Finland: Selected Issues

IMF Staff Country Reports, January 15, 2019

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This Selected Issues paper summarizes Nordea’s operations and business model; the macroeconomic and prudential implications of the move; and policy responses taken so far.
The IMF staff’s assessment is that banking supervision in the euro area has improved significantly following the creation of the Single Supervisory Mechanism, which should mitigate potential risks from Nordea’s move.
The Nordic authorities have done much, in conjunction with the European Central Bank, to ensure that potential gaps and fragmentation across national jurisdictions are avoided.
The resolution framework is designed to prevent taxpayers having to bail out banks, but is new, and work on building the crisis preparedness of euro area banks is still under way.
The banking union is not yet complete, details of the backstop for the Single Resolution Fund need to be finalized and a common euro area deposit insurance should be made fully operational.
Nordea is also operating in non-euro area member states—maintaining cooperation between euro area and noneuro area institutions remains important.
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Banking supervision in the euro area has improved significantly after creation of the Single Supervisory Mechanism.
Improvements should mitigate potential risks associated with Nordea’s move.
Nordic authorities, together with the European Central Bank, have taken measures to avoid gaps and fragmentation across national jurisdictions.
The resolution framework aims to prevent taxpayer bailouts but remains new; crisis preparedness work for euro area banks is ongoing.
The banking union remains incomplete with outstanding issues:
- Backstop details for the Single Resolution Fund need to be finalized.
- A common euro area deposit insurance should be made fully operational.
Cross-jurisdictional cooperation remains important because Nordea operates in non-euro area member states.

Continue strengthening banking supervision under the Single Supervisory Mechanism to mitigate risks from cross-border bank moves.
Finalize details of the backstop for the Single Resolution Fund.
Make a common euro area deposit insurance fully operational.
Maintain and deepen cooperation between euro area and noneuro area institutions to manage cross-border banking risks.
Continue building crisis preparedness of euro area banks under the new resolution framework.

Subject: Bank resolution, Bank resolution framework, Banking, Deposit insurance, Financial crises, Financial regulation and supervision, Financial sector policy and analysis, Liquidity requirements, Systemic risk
Keywords: Baltics, bank, Bank resolution, Bank resolution framework, banking group Nordea, banking union, capital requirement, CR, Denmark A/S, Deposit insurance, Finland, Global, ISCR, Liquidity requirements, Nordea's depositor, Nordea's liquidity ratios, Nordea's operation, O-SII buffer, Systemic risk