The payment period of deposit guarantee compensations is shortened to seven working days at the beginning of this year (1 January 2020) in accordance with the Act on the Financial Stability Authority. Deposit guarantee is an automatic deposit-protection scheme maintained in Finland by an authority (the Financial Stability Authority).
The statutory deposit guarantee covers deposits at Finnish banks. If a deposit bank has been declared bankrupt or the bank is in permanent default, the deposits will be repaid by a deposit guarantee compensation as a credit transfer to the depositors from the Deposit Guarantee Fund.
The Financial Stability Authority has completed a reform project of the deposit guarantee payment system, establishing data secure and automatic processes as well as requisite IT systems for the collection of information on deposits and for the fast payment of deposit guarantee compensations in a compensation event. Fast payment means that the Financial Stability Authority has the capacity to pay deposit guarantee compensations to the depositors within seven working days from a decision of the Authority establishing the beginning of the repayment obligation.
See chart: this is how deposit protection works in Finland
The reform of the FFSA’s payment system was completed in spring 2019. The purpose of the reform was to improve the protection of individual depositors in a compensation event and to foster financial stability in a crisis.
Deposit guarantee is regulated by the EU Deposit Guarantee Directive, which was implemented as part of domestic legislation by the Act on the Financial Stability Authority. The Deposit Guarantee Directive requires the capacity to repay within seven working days at the latest by 2024. However, according to national legislation, depositors are entitled to receive the deposit guarantee compensation within seven working days already as of 1 January 2020.
