ANNOUNCEMENT 17 Apr 2009

In April 2009, the government of Finland announced a change in private-sector financial support.

NUMBER OF INTERVENTIONS

1

  • 1 harmful
  • 0 neutral
  • 0 liberalising

SOURCE



The letter from the EC to Finland - Brussels, 13.XI.2008 C(2008) 6986. Avaliable from < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_N567_2008 >
The letter from the EC to Finland - Brussels, 17.12.2009 C(2009) 10285 fimal. Available from < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_N674_2009 >


Inception date: 13 Nov 2008 | Removal date: 14 Jul 2010
Still in force

Loan guarantee

On the 11th of November 2008 Finland notified a guarantee scheme for banks' funding in
Finland. The measure "Finnish Guarantee Scheme for banks' funding" (hereafter the "guarantee scheme") seeks to respond to the present financial crisis with a guarantee scheme in order to support the short and medium term financing needs of banks and mortgage institutions.

Eligible institutions for the State guarantee will be all Finnish deposit banks and mortgage banks, including the Finnish subsidiaries of foreign financial institutions, which are considered as solvent by the Finnish authorities. The beneficiary may be a deposit bank or its parent undertaking. In case of a group the beneficiary may be one bank or an undertaking in the group.

" The guarantee on the new issued debt allows the beneficiaries to refinance at advantageous conditions. This gives an economic advantage to the beneficiaries and strengthens the position of these beneficiaries compared to that of their competitors in Finland and other Member States and must therefore be regarded as distorting competition and affecting trade between Member States. The advantage is selective since it only benefits the beneficiaries of the scheme and is provided through State resources. In particular, the Commission is convinced that in the current circumstances of financial crisis no private investor would have granted such a significant guarantee on the senior debt of the participating banks." (par. 27-28 of the letter from the EC to Finland - Brussels, 13.XI.2008 C(2008) 6986).

Article 87(3)(b) of the EC Treaty enables the Commission to declare aid compatible with the Common Market if it is "to remedy a serious disturbance in the economy of a Member State." This aid has to be applied restrictively and must tackle a disturbance in the entire economy of the Member State according to the interpretation of the Article 87(3)(b) by the Court of First Instance. 
The Commission referred to its Communication on the financial crisis and concludes that the Measure complies with the conditions laid therein. Therefore, despite the measure constituting State aid pursuant to the Article 87(1) EC, it is compatible with the Common Market according to the Article 87(3)(b) EC Treaty. The Commission raises no objections against the measure at issue and authorizes it as emergency intervention in the face of the current financial crisis. (par. 30-47 of the letter).
 
 
On 17 April 2009 Finland notified a request to prolong and amend its guarantee scheme for banks´ funding. The original measure, notified on 11 November 2008, was approved on 13 November 2008 in State aid case N567/20081 ("the original decision").

"Firstly, Finland introduced a limited possibility to roll over short term debt (maturity from 90 days up to 12 months) to medium term debt (unsecured bonds with a maturity up to 3 years). This means that the participating banks can renew the previously guaranteed short-term debt as medium term debt and still retain the same State guarantee (hereafter the "extension facility"). For each credit institution there will be a maximum limit available under the extension facility. The maximum for each credit institution is its share of the total lending of all eligible banks as of 31 December 2008. There is also a monthly maximum per bank which corresponds to the amount of the short term debt that matures during the given month. 
Secondly, the requirement that the balance sheet growth of participating institutions be limited to certain thresholds, no longer applies to the participating banks.

Thirdly, the conditions on management wages and other remuneration were changed. Since the modification the participating banks have to follow the principles of the competitive remuneration system for state-owned and associated companies.

Fourthly, in the original scheme under point 16, the participating banks were not allowed to buy or otherwise acquire against payment their own shares. Since the modification the condition is not applicable anymore." (par. 8-11 of the letter from the EC to Finland - Brussels, 30.4.2009 C(2009) 3365 final).

Similar to the original scheme, the Commission agreed with the position of Finland that the prolonged scheme for eligible institutions constitutes aid to the institutions concerned pursuant to Article 87 (1) EC and gave the following assessment:

"The guarantee on the newly issued debt allows the beneficiaries to refinance at advantageous conditions. This gives an economic advantage to the beneficiaries and strengthens the position of these beneficiaries compared to their competitors in Finland and other Member States and must therefore be regarded as distorting competition and affecting trade between Member States. The advantage is selective since it only benefits the beneficiaries of the scheme and is provided through State resources." (par. 26-27 of the letter).

Article 87(3)(b) of the EC Treaty enables the Commission to declare aid compatible with the Common Market if it is "to remedy a serious disturbance in the economy of a Member State." This aid has to be applied restrictively and must tackle a disturbance in the entire economy of the Member State according to the interpretation of the Article 87(3)(b) by the Court of First Instance.

 
On 3 December 2009, Finland notified a request to prolong and amend its guarantee scheme for banks' funding until 30 June 2010. The Commission concluded that the notified prolongation of the Finnish guarantee scheme does not alter its previous assessments and decided not to raise objections.
 
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.
 
 

AFFECTED SECTORS

 

AFFECTED PRODUCTS

 
N/A