Credit risk arises from cash investments and derivatives. Counterparties must have high credit quality, with rating limits set by the Ministry. Cash is mainly deposited in the Bank of Finland and additionally invested in, for example, secured tripartite repo agreements.
Long-term derivative credit risk is reduced through collateral. Like many other sovereign borrowers, Finland uses a collateral agreement (CSA, Credit Support Annex) under the ISDA framework agreement. A bilateral collateral agreement means that both parties are obligated to provide collateral against derivative positions.