Insufficient Information Summary
In 2001, the International Monetary Fund (IMF) conducted a Financial System Stability Assessment (FSSA) of Finland. The IMF assessors, however, assessed the then existing banking regulator, the Finnish Financial Supervision Authority (FIN-FSA), which was replaced by a unified financial sector supervisor, the Financial Supervisory Authority on January 1, 2009. In its 2001 assessment the IMF concluded that Finland had, in general, put in place the essential conditions for effective banking supervision in most areas and that they were being administered satisfactorily. The FSSA, however, noted that Finland was materially non-compliant with some of the Basel Core Principles (BCPs) for Effective Banking Supervision. These pertained to the weaknesses in the power of FIN-FSA (former regulator) to: require compliance with safety and soundness measures; assess the adequacy and prescribe levels of loan-loss provisioning; control connected lending; establish criteria for acquisitions and investments; establish capital requirements based on risk; conduct more proactive on-site and off-site supervision; and take prompt remedial action. Finland was also found lacking in the areas of clear objectives, autonomy, and resources of the supervisor. A 2007 IMF Article IV report nevertheless affirmed that the Finnish financial system was sound and stable. Since the establishment of a new unified supervisor in Finland, there has not been much information regarding the effectiveness of banking supervision in the country or its compliance with the BCPs. In a recent (2009) report, the IMF commends the Finnish authorities on the country's resilient financial sector. However, they warn about risks arising from the 2008-2009 financial crisis, especially in regards to cross border supervision of banks as Finland's banking sector has a strong foreign presence.
General Overview
A number of International Monetary Fund (IMF) reports such as the 2007 and 2008 Article IV consultation reports, affirm that the Finnish financial sector is “sound and well supervised” (2007 IMF, p.15) and has been resilient to the current market turmoil. According to a 2009 report by the Institute of International Bankers (IIB), this is because Finland’s banking sector “operates on a solid foundation, and the banks still have strong capital adequacy” (p. 75). The report further states that, banks’ profits and efficiency puts the sector in good stead to withstand future shocks. Despite its resilience, the IMF assessors pointed to challenges arising from cross-border contagion. The 2008 Article IV consultation report notes that “spillovers from the global turmoil are adversely affecting activity and may weaken the financial system” (p. 1). Per the 2009 IIB report, over half of the Finnish banking sector is foreign owned and the global financial crisis that started in mid 2007, led to the collapse of major Icelandic banks with branches in Finland, consequently impacting the Finnish banking sector. The 2008 Article IV consultation report acknowledges that the Finnish authorities are committed to strengthening cross-border supervision, but alerted that “the still evolving harmonization of EU regulations and supervision for large multinational institutions remains an important concern as underscored by [the] recent Icelandic and Benelux cases” (p. 18). The IMF assessors agreed that priority should be given to clarifying the supervisory and fiscal responsibility of “home-host authorities in crisis resolution” (p. 18). For major cross-border institutions, it was agreed that there should be an eventual move towards an integrated European supervisory structure. Per the 2008 Article IV report, Finnish authorities expressed interest in a Financial System Stability Assessment (FSSA) update in 2010.
The 2001 IMF Financial System Stability Assessment assessing Finland’s then existing (now defunct) banking regulator, the Finnish Financial Supervision Authority (FIN-FSA), concluded that "the essential conditions for effective bank supervision have in general been put in place, and for the most part are being administered satisfactorily" (p. 35). The 2001 assessment noted however that Finland did not have a law on cross-sector and cross-border financial conglomerates to reflect the needs of the times. Subsequently, Finnish legislation on financial conglomerates, the Act on the Supervision of Financial and Insurance Conglomerates, was then put in place in July 2004. The FSSA, however, noted that Finland was "materially non-compliant with certain essential criteria" (p. 35) of the Basel Core Principles (BCPs) for Effective Banking Supervision. These pertained to the weaknesses in the FIN-FSA's powers to (1) require compliance with safety and soundness measures; (2) assess the adequacy and prescribe levels of loan loss provisioning; (3) control connected lending; (4) establish criteria for acquisitions and investments; (5) establish capital requirements based on risk; (6) conduct more proactive on-site and off-site supervision; and (7) take prompt remedial action. Finland was also found lacking in the areas of clear objectives, autonomy and resources of the supervisor.
According to a 2009 US Department of Commerce (DoC) report, the banking sector is governed by the Act on Credit Institutions. According to the new FIN-FSA website, the Act on the Financial Supervision Authority No. 878 of 2008 (with amendments up to 2009) governs the supervisory role and objectives of the new FIN-FSA, which is to ensure “financial stability and the necessary smooth operation of credit, insurance and pension institutions, and other supervised entities. Another aim is to safeguard the interests of the insured and to maintain confidence in the financial markets,” as well as fostering compliance with good practice in, and public awareness of, financial markets. The new FIN-FSA is responsible for “most of the supervisory functions undertaken by the former FIN-FSA and the ISA [Insurance Supervisory Authority]”, which includes “banks, insurance and pension companies, as well as other companies operating in the insurance sector, investment sector, investment firms, fund management companies and the Helsinki Stock Exchange (HSE)”. As of December 31 2009, Finland had 336 banks, with 14 branches of foreign credit institutions, according to the 2009 IIB report.
The Principles
II1. (1) Clear responsibilities and objectives for each supervisory agency.
In assessing the country's banking supervision framework in 2001, the IMF reported that the authority to formulate laws and issue licenses in the financial sector rested with the MoF, whereas the prudential supervisory authority lay with the FIN-FSA, an autonomous agency established in 1993 as an administrative part of the BoF. As mentioned earlier, the FIN-FSA existing at the time of the 2001 IMF assessment ceased to exist on December 31, 2008. The IMF assessment concluded that there were clear legislative documents prescribing the duties and responsibilities of the FIN-FSA. Areas of weakness with regard to this principle, as observed by the FSSA, were: (1) the objectives as detailed in its annual reports were not clearly aligned with other explanatory material; and (2) the distribution of banking supervisory authority and responsibility between the FIN-FSA and the MoF was complex and unclear. Further, the report observed that enforcement was not in the hands of the FIN-FSA, and the scope of its enforcement powers was not transparent. The IMF therefore recommended that Finland "develop a structure (possibly a manual/compendium) for the body of law and regulation for banking supervision that reflects the structure of the supervisory framework, and the objectives and principles that underpin it" (p. 39).
As of January 1, 2009, a new financial regulator that combined the functions of the banking supervisor (FIN-FSA) and that of the insurance regulator, ISA was established. The new supervisory authority, which maintains the name FIN-FSA, is responsible for “most of the supervisory functions undertaken by the former FIN-FSA and the defunct ISA”, which includes “banks, insurance and pension companies, as well as other companies operating in the insurance sector, investment sector, investment firms, fund management companies and the Helsinki Stock Exchange (HSE)” Per its website, the new FIN-FSA’s aim is to ensure “financial stability and the necessary smooth operation of credit, insurance and pension institutions, and other supervised entities. Another aim is to safeguard the interests of the insured and to maintain confidence in the financial markets”. The new FIN-FSA is “also responsible for fostering compliance with good practice in, and public awareness of, financial markets, under the Act on the Financial Supervision Authority” (with amendments up to 2009). Nevertheless, there is no information publicly available addressing Finland’s compliance with this principle since the new FIN-FSA came into operation.
II1.(2) Operational independence and adequate resources.
In its 2001 FSSA, in assessing the old banking sector regulator, the FIN-FSA, the IMF noted that the organization was an independent supervisory authority within the BoF charged with the supervision of financial markets and their participants. The FSSA further noted that the FIN-FSA was subject to the oversight of the Parliamentary Supervisory Council (PSC) only in respect of administrative matters, not in respect of the effectiveness of its supervision. However, the FSSA found that the FIN-FSA "ha[d] limited independence and accountability" (p. 35). This was because, the MoF had the authority to grant or revoke the license of institutions. Subsequent reports on the FIN-FSA (such as its 2007 and 2008 reports) concluded the same, namely, that the FIN-FSA was independent in its decision-making process although it was administratively connected to the BoF. It continued to be supervised on operational and administrative matters by the PSC. The Council also had a say in the appointment of the Board of the FIN-FSA.
The 2007 FIN-FSA report stated that the FIN-FSA was funded by the supervisory and processing fees it levied on supervised entities and securities issuers. Further, although the FIN-FSA was administratively connected to the BoF, it was independent in its decision-making. Its governance and management was governed by the Act on the Financial Supervision Authority, which required the operations and decision making of the FIN-FSA to be transparent and its management and governance to be sound. However, the FIN-FSA was supervised on operational and administrative matters by the PSC, elected by the Finnish Parliament. The Council also had a say in the appointment of the Board of the FIN-FSA. The new supervisory authority which commenced work on January 1 2009 is authorized by the Act on the Financial Supervision Authority (with amendments up to 2009) to foster “compliance with good practice in, and public awareness of, financial markets” per its website. The website also states that, while the new FIN-FSA operates administratively “in connection with the BoF”, it makes independent decisions in its supervisory work. However there is no information publicly available addressing Finland’s compliance with this principle since the new FIN-FSA began its duties.
II1.(3) A suitable legal framework for authorization and ongoing supervision.
The 2001 IMF FSSA, in assessing the old banking regulator, states that "the general prerequisites for adequate supervision [were] largely in place" (p. 23). Further, Finland had a stable and well-developed institutional and legal infrastructure, facilitating effective supervision. The Finnish Constitution contains the general principles governing the financial system's legal framework. Finland also has a codified legal system. In addition, the EU legal framework has an important bearing on Finnish supervisory laws. The FIN-FSA was charged with the responsibility to ensure that the supervised entities operated in accordance with relevant acts, especially the Act on Credit Institutions and its associated decrees, FIN-FSA guidelines and regulations, and those of other authorities. Subsequent to the change in banking regulators, in January 2009, there has been no information publicly available on Finland's compliance with this principle.
NC1.(4) A suitable legal framework to address compliance with laws as well as safety and soundness concerns.
In assessing the old banking regulator, the 2001 IMF FSSA noted that Finland was "materially non-compliant with certain essential criteria" (p. 35) of the Basel Core Principles. One of these pertained to the weaknesses in the FIN-FSA's powers to require compliance with safety and soundness measures. However, a new FIN-FSA, formed as a result of the merger between the former FIN-FSA and the now defunct ISA, commenced work on January 1 2009. There is however no information publicly available addressing Finland’s compliance with this principle since the new FIN-FSA began its duties.
II1.(5) Legal protection for supervisors.
The 2001 IMF FSSA assessing the old banking regulator, noted that the officers of the FIN FSA had the same legal protections as the members of the civil service, and that these protections "appear broadly adequate" (p. 39). The 2007 FIN-FSA report stated that the staff of the FIN-FSA had the ethical requirements to be loyal and independent in their conduct and activities. Since the establishment of the new FIN-FSA in 2009, there has been no information publicly available addressing Finland’s compliance with this principle.
II1.(6) Arrangement for sharing of information between supervisors and protection of confidentiality of shared information.
The old banking regulator’s website declared that it had extensive cooperation arrangements with other domestic supervisors, including the BoF, the MoF, the former ISA, and the Ministry of Social Affairs and Health (MSAH). Further, the FIN-FSA cooperated on the international front, participated in international fora, especially at the EU level, with such organizations as the Committee of European Banking Supervisors (CEBS), the Groupe de Contact (the banking supervisors' cooperation division under the CEBS), and the Banking Supervision Committee (BSC) under the European System of Central Banks (ESCB). There is however no information publicly available addressing Finland’s compliance with this principle since the new FIN-FSA began its duties in 2009.
II2. Clearly defined permissible activities for banks and control of the use of the word 'bank'.
There is insufficient information publicly available addressing Finland's compliance with this principle.
II3. Criteria for structure, directors, operating plan, controls, financial condition and capital base.
In assessing the old banking regulator’s supervision of Finland’s banking sector, the 2001 IMF FSSA found that although the FIN-FSA had issued a guideline on fit and proper requirements, the regulations on the fitness and propriety of directors and the senior management were not binding. Nonetheless, there is no further information publicly available addressing Finland's actual compliance with this principle.
II4. Authority to review and reject transfer of ownership.
There is insufficient information publicly available that directly addresses Finland's compliance with this principle. Section 18 of the amended Act on the Financial Supervision Authority, gives the current FIN-FSA the authority to “issue regulations on the regular provision to the Financial Supervisory Authority of information on a supervised entity’s financial position, ownership, internal control and risk management, members of administrative and supervisory bodies, employees and places of business, as well as information necessary for the performance of” its other supervisory duties.
II5. Authority to review major acquisitions and investments.
The 2001 IMF FSSA, assessing the old banking regulator, noted that Finland was "materially non-compliant with certain essential criteria" (p. 35) of the Basel Core Principles. One of these pertained to the weaknesses in the FIN-FSA's powers to establish criteria for acquisitions and investments, and the absence in the Act on Credit Institutions of explanation pertaining to the criteria on acquisitions and investments. However, since the change in regulators, there has been insufficient information publicly available addressing Finland's compliance with this principle.
CP6. Minimum capital adequacy requirements (meet Basle Capital Accord for internationally active banks).
According to the current banking regulator’s website, Basel II was implemented and put in effect in 2006, and serves as Finland’s financial sector capital adequacy framework. This framework “lays emphasis on supervised entities’ own responsibility, encouraging them to develop and improve their risk management systems, business models and capital management strategies.” Per the 2008 annual report by the FIN-FSA, at the time, all supervised entities complied with the Basel II framework. The report stated that the banking supervisor conducted “annual overall assessments of individual supervised entities’ capital adequacy in line with Pillar 2 of the Basel II framework also known as supervisory review and evaluation process (SREP)” (p. 28). The objective was to ensure that entities maintain adequate funds to cover material risks, and also to ensure that the entities have capable internal governance, risk management and internal control systems to protect the stability of their operations. Although the overall capital adequacy of Finnish banks declined in 2008, the 2008 annual report states that, it was still high comparative to international standards.
A December 2009 Press Release on the current banking regulator’s website states that the Finnish banking sector’s capital adequacy was strengthened in the third quarter of 2009. Furthermore, “capital adequacy ratio continued to improve in the third quarter, despite increased credit losses. At the end of September, capital adequacy for the sector as a whole was 14.4%, compared with 13.6% at the end of 2008 and 13.7% at the end of June 2009." The minimum requirement was exceeded and the release concluded that “supervised entities’ capacity to withstand loss improved despite the recession and is deemed to be at a good level. Their capacity to bear loss is good.”
II7. A method exists for the evaluation of procedures related to loans, investments and portfolio management.
The 2001 IMF FSSA, assessing the old banking regulator, noted that the FIN-FSA reviewed and assessed the credit procedures and loan loss provisions of institutions during its on-site inspections. However, it did not have the statutory authority to "require a credit institution to strengthen its lending practices, credit-granting standards, and level of provisions and reserves if it deem[ed] the level of problem assets to be of concern" (p. 36). The IMF therefore recommended that the FIN-FSA be given such statutory authority. Nonetheless, there is insufficient information publicly available as to Finland's compliance with this principle.
II8. Policies, practices and procedures for evaluating the quality of assets and the adequacy of loan loss provisions and reserves.
The 2001 IMF FSSA, assessing the old banking regulator, noted that the FIN-FSA reviewed and assessed the credit procedures and loan-loss provisions of institutions during its on-site inspections. However, it did not have the statutory authority to "require a credit institution to strengthen its lending practices, credit-granting standards, and level of provisions and reserves if it deem[ed] the level of problem assets to be of concern" (p. 36). The IMF therefore recommended that the FIN-FSA be given such statutory authority. The FSSA further found that the 1993 Act on Credit Institutions, with amendments up to 2001, allowed credit institutions to use credit loans as tier-one capital with no minimum term or period of notice. Also, as of 2001, the FIN-FSA did not have the power to require higher risk institutions to have a minimum capital ratio in excess of the 8 percent requirement. According to the 2008 Article IV report, while loan losses and capital adequacy were healthy, “a fiscal structural loosening [was] needed to minimize the damage to long-term fiscal sustainability, bank profitability and non-performing loans should be monitored closely, and structural reform [was] needed to raise long-term growth and secure fiscal sustainability” (p. 20) to offset any damage to the financial sector. This was recommended in response to the effects that the capital markets were having on banking profits. The 2008 FIN-FSA report states that the regulator urged banks to continuously assess “the position of their credit portfolios and embark early on any necessary measures to strengthen their capital base" (p. 4) to prevent liquidity risks. Nonetheless, there is insufficient information publicly available as to Finland's compliance with this principle.
II9. Prudential limits and management information system on concentration of exposure.
There is insufficient information publicly available that directly addresses Finland's compliance with this principle.
II10. Arm's length rule and monitoring for connected lending.
In assessing the old banking regulator, the 2001 IMF FSSA recommended that Finland amend the Act on Credit Institutions to include the stipulation that connected lending and lending to related parties be not extended on more favorable terms than business-as-usual loans. The FSSA also called for explicit powers to the FIN-FSA as provided in the Act on Credit Institutions, to limit connected lending, include the statistics on connected lending when deducing capital adequacy, and require collateralization of such loans. It also recommended establishing reporting requirements. As mentioned above, in 2009, the old regulator was replaced by a new one, and since, there has been insufficient information publicly available as to Finland's compliance with this principle.
II11. Policies and procedures for country risk and transfer risk.
The 2001 IMF FSSA in assessing the old banking regulator, noted that the FIN-FSA did not have supervisory oversight requiring a credit institution to set provisions that commensurate to country or transfer risk. However, there is insufficient information publicly available as to Finland's compliance with this principle.
II12. Measuring and monitoring market risk. Limit and/or specific capital charge on market risk exposure.
Per the 2008 FIN-FSA annual report, the global financial crisis prompted an increase in reporting data on liquidity position and counterparty risks. However, there is insufficient information publicly available that directly addresses Finland's compliance with this principle.
II13. Comprehensive risk management processes.
In assessing the old banking regulator, the 2001 IMF FSSA found that the FIN-FSA did not appear to have adequate powers to require the supervised entities to strengthen their risk management systems, and therefore recommended that its power be expanded to include this authority. The 2008 FIN-FSA annual report states that the FIN-FSA ensured that supervised entities in the financial sector had enough financial and other prerequisites to carry out their self managed internal controls and risk management and also ensured that entities did not endanger their capital adequacy. However, there is insufficient information publicly available as to Finland's compliance with this principle since the establishment of the new unified financial sector regulator.
II14. Adequate internal controls.
The 2001 IMF FSSA, in assessing the old banking regulator found that the size and composition of the Board of Directors and senior management of credit institutions were beyond the legal scope of the FIN-FSA and the MoF. There was no explicit requirement in law for the institutions to inform supervisors or seek their permission when there were material changes in their activities, except where the entity fell below the 8 percent minimum capital ratio. The FSSA, therefore, called for a legal basis for the FIN-FSA's power to require changes in the board or management to reflect the size and nature of the activities of the supervised institutions. The 2008 FIN-FSA annual report mentions that the FIN-FSA ensured that supervised entities in the financial sector had enough financial capital and other prerequisites to carry out their self managed internal controls and risk management and also ensured that entities did not endanger their capital adequacy. Nevertheless, there is insufficient information publicly available as to Finland's compliance with this principle since the establishment of the new unified financial sector regulator.
II15. Strict "know-your-customer" rules and high ethical and professional standards.
The old banking regulator’s website stated that the Finnish anti-money laundering and combating the financing of terrorism legislation was based on the European Union's Directive on Money Laundering and the FATF's recommendations, and was formulated by the Ministry of the Interior. The FIN-FSA supervised the risk management practices and internal controls to prevent money laundering in supervised institutions. Supervised entities were required to identify and know their customers and to detect and report suspicious transactions or activities to the Money Laundering Clearing House (MLCH), the Finnish FIU, which is a part of the National Bureau of Investigation in the Finnish Police. A 2007 report by the Financial Action Task Force (FATF) indicated that Finland was largely compliant with the FATF's recommendation on suspicious transaction reporting (STR), and only partially compliant with its recommendations relating to customer due diligence and internal controls for banks. The 2008 FIN-FSA annual report noted that in August 2008, Finland passed and implemented a new Anti-Money Laundering Act on the Prevention and Investigation of Money Laundering. The report further states that the Act “enacted the EU’s third Money Laundering Directive in Finland and replaced the Act on Preventing and Clearing Money Laundering, reformed in 2003” (p. 53). The new Act is to strengthen procedures to prevent money laundering and financing of terrorism, as well as customer due diligence. Nevertheless, there is insufficient information publicly available as to Finland's compliance with this principle
II16. Effective supervisory system consisting of on-site and off-site supervision.
In assessing the old banking regulator, the 2001 IMF FSSA found that the supervisory methodology was in transition in 2001, and recommended that the FIN-FSA should make use of an (sic) effective balance of on-and-offsite assessment techniques and practices" (p. 37). The 2008 FIN-FSA report noted that the financial crisis resulted in the FIN-FSA increasing its inspections in the areas of credit, market, liquidity and operational risks. It further mentioned that although the inspection focused mainly on large supervised entities, the inspection of smaller banks saw a significant increase. However, there is insufficient information publicly available as to Finland's compliance with this principle.
II17. Regular contact with bank management and understanding of bank's operations.
The 2008 FIN-FSA annual report noted that the financial crisis resulted in the banking sector regulator being in close contact with banks, particularly in the areas of risk and prudential supervision, and inspections. However, there is insufficient information publicly available that directly addresses Finland's compliance with this principle.
II18. Analytical reports and statistical returns on solo and consolidated basis.
In assessing the old regulator, the 2001 IMF FSSA found that the FIN-FSA "ha[d] not established criteria to assess the work of internal audit and therefore it [was] difficult for the FIN-FSA to arrive at an opinion on whether a reliance process was reasonable" (p. 37). However, there is insufficient information publicly available as to Finland's compliance with this principle.
II19. Independent validation of supervisory information through on-site examination or external auditors.
The 2001 IMF FSSA, assessing the old banking regulator, found that it did not enforce its statutory power to review external audit working papers, and recommended tighter enforcement for a "productive reliance process" (p. 37) with external auditors. However, there is insufficient information publicly available as to Finland's compliance with this principle since the establishment of the new unified financial sector regulator.
II20. Ability to supervise on a consolidated basis.
The 2001 IMF FSSA, assessing the old banking regulator, found that the FIN-FSA lacked explicit authority under law to define or limit the range of activities that a consolidated banking group may undertake, or the locations abroad where they may undertake them. However, there is insufficient information publicly available as to Finland's compliance with this principle since the establishment of the new unified financial sector regulator.
II21. Consistent accounting policies and practices that provide a true and fair view of the financial condition of the bank.
The 2001 IMF FSSA, in assessing the old banking regulator, found inadequacies in the powers of the FIN-FSA to hold the management of supervised entities responsible for timely, accurate, and reliable financial record keeping and data emissions, as well as for external verification and audit on the annual management reports and financial statements released to the public. Further, the FIN-FSA did not have the power to revoke the appointment of the auditor of a credit institution. The FIN-FSA had only one supervisory power in this matter and that was to impose conditional fees on the credit institutions. The old banking regulator’s website stated that the FIN-FSA was assigned the authority to monitor compliance with the International Financial Reporting Standards (IFRSs) in early 2005. Supervision in this area covered publicly traded Finnish companies and those companies that had applied to issue shares for public trading. Beginning 2007, supervision extended to bond-issuing companies. Supervision targeted the periodic financial reports published by the issuing companies. Nevertheless, there is insufficient information publicly available as to Finland's compliance with this principle since the establishment of the new unified financial sector regulator.
II22. Adequate supervisory measures to ensure timely corrective action.
The 2007 Global Survey report by the IIB, reporting on the old banking sector regulator, noted that the FIN-FSA had a host of remedial actions that it could take against non-compliant institutions and institutions that did not meet capital adequacy requirements. They included convening and attending the decision-making body meetings of such institutions; placing restrictions on the distribution of profits; inspecting and obtaining information; prohibiting a planned measure or decision; and issuing a public reprimand or warning. The 2007 FIN-FSA report also stated that the FIN-FSA had the right to impose sanctions on entities that breached the laws or its regulations. The 2001 IMF FSSA had recommended enhancing the FIN-FSA's powers to take early intervention actions on troubled institutions and defining them in law. According to the 2008 FIN-FSA annual report, the FIN-FSA regularly analyzed the “corporate governance, financial performance, risks and capital adequacy” (p. 23) of supervised entities and their systems to ensure remedial action is conducted in a timely fashion, and also increased supervision, particularly of entities that had liquidity problems. Nevertheless, there is insufficient information publicly available as to Finland's compliance with this principle since the establishment of the new unified financial sector regulator.
II23. Banking supervisors must practice global consolidated supervision over their internationally-active banking organizations.
The 2001 IMF FSSA, in assessing the old banking regulator, noted that the FIN-FSA did not have the power to impose limitations on the activities or require closure of an entity that was not adequately supervised by the host country relative to the risk posed by the subsidiary, or if the host country's regulatory framework prevented effective supervision on a consolidated basis. According to the 2008 FIN-FSA annual report, there were proposed amendments and changes to the way home and host country supervisory authorities supervised that had been “designed to consolidate the status of multilateral colleges of supervisors and the role of host country supervisors in the supervision of cross-border conglomerates, including major branches” (p. 47). However, there is no further information publicly available on these proposed changes or on Finland's current compliance with this principle.
II24. International exchange of information with other supervisors.
The old banking regulator’s website declared that the FIN-FSA had extensive cooperation arrangements with the supervisory authorities of other countries, especially the Nordic and other EU countries, on the basis of specific supervisory MoUs. However, there is insufficient information publicly available as to Finland's compliance with this principle.
II25. Supervision of local operation of foreign banks and information sharing with home country supervisors.
The 2001 IMF FSSA, in assessing the old banking regulatory framework, found that foreign banks outside of the European Economic Area (EEA) opening branches or subsidiaries in Finland were not required by law to obtain consent or "no objection" statements from their home country supervisors; however, the Finnish MoF must ascertain if they are subject to sufficient home supervision. The IMF therefore recommended that the FIN-FSA required approval or "no objection" statements from the home supervisor before granting license to institutions. Per the 2008 IMF Article IV Consultation report, the authorities were committed to strengthening cross-border supervision, Inspections of subsidiaries and branches operating in Finland were carried out in cooperation with other Nordic supervisors and it focused on credit, market, liquidity and operational risks. The 2008 FIN-FSA annual report stated that the FIN-FSA was part of a college of supervisors that supervised the Nordea and Danske Bank groups. Per the 2008 annual report, cross-border supervision became an important element in the “restructuring of the Nordic financial groups, and in the organization of crisis-hit banks” (p15). However, there is insufficient information publicly available as to Finland's compliance with this principle.
