Financial crisis: Banks in Finland and elsewhere raise deposit protection limit

RATA suspends Finnish operations of Kaupthing; Glitnir to sell Finnish subsidiaries

print this

The Finnish government raised its deposit protection limit on Wednesday, in the wake of similar moves Sweden and other European countries.
      Bank deposits are now guaranteed up to EUR 50,000, twice the previous EUR 25,000.
      This means that all private individuals, companies, and associations with deposits in banks operating in Finland, are protected.
      If a person has money in more than one bank, each of the accounts is protected up to EUR 50,000. If a person has more than one account in the same bank, they are all considered a single deposit.
     
Of the foreign banks operating in Finland, eQ Bank and Glitnir currently are subsidiaries of their parent companies, which means that they fall under Finnish banking rules. The Swedish Handelsbanken and the Icelandic Kaupthing are in a different position, because they operate in Finland as branch offices and not subsidiaries.
      Finnish customers of Handelsbanken are protected by Sweden’s deposit guarantee system, which protects deposits up to 500,000 krona (about EUR 50,000).
      The situation is slightly more complicated for Kaupting depositors.
     
Deposits in Kaupthing are guaranteed by the Icelandic government, which recently decided that deposits would be guaranteed with no upper limit; this only applies to deposits in Iceland; Foreign deposits are guaranteed up to EUR 20,000.
      However, under Finnish legislation, deposit protection offered by branch offices of foreign banks in Finland must not be worse than that for Finnish banks. The difference is made up by the Deposit Guarantee Fund.
      Under the rules, the bank must apply to the fund for the additional protection, and Kaupthing has made such an application.
      Johanna Palin of the Deposit Guarantee Fund, says that permission is not granted automatically: statements from the Bank of Finland and the Financial Supervision Authority are needed, even though the final result is a foregone conclusion.
      Until that happens, Finnish deposits of more than EUR 20,000 in Kapthing enjoy less protection than those in other banks.
      Lauri Rosendahl, director of the Finnish branch office of Kaupthing, emphasised on Wednesday that all Finnish deposits in Kaupthing are safe and available for immediate withdrawal, if necessary.
      Rosendahl would not say how many customers the bank has in Finland, or the monetary value of the deposits.
     
On Thursday morning Finland’s Financial Supervision Authority (RATA) suspended operations of the Finnish branch office of the Icelandic Kaupthing Bank, which had previously been nationalised. The bank’s online banking service was put on hold, and withdrawals were not possible.
      The aim of the move is to promote the equal treatment of depositors.
      Already on Monday, RATA ordered the Finnish subsidiaries of two Icelandic-owned banks, eQ Bank and Glitnir Bank not to transfer funds to their parent companies, or other foreign companies linked with the concerns.
     
Meanwile, Glitnir, which was also nationalised by the Icelandic government, announced that it plans to sell its Finnish subsidiaries, Glitnir Bank and Glitnir Asset Management.
      The Icelandic company is expected to take a major loss in the sale of its Finnish operations; it is hard to imagine a less attractive investment target today than an Icelandic bank or one of its subsidiaries.
      Glitnir Finland employs 250 people, and it has 17,000 customers with deposits of about 300 million.

More on this subject:
 US expert: No reason for Finns to panic

Previously in HS International Edition:
  Euro countries agree on unified system of bank deposit guarantees (7.10.2008)
  Finland’s bank deposit protection limit raised to EUR 50,000 (8.10.2008)
  Icelandic banks in Finland report no exodus of depositors (2.10.2008)

Links:
  Deposit Guarantee Fund

Helsingin Sanomat