The Finnish Financial Supervisory Authority (FIN-FSA) identified shortcomings in mortgage credit bank operations at supervised mortgage credit banks and other credit institutions following a thematic review based on information provided by the banks. Deficiencies concerned loan eligibility and collateral requirements, cover pool management, bond register controls and internal governance. FIN-FSA will issue individual supervisory letters and require the banks to remediate the identified shortcomings. The review found weaknesses in verifying that loans used as covered bond collateral comply with regulatory requirements, assessing loan-to-value ratios when loans are entered in the bond register, valuing and monitoring property collateral, insuring collateral against damage and using substitution assets. FIN-FSA also identified deficiencies in monitoring cover pool composition and coverage, determining the pool’s total value, maintaining accurate bond register records and defining the responsibilities of risk control, compliance and internal audit. Some institutions also failed to meet requirements for annual approval of the relative share of mortgage credit bank operations in their overall business.
Finnish Financial Supervisory Authority identifies shortcomings in mortgage credit bank operations
The Finnish Financial Supervisory Authority identified shortcomings in banks’ collateral eligibility checks, cover pool and bond register controls, and governance of mortgage credit bank operations. It will send individual supervisory letters and require affected banks to remediate the deficiencies.