FINLAND Trends and Developments Contributed by: Maria Lehtimäki, Waselius
are notoriously good at paying their auto debt and it is said that a Finnish consumer would rather lose the house than the wheels in front of it, and there may be some truth to this as auto finance default rates are at a record low when compared to European and global levels. How - ever, as the instrument is becoming more famil - iar to originators and investors, it is not all about auto anymore and it looks likely that there will be more issuers and a larger variety of assets com - ing onto the market, with the newest emerging asset class being non-performing loans (NPLs) in the wake of the prudential backstop guidance putting pressure on banks to deal with their non- performing exposures more efficiently. After a long period of negative reference rates, the new interest rate environment combined with the tumultuous geopolitical climate put a temporary hold on public ABS issuances in early 2023. However, issuers began to regain momen - tum with warehousing structures, and the public market is currently back to business as usual. Assets have adjusted to the new interest rates and market participants have again remembered that it is in fact normal to pay some interest on debt funding. Publicly available precedents show the way for new first-time issuers. Fully private transactions with no intention for a public ABS exit will, however, remain popular for small - er portfolio sizes due to a lack of commercial feasibility for a public transaction. Simple, transparent and standardised (STS) transactions were first introduced by the EU Securitisation Regulation on the true sale side and expanded into the synthetic transaction space by the 2019 amendment. Seeking the STS label is an investment made by the originator to show the quality of the transaction and can shave off a significant number of basis points from the pricing of deals. In Finland, the first STS
transactions were issued quickly after the entry into force of the regulation and have caught on in both public and private deals. Synthetic securitisations are not yet common - place in Finland, but it is expected that more synthetics will be seen after the first few exam - ples. Synthetic securitisations are used for capi - tal and risk management purposes by transfer - ring the risk of the underlying exposures to a counterparty by derivative or other instruments without a true sale of the assets. Nordea Bank has explored synthetic risk sharing transactions in several Nordic jurisdictions and in 2022, the Finnish bank entered into a multi-billion STS labelled synthetic risk sharing transaction cov - ering corporate loan exposures across Denmark, Finland, Norway and Sweden. ESG will be a topic of increasing importance in future transactions, with a primary focus on the “E”, which stands for environmental. The Euro - pean Banking Authority (EBA) released a frame - work for sustainable securitisation, including an update on the sustainability-related disclosure and due diligence requirements for securitisa - tion products. The work seeks to conform the EU Securitisation Regulation with the sphere of broader EU environmental, social and gov - ernance regulatory development. While this important work is ongoing and encompasses a multitude of issues ranging from ethical and philosophical to practical and quantitative, the results are already be starting to be seen in actual transactions. There are no Finnish green securitisations yet, but examples are starting to emerge from other Nordic jurisdictions, most recently with Norway’s DNB’s inaugural syn - thetic green securitisation in November 2024.
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