Finland and most old EU countries disagree on bank supervision
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Finland and most of the old member states of the European Union are on opposing sides as the EU seeks to agree on how to move forward with supervision of banking operations.
The reason why Finland finds itself in at odds with much of the rest of the EU is that the banking market in the Nordic region is more international than in the rest of Western Europe.
In Finland about 60 per cent of credits and deposits are controlled by foreign banks.
At their meeting on Saturday in the French city of Nice, the ministers of finance of the EU member states were in agreement that banking supervision needs to be developed, in order to prevent the collapse of banks in the event of mass defaults on credit. The differences arise from how this is to be achieved.
Finland wants officials of the host countries - that is, the countries where the banks are actually located, to have as great a role in oversight as possible. This is seen as important, because foreign-owned banks are rapidly changing their Finnish subsidiary banks into branch offices.
Old banking countries, such as Britain, France, and Germany take a somewhat dim view of allowing foreign supervisors to encroach on their territory.
“This kind of a situation easily creates protectionism”, said Bank of Finland Governor Erkki Liikanen, who took part in the Ecofin meeting.
Of the old EU member states, Spain and the Benelux countries (Belgium, The Netherlands, and Luxembourg) supported Finland. The new members of the EU also agreed with the Finnish view.
Liikanen said that the old EU member states also are gradually coming closer to the views held by Finland. He says that the reason for this is that the trend toward internationalisation of the banking sector is set to continue.
France’s Minister of Finance Christine Lagarde warned on Saturday that the EU is likely to suffer many shocks soon.
Inflation is at a high level, the finance market is unstable, and exchange rates are in fluctuation.
Four out of five European banks and other financial institutions have already been dealing with their problem credits.
To avoid the collapse of banks in the future, the EU ministers want to unify the banks’ reporting system by 2012.
What this unification would mean remains unclear.
The ministers also agreed that small and medium-sized companies would be granted EUR 15 billion in credit support in 2008-2009.
Finland’s Minister of Finance Jyrki Katainen says that Finnish companies will also be able to benefit from the credits.
Of the Finnish small and medium-sized companies, fewer than one third have had direct experiences of tighter credit policies.
“The problem is not very big yet”, Katainen said on Saturday.
Helsingin Sanomat
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| 15.9.2008 - TODAY |
 Finland and most old EU countries disagree on bank supervision |
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