Following a period of rapid financial liberalization and a record credit boom in the 1980s, Finland’s financial system suffered steadily increasing loan losses and falling earnings beginning in 1990. The Finnish Parliament created the Government Guarantee Fund (GGF) in April 1992 to support banks with loans, capital, and guarantees. In a press release issued on August 6, 1992, the government said the GGF would “secure the stable functioning of the banking system under any circumstances [emphasis added]”. Six months later, the Parliament of Finland specifically required the GGF to guarantee that all Finnish banks could meet their commitments. The government provided unlimited funding for this guarantee, stating that the guarantee provided full protection of depositors and other creditors; it specifically stated that the guarantee excluded equity holders, which are not creditors. The GGF never exercised the blanket guarantee to pay depositors or creditors of a failing bank. The Finnish Parliament replaced the facility with standing deposit insurance on December 8, 1998, with a coverage limit of 150,000 Finnish markkaa (USD 27,000) per depositor per bank.
"Finland: Government Guarantee Fund, Blanket Guarantee, 1992,"
Journal of Financial Crises: Vol. 4
Iss. 4, 188-200.
Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol4/iss4/8
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