Finland: A Banking and Finance Overview

Finland’s banking and finance market reflects the broader Nordic preference for stability, transparency and disciplined risk-taking. While recent years have been marked by economic uncertainty, higher interest rates and geopolitical tension, the market has proven resilient. Well-capitalised financial institutions, a pragmatic regulatory environment and a sophisticated borrower base continue to support steady activity across corporate lending, acquisition finance, real estate finance, private credit and selected areas of structured finance.

Traditional bank finance and leveraged lending remain the backbone of the Finnish market. Finnish corporates and financial institutions generally favour straightforward loan and bond structures with clear and transparent risk profiles, rather than highly engineered products. Cultural factors play an important role: borrowers often have some resistance to complexity and tend to prioritise predictability and long-term relationships, even where alternative structures could offer pricing advantages.

Within the banking sector, a clear distinction has emerged between the approaches of large Nordic banks and smaller regional players. While larger banks have generally remained cautious in the current environment, smaller Nordic banks have shown greater openness to innovative lending solutions. These banks have been particularly active in smaller ticket-size transactions, including real estate financings that fall outside the standard underwriting parameters of the largest institutions. Examples include forward purchase structures and other bespoke arrangements, where flexibility and speed of execution are critical for borrowers. This has allowed smaller banks to capture niches in the market that might otherwise be underserved.

Real estate finance has been a focal point of activity. As higher interest rates have reshaped valuations and financing costs, there has been a notable increase in refinancings of entire real estate portfolios. These refinancings are often preceded by group restructurings, aimed at simplifying ownership structures, reallocating assets or ring-fencing risk to facilitate lender negotiations. While new development financing has been more selective, lenders have remained willing to support well-capitalised sponsors and high-quality assets, particularly where refinancing reduces maturity risk and stabilises long-term funding.

The Finnish market has also felt the global shift from traditional bank lending towards private credit. Regulatory capital constraints, combined with economic uncertainty, have accelerated the expansion of direct lending across Europe, and Finland is no exception. Over the past year, private credit funds have been particularly prominent in sponsor-backed acquisition financings, where they have often emerged as the preferred lenders due to their ability to provide flexible structures and commit capital quickly. Typically, an RCF, commonly with super senior priority, by a large local bank is then embedded into the structure after the acquisition financing has been agreed to complement the term loan financing provided by private credit funds. For many private credit funds, Finland remains a relatively new jurisdiction. First-time transactions often require a rapid familiarisation with local structuring considerations, available security packages and enforcement mechanics. As a result, local market expertise has become increasingly important in aligning international lending models with Finnish legal and market practice.

Structural changes are also underway within the banking sector itself. Consolidation and strategic retrenchment have become more visible, with banks reassessing their geographic footprints and business lines. A notable example is Handelsbanken’s exit from the Finnish retail banking market, which has reshaped competitive dynamics and created both challenges and opportunities for remaining banks and new entrants. Such transactions underline a broader trend of M&A and balance sheet optimisation among Nordic financial institutions.

A further emerging theme is the development of an active market for non-performing loan (NPL) portfolio transactions. New Basel and CRR rules, including the NPL backstop, have increased pressure on banks to address non-performing exposures more proactively, either through accelerated write-downs or disposals. This has led to growing interest in NPL portfolio sales, attracting specialised investors and creating a new area of deal activity in Finland. While still at an early stage, this market is expected to expand as regulatory requirements continue to tighten and banks seek to optimise capital efficiency.

Securitisation plays a more focused role in the Finnish market. Public issuance is largely concentrated in auto loan ABS transactions, where Finland has been an early adopter of the EU’s Simple, Transparent and Standardised (STS) framework. Private securitisations are more common for unsecured consumer loans, trade receivables and SME portfolios, as well as esoteric assets, typically executed in smaller, less complex formats. While securitisation remains a niche compared to traditional lending, it provides an important alternative funding and risk management tool for certain originators. Structured finance techniques are also used in receivables finance and ABL transactions, especially for borrowers that have challenges in obtaining traditional leveraged funding, as well as to complement and diversify funding sources. Environmental, social and governance considerations are becoming increasingly relevant across financing transactions. Although Finland has yet to see a dedicated green securitisation, sustainability considerations are already influencing lender and investor expectations, disclosure practices and transaction structures, particularly in real estate and capital markets financing.

Looking ahead, Finland’s banking and finance market is likely to remain pragmatic and relationship-driven. Opportunities lie in private credit, innovative lending by smaller banks, real estate portfolio refinancings and the growing NPL transaction space. Challenges persist in the form of regulatory complexity, interest rate sensitivity and evolving bank strategies, but the market continues to adapt with a strong emphasis on quality, transparency and disciplined risk management.