Financial sector institutions operating in Finland must comply not only with legally binding regulations set by the authorities but also with recommendations and non-binding guidelines. Their operations are overseen by national and international supervisors.
The Finnish Financial Supervisory Authority (FIN-FSA)
Finanssivalvonta, or the Financial Supervisory Authority (FIN-FSA), is the authority for supervision of Finland’s financial and insurance sectors. The entities supervised by the authority include banks, insurance and pension companies as well as other companies operating in the insurance sector, investment firms, fund management companies and the Helsinki Stock Exchange. The supervised entities cover about 95% of The FIN-FSA’s funding, with the remainder provided by the Bank of Finland. The FIN-FSA was established on 1 January 2009, following a merger of the former Financial Supervision Authority and the Insurance Supervisory Authority.
The purpose of the FIN-FSA’s operations is to ensure the stable operation of credit, insurance and pension institutions and other supervised entities, as required for the stability of the financial markets. Its objectives also include safeguarding the interests of the insured and maintaining public confidence in the operation of the financial market. Additionally, the FIN-FSA’s duties include promoting good business practices and increasing public awareness of financial markets. These objectives and duties are enshrined in the Act on the Financial Supervisory Authority.
Find out more about the Financial Supervisory Authority. ↗
European financial supervision
EU-wide supervision of financial markets has been significantly enhanced with the internationalisation of financial activities and the financial and debt crises. The European financial supervisory system comprises both micro- and macro-level supervisory bodies. As a micro-supervisor, the European Central Bank (ECB) directly supervises the largest banks in the EU banking union. National supervisors are responsible for the supervision of other banks, but the ECB can, if it wishes, take any bank in the banking union under its direct supervision.
The aim of micro-level supervisory authorities is proper, effective and consistent supervision, with special attention paid to risk management and customer protection. At macro-level, the goal is to prevent the emergence of systemic risks to financial stability. The European Systemic Risk Board (ESRB) can issue recommendations and warnings to member states to combat systemic risks.
Abbreviations
| ESFS | European System of Financial Supervisors |
| ESA | European Surveillance Authorities |
| ESMA | European Securities and Markets Authority |
| EBA | European Banking Authority |
| EIOPA | European Insurance and Occupational Pensions Authority |
| ESRB | European Systemic Risk Board |
The Finnish Financial Ombudsman Bureau (FINE)
The Finnish Financial Ombudsman Bureau (FINE) is an advisory office operating in the financial sector. FINE’s purpose is to provide consumers, SMEs and corresponding customers with advice in the problems they may face in their insurance, banking and investment operations as well as to solve the related complaints. FINE’s services are provided free of charge to the customers.
FINE seeks to promote the interests of the financial sector’s customers and the healthy development of the practices in the financial sector. FINE also contributes to the legislative preparation work. To enhance the competence in financial matters, FINE publishes guidebooks and comparisons and participates in respective co-operative projects, trying to promote the safe use of credit and debit cards and the overall competence in economy-related matters.
The complaints boards that operate under the bureau are responsible for promoting good practices and improving the information provided to customers by issuing resolution recommendations on disputes and monitoring the application of contractual terms. There are three complaints boards, one each for banking, insurance and investment.
Find out more about the Financial Ombudsman Bureau (FINE). ↗
Good market practice
Good banking practice
Good banking practice has evolved from practical experience. The guidelines of good banking practice include codes of conduct for banks as well as principles concerning the relationship between the customer and the bank. This relationship is also governed by several laws and regulations issued by supervisory authorities.
The main principles of good banking practice are:
- The bank knows its customer and the customer’s financial situation to the extent required by the customer relationship (customer due diligence).
- Staff are suited to their duties and sufficiently trained.
- Operations are appropriately supervised, guided and managed.
- The customer relationship is based on mutual honesty and trust, which is reinforced by a long-term relationship.
- The bank considers the customer’s interest in its business operations.
- The customer has freedom of choice.
Banking secrecy
The principle of confidentiality of customer information, or banking secrecy, is followed in all banking operations. Bank employees, in the course of their duties, obtain a great deal of information about customers’ financial positions, personal circumstances such as family relationships and business or professional secrets. Such information is confidential under the Act on Credit Institutions. Banking secrecy means that no bank employee or member of a governing body may divulge information about a customer’s affairs to outsiders. The obligation of banking secrecy applies to both permanent and temporary customer relationships.
The obligation arising from the Act on Credit Institutions is complemented by specific confidentiality provisions elsewhere in legislation. Provisions on data protection, such as the Personal Data Act and the Credit Information Act, also affect the content of the confidentiality obligation. Banking activities require customers’ trust that their financial and private matters will be kept confidential. Banking secrecy is part of protecting customers’ privacy and covers both individuals and companies or organisations. Banking secrecy is the general rule, but various acts stipulate exceptions to it. Banking secrecy notwithstanding, authorities such as supervisors, the police and tax authorities have the right to access information that would otherwise be confidential. These exceptions should be interpreted narrowly.
Good insurance practice
Good insurance practice is a well-established concept in the insurance industry. It is referenced in the Insurance Contracts Act, in court and board decisions, as well as in supervisory authority guidelines and legal literature. There is no precise definition of good insurance practice; it is about operational principles – actions must be lawful, ethically sustainable, fair and reasonable.
Insurance secrecy, or the principle of customer data confidentiality, is an essential part of good insurance practice, just as banking secrecy is in banking. In practical terms, good insurance practice means that, for example, all customers must be treated equally in claims processing, and the insurer’s liability cannot be excessively reduced even by agreement.
Good securities market practice
Good securities market practice refers to the principles and rules which market participants agree should be considered correct and reasonable trading practices for all customer and operator parties. These principles guide procedures on the securities market when there is no applicable detailed regulation. Confidentiality of customer information is an important part of good securities market practice, as it is for other financial activities.
Prevention of money laundering
Money laundering is criminalised under the Penal Code. The prevention of money laundering is governed by the Act on Detecting and Preventing Money Laundering and Terrorist Financing (commonly referred to as the Anti-Money Laundering Act). If a bank suspects the legality of a customer’s transactions, it must report the suspicion to the Financial Intelligence Unit of the National Bureau of Investigation. According to the Anti-Money Laundering Act, banks must have adequate procedures to detect unusual transactions and are also required to know their customers (customer due diligence).
What is money laundering?
Money laundering refers to the acceptance, use, transfer or mediation of illegally obtained property, proceeds of crime or assets replacing them. It also includes the concealment or disguise of the true nature, origin, location and disposition rights relating to such property or assets resulting from crime. The aim is to conceal the criminal origin of assets and make them appear legitimate. Money laundering is often part of international organised crime.