Brussels, 14th November 2008
The European Commission has approved under EC Treaty state aid rules a Finnish support scheme to stabilise financial markets by providing guarantees to eligible financial institutions. The Commission found the measure to be in line with its Guidance Communication on state aid to overcome the financial crisis (see IP/08/1495). In particular, the scheme is non-discriminatory, limited in time and scope, provides for behavioural constraints to avoid abuses and is subject to a market-oriented remuneration from the beneficiaries. The Commission therefore concluded that the scheme was an adequate means to remedy a serious disturbance of the Finnish economy and as such in line with Article 87.3.b of the EC Treaty.
Competition Commissioner Neelie Kroes said: "The Finnish scheme demonstrates again what is the great strength of the Commission in this crisis: supervise Member States' support schemes with enough flexibility to take into account national particularities while ensuring enough coherence to maintain a level playing field for all European banks and limiting the moral hazard problem."
On 11 November 2008, Finland notified a guarantee scheme, aimed at stabilising the financial markets by ensuring financial institutions' access to financing, to the Commission.
The state guarantee would cover, against remuneration, the issuance of new short and medium term non-subordinated debt with a maturity between 90 days and three years. A maturity of up to five years is limited to mortgage-backed bonds only. The scheme's overall budget is capped at €50 billion. Only solvent banks would be allowed to enter it. Instruments guaranteed under the scheme may be issued until 30 April 2009.
The scheme contains elements of state aid but foresees various safeguards aimed at ensuring that the state intervention is proportionate, limited to what is necessary to stimulate interbank lending and adequate to reach this goal, in accordance with the EU state aid rules, as laid down in the Commission's guidance document (see IP/08/1495).
In particular, the scheme provides for non-discriminatory access as it will be open to all solvent Finnish deposit and mortgage banks, including Finnish subsidiaries of foreign banks. It is limited in time and scope, as both its global budget and individual guarantees are capped, for instance each bank may receive guarantees only up to the nominal value of short term debt issued by 17 October 2008. To benefit from the guarantee, participating banks are required to pay a market-oriented fee, in line with recommendations from the European Central Bank.
Moreover, beneficiaries will be subject to a series of behavioural commitments, to avoid an abusive use of the state support. These include restrictions on beneficiaries' balance sheet growth with regard to national and EU averages, limitations on expansion and marketing and strict conditions for staff remuneration or bonus payments. Finally, Finland committed to notify restructuring or liquidation plans for each beneficiary that had effectively drawn on the guarantee and to report periodically to the Commission on the implementation of the scheme.
In light of these commitments and conditions, the Commission concluded that the scheme would be an adequate means to restore confidence on the Finnish financial markets and to boost interbank lending. The strict safeguards will ensure that the state support is limited to what is necessary to stabilise the Finnish financial sector and that negative spill-over effects are minimised.
The non-confidential version of the decision will be made available under the case number N 567/2008 in the State Aid Register on the DG Competition website as soon as possible. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.