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EeMAP: Sustainable Finance in Finland - Elina Salminen, Finance Finland
Sustainable Finance in Finland
Vihreä Foorumi 13.2.2018
What is FFI and who do we represent?
FINANCIAL SECTOR ENTITIES
We build an operating
environment that promotes
business in the financial sector
Banking, insurance, employee pension funds,
finance houses, investment funds
FFI Board’s policy decision 3 February 2017
•The Finnish financial sector supports the internationally agreed target of limiting global
warming below two degrees Celsius
•FFI and its members will collaboratively collect climate change indicators that best suit
reporting in the financial sector
•An ad hoc working group consisting of representatives from member organisations will
then continue work on the indicators
Sustainable development commitment on climate
• The working group will draw up a commitment to
sustainable development on the basis of the
Board’s policy decision
• The objective is to compile indicators that best
support climate related reporting in the financial
• The purpose of the best practices guidelines is to
facilitate the work of members without being
• The commitment allows us to publicly communicate
the financial sector’s actions for the prevention of
Green supporting factor
• At a general level, Finance Finland supports projects that aim to combat climate change and
sees this as an opportunity for the banking sector.
• The actions combatting climate change should be seen as both short-term and long-term
developments and in the light of different instruments. Integrating a green supporting factor
in capital regulations is seen as a fast way to influence matters, but it is also viewed with
caution because the risk assessment of the green supporting factor has not yet been
conducted and the correlation of “greenness” and risk (probability of default) is currently
• Finance Finland considers it important to assess the verifiable and supporting data of the
green supporting factor recommended in the current proposal before the green supporting
factor is integrated into capital regulation.
Timeline of banks capital requirements regulation
CRR II / CRD V proposals
CRR II/CRD V
EBA/ESMA to publish
After 2 years CRR II/CRD V
has been approved
2016 20182017 2019 2020
Green supporting factor
Commission delegated act
22.3.2018 Commission to
publish guidelines for
High Level Expert Group (HLEG),
Finnish Housing Company
own the shares
of the housing
A housing company –
an individual legal entity
Shares in the company entitle the
shareholder to possess a specified
apartment in the building. Shares are
used as collateral for a housing loan
Certificates of shares
A housing company owns the real estate – which can
used as collateral
Finnish housing company – from legal perspective
• Finnish housing company (in Finnish: asunto-osakeyhtiö) is defined in the existing Act on Housing Companies
(22.12.2009/1559, as amended)
• A housing company is a very common legal entity in Finland
• There are around 85.000 housing companies in the country altogether.
• The company is registered in the trade register maintained by National Board of Patents and Registration of Finland.
Finnish Act on Limited Liability Companies (“ALLC”) is being applied to the extent AHC does not state otherwise.
• Based on the company’s Articles of Association, the company’s line of business is to own and possess at least one building
or a part thereof where the majority of the total floor space is, according to Articles of Association of the company, is
specified as individual apartments possessed by the shareholders of the company. The building is located on land (typically
plot) owned by the company or which the company has leased from the landowner.
• Shareholders have an obligation to pay property maintenance fees to the company, as in detail decided by the governing
bodies of the company in accordance with Articles of Association and AHC. Should an individual shareholder become
insolvent, the other shareholders have an obligation to cover the loss to the company in the form of additional property
maintenance fee. In addition, there are certain forced procedures available for the company to cover its losses in such a
• Claims of the shareholders are subordinate to other claims of the company in a potential liquidation.
Finnish housing company – from credit risk
• A legally unique entity type in the EU with specific characteristics which make it inherently
• Exposure is fully and completely secured by mortgages on residential property which is
occupied or let by the shareholders.
• Defaults are unusual: the default ratio (share of individual housing companies having
default in a statistically relevant population of housing companies) is less than 0,3 %.
Write-downs or final losses are almost non-existing.
• The total outstanding amount of housing company loans granted by credit institutions is
28 bn€ which is 13% of total loans to the public
• Housing companies are a rather homogenous group of counterparties where each
individual company represents one of a significant numbers or similarly managed
exposures which have been and are being treated in a similar manner. Due to this housing
company exposures are managed not as individually as exposures in the corporate
Finnish housing company – from customer perspective
• The lending to housing companies is in practice treated similar manner as a lending
to retail customers (which owns the shares in the housing company).
• The similarity of the treatment and low riskiness could be seen e.g. in the renovation
of the building owned by the housing company. The loan could be taken by the
housing company or by the shareholder. In former case, individual shareholder has a
liability of repayment of it’s share of loan but all shareholders have ultimately joint
liability of the repayment of total loan. Moreover, the real estate owned by the
housing company as a collateral has a better priority order than shares within the
For more information: firstname.lastname@example.org