Supervision release 7 July 2020 – 44/2020

Preparedness plans must be submitted to FIN-FSA by 31 December 2020

The uninterrupted supply of financial market services is critical for the functioning of the economy, companies and citizens. The provision of services by Finnish financial market participants is largely dependent on foreign service providers, and therefore it is prudent to prepare for circumstances where foreign services are unavailable for an extended period of time.

The Ministry of Finance is developing the regulation on the preparedness of the financial markets to be more unambiguous and better aligned with the requirements of the current operating environment (see Review of the regulations on the preparedness obligation applicable in the financial sector, Ministry of Finance publications 23/2018, in Finnish).

In order to have an overall view of the preparedness for emergency conditions and severe disruptions as well as of plans to develop preparedness capacity, the FIN-FSA requests entities under the preparedness obligation to draw up an entity-specific plan on how to ensure or intend to ensure the operability of critical services from an end customer to an end customer in circumstances where foreign service provision is completely unavailable.

  • Credit institutions
  • Payment institutions
  • Fund management companies
  • Investment firms
  • Finnish Central Securities Depository
  • Stock exchange

Services to be secured

The services to be secured are defined in the Ministry of Finance publication 23/2018 referred to at the beginning of the release.

Credit institutions and payment institutions

  1. Service for making a cash deposit on a payment account or withdrawing cash from a payment account and activities related to the operation and provision of a payment account.
  2. Execution of a payment transaction as a credit transfer, transfer of funds on a payment account of a service provider, direct debit or through a payment card or other payment device.
  3. Issuing of a payment instrument.
  4. Acceptance and processing of a payment transaction, based on a contract made with the payee, that results in a transfer of funds to the payee.
  5. Ativities to execute a credit transfer onto a Finnish account in another credit institution or payment institution and to receive a credit transfer from such an account.

Investment firms

  1. Reception and transmission of orders on financial instruments (intermediation of orders).
  2. Execution of orders on financial instruments on behalf of a client (execution of orders).
  3. Management of financial instruments under a client-specific contract in which decision-making power has in full or in part been granted to the contractor (asset management).
  4. Arrangement of the issue or sale of financial instruments by giving a subscription or purchase commitment (underwriting of issue).
  5. Arrangement of the issue or sale of financial instruments without giving a subscription or purchase commitment (arrangement of issue).
  6. Services related to the underwriting of an issue of securities.
  7. Custody and management of financial instruments on behalf of a client.

Fund management companies

  1. Tasks and services referred to in chapter 9, sections 4 and 5 of the Mutual Funds Act.

Finnish Central Securities Depository

  1. Maintenance of the records in the book-entry system with minimum disturbance.

Stock exchange

  1. Operation of regulated markets with minimum disturbance.

Content of the preparedness plan

The entity-specific plan must describe, for example, how it is ensured that the payer is able to submit a payment order to its payment service provider, and how the payment service provider processes the payment and transfers the payment to the payee's payment service provider and on to the payee's account. As regards card payments, the entire chain covering the payment of a purchase to the payee must be described correspondingly. With respect to the securities business, similar thinking applies: how to ensure the transfer of securities and money from the principal to the receiving end customer?

The plan must be based on a scenario where no inter-entity or entity-internal payment or securities system, function or data warehouse located abroad is available for months.

The preparedness plan must be clear and detailed enough to enable the assessment of its feasibility and regulatory compliance. If the report includes actions to be taken in the future, their schedule and content must be presented in exact terms.

Authorities responsible for preparedness issues and submission schedule of the plans

The plans submitted to the FIN-FSA will be assessed by financial market authorities responsible for preparedness issues, i.e. the Ministry of Finance and the Bank of Finland together with the FIN-FSA.

During the preparation of the plans, questions can be presented to the authorities for example on the expected content of the plans or any issues found to be unclear. These questions may be sent by email to varautuminen(at)finanssivalvonta.fi. The authorities will seek to share the responses to the questions to all entities under the preparedness obligation to ensure that the same information is available for everyone.

Please send your preparedness plans to the FIN-FSA at varautuminen(at)finanssivalvonta.fi by protected email (https://securemail.bof.fi) by 31 December 2020. 

Regulatory framework

In accordance with chapter 5, section 12 of the Credit Institutions Act, “a credit institution shall ensure attendance to its duties with as little disturbance as possible also in exceptional circumstances by participating in the preparedness planning of the financial markets and by preparing in advance the actions to be taken in exceptional circumstances as well as by other measures.”

In accordance with chapter 7, section 5 of the Act on the Book-Entry System and Settlement Activities “the resolution plan shall ensure the continuity of the core services provided by the CSD, access to legal remedies by holders of book entries and the importance of the activities of the CSD to the stability of the financial markets.” According to the chapter 2, section 12, “a CSD shall ensure the maintenance of the records in the book-entry system with minimum disturbance also in exceptional circumstances by using adequate information systems located in Finland or by other arrangements that are adequate with regard to the continuity of activities, as well as by participating in financial market contingency planning, by preparing in advance the actions to be taken in exceptional circumstances and by taking other corresponding measures.”

In accordance with chapter 3, section 1 of the Act on Trading in Financial Instruments “the activities of a stock exchange shall be arranged in a reliable manner, taking into account the nature and scope of its business. A stock exchange shall ensure the management of risks relating to its activities and the continuance of its activities in all circumstances.”

In accordance with the Government Decision on the Objectives of Security of Supply (1048/2018), “the continuity of the financial market services essential for the functioning of society shall be ensured through national backup systems.  Particular attention shall be paid to backup systems for securing inter-bank payment transfers, the clearing, delivery and safekeeping of securities, and payment of pensions and other recurring payments as well as the card payment infrastructure and verifications, even when the systems critical to these functions are not available in Finland or outside the borders.”

Chapter 3, section 18 of the Act on the Financial Supervisory Authority provides on the FIN-FSA’s right to obtain information: “Confidentiality provisions notwithstanding, a supervised entity or other financial market participant shall, without undue delay, provide the Financial Supervisory Authority with any such information and reports requested by it as are necessary for the exercise of its statutory duties.”

In accordance with chapter 8, section 71 of the Act on the Financial Supervisory Authority, “the Financial Supervisory Authority shall, confidentiality obligations notwithstanding, have the right to disclose information to, inter alia, the Ministry of Social Affairs and Health, the Ministry of Finance, the Financial Stability Authority and any other authorities supervising financial markets or responsible for the smooth functioning of financial markets for attending their duties” (e.g. the Bank of Finland).

For further information, please contact

  •  Anne Nisén, Senior Risk Expert, telephone +358 9 183 5211 or anne.nisen(at)fiva.fi
  • Jukka Laitinen, Legal Advisor, telephone 358 9 183 5287 or jukka.laitinen(at)fiva.fi