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PTT warns of banking crisis amid coronavirus outbreak
Published : 24 Mar 2020, 15:05
Pellervo Economic Research (PTT), one of the leading economic research institutes in Finland, has warned that the current coronavirus crisis could hit the Finnish banking industry, reported news agency Xinhua.
In a survey published Tuesday, Janne Huovari, head of forecasting at the institute, wrote that the decline suffered by the financial market would lead to a banking crisis. "The cashflow of many companies has plummeted and they cannot meet the obligations they have to banks," he noted.
Last week, as part of the emergency measures introduced in Finland, the Financial Supervisory Authority lowered the "own capital" requirement of banks, in an attempt to increase the possibility of banks to give loans.
The Finnish government announced earlier a 15 billion-euro economic rescue package to alleviate the impacts of the coronavirus pandemic. A total of 12 billion euros will be allocated to Finnvera, a Finnish state-owned financing company, in order to support businesses in overcoming difficulties caused by the pandemic.
At a news conference last week, Minister of Economic Affairs Mika Lintila underlined that the actual loans would be granted by banks. Lintilä said he hoped that "the banks will now recognize their responsibility."
The research institute also said Finland's Gross Domestic Product (GDP) could shrink by up to 6 percent this year. In other recent forecasts, the Research Institute of the Finnish Economy gave 5 percent as the lowest and the Bank of Finland 4 percent.
Huovari noted that Finland could easily increase its international debt. "It is now at 60 percent in relation to the GDP. As the serving costs are low and interest rates even negative, Finland could increase the ratio even to 90," he said.
Huovari also said the crisis should not be allowed to destroy enterprises that are otherwise profitable, which would in turn badly affect production capacity and block fast recovery.
So far, the total number of COVID-19 infection cases in Finland has exceeded 700, according to the Finnish health authority.