categories

Financial regulation in Finland

fin-fsaFinland has received a triple-A rating from all credit rating agencies around the world, including the Big Three. Among the reasons for the highest credit rating is that the country has very strong financial regulation that ensures institutional strength. In charge of financial regulation here is the (FIN-FSA).

Structure of FIN-FSA

FIN-FSA was created in 2009 when the Financial Supervision Authority (FSA) and the Insurance Supervision Authority (ISA) merged. Finland was going through tough economic times, just as the other countries during the 2009 global financial crisis. So, FIN-FSA was created to consolidate regulation of financial markets and insurance services under one roof.

According to , Finland’s financial regulation have to depend on the European Central Bank’s directives, which is why FIN-FSA is a part of the Single Supervisory Mechanism (SSM). The SSM is made up of the ECB and the regulatory bodies of the EU member nations. Other regional bodies FIN-FSA operates alongside are the European Systemic Risk Board (ESRB). Within FIN-FSA are 3 main bodies:

  • European Banking Authority (EBA),
  • European Securities and Markets Authority (ESMA), and
  • European Insurance and Occupational Pensions Authority (EIOPA)

The structure of financial regulation in Finland is indeed complicated with several overlapping features brought on by being part of the EU. Nevertheless, it has never hindered financial regulation in Finland, which remains one of the best-regulated regions in the world.

Role of FIN-FSA

Supervision of financial markets according to the SSM

This is the main purpose of any financial regulator, and FIN-FSA does it very well. The body ensures that the financial market participants, including FX brokers, play by the rules set out by the Act on the Financial Supervisory Authority. By supervising the market, there is increased confidence in the markets, which promotes local and foreign investment.

Supervision of other financial institutions

Besides the stock and equities markets, FIN-FSA also oversees the insurance sector, credit and pension companies. Here, the financial regulator ensures the rights of the participants are protected. This means following up on any complaints by the people and penalizing any wrongdoing.

Provide and promote incentives in supervision

Using the carrot instead of the stick approach, FIN-FSA rewards compliant companies, encouraging the rest to adhere to the regulations.

What makes FIN-FSA stand out as a financial regulator?

Even though FIN-FSA carries out essentially the same roles as any other financial regulator, it is an exemplary body, setting it apart even from other prominent bodies. The main reason, perhaps, is the experience with financial difficulty in the past. Finland’s economy had been suffering right up to 2015 with consecutive declines in GDP. Various industries were ailing simultaneously from electronics to exports with less demand for paper and Russia’s recession. Nevertheless, the country made it through and regained its triple-A credit rating.

FIN-FSA is also relatively independent from the government. The Bank of Finland funds only 5% of its operations while the other 95% comes from the supervised bodies. Without a single authority with a majority control over FIN-FSA, it can remain unbiased and therefore fair to all parties.