Opinion of the European Central Bank of 4 April 2008 at the request of the Finnish Ministry of Finance on a draft government proposal for a law on the Financial and Insurance Supervisory Authority and certain related draft laws (CON/2008/16)
Date: 2008-04-04
Institutions: European Central Bank
Subjects: Finland, financial stability, financial supervision, institutional activity, insurance, national law, supervisory power

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 4 April 2008  

at the request of the Finnish Ministry of Finance 

on a draft government proposal for a law on the Financial and Insurance Supervisory 

Authority and certain related draft laws 

(CON/2008/16) 

Introduction and legal basis 

On 13 February 2008, the European Central Bank (ECB) received a request from the Finnish Ministry of 

Finance  for  an  opinion  on  a  draft  government  proposal  including  a  draft  law  on  the  Financial  and 
Insurance Supervision Authority (hereinafter, the ‘draft law’), as well as certain other related draft laws1. 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European Community and the third and sixth indents of Article 2(1) of Council Decision 98/415/EC of 

29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative  provisions2,  as  the  proposal  concerns  Suomen  Pankki  and  contains  provisions  on  rules 

applicable to financial institutions insofar as they materially influence the stability of financial institutions 

and  markets.  In  accordance  with  the  first  sentence  of  Article 17.5  of  the  Rules  of  Procedure  of  the 

European Central Bank, the Governing Council has adopted this opinion. 

1. 

Purpose of the draft law 

The  purpose  of  the  draft  law  is  to  merge  the  existing  Financial  Supervision  Authority  (FSA),  which 

supervises  financial  markets  with  the  Insurance  Supervisory  Authority  (ISA),  which  supervises  the 

insurance and pensions industry. The FSA and the ISA will form a new consolidated supervisor under the 
name  ‘Financial  and  Insurance  Supervision  Authority’  (FISA)3  which  will  begin  to  operate  on 

1  

2  
3  

The Law on supervision fees of the Financial and Insurance Supervision Authority (a new draft law) and amendments to 
the following: the Law on credit institutions (121/2007), the Law on commercial banks and other credit institutions in the 
form of a limited company (1501/2001), the Law on savings banks (1502/2001), the Law on cooperative banks and other 
credit  institutions  established  as  cooperatives  (1504/2001),  the  Law  on  the  operation  of  a  foreign  credit  institution  or 
financial  institution  in  Finland  1608/1993),  the  Law  on  temporary  suspension  of  the  operations  of  a  deposit  bank 
(1509/2001), the Law on supervision of financial and insurance conglomerates (699/2004), the Law on investment firms 
(922/2007), the Law on the right of a foreign investment firm to provide investment services in Finland (580/1996), the 
Law on mutual funds (48/1999), the Law on the operations of a foreign management company in Finland (225/2004), the 
Law  on  securities  markets  (495/1989),  the  Law  on  pawn  shops  (1353/1992),  as  well  as  certain  other  laws  relating  to 
financial markets. 
OJ L 189, 3.7.1998, p. 42.  
The Finnish name is ‘Finanssivalvonta’. The word ‘insurance’ is added in the English translation of the name of the new 
authority, in order to avoid confusion with the present FSA (‘Rahoitustarkastus’). 

 
 
 
 
                                                 
1 January 2009.  The  FISA  will  have  a  similar  organisational  structure  to  the  FSA,  and  its  powers  will 

largely be a combination of those currently exercised by the FSA and the ISA.  

The new elements of the FISA’s structure and powers, in particular, relate to the following:  

(a) 

The  FISA’s  objectives  and  tasks.  The  FISA’s  objective  will  be  ‘to  promote  the  stability  of  the 

operations  of  credit,  insurance  and  pension  institutions  and  other  supervised  entities,  thereby 

contributing  to  financial  stability  and  to  safeguarding  of  the  interests  of  the  insured,  while 
otherwise maintaining confidence in financial market activity’4. The draft law also contains some 
tasks that are new or formulated in a more detailed way than the tasks of the FSA and the ISA5. In 

particular, the draft law will include comprehensive provisions in the area of customer protection, 
combining  existing  provisions  from  a  number  of  separate  acts6.  Further,  some  entities  currently 
supervised by FSA and the ISA will be removed from the scope of the FISA’s supervision7. 

(b)  Organisational  framework  and  governance  of  the  FISA.  As  is  the  case  for  the  current  FSA,  the 

FISA  will  be  established  within  the  organisational  structure  of  Suomen  Pankki.  The  FISA’s 

governing  bodies  will  be  similar  to  those  of  the  current  FSA,  namely:  (i)  the  Parliamentary 
Supervisory  Council  (which  is  also  one  of  the  governing  bodies  of  Suomen  Pankki)8;  (ii)  the 

FISA’s  Board,  which  will  have  powers  to  decide  on  the  direction  of  supervisory  activity;  and 

(iii) the FISA’s Director General who will exercise most of the direct supervisory powers. The key 

new elements introduced into the framework are as follows:  

– 

as  regards  the  FISA’s  Board:  (i)  the  composition  of  the  Board  will  now  include  three 

nominees proposed for appointment by the Suomen Pankki, the Ministry of Finance and the 

Ministry  of  Social  Affairs  and  Health,  respectively,  as  well  as  two  members  appointed 
directly by the Parliamentary Supervisory Council9; (ii) any of the Board  members will be 
eligible to be appointed as Board Chairman or Vice-Chairman10; (iii) certain administrative 

4  
5  

6  
7  

8  

9  

10  

See Section 1 of the draft law.  
See the FISA’s activities listed in Section 3 of the draft law. Certain further adjustments concern, inter alia, the FISA’s 
supervisory powers specified in Chapter 3 of the draft law. 
See Chapter 5 of the draft law.  
I.e.  pawn  shops  and  certain  boards  and  committees,  such  as  the  Traffic  Insurance  Board  and  the  Treatment  Insurance 
Board (see Section 4 of the draft law).  
See Sections 9 and 11 of the Law on Suomen Pankki (214/1998) (hereinafter, the ‘Law on Suomen Pankki’) provides that 
Suomen  Pankki’s  governing  bodies  are  the  Parliamentary  Supervisory  Council,  supervising  the  administration  and 
activities of Suomen Pankki, and the Board. 
See  Sections  8 and  9  of  the  draft  law.  Currently,  the  Board  of the  FSA  is  composed  of  six  members  and  three  deputy 
members appointed by the Parliamentary Supervisory Council for a period of three years. Two members and one deputy 
member are appointed on the basis of a proposal by the Ministry of Finance, one member and a deputy member on the 
basis of a proposal by the Suomen Pankki and one member and deputy member on the basis of a proposal by the Ministry 
of  Social  Affairs  and  Health.  The  director  generals  of  the  FSA  and  the  ISA  are  ex  officio  members  of  the  Board.  The 
Board of the ISA is appointed in a similar way, and its composition is in practice the same as that of the current FSA (see 
Sections 8 and 9 of the Law of 27 June 2003 on the Financial Supervision Authority (587/2003) (hereinafter, the ‘current 
Law on the FSA’)).  
See the third paragraph of Section 9 of the draft law. Currently the Board Chairman and Vice-Chairman are appointed by 
the Parliamentary Supervisory Council from among Board members nominated by Suomen Pankki and the Ministry of 
Finance (see Section 8(3) of the current Law on the FSA). 

2 

                                                 
responsibilities  of  the  Board  will  be  broadened11;  and  (iv)  the  Parliamentary  Supervisory 
Council will decide on Board members’ compensation12;  

– 

as  regards  the  FISA’s  Director  General:  (i)  the  Director  General  will  be  appointed  by  the 
Parliamentary Supervisory Council on a proposal of the Board13; the Director  General will 
have  a  fixed  term  of  office  of  five  years14;  (ii)  the  Director  General  will  be  entitled  to 
participate in the FISA’s Board meetings, but not as a voting member as is the case now15; 

and  (iii)  the  provisions  regarding  submission  of  decisions  falling  within  the  scope  of  the 
Director General’s competence for consideration by the Board will be made clearer16.  

(c) 

The FISA’s financing: the draft law proposes a funding mechanism aiming at ensuring that 90% of 

the  FISA’s  operational  costs  are  funded  by  fees  collected  from  the  supervised  entities,  while  the 

remaining 10% of such costs will be contributed by Suomen Pankki. According to the explanatory 

memorandum  to  the  draft  law,  this  Suomen  Pankki’s  contribution  to  the  FISA’s  financing  will 

ultimately  decrease  the  amounts  of  profit  distributions  provided  by  Suomen  Pankki  to  the  State 
budget17. 

(d)  Cooperation  with  other  authorities:  the  FISA’s  obligation  to  disclose  information  to  Suomen 

Pankki or to the Government will be broader. In particular, the FISA will be obliged to disclose any 
information that may have a significant effect on ‘financial  market developments’18. Certain new 

detailed  administrative  and  cost-sharing  rules  will  also  be  introduced  in  the  areas  where  closer 

cooperation  with  other  European  Economic  Area  supervisory  authorities  is  required  under  the 
provisions implementing Capital Requirements Directives19. 

11  
12  
13  

14  

15  
16  

17  
18  

19  

See Section 10 of the draft law.  
See Section 8(9) of the draft law. The current law on the FSA is silent on this issue. 
See  Section  8(4)  of  the  draft  law.  Currently  the  Director  General  of  the  FSA  is  appointed  by  the  President  of  the 
Republic. 
The Parliamentary Supervisory Council will have the power to issue a warning and suspend the Director General from 
duty; the Director General may be suspended if they are prosecuted or under investigation for an offence (Sections 8 and 
11 of the draft law). 
See Section 9 of the draft law and Section 9 of the current Law on the FSA. 
Under Section 13 of the draft law: (1) the matters listed in Subsection 1 (e.g. granting an authorisation to a supervised 
entity) will be provided by the Director General to the Board ‘for information’; (2) any Board member may require that 
such matter is taken up by the Board ‘for consideration’; and (3) the Board is entitled to take a decision on the matter if it 
may significantly affect the stability of financial markets or otherwise significantly affect their development. 
See Section 70 of the draft law and Chapter 5.6 ‘Covering the costs of supervision’ of the explanatory memorandum. 
See the fifth paragraph of Section 71 of the draft law. The fourth paragraph of Section 36 of the current Law on the FSA 
only  specifies  the  duty  to  provide  information  on  matters  that  may  jeopardise  financial  stability  or  cause  major 
disruptions to the operation of the financial system. 
See  Chapter  6  of  the  draft  law.  The  ‘Capital  Requirements  Directives’  are  Directive  2006/48/EC  of  the  European 
Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions 
(recast) (OJ L 177, 30.6.2006, p. 1), as last amended by Directive 2007/64/EC (OJ L 319, 5.12.2007, p. 1), and Directive 
2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms 
and  credit  institutions  (recast)  (OJ  L  177,  30.6.2006,  p.  201).  The  Capital  Requirements  Directives  have  been 
implemented in Finland by the Law on credit institutions (121/2007) and certain other laws. 

3 

 
                                                 
2. 

General comment 

2.1  The ECB broadly welcomes the general aim of the draft law to strengthen the supervisory structure 

in Finland, by ensuring that it is appropriately equipped to respond to risks emerging in financial 

markets, particularly in cross-sectoral domestic activity and in a cross-border context. The ECB has 

recognised  in  its  previous  opinions  that  the  nature  and  scope  of  risk  in  the  financial  sector  is 

widening,  due  to  closer  links  between  credit  institutions,  insurance  companies,  investment  firms 

and pension funds, as demonstrated by the emergence of hybrid financial products, the increased 
use of risk transfer instruments and the growing role of financial conglomerates20. 

2.2  Moreover, the ECB notes that, like the FSA, FISA will operate in connection with Suomen Pankki. 

Indeed,  central  banks  have  traditionally  been  closely  involved  in  the  prudential  supervision  of 

credit  institutions  due  to  their  pivotal  role  in  the  financial  system,  in  particular  regarding  the 
implementation  of  monetary  policy  and  ensuring  the  proper  functioning  of  payment  systems21. 

Moreover, the maintenance of a close involvement of euro area national central banks (NCBs) in 

prudential  supervision  is  an  important  condition  for  allowing  the  Eurosystem  to  contribute 
adequately  to  monitoring  the  risks  to  financial  stability  in  the  euro  area22,  in  accordance  with 

Article 105(5) of the Treaty, and to safeguarding smooth coordination between the central banking 

functions  exercised  at  Eurosystem  level  and  the  supervisory  functions  carried  out  at  national 
level23. 

2.3 

In this context, the ECB makes a number of comments relating to specific provisions of the draft 
law, with a view to ensuring the operational independence of the proposed supervisory authority24 

and the appropriate scope of central bank involvement in supervision and oversight policies.  

3. 

Objectives and governance of the supervisory authority 

3.1  The ECB broadly welcomes the objectives assigned to the FISA, as well as the clear statement that 
the FISA will operate in connection with Suomen Pankki25. Such cooperation would be particularly 

important as regards the FISA’s contribution to financial stability, which is also a task performed 
by Suomen Pankki26. 

20  

21  

22  

23  

24  

25  
26  

See, e.g. paragraph 5 of ECB Opinion CON/2004/16 of 11 May 2004 at the request of the Italian Ministry of Economic 
Affairs and Finance on a draft law on the protection of savings. 
See  paragraph  6  of  ECB  Opinion  CON/2003/23  of  24  October  2003  at  the  request  of  the  Ministry  of  Finance  of  the 
Netherlands  on  a  draft  law  on  provisions  concerning  the  merger  of  De  Nederlandsche  Bank  and  the  Pensions  and 
Insurance Supervisory Authority Foundation.  
See paragraph 4 of ECB Opinion CON/2001/10 of 25 May 2001 at the request of the Austrian Ministry of Finance on a 
draft law establishing and organising the financial market supervisory authority [title shortened]. 
See paragraph 5 of ECB Opinion CON/2001/35 of 8 November 2001 at the request of the German Ministry of Finance on 
a draft law establishing an integrated financial services supervision. 
See paragraphs 3.1 and 3.2 of ECB Opinion CON/2006/39 of 2 August 2006 at the request of Poland’s Sejm Marshall on 
a draft law amending the Law on Narodowy Bank Polski. See also the Bank for International Settlements (BIS), Core 
Principles for Effective Banking Supervision, October 2006, Principle 1 (available on the BIS website (www.bis.org)). 
Section 1 of the draft law. 
Section 3 second paragraph, subparagraph 3 of the Law on Suomen Pankki. 

4 

 
                                                 
3.2  The ECB notes that the proposals set out in the draft law seek to establish a sound decision-making 
structure  within  the  FISA.  Further  to  its  earlier  recommendations27,  the  ECB  would  like  to 

underline that granting the Director General full membership of the FISA’s Board would enhance 

the quality of the decision-making process. It should also increase the acceptance and credibility of 

Board decisions in the market place and the FISA’s commitment to implementing the decisions.  

3.3  The  ECB  welcomes  the  introduction  of  a  provision  providing  for  a  fixed  term  of  office  for  the 

FISA’s Director General. It understands that certain general safeguards against dismissal before the 

lapse of the statutory term in office will apply to the Director General on the basis of Finnish law 
governing  Suomen  Pankki  staff28.  The  ECB  considers  nevertheless  that  appropriate  express 

safeguards  should  be  introduced  against  unfair  dismissal  before  expiry  of  the  statutory  term  of 

office, both in relation to the FISA’s Director General and its Board members. As a minimum, it is 

recommended  to  include  in  the  draft  law  a  list  of  the  possible  grounds  for  dismissal  of  Board 

members  and  of  the  Director  General,  as  well  as  a  clarification  regarding  the  applicable  court 

review procedure. The draft provisions regarding suspension from office should also be reviewed 

to take into account the issues raised in this paragraph.  

4. 

FISA’s relationship with Suomen Pankki 

4.1  Central bank independence safeguards 

Like the FSA, the FISA will be a body operating in connection with Suomen Pankki. It will form 

part of Suomen Pankki’s organisational structure, as regulated by the Law on Suomen Pankki and 

other  relevant  provisions.  As  a  consequence,  all  FISA’s  acts  or  omissions  will  be  attributable  to 

Suomen Pankki as the sole legal person liable for such acts or omissions. However, the practical 

influence of Suomen Pankki’s Board on decisions of the FISA’s Board and Director General will 

be limited to nomination of one FISA Board member. In the above context, the ECB would like to 

remind  the  consulting  authority  of  its  views  expressed  in  its  previous  opinions  in  circumstances 

where national laws provide for supervisory authorities to share legal personality with an NCB but 

be governed by a separate decision-making body, independent from the NCB’s governing bodies 

responsible  for  the  conduct  of  core  central  bank  tasks.  The  ECB  has  noted  in  particular  that: 

(i) such a structure, together with the potential exposure of an NCB to liabilities resulting from the 

supervisory  authority’s  activity,  could  be  seen  as  a  threat  to  the  NCB’s  overall  institutional  and 
financial  independence29;  and  (ii)  it  is  important  to  ensure  that  decisions  adopted  by  such 
supervisory authorities do not endanger the finances of the NCB as a whole30. The ECB notes that 

27  

28  

29  

30  

See paragraph 6 of ECB Opinion CON/2002/23, of 18 September 2002, at the request of the Finnish Ministry of Finance 
on a draft proposal concerning a revision of the Act on the Financial Supervision Authority. 
Section  26  of  the  Law  on  civil  servants  of  Suomen  Pankki  (1166/1998)  includes  a  general  rule,  pursuant  to  which  an 
employee may be dismissed in cases of serious breach or negligence in their duties. 
See paragraph 6 of ECB Opinion CON/2002/16 of 5 June 2002 at the request of the Irish Department of Finance on a 
draft Central Bank and Financial Authority of Ireland Bill, 2002. 
See the ECB Convergence Report, December 2006, ‘Introduction and executive summary’, Section 2 (Compatibility of 
national  legislation  with  the  Treaty),  Subsection  2.3.1  (Central  bank  independence)  under  the  heading  ‘Financial 
independence – Financial liability for supervisory authorities’, p. 28. 

5 

 
 
                                                 
Suomen  Pankki  may  face  risks  in  relation  to  the  operation  of  FISA  (both  as  regards  its  internal 

management  and  the  adopted  supervisory  policies  and  decisions)  that  will  not  be  limited  to  its 

potential  financial  liability,  but  may  also  include,  in  particular,  reputational  and  operational  risks 

relating to diminished effectiveness of central bank operations, e.g. in the event of disputes arising 

between the supervised entities and the supervisor. 

4.2  Taking  the  above  into  account,  the  institutional  framework  proposed  by  the  draft  law  should  be 
reviewed  to  ensure  that  Suomen  Pankki’s  institutional  and  financial  independence31  will  be 

protected under the proposed reform. In this regard, the ECB’s comments relate to five separate but 

inter-related dimensions, which will require further consideration individually and in terms of their 

inter-relationships, with a view to finding a balanced solution. 

(a) 

Institutional set-up 

Some Member States with similar supervisory structures as proposed in the draft law have 

adopted  institutional  frameworks  which  adequately  protect  their  NCBs  from  risks  to  their 

institutional  and  financial  independence.  Such  frameworks  rely,  inter  alia,  on:  (i)  a 

sufficiently  strong  representation  of  the  NCB  in  the  supervisory  authority’s  governing 
body32, which may include the NCB governor acting as ex officio  Chair33; or (ii) a duty to 

obtain  the  governor’s  approval  on  key  supervisory  decisions  relating  to  the  stability  of  the 
financial  system34.  Having  regard  to  central  bank  independence  requirements,  the  ECB 

recommends that one of these institutional mechanisms is introduced into the Finnish legal 
framework35.  One  important  safeguard  in  this  respect  could  be  statutory  recognition  of  the 

current  practice  of  appointing  the  FISA’s  Board  member  nominated  by  Suomen  Pankki  as 

Chair. 

(b)  Budgetary arrangements 

FISA’s revenues and expenses will be included in Suomen Pankki’s annual accounts, while 

the  FISA’s  Board  will  be  obliged  to  submit  the  FISA’s  annual  budget  to  the  Board  of 
Suomen Pankki for confirmation36. The ECB understands that the FISA’s Board is entitled to 

31  
32  

33  

34  

35  

36  

See Article 108 of the Treaty. 
In  Estonia,  for  instance,  Eesti  Pank’s  President  is  an  ex  officio  member  of  the  Financial  Supervision  Authority’s 
supervisory board, while further two members in the six-person board are appointed by Eesti Pank’s Board on a proposal 
by  Eesti  Pank’s  President  (Section  8  of  the  Law  of  9  May  2001  on  the  Financial  Supervision  Authority).  Cf.  the 
supervisory  structures  in  Austria,  Belgium  and  Latvia  described  in  footnotes  58,  60  and  61  to  ECB  Opinion 
CON/2006/15  of  9  March  2006  at  the  request  of  the  Polish  Minister  of  Finance  on  a  draft  law  on  the  supervision  of 
financial institutions. 
In France, for example, the Commission Bancaire is chaired by the President of the Banque de France (Articles L. 613-3 
and L. 613-7 of the French Financial and Monetary Code). Cf. paragraph 3.1.1 of the ECB Opinion CON/2006/15.  
The Irish Financial Services Regulatory Authority is required to consult the Governor of the Central Bank and Financial 
Services  Authority  of  Ireland,  and  may  act  only  with  the  agreement  of  the  Governor  on  any  matter  relating  to  the 
financial stability of the State’s financial system, including (but not limited to) the issue, revocation and suspension of a 
licence or other authority. See Sections 33C(9), (9A) and (9B) of the Central Bank Act 1942, as amended. Some elements 
of such structure are also present in Denmark and Hungary (see the detailed description in footnotes 64 and 66 to ECB 
Opinion CON/2006/15). 
This  recommendation  is  related  to  the  ECB’s  concerns  regarding  the  reimbursement  mechanism,  as  explained  in 
paragraph 4.2(c) of this opinion. 
See Section 10 of the draft law. 

6 

 
 
                                                 
independently  determine,  inter  alia,  the  FISA’s  specific  objectives  and  strategic  directions, 

including  their  budgetary  implications,  while  Suomen  Pankki’s  powers  are  limited  to 

returning the FISA’s budget to the FISA’s Board for reconsideration. The ECB recommends 

that  the  Board  of  Suomen  Pankki  should  be  given  the  explicit  power  to  oppose  any 

budgetary proposals submitted by the FISA’s Board and to decide on essential changes to the 

FISA’s budget if this is necessary in view of the budget’s implications for Suomen Pankki’s 
independence and its capacity to pursue central banking tasks37. 

(c) 

The reimbursement mechanism and its financial implications 

The ECB notes that the draft law provides for a reimbursement mechanism under which the 

State  would  ultimately  cover  any  damages  paid  by  Suomen  Pankki  as  a  result  of  errors  or 

omissions in the performance of the FISA’s supervisory tasks, to the extent that such damage 
exceeds  the  amount  of  remaining  profit  distributable  to  the  State38.  As  stated  in  the 

explanatory  memorandum  to  the  draft  law,  the  reimbursement  mechanism  is  intended  to 

cater  for  exceptional  situations  where  Suomen  Pankki’s  exposure  to  financial  liability 

resulting from the FISA’s supervisory liability could jeopardise Suomen Pankki’s financial 
position39.  The  ECB  understands  from  the  explanatory  memorandum  that,  under  the 

reimbursement mechanism, Suomen Pankki will in the first place pay the damages to third 

parties, but ultimately Suomen Pankki will carry the burden of the payment of such damages 

only up to the amount of profits distributable to the State. If the damages payable by Suomen 

Pankki  exceed  the  amount  of  profits  distributable  to  the  State,  Suomen  Pankki  (i) will  not 

distribute  any  profit,  as  damages  have  been  paid  equal  to  such  amount,  and  (ii) will  be 

reimbursed by the State for the part of the damages paid in excess of the distributable profits 

‘without  undue  delay’.  The  ECB  understands  that,  due  to  the  nature  of  this  scheme,  the 

reimbursement will not occur until Suomen Pankki’s accounts for the year have been closed 

and  the  distributable  profit  duly  determined.  Although  the  ECB  welcomes  the  intention 

underlying  these  provisions  preventing  supervisory  liability  from  being  detrimental  to 

Suomen  Pankki’s  finances  as  a  whole,  the  ECB  remains  concerned  that  the  proposed 
reimbursement  mechanism,  in  the  light  of  the  proposed  FISA  institutional  framework40,  is 

not sufficient to ensure the NCB’s financial independence. The ECB would therefore suggest 

giving further consideration to the proposed reimbursement mechanism. One solution would 

be to ensure that compensation for damage suffered by third parties as a result of errors or 

omissions  in  the  performance  of  FISA’s  supervisory  tasks  is  paid  directly  from  the  State 

budget.  Another  possibility,  taking  into  account  the  function  of  the  reimbursement 

37  
38  

39  
40  

See paragraph 8 of ECB Opinion CON/2002/16. 
According to Section 69 of the draft law, Suomen Pankki is liable for damage arising from an error or omission by the 
FISA  as  provided  for  in  the  Law  on  tort  liability,  but  the  Government  will  reimburse  Suomen  Pankki,  without  undue 
delay,  for  any  payment  made  in  compensation  of  such  damage,  to  the  extent  the  compensation  exceeds  the amount  of 
profits distributable to the State by Suomen Pankki according to Section 21(2) of the Law on Suomen Pankki.  
See chapter 3.2 ‘Administration – Basic structure of the governance model’ of the explanatory memorandum.  
See paragraph 4.2(a) of this opinion. 

7 

 
                                                 
mechanism as a measure intended to ensure Suomen Pankki's financial independence, would 

be  to  include  express  provisions  in  the  draft  law  specifying  that  expenses  relating  to  the 

FISA’s supervisory liability will be reimbursed by the State immediately after such expenses 

have been incurred and presented for repayment by Suomen Pankki. 

(d) 

Transfer of ISA’s liabilities and commitments to Suomen Pankki 

The draft law further provides for a transfer to Suomen Pankki of, inter alia, ‘liabilities and 
commitments’ of the current ISA41. In line with its previous opinions42, the ECB notes that 

provisions  making  an  NCB  a  legal  successor  to  the  liabilities  of  a  separate  supervisory 

authority raise issues of compliance with the monetary financing prohibition in Article 101 

of the Treaty. The ECB notes that the ISA is currently, unlike the FSA, a legal entity distinct 

from  Suomen  Pankki,  and  that  Suomen  Pankki  will  take  over  the  existing  liabilities  and 

commitments  of  the  current  ISA  without  being  insulated  from  the  financial  obligations 

resulting  from  the  prior  activities  of  such  a  previously  independent  public  body.  This 
arrangement  would  be  incompatible  with  Article  101  of  the  Treaty43.  The  ECB  therefore 

recommends  specifying  in  the  draft  law  that  the  State  will  meet  any  financial  obligations 

incurred by Suomen Pankki as a result of it being substituted for the ISA and that the State 
should not have any recourse to Suomen Pankki in relation to its liability in this respect44. 

(e)  Auditing and reporting regime 

The draft law is silent with regard to the auditing and reporting regime applicable to FISA. 

As  Suomen  Pankki’s  annual  accounts  are  audited  by  independent  external  auditors  under 

Article  27.1  of  the  Statute  of  the  European  System  of  Central  Banks  and  of  the  European 

Central Bank (hereinafter the ‘ESCB Statute’), the ECB assumes that the auditors’ mandate 

will be extended to the FISA. However, this point should be clarified expressly in the draft 

law.  

4.3  Central bank role in relation to oversight 

Article  105(5)  of  the  Treaty  assigns  the  ESCB  the  task  of  contributing  to  the  smooth  conduct  of 

policies  pursued  by  the  competent  authorities  relating  to  the  prudential  supervision  of  credit 

institutions  and  the  stability  of  the  financial  system.  The  ECB  understands  that  this  task  is 

recognised  in  Section  3  of  the  Law  on  Suomen  Pankki,  which  specifies  that  Suomen  Pankki 

41  
42  

43  

44  

See the first paragraph of Section 76 of the draft law.  
See paragraphs 8 to 12 of the ECB Opinion CON/2005/24 of 15 July 2005 at the request of the Ministry of Finance of the 
Czech Republic on a draft law on the integration of financial market supervisors.  
See  the  ECB  Convergence  Report,  May  2007, Chapter  2  (Framework  for  analysis),  Subsection  2.2.4.1  (Prohibition  on 
monetary financing) under the heading ‘Assumption of public sector liabilities’, p. 22. National legislation requiring an 
NCB to take over the liabilities of a previously independent public body as a result of a national reorganisation of certain 
tasks and duties (for example, in the context of a transfer to the NCB of certain supervisory tasks previously carried out 
by the State or independent public authorities or bodies) without insulating the NCB from financial obligations resulting 
from  the  prior  activities  of  such  previously  independent  public  bodies  is  incompatible  with  the  monetary  financing 
prohibition. 
See paragraphs 8 and 10 to 11 of ECB Opinion CON/2005/24. 

8 

 
 
 
                                                 
participates  in  maintaining  the  reliability  and  efficiency  of  the  payment  system  and  overall 

financial system and participates in their development.  

4.4  More specifically, an oversight function is inherent in a central bank’s task of promoting a sound 

market infrastructure to safeguard the effectiveness of monetary policy and the overall stability of 

the  financial  system.  As  expressed  in  its  earlier  opinions,  the  ECB  understands  that  Section  3, 

second  paragraph,  subparagraph  3  of  the  Law  on  Suomen  Pankki  provides  the  legal  basis  for 

Suomen Pankki’s oversight function. The ECB notes that it would be helpful to include an explicit 

reference in the Law on Suomen Pankki to the oversight function regarding securities clearing and 
settlement  systems  and  market  infrastructure45.  In  the  context  of  the  current  reform,  the  ECB 

recommends  that  the  tasks  of  Suomen  Pankki  and  the  FISA  relating  to  the  oversight  and 

supervision of payments and securities clearing and settlement systems and market infrastructure, 

are  specified  more  explicitly  in  the  legislation,  in  particular  by  referring  explicitly  to  Suomen 
Pankki’s responsibility for oversight of all such systems and infrastructures operating in Finland46.  

4.5  Exchange of information 

Under Section 71(5) of the draft law, the FISA will be obliged to disclose, without undue delay, to 

the  Ministry  of  Finance,  the  Ministry  of  Social  Affairs  and  Health  and  Suomen  Pankki  any 

information  on  ‘matters  that,  according  to  the  FISA’s  judgement,  may  have  significant  effect  on 

financial  stability  or  other  financial  market  developments,  or  cause  major  disruptions  in  the 

operation  of  the  financial  system’.  The  ECB  notes  that  this  provision  clarifies  that  the  FISA  is 

under  a  legal  obligation  to  disclose  supervisory  information  to  Suomen  Pankki.  However, 

extending  the  disclosure  of  confidential  information  to  central  government  administration  should 

not impair the FISA’s operational independence and should comply with Community law. 

4.6  As emphasised in previous ECB opinions47, central banks provide valuable input to the supervisory 

process  and  their  access  to  supervisory  information  benefits  the  conduct  of  monetary  policy 

operations, the oversight of payment systems and the pursuit of financial stability. Transmission of 

supervisory  information  and  data,  primarily  in  aggregated  form,  is  necessary  for  effective 

monitoring of financial stability and for assessing the prevailing conditions in the financial system 

as  a  whole  as  well  as  for  the  efficacy  of  the  response  when  a  financial  crisis  occurs.  The  ECB 

would  therefore  welcome  insertion  of an  explicit  provision  in  the  draft  law  stipulating  that  FISA 

has a duty to exchange information with Suomen Pankki in relation to all ESCB-related tasks.  

45  

46  

47  

See paragraphs 17 and 18 of ECB Opinion CON/2003/22 of 15 October 2003 at the request of the Finnish Ministry of 
Finance on a draft governmental proposal to amend the Suomen Pankki Act and other related acts; also paragraphs 14 
and  15  of  ECB  Opinion  CON/2004/1  of  20  January  2004  at  the  request  of  the  Economic  Committee  of  the  Finnish 
Parliament on the governmental proposal to amend the Suomen Pankki Act and other related acts. 
See paragraph 3.2 of ECB Opinion CON/2006/20 of 25 April 2006 on the Dutch draft law concerning financial sector 
supervision and paragraph 2.8 of ECB Opinion CON/2006/53 of 16 November 2006 at the request of the Polish Minister 
for  Finance  on  a  draft  law  amending  the  Law  on  trading  in  financial  instruments.  See  also  the  BIS  Committee  on 
Payment  and  Settlement  Systems,  ‘Central  Bank  Oversight  of  Payment  and  Settlement  Systems’,  May  2005,  p.  1 
(available on the BIS website (www.bis.org)).  
See, e.g. paragraph 2.4.1 of ECB Opinion CON/2006/15. 

9 

                                                 
4.7  The  ECB  recommends  that  the  provisions  regarding  exchange  of  information  between  the  FISA 

and  Suomen  Pankki  and  between  the  FISA  and  other  administrative  bodies  (domestic  or  foreign) 

are  combined  with  express  safeguards  ensuring  the  effectiveness  of  the  confidentiality  rules 

applicable to the ESCB, as specified in Article 38 of the ESCB Statute. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 4 April 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

10