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Moody’s: MuniFin will benefit from forced mergers of Finnish municipalities

Cover picture - Moody´s research and ratings 19 Jan 2015

The credit rating agency Moody’s once again interprets that the future changes in the Finnish municipal system will benefit Municipality Finance (MuniFin), the largest lender to the Finnish municipalities.

In its issuer comment published on January 19, Moody’s estimates that the Finnish Supreme Administrative Court’s decision in December to approve the government-mandated merger of two Finnish municipalities (Lavia and Pori) is credit positive for MuniFin. With the mandated merger, the government pursues to strengthen the municipalities’ financies and create economies of scale.

In its comment, Moody’s expects there will be more consolidation going forward. The Finnish municipalities are relatively small, with 217 out of the 320 Finnish municipalities having a population below 10,000.

Moody’s stated that the consolidation of the municipal sector, helped by the supreme court ruling, will have a positive impact on MuniFin’s asset quality.

In December 2014, Moody’s published a comment about the effects of Finland’s proposed municipal law for MuniFin, which it expected to be credit positive.

Moody’s long-term credit rating for MuniFin is Aaa stable.