Finland’s health and social services transfer to wellbeing services counties – and MuniFin continues to finance them

In June 2021, the Finnish Parliament adopted the legislative package on Finland’s health and social services reform. From the beginning of 2023, the responsibility for organising health, social and rescue services will be transferred from the municipalities to the 21 self-governing wellbeing services counties. The City of Helsinki is an exception: it will be responsible for organising these services within its own area.

The wellbeing services counties are responsible for organising public services such as primary healthcare, specialised medical treatment, social welfare, dental care, mental health services, substance abuse treatment, services for the disabled and housing services for the elderly. Municipalities will continue to provide day care, education, and sports and culture services, for example.

The health and social services reform aims to ensure equal and high-quality health and social services, improve their availability and accessibility and curb their increasing costs. The reform also seeks to reduce health and welfare inequalities, secure the availability of skilled employees and meet the challenges created by demographic changes.

The legislative package adopted in June enables MuniFin to continue to act as the financier of loans transferred from municipalities and joint municipal authorities to the new wellbeing services counties. The Finnish Parliament is currently working on amending the Act on the Municipal Guarantee Board, a key piece of legislation for MuniFin’s operations. If implemented, this amendment would allow MuniFin to finance new investments by the wellbeing services counties and the companies and organisations that they control. This amendment is planned to take effect on 1 May.

The Finnish Financial Supervisory Authority (FIN-FSA) has decided that like the central government and municipalities, wellbeing services counties will also fall in the zero-risk category in the capital adequacy regulation of banks. This decision brings the wellbeing services counties on par with municipalities when it comes to the availability and efficiency of funding. The decision is a welcome one, as long-term investments should be made with long-term financing.

Read more: Reform of healthcare, social welfare and rescue services (external link)

More customer benefits and investments in sustainability – MuniFin published its 2021 Annual Report and Green and Social Impact Reports

The demand for financing in the municipal sector was moderate and lower than expected in 2021. This was due to an unexpectedly good economic and employment situation and the central government’s COVID-19 support for municipalities. In contrast, the demand for non-profit housing finance grew moderately and has remained largely unaffected throughout the pandemic. Our new long-term financing for 2021 totalled EUR 3.7 billion.

What was 2021 like at MuniFin? Watch the video below.

This year, we report the impacts of our green and social finance in separate reports. We grant green finance to projects that have verifiable positive impacts on the environment and social finance to projects that produce widespread social benefits.

The cover of the Green Impact Report. On the left hand side a car connected to a charger. On the left hand side a girl with a dog on the backseat of the car.
The cover of the Social Impact Report 2021. On the left, there's a wooden house, on the right a happy disabled woman wearing headphones.

Integrating sustainability and new operating models

Sustainability is interwoven even more closely into all our operations and the work of all our employees. In 2021, we started to work on calculations to make the environmental load of our own operations more visible. We also published our Sustainable Investment Framework, which summarises the sustainability principles, processes and responsibilities in our investment activities. Because sustainability is such an integral part of all our work, we have incorporated it directly into our operational reporting for the first time, instead of publishing a separate report.

MuniFin’s year 2021 was characterised by renewal and the rooting of new operating models.

“This year, we will continue to renew, improve our management and integrate sustainability into our operations even more closely”, says Esa Kallio, MuniFin’s president and CEO.

New homes for people in mental health recovery: Diverse support measures help residents achieve an independent life

Mielen Association, a non-profit expert organisation that provides mental health and substance abuse services in Pirkanmaa, has commissioned a new supported accommodation unit in Nekala, Tampere. The apartment building will have 34 new homes for people recovering from mental health issues. The unit’s biggest asset is its location: the plot already houses a maisonette with 16 supported housing apartments as well as the Lideshovi activity centre.

“The new building is located by Lake Lidesjärvi, so some residents will have a view over the lake. The location is also excellent because the unit is only three kilometres from the Tampere city centre”, says Maarit Hirvonen, executive director at Mielen Association.

The new apartments are financed with MuniFin’s social finance and offer supported accommodation for people with mental health issues. The residents are offered daily support, including time with the staff members, conversational therapy and concrete help with everyday living.

“Our clients have very different needs. Some may need help with a single matter, while others require more comprehensive support. For example, our staff may offer conversational therapy to one client, but do housework with another. In addition to support with life management and medication, we can also provide social guidance or help dealing with the paperwork required for social security, for example”, Hirvonen explains.

According to Maarit Hirvonen, executive director at Mielen Association, supported accommodation is a temporary solution that yields good results.

Towards independent living

The new building will only house people recovering from mental health issues. Many residents come to supported accommodation from institutional care, but some transfer from their home and some come through social services.

“Living in supported accommodation is a temporary solution. Most of our residents live with us for a couple of years, moving on to independent living when the time is right. For municipalities, this is an affordable service because supported accommodation produces good results”, Hirvonen says.

Participation and recovery are at the heart of all Mielen Association operations. Residents get to have their say on various things, from the kind of support they need to the forms of groups and activities offered.

“Recovery is the core of our work. We believe that everyone can recover from mental illness. Difficult experiences can help people discover a way of life that is meaningful and good for them. With us, it is the clients who say what they want and how they want it. Our staff members do not tell clients what to do, but instead find a mutual way forward through discussion.”

The successful rehabilitation of the residents has long-term effects. The guidance and support that residents receive may decrease the negative effects of their mental health problems, improve their life management skills and socioeconomic situation, and empower them to live independently.

An apartment of one’s own and opportunities for participation

Mental health issues and substance abuse have increased considerably in recent years, and the COVID-19 pandemic is expected to only aggravate these problems. Tampere and the entire Pirkanmaa region are in dire need of more supported accommodation. In addition to new homes, the new unit will create new jobs and improve the use of existing facilities.

“The need is definitely there! When one resident is moving out, a new one is always moving in. We receive regular inquiries about vacant apartments. Thanks to the new building, we can take on new staff and boost the efficiency of our existing services. It will double our staff and allow us to increase staff time with residents and offer more group activities at the activity centre”, Hirvonen says.

In Nekala, construction work has progressed under lucky stars. The work has gone as planned and right on schedule – even the pandemic has not thrown a spanner in the works.

“Construction work began in late August, and the building has now reached its rooftop height. After the elements have dried off, next up will be the interior. So things are looking good, and the building should be completed in October or November this year”, says Hirvonen contentedly.

The activity centre located next to the new apartments will offer residents various activities. For this reason, most of the new building is dedicated to apartments, and common facilities are limited.

“In addition to apartments, the building will have one communal room and a laundry. Residents can go next door to the activity centre to see other people, grab coffee, read the papers, have lunch or take part in group activities. Saunas are also available next door”, Hirvonen lists.

As the construction work proceeds, the apartments are also beginning to take shape. Hirvonen is very pleased about the new homes. The new building includes many modern solutions and choices that improve the quality of living.

“All the homes will be a nice size, over 30 square metres each. The apartments will have an open-plan kitchen and living room with a dishwasher as well as an alcove or a small bedroom. Large windows make the homes nice and bright. On the apartments overlooking the lake, the view is naturally a nice bonus. The building will be entirely accessible, ensuring easy access with a wheelchair or walker. Modern electric locks also make life easier”, Hirvonen elaborates.

Social finance

MuniFin’s social finance is granted to investments that produce widespread social benefits. Social finance projects impact their surroundings and communities in a positive way: they promote equality, communality, welfare or regional vitality.

Social bonds

Written by Joonas Holste

Virtual photo and work site photo by Mielen Association

Maarit Hirvonen’s photo by Anna-Stiina Saarinen

Mari Tyster: Despite its flaws, regulation helps change the world

The pace of financial regulation has been accelerating since the late 1980s, with the financial crisis ramping up the speed even more. Developments in regulation have not always been straightforward or even logical, but despite their flaws, they have brought security and stability to our operations, customers and the market.

Tighter capital and liquidity requirements

The COVID-19 pandemic has highlighted the importance of the stability of the financial market. Banks have demonstrated their ability to operate during the crisis, in part thanks to the capital and liquidity buffers imposed on them. The economy as a whole has also not suffered as much as feared.

Harmonisation has made banking requirements clearer in general, but accounting for the specificities of the different business models is a difficult task.

Risk management and reporting

Different ways to identify, address and manage risks have evolved substantially over the years, and the importance of risk management is well understood across banking organisations. However, risk management has become such a multi-faceted and complicated process that it can sometimes be challenging to see the wood for the trees.

Reporting to the authorities has become somewhat of an art form, requiring specific reporting skills in addition to financial administration skills. Reporting currently serves the purposes of the authorities and not the businesses themselves, and as a result, the same data is being reported multiple times in an inefficient way. It would be beneficial to eliminate these overlaps and streamline reporting practices, but looking at the current roadmap of regulatory development, this does not seem very likely.

Requirements for investment services

The provision of investment services involves a considerable amount of reporting and information sharing between authorities, customers and other market participants. The rules are made to provide security for everyone in the market, but they also assist the authorities in their supervisory work to promote market stability.

Information overload can make investment services difficult to approach, but it is not the original purpose of regulation. This problem could perhaps be solved with legal design, which means making regulation and the relevant documentation more user-friendly and understandable.

MuniFin provides investment services on a relatively small scale, but the new regulation has nevertheless affected us substantially – perhaps even more than the regulators intended.

Necessity is often a good motivator. The current operating environment could have come about through independent market developments, but at a slower pace and with much more variation between different organisations.

Faster globalisation is challenging traditional operating models

Globalisation is accelerating and posing major challenges for the traditional approach to regulatory work. Very few things concern only individual countries these days. Time will tell whether regulation based on strict geographical boundaries will become downright impossible.

The European Union has partially tackled this issue by creating an European market. But the euro area and the European Union are not the same thing, which already creates many new regulatory nuances. Global phenomena will not stop at some boundaries drawn on a map; a good example of this is climate change and the EU Taxonomy for Sustainable Economic Activities, which seeks to speed up the achievement of climate goals by linking the funding of investments to their environmental impacts.

In the future, regulation will be problematic not only because of climate risks but also because of cyber threats, as a cyberattack can strike anytime from anywhere in the world. Regulation has the potential to make the world a better and safer place, but this requires more global cooperation.

At MuniFin, we closely monitor regulatory developments that are relevant to our own operations and aim to influence potential problem areas. In this constantly changing world, nobody has all the answers, but through open dialogue and cooperation, we can bring about regulation that truly advances society.

Mari Tyster
Executive Vice President, Legal and Communications, Deputy to the CEO, and Member of the Executive Management Team at MuniFin

Even the stairway is a teaching facility at the Language Immersion School

In the autumn of 2020, after eight years of waiting, the Jakobstad Language Immersion School moved into new premises. The old building was abandoned due to indoor air problems, and the temporary premises also had some issues with air quality. The relocation process was long but well worth the wait, as the new building meets the demands of the developments that have taken place in teaching methods in the past eight years. The Language Immersion School now offers a taste of the future of education.

“Special attention has been paid to ventilation, acoustics and space design. The new building is really beautiful and cosy”, Hellstrand notes happily.

Classes in the second official language

Kristiina Hellstrand has been the principal of the Language Immersion School since its beginning.

With about 400 pupils, the Language Immersion School is the largest primary school in Jakobstad. In the bilingual town of Jakobstad, language immersion means that pupils who speak Finnish as their first language study in Finland’s second official language, Swedish, and vice versa. At the beginning of their school journey, pupils study exclusively in their second language, with the role of the first language increasing during the following years. The school follows the national curriculum: the only difference is the language.

The city has offered language immersion education since 1993. The concept landed in Finland a few years earlier from Canada, and Hellstrand was immediately inspired by it.

“When the city was looking for its first language immersion teachers, I signed up right away. That was almost 30 years ago, and I’m still happy with my decision.”

In 2003, the city founded a dedicated language immersion school, which is still one of a kind in Finland. Hellstrand has been the school’s principal from day one.

“At first, the Swedish-speaking kids were in one school and the Finnish-speaking kids in another. I cycled between the two schools, feeling like I was a language immersion school on wheels”, Hellstrand says with a chuckle.

Later on, mainstream education pupils were relocated to other primary schools, and the language immersion groups moved under one roof. The Language Immersion School has since operated in a hundred-year-old school building, in an old secondary school and in the premises of a business school, before finally moving into its own purpose-built facilities.

No school desks, no classrooms

Jan Levander says the choice of materials plays an important role in open school spaces.

The new building is impressive. Large windows let light in to spacious lobbies, and the hallways are decorated with pleasant earthy colours, soft surfaces and green elements. On the outside, the building’s most striking quality is its exterior wall material, which is taking on the colour of rust. But there’s no need to worry, assures Jan Levander, director of education and culture in Jakobstad.

“It will take about two years for the walls to get their final pigment, so I shouldn’t pass my judgment yet. But I think it already looks nice.”

The irregularly shaped two-storey building has been carefully designed. As part of the planning process, Levander and Hellstrand took part in the Nova Schola programme by the Finnish Consulting Group, in which participants got to know new types of learning environments all over Finland. The city’s construction manager and the school project’s lead architect also participated.

Hellstrand says that they visited five or six schools during two years. “At the visits, we understood how important acoustics are. Many think that open school spaces as restless and noisy, but with the right materials and good design, they’re anything but”, she remarks.

Inspiration from the tour shows in the Language Immersion School, which is Jakobstad’s first open learning environment. The school does not have any traditional classrooms. Instead, all learning spaces are used for teaching as needed. Some rooms have movable walls and curtains to divide the space. All parts of the building are designed for educational use: even the staircase can serve as an auditorium.

“The staircase has a high-quality sound system, a large screen and room for a large number of pupils”, says Levander.

According to Hellstrand, children have been quick to adopt the open environment, but the teachers have needed more time to adjust. There are no school desks: pupils sit on couches, around larger tables or on chairs – and sometimes on the floor.

“For us teachers, it takes some getting used to if a pupil is spinning on a chair or sitting on the floor. It can feel like the situation is not fully under our control. But if the pupils say it makes it easier for them to concentrate, does it make sense to force them to sit still? After all, adults are also allowed to move when we are attending a lecture or a presentation”, Hellstrand explains.

The hallways have an earthy colour scheme.

Quiet corners are excellent for calm and concentrated work.

A series of large projects financed with real estate leasing

The school network in Jakobstad is undergoing major changes. After the Language Immersion School, the Oxhamn School, a Swedish-language secondary school, will be the next to have new facilities. A new primary school is also being planned, pending the municipal council’s decision.

“After these projects, the school network should be set for at least ten years”, Levander observes.

The Language Immersion School, the Oxhamn School and the day-care centre Alma, which was completed in 2020 and serves almost 200 children, are all financed with MuniFin’s real estate leasing.

“Leasing is a flexible option for large projects. Population is currently declining in Jakobstad, making it difficult to estimate what the value of these properties will be after 15 or 20 years. Leasing gives us more security in this regard”, Levander continues.

The Oxhamn School, which will be completed late this year, will also have many open spaces, but it will not be a completely open learning environment. Levander explains that it will fall somewhere between a traditional school and the open learning environment of the Language Immersion School – for example, there will be more spaces for subject-specific instruction.

The concept of a classroom has remained virtually unchanged for a long time. But according to Hellstrand, schools must keep up with the times. New ways of learning require new learning environments.

“After all, we are preparing children for the future, not for the past”, she concludes.

Text: Roope Huotari
Images: interviewees

Municipality Finance Plc Financial Statements Bulletin 1 January–31 December 2021

In brief: MuniFin Group in 2021

  • The Group’s net operating profit excluding unrealised fair value changes amounted EUR 213 million (EUR 197 million) and it increased by 8.0% (6.2%). The Group’s net interest income totalled EUR 280 million (EUR 254 million) and grew by 10.3% (5.8%). Costs in the financial year amounted to EUR 72 million (EUR 58 million). Costs excluding the non-recurring item grew as expected and were EUR 2.6 million higher, making the figure 4.4% greater than in the previous year.
  • The net operating profit amounted to EUR 240 million (EUR 194 million). Unrealised fair value changes amounted to EUR 27 million (EUR -3 million) in the financial year.
  • Changes to the regulation of banks’ capital adequacy (CRR II and CRD V) were applied at the end of June 2021. The Group’s leverage ratio was 12.8% (3.9%) at the end of December. MuniFin fulfils the CRR II definition of a public development credit institution and may therefore deduct all credit receivables from the central government and municipalities in the calculation of its leverage ratio. This change explains the growth of leverage ratio.
  • At the end of December 2021, the Group’s CET1 capital ratio remained very strong, 95.0% (104.3%). Tier 1 and total capital ratio were 118.4% (132.7%). The new CRR II regulation lowered the capital ratio mainly due to the changes in the calculation of the counterparty credit risk and CVA VaR. CET1 capital ratio nevertheless exceeded the total requirement of 13.4% by over seven times, with capital buffers accounted for.
  • The COVID-19 pandemic that broke out in March 2020 has now lasted almost two years, although its intensity has varied. As a whole, the pandemic has only had a minor effect on the Group’s financial standing. In this financial year, the demand for financing in the municipal sector remained lower than expected due to surprisingly good economic development and the Government’s temporary COVID-19 recovery measures in 2020.
  • Long-term customer financing, including both long-term loans and leased assets totalled EUR 29,214 million (EUR 28,022 million) and grew by 4.3% (13.0%) at the end of December. The total of new lending in January–December amounted to EUR 3,275 million (EUR 4,764 million). Short-term customer financing decreased by 16.9% (previous year’s growth was 62.9%) and reached EUR 1,089 million (EUR 1,310 million).
  • Of all long-term customer financing, the amount of green finance aimed at environmentally sustainable investments totalled EUR 2,328 million (EUR 1,786 million) and the amount of social finance aimed at investments promoting equality and communality totalled EUR 1,164 million (EUR 589 million) at the end of December. Green and social finance have been well received by customers, and the amount of this finance increased by 47.0% (88.0%) from the previous year.
  • In 2021, new long-term funding reached EUR 9,395 million (EUR 10,966 million). At the end of December, the total amount of acquired funding was EUR 40,712 million (EUR 38,139 million), of which long-term funding made up for EUR 36,893 million (EUR 34,243 million).
  • The Group’s liquidity has remained at a very good level. At the end of December, total liquidity amounted to EUR 12,222 million (EUR 10,089 million). The Liquidity Coverage Ratio (LCR) stood at 334.9% (264.4%) at the end of the year and the Net Stable Funding Ratio (NSFR) at 123.6% (116.4%).
  • The Board of Directors proposes to the Annual General Meeting to be held in spring 2022 a dividend of EUR 1.03 per share for 2021, totalling EUR 40,235,711.94. The total dividend payment for 2020 was EUR 20,313,174.96.
  • Outlook for 2022: The Group expects its net operating profit excluding unrealised fair value changes to be significantly lower than in the previous year, as per the Group’s long-term profitability targets and more beneficial customer pricing enabled by these targets. The Group expects its capital adequacy ratio and leverage ratio to remain very strong. The valuation principles set in IFRS 9 may cause significant but temporary unrealised fair value changes, some of which increase the volatility of net operating profit and make it more difficult to estimate in the short term.

Key figures (Group)

31 Dec 202131 Dec 2020
Net operating profit excluding unrealised fair value changes (EUR million)*213197
Net operating profit (EUR million)*240194
Net interest income (EUR million)*280254
New lending (EUR million)*3,2754,764
Long-term customer financing (EUR million)*29,21428,022
New long-term funding (EUR million)*9,39510,966
Balance sheet total (EUR million)46,36044,042
CET1 capital (EUR million)1,4081,277
Tier 1 capital (EUR million)1,7561,624
Total own funds (EUR million)1,7561,624
CET1 capital ratio, %**95.0104.3
Tier 1 capital ratio, %**118.4132.7
Total capital ratio, %**118.4132.7
Leverage ratio, %**12.83.9
Return on equity (ROE), %*10.79.4
Cost-to-income ratio*0.20.2

*Alternative performance measure.
**Figures for the financial year 2021 are calculated in accordance with CRR II. Comparison periods have not been restated to reflect the updated capital requirements regulation.

Comment on the 2020 financial year by President and CEO Esa Kallio

Finland’s economic and employment situation exceeded expectations in 2021 and reached a surprisingly good level. The central government’s COVID-19 support package ensured that municipalities have not had to shoulder the negative economic effects of the pandemic.

Municipal sector’s demand for financing was lower than expected in 2021. The demand for state-subsidised housing finance grew moderately, as expected. MuniFin’s market position is strong, and we continue to be by far the largest single credit institution offering long-term loans for our customer base.

Despite the temporarily improved financial situation, the fiscal sustainability gap and structural problems in the public economy continue to exist. In 2022, we therefore expect the demand for financing in the municipal sector to return to the pre-pandemic level.

The European Union’s changes to the capital adequacy regulation were applied at the end of June. Under the new regulation, MuniFin gained the status of a public development credit institution, which significantly eases MuniFin’s ability to comply with the leverage ratio capital requirement. This has allowed us to increasingly transfer the benefit from negative interest rates to our customers, making our loan financing even more affordable than before. This change in our credit terms took force in October, and its benefits will begin to have a wider impact in the interest expenses of our loan customers in 2022.

Once again, our funding succeeded excellently, and the availability of funding in the international capital market remained good. Thanks to our effective funding, we were again able to ensure affordable financing for our customers.

The legislative package for Finland’s long-prepared health and social services reform was largely completed in June, allowing municipalities to launch practical preparations. In the future, MuniFin’s customers will include the new wellbeing services counties.

Our customers play a key role in mitigating climate change and promoting the green transition. We support our customers in this transition by offering them green finance and sharing our expertise. In 2021, the demand for our green finance continued to grow, and the social finance that we launched in 2020 established its position among our customers.

MuniFin’s year started with a renewed organisation and was characterised by renewal and the rooting of new operating models. I wish to thank our customers for their close collaboration and our staff for their excellent work during this year of external and internal upheaval.

Information on Group results

Consolidated income statement01–12/202101–12/2020Change, %
(EUR million)   
Net interest income28025410.3
Other income4285.4
Income excluding unrealised fair value changes28525711.0
Commission expenses-5-5-0.2
Personnel expenses-18-18-0.3
Other items in administrative expenses-17-1511.6
Depreciation and impairment on tangible and intangible assets-16-6>100
Other operating expenses-16-156.6
Credit loss and impairments on financial assets0-1-87.8
Net operating profit excluding unrealised fair value changes2131978.0
Unrealised fair value changes27-3<-100
Net operating profit24019423.5
Profit for the financial year19215523.4

The sum of individual results may differ from the displayed total due rounding. Changes of more than 100% are shown as >100% or <-100%.

Group’s net operating profit excluding unrealised fair value changes

MuniFin Group’s core business operations remained strong during 2021. The Group’s net operating profit excluding unrealised fair value changes grew by 8.0% (6.2%) and totalled EUR 213 million (EUR 197 million). Income excluding unrealised fair value changes was EUR 285 million (EUR 257 million) and grew by 11.0% (4.3%). The Group’s costs were EUR 72 million (EUR 58 million) rising by 22.4% from the previous year. The non-recurring item related to impairment on on-going IT system implementation, EUR 10.5 million, increased costs. Costs excluding the non-recurring item grew as predicted and were 4.4% higher than in previous year (-3.0%). The COVID-19 pandemic did not have a significant negative impact on the Group’s core business and profitability in 2021 or in comparison year.

Net interest income totalled EUR 280 million (EUR 254 million), and increased by 10.3% (5.8%) from the previous year. Net interest income was positively affected by growing volumes and low market interest rates. In October 2021, the Group changed the conditions of its long-term customer loans with variable interest rates so that its customers will benefit from negative reference rates better than before. This change only had a minor effect on the Group’s profits. The Group’s net interest income does not recognise the interest expenses of EUR 16 million of the AT1 capital instrument, as the capital loan is treated as an equity instrument in the consolidated accounts. The interest expenses of the capital loan are treated similarly to dividend distribution; that is, as a decrease in retained earnings under equity upon realisation of interest payment on an annual basis.

Other income grew from the previous year to EUR 4 million (EUR 2 million). Other income includes commission income, realised net income from securities and foreign exchange transactions, net income on financial assets at fair value through other comprehensive income, and other operating income. In addition, the turnover of MuniFin’s subsidiary company Financial Advisory Services Inspira is included in the other income.

During 2020, the COVID-19 pandemic slowed cost growth, making the year’s costs unusually low. Costs started rising again in 2021, although the growth was slower than before the pandemic.

Commission expenses totalled EUR 5 million (EUR 5 million) and consisted primarily of paid guarantee fees, custody fees and funding programme update fees.

Administrative expenses reached EUR 35 million (EUR 33 million) and grew by 5.2% (2.3%). Of this, personnel expenses comprised EUR 18 million (EUR 18 million) and other administrative expenses EUR 17 million (EUR 15 million). Personnel expenses were almost at the same level than in previous year and were 0.3% (0.8%) less than in 2020. There were no significant changes in employee numbers and the average number of employees in the Group was 162 (167). Salary and pension costs decreased slightly during the financial year.

Other items in administrative expenses grew by 11.6% (4.0%) during the financial year. The cost of maintaining and developing information systems has increased IT expenses, but on the other hand, the COVID-19 pandemic has reduced certain types of expenditure, such as travelling expenses both in 2021 and 2020. In 2019, MuniFin Group signed outsourcing agreements for IT end-user and infrastructure services as well as the operation of the business IT systems to improve operational reliability and the availability of services. This implementation project was completed in late 2021.

During the financial year, depreciation and impairment of tangible and intangible assets reached EUR 16 million (EUR 6 million). The item includes impairment of EUR 10.5 million on the Group’s significant on-going IT system implementation.

Other operating expenses increased by 6.6% (-17.1%) to EUR 16 million (EUR 15 million). Fees collected by authorities increased by 23.0% (13.6%) to EUR 9 million (EUR 7 million), mainly due to an increase in the contribution to the Single Resolution Fund, which grew by 30.5% to EUR 6.7 million (EUR 5.2 million). These fees excluded, other expenses were EUR 6 million (EUR 7 million), decreasing by 10.3% (-35.1%), mostly due to smaller purchases of external services compared to 2020. Other expenses include a provision of EUR 0.4 million related to a possible tax increase following a tax interpretation issue from previous years.

The amount of expected credit losses (ECL), calculated according to IFRS 9, decreased during the financial year and was EUR -0.1 million (EUR -0.9 million). MuniFin Group has updated the scenarios and weights used to calculate ECL.

In 2020, MuniFin Group recorded an additional discretionary provision (management overlay) of EUR 0.3 million to take into account the financial effects of the COVID-19 pandemic. This was due to the fact that the deteriorating financial situation of certain customer segments had not yet reflected in MuniFin Group’s internal risk ratings for these segments, and therefore the Group’s management decided to record an additional discretionary provision based on a group-specific assessment. The financial situation of these customer segments later improved, and the management decided to remove the additional discretionary provision in late 2021. At the end of 2021, the Group’s management decided to record an additional discretionary provision of EUR 0.4 million to take into account ECL model changes that will take place in 2022. During 2022, the Group will further develop loss given default (LGD) calculation of mortgage loans as well as lifetime ECL calculations.

The Group’s overall credit risk position has remained low. According to the management’s assessment, all receivables will be recovered in full and no final credit loss will therefore arise, because the receivables are from Finnish municipalities, or they are accompanied by a securing municipal guarantee or a state deficiency guarantee supplementing mortgage collateral. During the Group’s history of more than 30 years, it has never recognised any final credit losses in its customer financing.

At the end 2021, the Group had a total of EUR 19 (EUR 24 million) of guarantee receivables from public sector entities due to customer insolvency, which are still under 0.01% of total customer exposure. The credit risk of the liquidity portfolio has remained at a good level, its average credit rating being AA+ (AA+).

Group’s profit and unrealised fair value changes

The Group’s net operating profit was EUR 240 million (EUR 194 million). Unrealised fair value changes improved the Group’s net operating profit by EUR 27 million, while in the previous year it had a negative impact of EUR 3 million. In 2021, net income from hedge accounting amounted to EUR 5 million (EUR 4 million) and unrealised net income from securities transactions to EUR 22 million (EUR -7 million).

The Group’s effective tax rate during the financial year was 20.1% (20.0%). Taxes in the consolidated income statement amounted to EUR 48 million (EUR 39 million). After taxes, the Group’s profit for the financial year was EUR 192 million (EUR 155 million). The Group’s full-year return on equity (ROE) was 10.7% (9.4%). Excluding unrealised fair value changes, the ROE was 9.6% (9.6%).

The Group’s other comprehensive income includes unrealised fair value changes of EUR -3 million (EUR -32 million). During the financial year, the most significant item affecting the other comprehensive income was cost-of-hedging, EUR -3 million (EUR -16 million). The fair value change due to changes in own credit risk of financial liabilities designated at fair value through profit or loss totalled EUR 0.4 million (EUR -17 million).

On the whole, unrealised fair value changes net of deferred tax affected the Group’s equity by EUR 19 million (EUR -28 million) and CET1 capital net of deferred tax in capital adequacy by EUR 19 million (EUR -15 million). The cumulative effect of unrealised fair value changes on the Group’s own funds in capital adequacy calculations was EUR 31 million (EUR 12 million).

Unrealised fair value changes reflect the temporary impact of market conditions on the valuation levels of financial instruments at the reporting time. The value changes may vary significantly from one reporting period to another, causing volatility in profit, equity and own funds in capital adequacy calculations. The effect on individual contracts will be removed by the end of the contract period.

In accordance with its risk management principles, MuniFin Group uses derivatives to financially hedge against interest rate, exchange rate and other market and price risks. Cash flows under agreements are hedged, but due to the generally used valuation methods, changes in fair value differ between the financial instrument and the respective hedging derivative. Changes in the shape of the interest rate curve and credit risk spreads in different currencies affect the valuations, which cause the fair values of hedged assets and liabilities and hedging instruments to behave in different ways. In practice, the changes in valuations are not realised on a cash basis because the Group primarily holds financial instruments and their hedging derivatives almost always until the maturity date. Changes in credit risk spreads are not expected to be materialised as credit losses for the Group, because the Group’s liquidity reserve has been invested in instruments with low credit risk. In the financial year, unrealised fair value changes were influenced in particular by changes in interest rate expectations and credit risk spreads in the Group’s main funding markets.

Parent Company’s result

MuniFin’s total net interest income at year-end was EUR 264 million (EUR 238 million), and its net operating profit stood at EUR 223 million (EUR 178 million). The profit after appropriations and taxes was EUR 137 million (EUR 22 million). The interest expenses of EUR 16 million for 2021 on the AT1 capital loan, which forms part of Additional Tier 1 capital in capital adequacy calculation, have been deducted in full from the Parent Company’s net interest income (EUR 16 million). In the Parent Company, the AT1 capital loan has been recorded under the balance sheet item Subordinated liabilities.

Subsidiary Inspira

The turnover of MuniFin’s subsidiary company, Financial Advisory Services Inspira Ltd, was EUR 1.7 million for 2021 (EUR 2.8 million), and its net operating profit amounted to EUR 0.1 million (EUR 0.1 million).

Outlook for 2022

According to the MuniFin Group’s current view, global economic growth is slowing down, but the main trend in the economic outlook remains still relatively positive. Employment continues to have room for growth, household savings lend support to consumption potential and private investments are expected to remain at a good level. The first half of the year will suffer from the uncertainty caused by the coronavirus Omicron variant. The high price of energy and the ongoing component shortage will continue to cause cost pressures and take their toll on economic activity. Economic forecasts continue to be highly uncertain.

The main trends in monetary policy are the same in the United States and Europe, but their central banks will move at a considerably different pace. The risk of the economy overheating in the United States is real, and the central bank Fed is likely to have to raise its key interest rates several times, already in 2022. In the euro area, the increased inflation is still mainly explained by reasons that are expected to be temporary. The ECB’s new symmetrical inflation target of 2% leaves the central bank more leeway to ignore temporary cost-push inflation. The ECB is likely to scale down its non-standard measures in 2022, but presumably very gradually. It now seems that a prudent normalisation of the interest rate policy could begin in late 2023, when the euro area should reach its pre-pandemic growth path. The outlook in monetary policy continues to be highly prone to changes in the pandemic situation.

In Finland, labour shortage and the increasing price of necessities will slow down economic growth in 2022. GDP growth will nevertheless remain somewhat stronger than Finland’s long-term growth potential. Unemployment is expected to fall below 7%.

The central government’s COVID-19 support package will no longer boost municipal finances in 2022, returning the focus on structural imbalances. More specific assessments of how the health and social services reform will impact individual municipalities will not be available until spring 2022. The reform’s practical challenges and the uncertainty of its financial impact make it difficult to predict municipal finances over the next few years.

In 2022, the health and social services reform will be reflected in the Group’s operations as practical preparation to act as a financing counterparty to the new wellbeing services counties. It is difficult to estimate the wider economic impact of the reform at this stage, when there is no practical information available on how wellbeing services counties will function. Wellbeing services counties’ future level of investments will effect on MuniFin’s financing volumes, but on the other hand the operating expenditures of the counties will be covered from the government’s budget. In MuniFin’s financing operations, health and social services lending plays such a role that changes in it will not have a material impact on MuniFin’s financial development in the near future.

After confirmation of its status as a public development credit institution, MuniFin decided in June 2021 to change the conditions of its long-term customer loans with variable interest rates in a way that will allow customers to benefit from negative reference rates better than before, which will clearly make the Group’s 2022 net interest income lower than in the previous year. The Group’s customer operations and funding are expected to continue to run and develop steadily. Operating expenses are expected to grow from 2021, as investments in IT systems and operational reliability as well as the marked rise in supervisory fees all increase expenses.

Considering the above-mentioned circumstances, the Group expects its net operating profit excluding unrealised fair value changes to be significantly lower than in the previous year, as per the Group’s long-term profitability targets and more beneficial customer pricing enabled by these targets. The Group expects its capital adequacy ratio and leverage ratio to remain very strong. The valuation principles set in the IFRS regulatory framework may cause significant but temporary unrealised fair value changes, some of which increase the volatility of net operating profit and make it more difficult to estimate in the short term.

These estimates are based on a current assessment of the development of MuniFin Group’s operations and the operating environment.

Webinar for investors and other stakeholders

MuniFin Group’s results for the year 2021 will be presented to investors and other stakeholders in a results webinar held on 9 February 2022 at 2:00 pm EET. Register for the webinar here. Register here if you are not able to attend but wish to receive a recording.

Municipality Finance Plc

Further information:

Esa Kallio, President and CEO, tel. +358 50 337 7953

Harri Luhtala, Executive Vice President, Finance, CFO, tel. +358 50 592 9454

MuniFin (Municipality Finance Plc) is one of Finland’s largest credit institutions. The company is owned by Finnish municipalities, the public sector pension fund Keva and the Republic of Finland. MuniFin Group also includes the subsidiary company, Financial Advisory Services Inspira Ltd. The Group’s balance sheet is over EUR 46 billion.

MuniFin builds a better and more sustainable future with its customers. MuniFin’s customers are Finnish municipalities, municipal federations, municipally controlled entities and non-profit housing organisations. Lending is used for environmentally and socially responsible investment targets such as public transportation, hospitals and healthcare centres, schools and day care centres, and homes for people with special needs.

MuniFin’s customers are domestic but the company operates in a completely global business environment. The company is an active Finnish bond issuer in international capital markets and the first Finnish green and social bond issuer. The funding is exclusively guaranteed by the Municipal Guarantee Board.

Read more:


Analyst Lari Toppinen joins MuniFin’s Funding and Sustainability team

Lari Toppinen is one of four people working with funding in MuniFin. His tasks include issuing benchmarks, private placements, hedging and, dealer and investor relations. During his first weeks he has been involved with several transactions, as the team has already reached 30% of this year’s EUR 9–10 billion long-term funding target.

– I would say it has been an exciting start to the year and I quite enjoy the fast-paced environment. Everyone in the team is extremely professional and helpful and I am impressed how fast our team can adapt to new situations and market conditions. I look forward to collaborating more in the coming months, Toppinen says.

– Lari is a team player with good analytical skills, which are key factors in succeeding in this position. He is a great addition to the team and we all look forward to working together, says Antti Kontio, Head of Funding and Sustainability.

Before joining MuniFin, Toppinen gained experience from capital markets at Danske Bank. Currently, he is finishing his master’s degree at Hanken School of Economics.

Toppinen applied to MuniFin as he was intrigued by the company’s reputation as Finland’s most active bond issuer and pioneer status on sustainable finance. Being able to work in a global business environment is also a huge motivational factor for him.

– I always knew I wanted to work in an international role. I completed my bachelor’s degree at Stockholm University and before that I spent six months in Canada studying sustainable investing. I also studied for a year in Spain when I was younger. I hope the situation will soon allow us to travel and meet our dealer banks and investors in person, Toppinen says.

In his free time, he enjoys a variety of sports such as cross-country and downhill skiing, and golf. He likes to spend time with his friends and family and is a big fan of stand-up comedy.

– Ricky Gervais is probably the world’s greatest comedian. His character in The Office is one of my all-time favourites. A fun fact about me is that I enjoy performing and acting myself whenever there is a chance, Toppinen smiles.

Lari Toppinen

  • Funding Analyst at MuniFin since 10 January 2022
  • Soon graduating from Hanken School of Economics, majoring in finance
  • Lives in central Helsinki
  • Hobbies include cross-country and downhill skiing, and golf
  • Enjoys stand-up comedy, acting and hanging out with friends and family

Photo: Sami Lamberg

Text: Jenni Heikkilä

Invitation: MuniFin’s results webinar on 9 February 2022


  • Esa Kallio, President and CEO 
  • Timo Vesala, Chief Economist  
  • Joakim Holmström, Executive Vice President, Capital Markets & Sustainability

There will be a Q&A session after the presentations. 

MuniFin’s results webinar

Time: 9 February 2022 2:00 pm (EET)

Registration: Please register for the webinar here.

The event is organized via Microsoft Teams.

A link to join the event will be sent to the registered e-mail. The webinar will be recorded and the recording will be sent to everyone who have registered.

Register here if you are not able to attend but wish to receive the recording.

MuniFin (Municipality Finance Plc) is one of Finland’s largest credit institutions: the Group’s balance sheet totals close to EUR 46 billion. The company is owned by Finnish municipalities, the public sector pension fund Keva and the Republic of Finland.

MuniFin builds a better and more sustainable future with its customers. MuniFin’s customers are Finnish municipalities, municipal federations, municipally controlled entities and non-profit housing organisations. Lending is used for environmentally and socially responsible investment targets such as public transportation, hospitals and healthcare centres, schools and day care centres, and homes for people with special needs.

MuniFin’s customers are domestic but the company operates in a completely global business environment. It is an active Finnish bond issuer in international capital markets and the first Finnish green and social bond issuer. The funding is exclusively guaranteed by the Municipal Guarantee Board.

The Municipality Finance Group also includes the subsidiary company, Financial Advisory Services Inspira Ltd.

MuniFin issues its first euro benchmark transaction of the year

The mandate for the transaction was announced on Monday 17 January and books were opened the following morning. Investors showed strong interest and just after ninety minutes MuniFin tightened the pricing. 

Finally, the books were closed in excess of EUR 2.05 billion. Final spread was set two basis points lower than the initial guidance. The new bond carries a coupon of 0.250%, and was priced at mid-swaps-5bps, equivalent to a spread of +37.7bps over the DBR 0% due February 2032.  

The successful transaction gathered a high-quality and geographically diverse investor base. Banks took the largest share with 35% followed by central banks and official institutions with 31%, asset managers with 23% and insurers and pension funds with the remaining 11%.  

Geographically, the largest share went to Benelux region with 32% followed by Germany, Austria and Switzerland with 22%, France with 17%, Asia with 10%, the Nordics with 9%, The Americas 5%, the UK with 4% and other European accounts with 1%. 

A new member of the MuniFin Funding and Sustainability Team since 10th January, Lari Toppinen, worked closely on the transaction. 

–  We are extremely pleased with the outcome and grateful for the trust placed in us by the investors. As a recent reinforcement of the MuniFin team, working on the deal was exciting and rewarding for me as it was one of my first ones here. I look forward to collaborating more with the team and our bookrunners and investors in the coming months. 

Toppinen is one of four people working with funding in MuniFin. This includes tasks such as issuing benchmarks, private placements, hedging as well as dealer and investor relations. 

This year, MuniFin plans to issue EUR 9-10 billion of new long-term funding. After this benchmark MuniFin has reached almost 30% of the target. Since the start of the year, MuniFin has already issued several NOK denominated bonds, a new Sterling line maturing in June 2025 as well as a handful of private placements. 

Comments from the dealer banks 

–  A fantastic way for MuniFin to start its euro benchmark funding this year. In a busy market, MuniFin demonstrated its broad investor appeal with a high quality, and geographically diverse final orderbook which closed twice oversubscribed. Congratulations to the MuniFin team! Citi is delighted to have been bookrunner on this successful transaction. 

Ebba Wexler, Managing Director, Public Sector DCM, Citi 

–  MuniFin continues their strong start to 2022 with their first EUR benchmark of the year. Final pricing through Fair value in an extremely competitive market, is a clear testament to the strength of the credit and excellent support that MuniFin enjoys from a well-diversified and high-quality investor community. Danske Bank is delighted to have been part of this successful transaction and proud to support MuniFin in reaching their funding target of EUR 9-10bn for 2022. 

Axel Zetterblom, SSA Origination, Danske Bank 

–  A fantastic outcome for MuniFin’s first Euro benchmark of the 2022 calendar year. The transaction was met with strong investor interest from a diverse range of high-quality accounts, and the two times oversubscribed orderbook highlights the strength of the issuer’s credit quality. Deutsche Bank is delighted to be part of this transaction. 

Achim Linsenmaier, Global Head of Public Sector Origination DCM, Deutsche Bank 

–  Congratulations to MuniFin on a phenomenal transaction to kick off their EUR benchmark funding for 2022. A combination of immensely loyal investors and fantastic execution judgement from the MuniFin team provided an amazing result in what was a busy EUR market. 

Laura Quinn, Managing Director, Head of Primary Markets, TD Securities 

Further information

Joakim Holmström
Executive Vice President, Capital Markets and Sustainability, MuniFin
Tel. +358 50 4443 638

Antti Kontio
Head of Funding and Sustainability, MuniFin
Tel. +358 500 3700285

MuniFin’s Sterling market debut of the year attracted high-quality investors

The transaction was announced to the market on Wednesday, January 12. The books were opened with price guidance at UKT 06/25 +39bps area. Investor demand was strong and just an hour after opening the books the spread was tightened. The orderbook was finally closed in excess of GBP 430 million.  

This fixed-rate benchmark pays a coupon of 1.125% (annual) and a spread of 38bps over the UKT 0.625% June 2025 reference Gilt. HSBC, NatWest and RBC acted as dealers. 

Central banks and official institutions took 38%, followed by banks at 29% and Fund Managers at 25%. In terms of geography, distribution was concentrated in the UK at 54% and Asia in the second place with 33%. 

– We have established a solid reputation in the Sterling market, and it is shown by the high-quality orderbook, says Manager Miia Palviainen from MuniFin Funding and Sustainability team. 

Transaction details 

Issuer:  Municipality Finance Plc (“Munifin”)  
Ratings:  Aa1 / AA+ (both Stable) by Moody’s / S&P  
Size:  GBP 300,000,000  
Coupon:  1.125% annual, Actual/Actual (ICMA), following unadjusted  
Pricing Date:    12th January 2022 
Payment Date: 19th January 2022 
Maturity Date:  19 th June 2025  
Benchmark:  UKT 0.625 07/06/2025 
Benchmark Spread:  +38bps 
Joint Bookrunners:  HSBC, NatWest, RBC 

Comments from the Bookrunners 

–  Congratulations to the MuniFin team on their excellent first GBP syndication of 2022. They achieved a truly exceptional result, attracting large and diverse investor interest which allowed the deal to be priced with a minimal new issue concession. Going forward, this transaction will establish a valuable new reference point for GBP investors. HSBC was proud to be involved in the transaction. 

Sabrina Khalfoune, HSBC SSA DCM  

–  Munifin were quick to capitalise on the strong Sterling backdrop and entered the market with their first syndicated trade of 2022 becoming the first Nordic agency to enter the Sterling market. This reconfirms their commitment to the currency following a record amount of sterling issuance in 2021 (~15% of funding programme). The high quality and oversubscribed book represents the broad credit appeal of the MuniFin name and we are very pleased to have been involved at NatWest. 

 Kerr Finlayson, Managing Director, NatWest  

–  A fantastic transaction for MuniFin, reacting swiftly to the favourable market conditions and securing their window to price one of the issuer’s most successful outings in the Sterling market. Attracting MuniFin’s largest orderbook in the currency in almost a decade with participation from a broad range of investors is a real testament to the growing presence MuniFin have established in this market in recent years. A really great outcome and RBC was delighted to have been involved.”  

Andrea Jelic, Director, RBC Capital Markets. 

Further information

Antti Kontio
Head of Funding and Sustainability, MuniFin
Tel. +358 500 3700285