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Main features of the Finnish collateral in the context of the Spanish banking recapitalization program - Permanent Representation of Finland to the European Union : Current Affairs

PERMANENT REPRESENTATION OF FINLAND
TO THE EUROPEAN UNION


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News, 7/17/2012

Main features of the Finnish collateral in the context of the Spanish banking recapitalization program

•                     The agreed arrangement is based on the model provided by the previous arrangement related to the Greek programme and on the Eurogroup collateral agreement of 3 October 2011.

•                     Arrangement is between Finland and the Spanish Deposit Guarantee Fund, which is financed by Spanish banks.

•                     Collateral is provided prior to any drawdown under the financial assistance facility agreement for the recapitalization of financial institutions in Spain.

•                     The amount is equal to 40 % of Finland’s exposure in respect of any outstanding principle under the Guarantees issued by Finland in the context of this financial assistance. It covers Finland's share irrespective whether the loans come from the EFSF or ESM.

•                     The amount is put in an escrow account and invested in highly-rated euro area Member States’ bonds.

•                     Finland’s share of EFSF guarantees is 1,9248 %. The aggregate collateralization obligation for the EUR 30 billion first tranche is thus EUR 30 billion x 1,9248 % x 40 % = EUR 231 million.

•                     The maximum required collateral amount is EUR 769,92 million, if the EUR 100 billion facility is disbursed in full.

•                     As a cost of the arrangement, Finland foregoes its share of the EFSF                   and ESM profits related to the Spanish banking recapitalization program.

•                     Finland has already agreed to pay the total ESM paid-in capital in one tranche instead of five as a cost of being the beneficiary of collateral arrangements.

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Updated 7/17/2012


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