The Financial Stability Authority’s mission and objectives
The Financial Stability Authority serves as Finland’s national resolution authority to ensure the stability of the financial markets and reorganise credit institutions and investment firms experiencing financial difficulties.
The Financial Stability Authority’s duties
In normal circumstances, the Authority’s key tasks include drafting and maintaining resolution plans for credit institutions, investment firms and the central securities depository and carefully preparing for the management of crises.
Furthermore, if an institution encounters serious financial difficulties, the Authority may decide on placing the institution under resolution, in which case the Authority will apply the necessary resolution tools to the institution under resolution. In resolution-related matters, the Financial Stability Authority operates as part of the European Union’s Single Resolution Mechanism (SRM) and participates in the work of the Single Resolution Board (SRB).
The Financial Stability Authority also acts as Finland’s national authority responsible for the deposit guarantee scheme. As the deposit guarantee authority, FFSA manages the tasks assigned to the Deposit Guarantee Fund, collects and manages deposit guarantee contributions and, where necessary, decides on the beginning of the Deposit Guarantee Fund’s repayment obligation if a deposit bank becomes insolvent.
FFSA manages the Financial Stability Fund, which is external to the State budget. The Fund consists of the Resolution Fund and the Deposit Guarantee Fund which are both financed by separate contributions. These funds and funds from the Single Resolution Fund (SRF) managed by the SRB can be used, subject to the conditions stipulated by the relevant legislation, in crisis situations to cover costs and/or protect depositors.
The Financial Stability Authority’s objectives
The Financial Stability Authority’s social impact objectives are reviewed annually in performance agreement negotiations between the Authority and the Ministry of Finance. The Authority’s broad social impact objectives have been fairly well-established over the past few years:
- minimising the costs of banking crises
- maintaining the credibility of the deposit guarantee scheme and the resolution mechanism.
FFSA has a clear and strong mission as well as precisely defined legal duties from which its broad social objectives are derived.
The Authority’s social impact objectives agreed for 2021 that add specificity to the two broader objectives are as follows:
- Maintaining a high capacity for the Financial Stability Authority to respond to a crisis involving any institution and minimise the need for public support
- ensuring that institutions have a sufficient capacity to cover losses and prepare for crises
- securing access to compensation funds for depositors in crises
- effectively influencing the development of the resolution framework.
These objectives will be reflected in the focus areas of the Authority’s operations in 2021.