Banking and financial service providers
Banking and financial activites are strictly regulated by law. One of the aims of regulation is protecting the interests of depositors. The Credit Institutions Act regulates credit institutions' business activities involving the receipt of deposits or other repayable funds from the public and the own-account lending and other similar financing by the recipient institutions, as well as the issuance of electronic money. In everyday language, credit institutions are referred to as ‘banks’ or ‘deposit banks’, but the concept also includes other financing institutions. The Credit Institutions Act also regulates more broadly the activities of financial institutions.
Operation as a deposit bank or financing institution requires authorisation
Deposit banks and financing institutions are credit institutions. They can accept repayable funds from the general public and use them eg for lending purposes. Such activities are subject to authorisation, under the Credit Institutions Act.
- A deposit bank is a credit institution that has the exclusive right to receive funds from the general public. Deposits are repayable funds that are covered for partial or full reimbursement from the deposit guarantee fund. Deposit banks can also engage in other statutory activities of credit institutions. There are some 300 authorised deposit banks in Finland.
- A financing institution is a credit institution that can receive repayable funds other than deposits from the general public. Typical financing institutions are finance companies, which provide funding for purchases of physical assets, directly or jointly with selling establishments. Mortgage banks, which are also financing institutions, can issue collateralised bonds and grant loans to the general public from funds that they collect.
Financial institutions do not need authorisation
A financial institution is not a credit institution but is a company that is primarily involved in lending, financial leasing or other financing activities. Financial institutions cannot accept deposits or other payable funds from the general public nor engage in any other fund raising activities, and they are not subject to authorisation.
FIN-FSA supervises authorised credit institutions
FIN-FSA sees to it that deposit banks and financing institutions fulfil the statutory requirements and limitations imposed on them as well as the requirements and limitations prescribed in FIN-FSA regulations concerning the activities, risk management, capital adequacy and risk-taking of deposit banks and credit institutions. FIN-FSA supervises compliance with these regulations at the consolidation group level for deposit banks and credit organisations, which means companies belonging to the same financial group.
Financial institutions are not supervised as individual companies, but are included in the supervision of their respective consolidation groups.
16 May 2012