The Financial Stability Authority is well placed to carry out bank resolution tasks. However, it should clarify the resolution plans it has drawn up for banks so far. In addition, the authorities should clarify the procedures concerning the exchange of information specified in law and update the existing memorandum of understanding on cooperation.
The banking union is the EU-level banking supervision and resolution scheme. Under the banking union’s Single Resolution Mechanism, the Single Resolution Board is responsible for any resolution activities concerning ‘significant banks’, while national resolution authorities, such as the Finnish Financial Stability Authority, are responsible for resolution tasks concerning nationally controlled ‘less significant banks’. One of the tasks of the resolution authority is to draw up resolution plans for banks in case of a situation where a bank is failing or likely to fail.
The purpose of the audit was to examine how well the Financial Stability Authority is prepared to implement resolution tasks and how the resolution tasks have been prepared in practice. The aim of the Single Resolution Mechanism is to ensure that in the event of a crisis, investors and the banking sector would bear the costs caused by the crisis.
According to the audit, the Financial Stability Authority is well placed to carry out bank resolution tasks. The Act on the Resolution of Credit Institutions and Investment Firms (‘the Resolution Act’) provides the Financial Stability Authority with powers in accordance with the Bank Recovery and Resolution Directive to apply resolution tools and powers. The Financial Stability Authority has been set up as a separate agency to ensure its operational independence. It has drawn up resolution plans for all less significant banks in Finland. The contents of these plans largely comply with the relevant recommendations.
The National Audit Office recommends that the Financial Stability Authority should clarify the sections of the resolution plans concerning information and communication plans. In addition, the Financial Stability Authority and the Bank of Finland should draw up a memorandum of understanding on cooperation that clarifies the procedures for the exchange of information as required by law. Furthermore, the Ministry of Finance should ensure that the memorandum of understanding on cooperation and on the division of duties between various authorities regarding financial system crisis management are updated to match the changed operating environment. To enhance the comprehensiveness of the external audit of the banking union, it is also recommended that the Ministry of Finance should examine the possibility of extending the audit rights of the National Audit Office.