An Outlook on the Effects of the Global Financial Crisis on the Finnish Markets
- Finland
- 10/14/2008
- Roschier, Attorneys Ltd. - Finland
The global financial crisis recently took a further downturn when Lehman Brothers’ bankruptcy was announced on 14 September 2008. The Finnish Financial Supervision Authority (the FFSA) considered in its recent analysis published on 25 September 2008 the effects of the global financial crisis on the Finnish markets.
In respect of banks, the FFSA concluded in its analysis that despite decreasing profits, the confidence in and solidity of Finnish banks is still good and the banks have sufficient buffers to handle even surprising losses. Although the FFSA expects the direct effects of the global financial crisis in Finland to be fewer, one of the indirect effects is the slow down of the Finnish economy and a weakened quality of the banks’ loan portfolio and the banks’ increased financing expenses. According to the FFSA, Finnish banks have for many years focused on developing their risk management and are today better equipped to encounter market turmoil than during the Finnish banking crisis of the early 1990s. In respect of Finnish investment funds, the FFSA concluded that investments by these funds in debt and equity securities issued by Lehman Brothers amounted to 0.06 per cent of the funds’ assets. Due to the uncertainty on the markets, the FFSA has also examined the valuation of corporate loans in investment funds and has required that certain investment funds take measures in order to clarify their rules for valuation of corporate loans.
Recently, many regulators in Europe and elsewhere have decided to partly ban short-selling of securities. There have also been discussions among regulators in other countries, including Finland, as to the necessity of such measures. The FFSA has, however, concluded that, at least for the time being, it does not consider similar regulations or emergency measures necessary in Finland.
More recently, on 6 October the FFSA stated that it has intensified the supervision of any potential short-selling of shares in the financial sector and co-operates with other supervisory authorities on the capital markets. The FFSA will, as usual, analyse any major changes in trading prices of individual securities and will also, if needed, investigate any suspected market manipulation
