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Brussels, 11 th September 2009

State aid: Commission approves Finnish capital injection scheme for financial institutions

The European Commission has approved under EC Treaty state aid rules a Finnish support scheme to stabilise financial markets by providing capital injections to eligible financial institutions. The Commission found the measure to be in line with its Guidance Communications on state aid to overcome the financial crisis (see IP/08/1495 and IP/08/1901). In particular, the Commission considers that the measure constitutes an adequate means to remedy a serious disturbance of the Finnish economy and is as such in line with Article 87.3.b of the EC Treaty. In particular, the scheme is non-discriminatory, limited in time and scope and provides safeguards to minimise distortions of competition.

Competition Commissioner Neelie Kroes said: "The Finnish recapitalisation scheme is an effective means to secure banks' capital base and to finance the real economy, while at the same time limiting distortions of competition".

On 29 May 2009, Finland notified the draft measure, which is aimed at strengthening the solvency of deposit banks in Finland to allow them to ensure proper financing of the economy and to better cope with expected financial difficulties.

Under the scheme the Finnish State would subscribe non-cumulative and unsecured subordinated loan instruments issued by eligible banks up to ¼ of the required amount of their own funds. The subordinated loans would be reimbursed after three years and upon the approval of the Financial Supervisory Authority.

The scheme's overall budget is capped at €4 billion. Only solvent banks would be allowed to enter it.

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 documents (see IP/08/1495 and IP/08/1901 ).

In particular, the scheme provides for non-discriminatory access as it will be open to all solvent Finnish deposit banks, including Finnish subsidiaries of foreign banks. It is limited in time and scope, as both its global budget and amount per institution are capped. To benefit from the recapitalisation participating banks are required to pay a market-oriented fee, in line with recommendations from the European Central Bank.

Moreover, the scheme foresees substantial behavioural commitments for the participating institutions regarding executive pay and shares buy back.

In light of these commitments and conditions, the Commission concluded that the scheme would be an adequate means to restore confidence on Finnish financial markets. 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 329/2009 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 .

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