The Finnish banking sector is strongly committed to the common effort to mitigate the coronavirus crisis. Banks strive to help their customers through the crisis, for example by negotiating more flexible arrangements on existing contracts. Within the last two months, banks have received a total of 210,000 loan grace period applications from households and companies. Most of them have been related to personal home loans.
While the flow of new applications has clearly decreased, the number of applications from retail customers is still higher than usual. In the period between 16 March and 13 May, banks received grace period applications from about 180,000 retail customers and nearly 30,000 companies. A substantial number have already been processed. Nearly all have been accepted.
“Loan grace periods are a concrete way to offer aid and flexibility to both households and companies in this difficult time. Banks have also relaxed payment schedules, merged loans, and made other arrangements to lower the monthly sums paid by customers. Many companies have also applied for working capital loans”, says Finance Finland’s (FFI) Director and Chief Economist, Veli-Matti Mattila.
Risk assessment must continue despite the crisis
“Financial sector companies have a key role in carrying us through the current economic crisis. The wheels of the Finnish economy will not keep turning without sound banks, insurers and pension companies”, Mattila says. FIN-FSA reported in March that Finnish banks’ resiliency against operating environment disruptions is higher than European average.
Mattila points out that despite the crisis, banks must continue to assess and measure risks accurately. “The prerequisite for grace periods and other flexible arrangements is that the customer had no pre-crisis loan servicing difficulties and that the bank estimates the customer’s repayment ability will return to normal after the crisis.”
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