A new Finnish Act on Mortgage Credit Banks entered into force on 1 January 2000. The Act creates a new form of credit institution to the Finnish legal system – a mortgage credit bank. However, the mortgage bank is generally subject to the regulations of the Finnish Companies Act and Act on Credit Institutions, whereas, the new Act shall provide complementary and more specific provisions concerning the mortgage credit banks.
The business activity of a mortgage credit bank is limited to granting credits that are secured by shares in a housing corporation or real-estate corporation, by rights of residences or by real estate mortgages ("mortgage credits"). The mortgage credit bank is also permitted to grant credits to public corporations or credits which are fully collateralised by a guarantee of an organisation governed by public law or a claim on such organisation ("public-sector credits"). In addition, the area of operations of a mortgage credit bank may also consist of other thereto closely related activities.
Furthermore the new Act gives the mortgage credit bank a sole right to issue bonds that are secured by the above mentioned mortgage credits or public-sector credits. The mortgage credits bank is obliged to hold a register of the issued bonds and securities related to them. The register - as well as other activities of the mortgage bank – is supervised by the Finnish Financial Supervision.
The new Act entitles the bondholders a strong position through different regulations. For instance, the mortgage credit granted by a mortgage credit bank may not exceed 60 per cent of the current (market) value of the shares or real estate provided as collateral. Also the mortgage credit bank is not entitled to convey or pledge mortgage credits or public-sector credits without a permission of the Financial Supervision. Furthermore, if the mortgage credit bank is placed in liquidation or declared bankrupt, the claim based on a bond is entitled to a special priority.
For further information, please contact Pekka Lehtinen.
This article contains general information on the subject matter and shall not be relied upon for a specific case. Specialist advice should be sought with respect to any specific circumstances.
