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Commercial businesses to be authorized to take customer depositsRoschier-Holmberg & Waselius Helsinki

In September 1999, the Finnish Ministry of Finance appointed a working group to evaluate the need to amend legislation applicable to the taking and receiving of deposits, and other corresponding repayable funds, from the public and to propose new legislation, where required. The report of the working group was delivered to the Ministry of Finance and published in January this year.

In particular, the working group was to assess the need to rewrite the definition of taking deposits, to evaluate the taking of deposits by entities other than credit institutions, to propose implementation of the provisions of Directive 2000/46/EC on the taking up, pursuit of and prudential supervision of the business of electronic money institutions, and to evaluate the regulation and safety of local money transfer systems. According to the Ministry of Finance instructions, the starting point was to guarantee sufficient competition in the provision of different saving and investment services and products, while preserving at least one particularly secure method of saving and transfer of payments.

Under the existing legislation, the taking and receiving of customer deposits is allowed only for certain savings associations (expected to be abrogated within five years), as well as deposit banks subject to licence by the Ministry of Finance to act as a credit institution. Following the working group's proposal, the right to receive customer deposits would be available also for other companies, to the extent that such deposits may be used for cash withdrawals or payments of goods or services provided by the receiving company or, subject to the consent of the Financial Supervision Authority, by its group companies. However, the right to receive deposits falling within the scope of the legislation governing the protection of deposits would only be available to deposit banks in accordance with existing legislation.

Furthermore, if the deposits are used for payment of goods or services provided by other entities then the receiving company or its group companies, the taking of deposits would require a licence granted by the Ministry of Finance. The working group proposes that the maximum amount that a company, not authorized to act as a deposit bank or other credit institution, may receive from a single customer, would be restricted to euro3,000 ($2,793). The proposal is expected to be particularly important to the business activities of companies engaged in retail trade.

The working group also proposes that, in order to improve the access to banking services in Finland, credit institutions would be entitled to use outside representatives when offering banking services, provided that the representatives meet certain quality requirements outlined in the working group's report. Finally, the working group proposes a limited authorization, entitling its holder to provide limited payment intermediation, and to issue electronic cash without being authorized to act as a credit institution.

Dimitrios Himonas

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