State aid: Commission approves Finnish capital injection scheme for financial institutions
11 September 2009
Under the scheme the Finnish State would subscribe non-cumulative and unsecured subordinated loan instruments issued by eligible banks up to a quarter of the required amount of their own funds.
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 published the draft measure. 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 into the scheme.
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 share buy-backs.
© European Commission
