Procedures to be Followed in Banking Services

Regulations and Guidelines 3/2024 Case ID: FIVA/2023/1204 Procedures to be Followed in Banking Services Date of Issue: 1.11.2024 Effective from: 7.11.2024 Further information: Banking Supervision/Procedures FINANSIVALVONTA tel. 09 183 51 firstname.lastname@finanssivalvonta.fi finanssivalvonta.fi

Legal Nature of Regulations and Guidelines Regulations Presented under the "Regulation" heading in Finanssivalvonta's collection of regulations and guidelines are the binding rules issued by Finanssivalvonta, which must be complied with. Finanssivalvonta issues regulations solely based on the provisions of the authorizing law and within its limits.

Guidelines
Presented under the "Guideline" heading are Finanssivalvonta's interpretations of the content of legislation or other binding regulations. The "Guideline" heading also includes recommendations and other operational guidelines that are not binding. Guidelines also contain Finanssivalvonta's recommendations regarding the compliance with international guidelines and recommendations. The wording of a guideline indicates whether it is an interpretation or a recommendation/operational guideline. The writing style of guidelines and the legal nature of regulations and guidelines are explained in more detail on Finanssivalvonta's website. Finanssivalvonta.fi > Regulation > Legal Nature of Regulations and Guidelines

Table of Contents
1 Scope and Definitions 4
2 Legal Basis 5
3 Objectives 6
4 Marketing of Services 7
5 Information Provided in Mortgage Loan Advertising 8 6 Disclosure Obligations Regarding Credit Agreements 10 7 Securities Attached to Credit Agreements 12 8 Marketing and Disclosure Obligations Regarding Deposit Agreements 13 9 Repealed Regulations and Guidelines 14

1 Scope and Definitions
1.1 Scope
These regulations and guidelines apply to supervised entities and other financial market participants referred to in Sections 4 and 5 of the Act on Finanssivalvonta, insofar as they provide or intermediated mortgage loans or consumer credit, or provide deposit accounts. These regulations and guidelines also apply to foreign EEA supervised entities' branches located in Finland, and to foreign supervised entities referred to in Section 6 of the Act on Finanssivalvonta, which provide or intermediated mortgage loans or consumer credit, or provide deposit accounts in Finland without establishing a branch.

1.2 Definitions
In these regulations and guidelines, the following terms mean:

• consumer: a consumer as defined in Section 4 of Chapter 1 of the Consumer Protection Act,
• service provider: all supervised entities and other financial market participants referred to in Section 1.1 above, as well as foreign supervised entities, insofar as they provide or intermediated consumer credit or provide deposit accounts to or in Finland.
• mortgage loan: a loan falling within the scope of application of Chapter 7a of the Consumer Protection Act.
• consumer credit: a loan falling within the scope of application of Chapter 7 of the Consumer Protection Act.

2 Legal Basis
2.1 Legislation
The following regulations relate to the subject matter of these regulations and guidelines:

• Consumer Protection Act (38/1978)
• Act on Credit Institution Business (610/2014)
• Commercial Code (3/1734)
• Act on Guarantees and Pledges by Third Parties (361/1999)

2.2 European Union Directives
The following EU directives relate to the subject matter of these regulations and guidelines:

• Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010;
• Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on consumer credit agreements and repealing Council Directive 87/102/EEC.

2.3 Finanssivalvonta's Authority to Issue Regulations Finanssivalvonta's right to issue binding regulations is based on the following provisions of law:

• Section 5, paragraph 2 of Chapter 7a of the Consumer Protection Act.

3 Objectives
The objective of these regulations and guidelines is to provide the regulations referred to in Section 5 of Chapter 7a of the Consumer Protection Act, as well as other supplementary guidance on obligations related to consumer lending and deposit accounts. The regulations and guidelines aim to promote good practices and customer protection, thereby increasing customers' trust in service providers and the functioning of financial markets.

4 Marketing of Services
(1) Chapter 2 of the Consumer Protection Act contains general provisions on marketing. Additionally, Section 2 of Chapter 15 of the Credit Institution Act contains a general provision on marketing.
Guideline (items 2–4)
(2) According to Finanssivalvonta's interpretation, the legislative provisions mentioned in item 1 mean that marketing should describe as fairly and understandably as possible the key features and main content of the service or product that may be relevant to the customer's decisions regarding the service or product. Based on the information provided in marketing, the customer should be able to understand what kind of service or product is involved. (3) According to Finanssivalvonta's interpretation, the legislative provisions mean that marketing should not create an unfounded impression of the service or product's affordability or the service provider's reliability through imagery or otherwise. The potential risks of the product should be clearly and understandably disclosed. (4) Finanssivalvonta recommends that service providers promptly correct or adequately supplement false information provided in their marketing, the truthfulness or misleading nature of which becomes apparent only after the information has been presented and which may be of material importance to the customer.

5 Information Provided in Mortgage Loan Advertising (5) According to Section 5, paragraph 1 of Chapter 7a of the Consumer Protection Act, mortgage loan advertising must state the Annual Percentage Rate (APR) if the advertisement indicates the loan interest rate or another figure describing costs charged for the loan, or other information regarding the terms of the credit agreement. In such cases, the advertisement must also clearly show the other information listed in Section 5. (6) According to Section 5, paragraph 2 of Chapter 7a of the Consumer Protection Act, the APR and other information referred to in paragraph 1 must be provided clearly, concisely, and prominently using a representative example. Finanssivalvonta shall issue more detailed regulations on the basis for determining the example. The APR must be stated in advertising at least as prominently as other figures describing loan costs. Regulation (items 7–11) (7) When Chapter 7a of the Consumer Protection Act requires mortgage loan advertising to state the APR, the information regarding it and other information referred to in that paragraph must be provided using a representative example, taking into account the following factors in its determination:

• The APR must be calculated according to the Ministry of Justice's regulation on the APR for consumer loans dated 9.12.2016/1123, whereby:
  – the loan amount in the calculation is 100,000 euros and the repayment period is 20 years, – the loan is drawn down at once as of the calculation date of the representative example, – the loan is repaid in equal monthly installments, with the first payment made one month after the loan is drawn down, – the interest rate linkage of the loan is the most commonly used interest rate linkage based on the latest reporting date according to Bank of Finland's statistics on new mortgage loan agreements, – the loan interest is the reference rate value at the calculation date of the representative example, – the loan margin is the calculated interest margin based on the latest reporting date according to Bank of Finland's statistics on new mortgage loans, – other loan costs than interest are the credit institution's current price list fees for a loan of the example size.
• For other matters, assumptions defined in the aforementioned Ministry of Justice regulation are used when calculating the APR.
  (8) The example must be representative relative to the credit institution's offered loans. If the credit institution's mortgage loans differ significantly from the assumptions in item (7), the credit institution must use terms for calculating the APR that are representative relative to its offered mortgage loans. (9) The assumptions used in the APR calculation must be clearly stated alongside the calculation. Additionally, it must be stated whether the credit institution used Finanssivalvonta's assumptions or terms representative of its offered mortgage loans in calculating the APR. (10) Based on Section 5, paragraph 1 of Chapter 7a of the Consumer Protection Act, the information to be disclosed must state, in addition to the loan's APR, other information required by that section, such that where information has been used in calculating the advertised APR, the data used in the calculation is disclosed. Other loan costs than interest must be itemized and specified. (11) The advertisement must clearly state that it is an indicative example calculated using assumptions and does not necessarily correspond to the actual APR of the loan granted to the consumer.

6 Disclosure Obligations Regarding Credit Agreements (12) According to Section 13 of Chapter 7 of the Consumer Protection Act, the credit institution must act responsibly when granting a loan. Paragraph 2, item 5 of that section specifically requires that the credit institution: provides the consumer with sufficient and clear explanations before concluding the credit agreement to assess whether the loan and any offered additional services suit the consumer's needs and financial situation, and provides information on whether the consumer can terminate a contract for additional services separately and what consequences termination entails for the consumer. Guideline (items 13–16) (13) According to Finanssivalvonta's interpretation, Section 13 of Chapter 7 means that service providers must, particularly for mortgage loans and other large or long-term consumer credits, provide the customer with sufficient information before concluding the credit agreement on at least the following matters related to taking out a loan:

• different loan options,
• different interest rate options and structures,
• risks caused by