Finland achieves medium overall compliance with international standards and codes, with a score of 55 out of 100 in our Standards Compliance Index. Finland is fully compliant with the standards on data dissemination and monetary policy, however, the overall evidence suggests that in the case of most standards, Finland has the necessary prerequisites and legal framework in place but lacks sufficient enforcement to merit a 'full compliance' rating. For instance, in the areas of Anti-Money laundering, Corporate Governance, and Fiscal Transparency, Finland's legal and institutional frameworks are sound but the country is lagging in terms of proper implementation or information thereof. Similarly, for Securities Regulation, Insolvency, and Payment Systems, Finland is assigned a rating of 'compliance in progress' indicating the country has incorporated all the necessary requirements into legislation and has achieved a fair amount of successes in their implementation but still falls short of full compliance. In terms of Finland's compliance with the other supervisory standards, namely Banking and Insurance Supervision, there is a dearth of significant information publicly available to assign a compliance level. Finland has yet to adopt international accounting standards, and plans to adopt International Standards on Auditing as required by the European Commission's Directive 2006/43/EC.

Macroeconomic Policy and Data Transparency

Finland became a subscriber to the Special Data Dissemination Standard (SDDS) of the International Monetary Fund (IMF) on June 3, 1996. According to the SDDS website, Finland's data meets all requirements for coverage, periodicity, and timeliness. Finland does avail itself of a timeliness flexibility option for central government operations data, explaining that this is necessary only for the period from December through March, when it prepares its annual data for the prior year. Information provided on the SDDS website also indicates that Finland complies with the SDDS' requirements on access, integrity and quality of data. The SDDS website also shows that Finland produces summary methodologies for all datasets, as well as advance release calendars that are also posted on the website of Statistics Finland. The IMF in its 2005 report notes that Finland regularly updates its metadata and adheres to the release dates posted on its advance release calendars. As a member of the European Union, European Monetary Union, and European Statistical System, Finland is also subject to the policies and practices regarding statistics that are promulgated by those bodies. More »

Finland adopted the Euro with its launch in January 1999 and in doing so, its monetary policy is no longer governed by the Bank of Finland. Rather, the Governing Council of the European Central Bank (ECB) determines Finnish monetary policy, and the Eurosystem (consisting of the ECB and the central banks of the member states that have adopted the euro) is responsible for its implementation. According to the International Monetary Fund (IMF), the Eurosystem and the ECB maintain high transparency standards and a commitment to openness. The ECB observes the IMF's codes and standards for monetary policy transparency and pursues an active policy of communication with the public. More »

Finland's fiscal policy objectives are set out in its Government Stability Program, and as a member of the European Union (EU), Finland must comply with the EU's criteria for prudent fiscal policy as laid down in the Stability and Growth Pact. Finland has been a member of the International Monetary Fund's Special Data Dissemination Standard since 1996, and the metadata it provides to the website meet all requirements for coverage, timeliness, and periodicity. A 2004 international study of budget-system frameworks by the Organization for Economic Cooperation and Development describes the Finnish Constitution as containing "extensive" provisions covering the budget process. These are supplemented by provisions of the State Budget Act. In addition, the Constitution and the 1999 Act on Openness in Government Activities impose requirements of transparency and disclosure on all government authorities, including the right of citizens to access budget-related statistics and information on the budget process. However, there is as yet no comprehensive assessment of Finland's fiscal policy transparency practices. This prevents the assignment of a higher overall compliance rating for this standard. More »

Institutional and market infrastructure

Phillip & Partners and Deloitte and Touche, reporting in 2002 for the European Commission, note that Finland has fully adopted 19 of the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank, almost fully adopted 15 principles, partially adopted 5 principles, and has not adopted 2 principles. The Finnish insolvency regime received an overhaul in 1995 with the passage of the Act on the Supervision of the Administration of Bankrupt Estates, which established the office of the independent Bankruptcy Ombudsman, and again in 2004, when a new Bankruptcy Act went into effect. The Act seeks to improve clarity, transparency, and predictability in the insolvency regime, as well as incorporating the necessary flexibility to permit restructuring or other options, as the individual case requires. Insolvency proceedings in Finland are deemed more efficient and less costly than the average of other member states of the Organization for Economic Cooperation and Development (OECD), according to the World Bank's 2008 "Doing Business" guide. According to the World Bank, Finland's average time and cost of bankruptcy proceedings are 0.9 years and 4% of the estate, respectively, which compares quite favorably to the OECD averages of 1.3 years and 7.5%. Return to creditors for Finland at 88.2 cents on the dollar is also above the OECD average of 74.1. More »

In line with European Commission (EC) Regulation No. 1606/2002, listed companies in Finland are required to use International Financial Reporting Standards (IFRSs) in their consolidated accounts. The provisions of Regulation No. 1606/2002 led to an amendment to the Accounting Act which came into force at the end of 2004, making the application of IFRSs mandatory in consolidated accounts of all publicly listed companies in Finland. The 2006 EC report on the implementation of Regulation No. 1606/2002 points out that Finland permits IFRSs in the annual accounts for listed companies and in the annual and consolidated accounts for all other companies. Companies that choose not to apply IFRSs follow national regulations and adhere to an accounting framework governed by the Accounting Act and the Accounting Ordinance which, according to a 2002 KPMG report, differ from IFRSs. More »

Requirements for corporate governance practices are incorporated into a variety of legislations in Finland. In July 2004, a corporate governance code "Corporate Governance Recommendation for Listed Companies," entered into force on a comply-or-explain basis to harmonize the existing regulations, increase operational transparency, and improve the quality of disclosure. In a 2002 comparative study on corporate governance codes in the European Union, Weil, Gothsal & Manges report that Finnish law already includes many of the provisions that are in the corporate governance codes of most countries, so that the Recommendation serves primarily as a complement to existing requirements. A 2005 Finnish Financial Supervision Authority report states that the corporate governance framework is based on the 2004 Organization for Economic Cooperation and Development Principles of Corporate Governance. The new Limited Liabilities Companies Act entered into force on September 1, 2006, replacing the Limited Liabilities Companies Act of 1978. The new Act was designed to improve the clarity and comprehensiveness of the Companies Act, and to strengthen the legal protection of creditors and minority shareholders. More »

On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force, requiring all statutory audits of annual and consolidated accounts to be carried out on the basis of International Standards on Auditing (ISAs) as adopted by the European Commission (EC). European Union (EU) member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. Finland is an EU member and, as such, adheres to the EC regulations. Auditing practices in Finland are governed by the Auditing Act. In July 2007, a new Auditing Act was adopted in Finland which complies with Directive 2006/43/EC, and detailed provisions on the enforcement of the Auditing Act were laid out in the Auditing Ordinance that came into effect the same year. The Finnish Institute of Authorized Public Accountants (KHT) issues generally accepted auditing standards (tilintarkastusstandardit) which, according to the 2006 KHT self-assessment, are based on ISAs, but with modifications that reflect the local legal environment. More »

The Financial Action Task Force (FATF) conducted a mutual evaluation of Finland in 2007 and concluded that the anti-money laundering and combating the financing of terrorism (AML/CFT) legal framework prevailing in Finland is broad and encompasses most of the elements of the Vienna and Palermo Conventions. The report also notes that Finland applies proper preventive measures to its financial institutions. Per the same report, the Finnish financial intelligence unit, the Money Laundering Clearing House (MLCH), is generally effective and other law enforcement officials in Finland are competent. The country also has a comprehensive framework for national and international cooperation. In the area of preventive measures, Finland has broad customer identification, record keeping, and suspicious transaction reporting requirements. The FATF report, however, points to deficiencies in implementation of laws and regulations, such as the low rates of actual prosecutions and convictions and the weak sanctions regime. Also, the report identifies inadequacies in the supervision of designated non-financial businesses and professions and the lax customer due diligence requirements in this sector. Among its recommendations, the 2007 FATF report includes broadening the AML/CFT regime to enable more robust supervision; making sanctions for non-compliance more effective and covering all supervised entities; increasing national and international cooperation and information exchange; enhancing the scope of confiscation, seizing, and freezing measures; improving the data-keeping and guidelines of the MLCH; focusing law enforcement efforts on AML/CFT investigations, prosecutions, and convictions; making the supervision of legal persons and the non-profit sector more effective; and closing gaps in implementing the United Nations Conventions and in the mutual legal assistance and extradition regimes in Finland. More »

In 2001, the International Monetary Fund (IMF) assessed Finland's systemically important payment systems, which according to the IMF were the Bank of Finland's real-time gross settlement system (BoF-RTGS), the large-value payment system for express transfers and checks (POPS), and the retail payment system. BoF-RTGS is a component of the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) system, the Euro area payment system. The 2001 IMF assessment concluded that the three systems observed all the Core Principles for systemically important payment systems (CPSIPS). A 2004 European Central Bank report assessed BoF-RTGS and POPS against the CPSIPS and found that BoF-RTGS fully observed all the core principles (CPs), except CP VIII, which it broadly observed, and POPS observed all the CPs. The report noted that CP V was not applicable to both systems. The BoF, in its 2006 Financial Stability report, indicated that Finland's SIPS conform to the CPSIPS and the BoF regularly monitors the operation of these systems. Finland is expected to migrate to the Euro area payment system, TARGET2, on February 18, 2008. TARGET2 is the successor to TARGET and is a centralized system with a common technical platform which allows it to provide a harmonized level of service for its members. More »

Financial Regulation and Supervision

A 2001 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) indicates that Finland has, in general, put in place the essential conditions for effective banking supervision in most areas and that they are being administered satisfactorily. The FSSA, however, notes that Finland is materially non-compliant with some of the Basel Core Principles (BCPs) for Effective Banking Supervision. These pertain to the weaknesses in the power of the Finnish Financial Supervision Authority (FIN-FSA) to: require compliance with safety and soundness measures; assess the adequacy and prescribe levels of loan-loss provisioning; control connected lending; establish criteria for acquisitions and investments; establish capital requirements based on risk; conduct more proactive on-site and off-site supervision; and take prompt remedial action. Finland is also found lacking in the areas of clear objectives, autonomy, and resources of the supervisor. A more recent (2007) IMF Article IV report nevertheless affirms that the Finnish financial system is sound and stable. The report mentions the planned merger of the FIN-FSA and the Insurance Supervisory Authority in 2009, which is designed to pool the expertise and resources of the former supervisors and bring common supervised cross-sector entities under one umbrella, thereby making supervision more effective. Despite the 2001 IMF assessment and subsequent reports, there is little information publicly available directly addressing Finland's overall compliance with the BCPs. More »

According to the International Monetary Fund's (IMF) Financial System Stability Assessment (FSSA), published in 2001, Finland has broadly implemented the International Organization of Securities Commissions Principles and Objectives for Effective Securities Regulation. The report noted that Finland has a well developed and transparent framework for the supervision of the securities markets, but recommends further improvement in certain areas. The IMF FSSA pointed to weaknesses primarily in three areas: regulatory independence; sufficiency of regulatory powers; and potential systemic financial risks related to short selling or the structure of market arrangements for equity settlements and trading allotments. The IMF indicated that additional administrative powers would enhance the Finnish Financial Supervision Authority's (FIN-FSA) ability to enforce the rules and regulations that applied to the securities markets, while cooperating with other regulators. The report further noted that although the FIN-FSA's regulatory and surveillance powers met international standards, it exhibited some weaknesses in its enforcement and sanction capabilities. More »

The International Monetary Fund's (IMF) 2001 assessment of Finland's observance of the Insurance Supervisory Principles (later renamed Insurance Core Principles, or ICPs) promulgated by the International Association of Insurance Supervisors (IAIS) found that Finland either fully or largely complied with the IAIS Principles. The assessment, however, found areas where improvements were needed, namely stricter separation of regulatory and supervisory powers by shifting the licensing authority from the Ministry of Social Affairs and Health to the Insurance Supervisory Authority (ISA), Finland's insurance sector supervisor; implementation of an insurance-based risk analysis model; closer targeting of the allocation of supervisory resources; expansion of the electronic documentation and audit trail system; legislation on mixed bank-insurance conglomerates; and a legal basis for early intervention mechanism for life insurance companies. The assessment did not assign levels of compliance for each principle, and there is little subsequent information publicly available as to Finland's compliance with the revised, more stringent ICPs of 2003. A 2007 IMF report, nevertheless, affirms that the Finnish financial system is sound and well-supervised, and that the insurance sector is profitable and well-capitalized. The report also talks about the envisaged merger of the Finnish Financial Supervision Authority and the ISA in 2009, in order to pool in the expertise and resources of the former supervisors and bring common supervised cross-sector entities under one umbrella, thereby making supervision more effective. More »

Legend:

Credit Ratings

Moody's Aaa/Stable

Fitch AAA/Stable

Standard & Poor's AAA/Stable

Macroeconomic Data

2007 GDP (Current Prices): 245 billion USD (IMF)

2007 GDP (Per Capita): 46,602 USD (IMF)

2008 GDP (Growth Forecast): 2.4% (IMF)

2008 Inflation (CPI): 2.8% (IMF)

2007 Unemployment: 6.6% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 3.7 billion USD (UNCTAD)

FDI (Outward): 0.01 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 834 million USD (OECD)