How is deposit guarantee compensation paid?
If a Finnish deposit bank is declared bankrupt or is in permanent default, the Financial Stability Authority assesses the situation and decides whether to commence the payment of compensation. The Financial Stability Authority then issues decisions on the individual compensation amounts.
The compensation is paid to depositors within seven working days and is limited to a maximum of EUR 100,000 for each depositor’s deposits in one bank.
Chart: This is how deposit guarantee works in Finland
How does a compensation event emerge?
Bankruptcy of a deposit bank
A compensation event emerges when a deposit bank is declared bankrupt, for example. The court notifies the Financial Stability Authority, which then decides on whether compensation for deposits will be paid.
Other potential scenarios in which a compensation event emerges
If a deposit bank has not paid matured and undisputed compensable deposits, the depositor may report the matter to the Financial Stability Authority. The Authority must then issue a decision on the payment of compensation within five working days.
A compensation event can also begin by a deposit bank being deemed insolvent by a decision of the authorities.
The two-stage decision-making process in compensation events
The Financial Stability Authority’s decision-making process consists of two stages. In the first stage, the Authority decides on whether compensation will be paid for the deposits, i.e. whether the compensation process will commence. The FFSA then issues separate appealable decisions to depositors regarding their right to deposit guarantee compensation and the amount of compensation to be paid.
The FFSA’s decision on compensation for deposits
When a potential compensation event emerges, the Financial Stability Authority decides whether compensation for the deposits will be paid from the Deposit Guarantee Fund. The decision is made in cooperation with the Financial Supervisory Authority and the Bank of Finland.
The Financial Stability Authority issues a positive compensation decision if, based on the information received, the non-payment of deposits is caused by the bank’s insolvency or other financial difficulties and the Authority estimates that the difficulties in question are not temporary.
The Financial Stability Authority issues its decision within five working days of being notified of the potential compensation event.
The FFSA’s decisions on deposit guarantee compensation for each depositor
The Financial Stability Authority issues depositor-specific compensation decisions based on information received from the deposit bank. If the depositor’s right to deposit guarantee compensation and the compensation amount can be directly ascertained from the information received from the bank, the FFSA issues the decision on deposit guarantee compensation by means of an automatic decision-making procedure within one week of the FFSA’s decision to pay compensation for deposits. Depositors do not need to apply for compensation.
If the decision-making is subject to the FFSA’s discretion, the FFSA issues the decisions manually. In this case, the FFSA issues the decisions within three months of deciding on the payment of compensation. This applies in the following situations, for example:
- The depositor’s right to compensation is unclear
- The depositor’s right to use the deposit has been restricted by a decision of the authorities
- The depositor’s receivables are assets obtained from the sale of a residence
If the depositor uses the suomi.fi messaging service, they receive the decision on deposit guarantee compensation quickly in the suomi.fi electronic mailbox. Otherwise the depositor is informed of the decision by mail. All communication concerning deposit guarantee decisions can be handled quickly and easily via the electronic service.
How quickly is compensation paid?
The Financial Stability Authority pays compensation within seven working days of making the compensation payment decision. This is possible because the payment of compensation is a highly automated process. Deposit guarantee compensation is paid by means of a bank transfer, which means the depositor can quickly access the compensation.
What do depositors need to do in a compensation event?
The Financial Stability Authority receives information on depositors and deposits to be compensated directly from the bank and issues decisions on deposit guarantee compensation based on the information provided by the bank. If necessary, the FFSA will contact the depositor to request additional information. Depositors do not need to submit information on their deposits to the Financial Stability Authority.Depositors also do not need to apply for compensation, as deposit guarantee compensation is paid out without a separate application.
In a compensation event, the FFSA requests depositors to provide an account number to which the deposit guarantee compensation should be paid. The account number can be sent electronically by the depositor verifying their identity on the suomi.fi service or by submitting a paper notification form. Electronically submitted account numbers reach the FFSA quickly and securely, enabling the FFSA to pay the compensation without delay. For depositors who use a paper notification form, the payment of compensation takes a little longer. The FFSA never requests depositors to provide personal information or account numbers by e-mail.