The regulatory regime applicable to banks
The primary law governing credit institutions in Finland is the Act on Credit Institutions (ACI). The ACI entered into force in August 2014, replacing the previous act of the same name. One of the main objectives of the reform was to implement, via the ACI, the CRD IV Directive and the Capital Requirements Regulation (CRR) into Finnish legislation.
The ACI is generally applicable to all credit institutions. In addition, there are other laws on specific matters that are applicable to banks of particular forms. Deposit banks are categorised as commercial banks (banks in the form of a limited company), cooperative banks or savings banks, each of which are subject to their own specific regulation. As such, the regulatory framework in Finland consists of various laws governing specific forms of banking activities. The most important laws and regulations are the following:
- the ACI, which governs, inter alia, the establishment and management of credit institutions. The definition of a credit institution includes deposit banks and credit societies. As a general law applicable to all credit institutions, the ACI lays down the authorisation requirements, defines the permitted business activities and sets out the conduct of business rules. The ACI also contains provisions on capital adequacy and liquidity requirements;
- the Act on Commercial Banks and Other Credit Institutions in the Form of a Limited Company, which regulates the operations of commercial banks. This Act lays down provisions regarding, inter alia, the division, merger, liquidation and bankruptcy of commercial banks. The Companies Act, as a generally applicable law, governs the corporate aspects of commercial banks except as otherwise provided for in the Act on Commercial Banks and Other Credit Institutions in the Form of a Limited Company or in the ACI;
- the Act on Cooperative Banks and Other Credit Institutions in the Form of a Cooperative, which regulates the operations of cooperative banks. The Act lays down provisions regarding, inter alia, the division, merger, liquidation and bankruptcy of cooperative banks. The Cooperatives Act, as a generally applicable law, governs the corporate aspects of cooperative banks except as otherwise provided for in the Act on Cooperative Banks and Other Credit Institutions in the Form of a Cooperative or in the ACI. There are two cooperative bank groups operating in Finland: OP Financial Group and POP Bank Group. At the end of 2018, OP Financial Group was made up of 157 independent cooperative banks, while POP Bank Group consisted of 26 independent cooperative banks;
- the Act on Mortgage Banks and the Act on Mortgage Societies regulate the operations of mortgage banks and mortgage societies, respectively. Mortgage banks and mortgage societies are credit institutions that specialise in the financing of residential and commercial real estate. However, their role is not significant in the Finnish financing sector owing to the strong position of deposit banks as providers of financing;
- the Savings Bank Act governs the operations of savings banks, which have the special purpose of promoting saving. At the end of 2018, there were 23 regional savings banks operating in Finland;
- the Deposit Banks Amalgamation Act (Amalgamations Act). An amalgamation of deposit banks comprises a cooperative central institution, the companies belonging to the central institution's consolidation group, the member credit institutions and the companies belonging to the member credit institutions' consolidation groups, and the credit institutions, financial institutions and service companies in which the aforementioned institutions jointly hold more than half of the voting rights. Under the Amalgamations Act, a central institution is liable for the debts of its member credit institutions. Furthermore, the member credit institutions are jointly liable for each other's debts. Pursuant to the Amalgamations Act, the aggregate amount and liquidity of the amalgamation's own funds are monitored at the amalgamation level on a consolidated basis; and
- regulations and guidelines issued by the Finnish Financial Supervisory Authority (FIN-FSA).
As regards banking services provided by non-Finnish banks, the ACI sets out conditions under which non-Finnish credit institutions may provide their services in Finland. Credit institutions from countries belonging to the European Economic Area (EEA) may provide banking services in Finland either by establishing a branch or by providing cross-border services, provided that a notification is submitted to the FIN-FSA in accordance with the passporting regime available to EEA credit institutions. Credit institutions from non-EEA countries are not able to take advantage of the passporting regime available to EEA credit institutions; consequently, if a credit institution from a non-EEA country intends to provide its services in Finland, this must happen through a branch with prior authorisation from the FIN-FSA. The authorisation procedure for non-EEA credit institutions is comparable to the authorisation procedure applicable to Finnish credit institutions. At present, there are no authorisations for non-EEA credit institutions in force in Finland.