National economy needs banks
Banks play a vital role in the financial market and national economy as a whole. They grant credits, receive deposits, transfer payments and manage the investments and assets of customers. The effective transfer of payments is an essential prerequisite for a well-functioning market economy.
At the end of 2010, there were a total of 325 banks operating in Finland. These included domestic deposit banks, investment banks, and branches and subsidiaries of foreign credit institutions.
The most important piece of legislation that governs banking in Finland is the Act on Credit Institutions. Compliance with the laws and regulations is overseen by the Financial Supervisory Authority, which also monitors that banks maintain a healthy ratio of capital adequacy.
All authorized deposit-taking banks are members of the Deposit Guarantee Fund. If an individual bank becomes insolvent, the Fund will compensate its customers' deposits to a maximum of €100,000 per depositor.
The forming of financial groups has been a prevalent phenomenon in the banking sector in recent years. There has also been increase in foreign ownership in the sector.
A financial group is formed by one deposit bank and one or several other businesses that operate in the financial sector, such as fund management companies, finance houses, life or non-life insurers or pension insurers. Partnership arrangements between banks and insurers also enable the businesses to use each other's distribution networks and to cross-sell their products.
There are a large number of national, international and EU-level regulatory projects currently under way, many of which are a consequence of the recent financial crisis. The effects of the regulatory reform must be thoroughly analysed, as they will have impact on the whole sector, consumers included.