The Guarantee Scheme for Bank Funding in Finland (Finland GFC)

17 Pages Posted: 26 Oct 2020 Last revised: 27 Aug 2021

See all articles by Lily Engbith

Lily Engbith

Yale School of Management - Program on Financial Stability

Date Written: October 10, 2020

Abstract

As the global financial crisis raged in October 2008, its severe impact on global credit markets impelled governments to enact stabilization measures to calm and protect their domestic economies. The Republic of Finland, though not directly affected, designed preemptive interventions to mitigate disruption to its financial system. Among them was the Guarantee Scheme for Bank Funding in Finland (the Guarantee Scheme), announced on October 22, 2008, and implemented on February 12, 2009, which aimed to support banks and mortgage institutions with their short- and medium-term financing needs. Under the program, the Finnish State Treasury made up to €50 billion available to guarantee new debt issued by any Finnish deposit bank or mortgage institution considered to be solvent by authorities. Initially, types of debt covered by the Guarantee Scheme included new certificates of deposit, unsecured bonds, and other non-subordinated instruments with maturities of greater than 90 days but less than three years. Covered bonds with maturities of up to five years were also eligible. Although the Guarantee Scheme was amended and prolonged twice, it was never utilized and concluded with the expiration of the issuance window on June 30, 2010.

Keywords: Finland, short-term debt, medium-term debt, mortgage banks, credit institutions, government guarantee, guarantee scheme

JEL Classification: G01,G28

Suggested Citation

Engbith, Lily, The Guarantee Scheme for Bank Funding in Finland (Finland GFC) (October 10, 2020). Journal of Financial Crises: Vol. 2 : Iss. 3, 664-680. , Available at SSRN: https://ssrn.com/abstract=3717990

Lily Engbith (Contact Author)

Yale School of Management - Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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