Research Discussion Papers, Bank of Finland
No 15/2000:
Recent Developments in the Finnish Banking Sector
Atso Andersen, Jussi Snellman and Ari Hyytinen
Abstract: In this paper we discuss recent developments in the
Finnish banking sector. Our specific aim is to examine whether and to what
extent recent developments in Finland are broadly in line with the trends
common to banking sectors in Europe and also worldwide.
We focus on
developments in banks’ profit and loss accounts, balance sheets and the
market structure of the banking sector. In addition, technological
developments are surveyed. As regards consolidation, the Finnish banking
sector is a trendsetter. The emphasis in structural development has moved
to cross-border banking and bankassurance. On the other hand, it turns out
that it is difficult to track some of the trends that are believed to
characterize European banking sectors using Finnish data. For instance,
disintermediation has thus far been moderate in Finland, as the role of
banks as providers of financing to households and companies is still
significant and generally shows no signs of diminishing. Tougher
competition in lending does not seem to have reduced Finnish banks’
profitability, which was at a record high in 1999 and in the first half of
2000.
The Finnish banks have fully recovered from the banking crisis of
the early 1990s. Improved profitability is largely due to enhanced
efficiency as well as recent favourable economic performance. The banking
sector has experienced a rapid process of consolidation during the 1990s
and currently banks are in the middle of a period of intensive launching of
new technology-based products. It can be argued that as a result of
developments in the 1990s the Finnish banking sector is among the most
profitable and efficient in Europe.
Keywords: banks; financial system; stability; (follow links to similar papers)
39 pages, October 26, 2000
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