Bank of Finland head warns of excessive borrowing

Finland’s top banker has warned Finns to avoid excessive borrowing despite exceptionally low rates.

Erkki Liikanen, governor of the Bank of Finland, said in an interview at the weekend that recent rate reductions are indeed intended to lift household spending, but added that families need to carefully consider borrowing. He said that rates do not stay low indefinitely and that debts can easily become a burden for borrowers.

The comments followed Thursday’s announcement from the European Central Bank (ECB) that it was reducing its key-lending rate to 0.75 per cent, the lowest in history. Such cuts have triggered a rise in Finnish borrowing and experts now say one in every three Finns is now tied to a mortgage, with the average loan amounting to around EUR 100,000.

The news comes after Mr Liikanen told EU officials in a summit last week that a banking union is key to the region’s current strategy to keep banks from being too risky by assuming they will be bailed out by government.

He said, “Each (country) is responsible for its own mistakes and not another’s, but if the power and the responsibility are at the European euro area level, then together we can make decisions and assume responsibility,” YLE reports. He added, “They have taken risks and in many countries taxpayers have ended up paying. This must end.”