interest rates on new loans in Finland continue to be low by historical standards and considerably lower than in the euro area on average. In the euro area, the financing conditions for households and non-financial corporations have tightened the most in the countries at the centre of the debt crisis. In particular, new loans to small and medium-sized enterprises in the crisis countries have clearly become increasingly expensive in comparison with corporate loans in countries with high credit ratings.

The structure of corporate financing has transformed during the past year in Finland and the rest of the euro area. Loans drawn from MFIs operating in Finland continue to be the single most important source of funding for Finnish non-financial corporations. However, since summer 2012, the stock of these loans has contracted slightly. In contrast, the significance of market-based corporate financing has risen both in Finland and other countries with high credit ratings, as larger non-financial corporations have issued more new bonds than previously. In the crisis countries, lending to non-financial corporations has contracted steeply, and growth in market-based corporate financing has been sluggish.

Regulation on lending for house purchases is set to be tightened in the Nordic countries. Sweden and Norway are planning to increase the capital requirements for banks to cover the credit risks related to housing loans granted by them. Denmark has specified its regulations on the booking of impairment losses with the objective that banks would book their expected credit losses at an earlier stage than presently. In Finland, the government is expected to issue a proposal for a law amendment to enable a limit on the maximum size of new housing loans with a binding maximum loan-to-value ratio, or so-called loan cap, if necessary.

Migration into the Single Euro Payments Area (SEPA) is proceeding in all euro area countries. In Finland, the extensive systems changes rolled out by banks in relation to credit transfers have increased the number of disruptions in payment transmission, which has reflected in the customers’ daily lives as payment delays, among other things. The reasons underlying these disruptions vary, and so far banks have been unable to eliminate them completely.

A joint working group of European national central banks and regulators requests feedback on recommendations aiming to improve the security of new internet payment and information services that are independent of banks and use customers’ account information.

For further information, please contact: Hanna Putkuri, Economist, hanna.putkuri(at)bof.fi, tel. +358 10 831 2103.

Financial Market Report 1/2013 (in Finnish)