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RR RUEHWEB

DE RUEHHE #0047 0371409
ZNR UUUUU ZZH
R 061409Z FEB 09
FM AMEMBASSY HELSINKI
TO RUEHC/SECSTATE WASHDC 4796
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUCNMEU/EU INTEREST COLLECTIVE

UNCLAS HELSINKI 000047 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN FI PREL
SUBJECT: FINLAND TAKES MEASURES TO BOOST FINANCIAL MARKETS 
 
 ¶1.  Noting that banks have recently had to focus efforts to 
satisfy the financial needs of large-scale businesses, the 
Finnish Cabinet Committee on Economic Policy outlined on 
January 27 measures to boost financial markets in Finland. 
The committee announced that it will submit to Parliament in 
early February a proposal for state capital investment in 
deposit-taking banks.  The state will offer banks interest 
bearing subordinate loans which can be considered as Tier 1 
capital.  The government also will grant state guaranteees of 
up to 50 billion euros total for the refunding of Finnnish 
banks and will charge a market-based fee for guarantees.  In 
order to avail themselves of these benefits, banks must agree 
to restrict the salaries of top managers.  The Ministry of 
Finance has decided to grant the State Pension Fund the right 
to a limited use of the assets in its possession to acquire 
commercial papers of significant and financially solid 
Finnish companies, a decision that is intended to promote the 
recovery of the commercial paper market, which has been 
decimated in the ongoing economic downturn. 
 
¶2.  Econoff met February 5 with Markku Puumalainen, Financial 
Counselor in the Financial Markets Department of the Finnish 
Ministry of Finance.  Puumalainen commented that the 
government expected the measures listed in para 1 would be 
implemented by the end of February.  To date, banks have 
indicated they do not need to take advantage of the programs 
offered by the government.  According to Puumalainen, far 
from needing short-term security guarantees, many Finnish 
banks have more short-term liquidity than they need. 
However, long and medium term liquidity is an issue, so the 
government has agreed to divide the 50 billion euros slightly 
differently than originally anticipated by offering banks the 
opportunity apply a larger segment for longer-term financing. 
 
¶3.  The banking and commerce sectors have responded 
positively to the package.  Small and medium-sized businesses 
in particular have had a very hard time securing affordable 
financing.  The government's recently announced economic 
stimulus package (see septel) should allay critics' concerns 
that the measures to boost financial markets ignored the 
issue of low demand for goods and services.  Taken together, 
the Government hopes that the financial market package and 
the economic stimulus plan will lessen the need for layoffs 
and job cuts. 
 
BUTLER