Finland’s bank deposit protection limit raised to EUR 50,000

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The protection limit for bank deposits in Finland will be raised to EUR 50,000 today, Wednesday, as soon as the government has made a technical decision on the matter. Minister of Finance Jyrki Katainen (Nat. Coalition) said on Tuesday that the guarantee will become effective immediately.
     
On Tuesday the ministers of finance of the EU countries issued a strong recommendation that the member states raise the level of their bank deposit guarantees to EUR 50,000 for at least a year.
      The protection limit can be even higher. The aim of the move is to safeguard private citizens’ savings and to calm the severely disturbed finance markets.
      Finland will not decide as yet on the length of the raised bank deposit protection period. The guarantee is in force “until further notice”.
      “The raising of the protection level in Finland does not arise from concerns related to the safety of the Finns’ own bank deposits. But because the protection limit is higher in Sweden there is a danger that deposits would start flowing out of the country”, Katainen said in Luxembourg on Tuesday after the ECOFIN meeting of European finance ministers.
      Hence raising the protection level improves Finnish banks’ competitiveness.
     
Until now the bank deposit protection limit in Finland has been set at EUR 25,000. According to the EU laws, the minimum level at the member states is EUR 20,000.
      The financial crisis has drawn many countries - Sweden, Ireland, Great Britain, Denmark, Germany, and Austria among them - to raise their bank deposit guarantee levels unilaterally during the past week. According to Katainen, the latest EU move is used to increase the sense of security in Finland and elsewhere in the Union.
      “This is a clear message that the European economy is not going to be allowed to collapse.”
     
Raising the guarantee level to EUR 50,000 will not be easy, however, for many of the new EU members in Central and Eastern Europe.
      “Some smaller countries, with limited economies and financial structures, will find it hard to reach this minimum level”, admitted Christine Lagarde, the Finance Minister of France, which currently holds the EU Presidency, after the meeting.
      Lagarde emphasised, however, that she does not want to see in Europe bankruptcies similar to that of the investment bank Lehman Brothers. Hence it is the member states’ responsibility to try to restore confidence in the markets.
      The EU finance ministers published a list of measures, the purpose of which is to calm the financial crisis. One central means is to support the capital flows in weak but important banks. The governmental interventions should be swift but temporary.
      “We aim to guarantee the stability and constancy of the banking system and we will use any means necessary to achieve this”, Lagarde said at the press conference.
     
The financial crisis threatening Europe and the rest of the world will not be over in a second, no matter how earnestly the politicians declare their support to banks.
      According to the European Economy Commissioner Joaquin Almunia, the crisis of the financial institutions must be overcome now, so that the problems will not spread to the other sectors of the economy. This, however, cannot be completely avoided.
      “Mentally I have prepared myself for slow going in the economy for the next two to three years”, Katainen estimated.


Previously in HS International Edition:
  Euro countries agree on unified system of bank deposit guarantees (7.10.2008)

Links:
  ECOFIN: Immediate responses to financial turmoil

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