The Act on the Municipal Guarantee Board No. 487/ 1996
Issued in Helsinki on June 28, 1996
The purpose of the institution under public law called the Municipal Guarantee Board, hereinafter the Guarantee Board, is to safeguard and develop the joint funding of municipalities.
In order to fulfil its purpose, the Guarantee Board can, in the manner provided for in section 1 a, grant guarantees for such funding of credit institutions directly or indirectly owned or controlled by municipalities which will be used for lending to municipalities and municipal federations, and to corporations which are wholly owned by municipalities or under their control. (3.11.2006/944)
In order to fulfil its purpose, the Guarantee Board can, in the manner provided for in section 1 a, also grant guarantees for such funding of the credit institutions as referred to in paragraph 2 which will be used for lending to corporations designated by government authorities and engaged in the renting or production and maintenance of housing on social grounds or corporations controlled by them. (3.11.2006/944)
A guarantee can be granted as a security for the receivables of a corporation funding a credit institution referred to in paragraph 2 and also as a security for the credit institution’s receivables in arrangements directly related to funding. (3.11.2006/944)
The Guarantee Board may grant guarantees for the funding of credit institutions referred to in section 1 if the credit institution uses the funds it obtains:
- financing municipalities or municipal federations;
- financing at preferential terms in accordance with European Community State aid rules corporations designated by state authorities and engaging in the renting or production and maintenance of housing on social grounds, or corporations controlled by them; or
- financing at preferential terms in accordance with European Community State aid rules entities totally owned or controlled by municipalities or municipal federations, or municipal enterprises, which provide public services falling within the sphere of municipal authority as provided for in legislation or carry out functions directly in service thereof or provide other services essential to citizens, if due to local or regional circumstances the provision of the last-mentioned services is necessary to ensure their availability or efficient provision.
The credit institution may use part of the funds it obtains to safeguard its solvency.
Without being restricted by the provisions of Section 1 and 1 a, the guarantees granted by the Municipal Guarantee Board can be targeted to credit institutions’ fundraising, referred to in Section 1 a, which has been used for transferred debtors and other commitments, as well as relevant interest and currency exchange agreements and other hedging arrangements specified in the Act (616/2021) Section 21, 26 and 27enforced as a result of the initiated reform of health and social care, and rescue services.
Section 1 b added with Act 636/2021 shall enter into force on 1/1/2023.
Member organizations of the Guarantee Board consist of municipalities which on 1 January 2007 were member organizations of the Guarantee Board.
Other municipalities may join the Guarantee Board by giving the Guarantee Board’s Board of Directors written notification to that effect. The rights and obligations attaching to membership become effective as from the date on which the Board of Directors enters the municipality as a member of the Guarantee Board.
The Guarantee Board Auditor shall supervise the observation of this Act and the provisions issued by virtue thereof. The Guarantee Board Auditor shall be appointed by the Ministry of Finance by a proposal of the Board of Directors of the Guarantee Board for a term of no more than four calendar years at a time.
The Guarantee Board can acquire rights and make commitments and be heard in courts and at other authorities.
The right to make decisions of the Guarantee Board shall be used by the Council, unless otherwise laid down in this Act, or unless the right to make decisions rests with another organ or employee of the Guarantee Board pursuant to the Guarantee Board’s Standing Orders. (3.11.2006/944)
The Council shall have not less than 10 and not more than 15 members and a personal deputy for each of them. The Ministry of Finance shall appoint the members and deputy members for four calendar years at a time starting on January 1 of the year following municipal elections. They shall be appointed from among the persons put forward by the central municipal organization. When appointing the members, account shall be taken of the relative political powers prevailing in member organizations and of regional and other impartiality aspects. (2.11.2017/722)
The Council shall elect among themselves a Chairman and at most two Deputy Chairmen.
The Guarantee Board shall have a Board of Directors, which shall be responsible for the administration of the Guarantee Board and the preparation and execution of the decisions of the Council. The right to be heard of the Guarantee Board shall be used by the Board of Directors.
The Guarantee Board shall have a Managing Director, who shall be appointed by the Board of Directors.
More detailed provisions concerning the organs of the Guarantee Board and their composition, term of office and duties and concerning other activities of the Guarantee Board shall be issued in the Standing Orders which shall be approved by the Council.
The granting of guarantees shall be decided by the Board of Directors of the Guarantee Board or, by virtue of the Standing Orders, the Managing Director. When granting guarantees, sound and cautious business principles shall be followed.
Guarantees granted as security for the receivables of a credit institution as referred to in section 1 in arrangements directly related to funding may at the time at which the guarantee is granted not exceed four percent of the Guarantee Board’s total guarantee liabilities.
The Municipal Guarantee Board can grant guarantees only against a sufficient security. A security may also be granted as a covenant without a separate counter security. In special cases, guarantees can also at other times be granted without a security, if the Ministry of Finance grants an authorization. (2.11.2017/722)
Guarantee premium shall be collected on the guarantees.
The Guarantee Board’s expenses must be covered with income from its activities in the long term. In order to safeguard the liquidity of the Guarantee Board, the Guarantee Board shall have a fund and necessary stand-by credit facilities.
The decision on the amount of funds to be transferred into the fund annually in connection with the closing of accounts shall be taken by the Council. The funds held in the fund shall be invested in a manner that attends to the safety, yield and liquidity of the investments.
The Guarantee Board’s fund and stand-by credit facilities may be used to cover a liability to pay arising from a guarantee and to grant interim funding to a credit institution referred to in section 1 in order to prevent an imminent liability to pay from arising to it.
Member organizations shall be jointly responsible for the funding of such expenses and commitments which cannot be otherwise covered, in proportion to their population figures at the preceding year-end as referred to in section 18 of the Population Data Act (507/93).
The financial obligations arising on the basis of guarantees granted by the Guarantee Board shall be primarily covered from the Guarantee Board’s fund. Should the assets of the fund not suffice to cover the obligations, the Guarantee Board shall be entitled to cover the obligations with contributions to be collected from member organizations. The rates of contributions, which shall be determined in the manner laid down in section 10, shall be confirmed by the Board of Directors.
The contributions referred to in subsection 1 paid by the member organizations should be reimbursed to them together with interest accrued pursuant to section 3, subsection 2, and section 4 of the Interest Act (633/82) as soon as possible after the Guarantee Board can afford it. The reimbursement shall take place at the latest after the adopted financial statements of the Guarantee Board show that the Guarantee Board has sufficient assets.
The Council selects an audit firm to audit the annual accounts and administration for a period not exceeding its term of office. The responsible auditor, named by the audit firm, shall be an authorised APA (Authorised Public Accountant) or CPFA (Chartered Public Finance Auditor) auditor. The provisions of the Auditing Act (936/1994) apply, where applicable, to auditing. (1141/2015). (18.9.2015/1165)
The Guarantee Board draws up annual accounts for each calendar year. The provisions of the Accounting Act (1336/1997) apply, where applicable, to accounting. The Council approves the Guarantee Board’s annual accounts.
An audit firm shall be appointed as the Guarantee Board Auditor. A natural person performing the duties of the Guarantee Board Auditor at the audit firm shall be an authorised APA (Authorised Public Accountant) or a CPFA (Chartered Public Finance Auditor) auditor. An audit firm appointed to carry out the audit tasks of the Guarantee Board under section 12 cannot act as the Guarantee Board Auditor at the same time. (18.9.2015/1165)
The Guarantee Board Auditor shall for each financial year submit to the Ministry of Finance and the Board of Directors of the Guarantee Board a report on the operations and finances of the Guarantee Board. The Auditor shall without delay notify them of any matters or decisions which have come to his notice in the execution of his duties and which could be seen as:
- being, in a material manner, in breach of the laws, decrees or administrative regulations concerning the Guarantee Board or its activities;
- endangering the continuance of the activities of the Guarantee Board; or
- leading to a critical note in the auditors’ report or to a negative statement concerning adoption of the financial accounts.
The Guarantee Board shall supply the Guarantee Board Auditor with copies of the financial statements and auditors’ report and any other information necessary for supervision requested by the Auditor. The Auditor is entitled to be present and to speak at meetings of the Council. For special reasons, the Auditor is also entitled to conduct an audit on the premises of the Guarantee Board. (3.11.2006/944)
The guarantee premiums to be collected on the guarantees granted by the Guarantee Board and the contributions of member organizations can be collected without a court decision and an execution sentence in the same order as laid down in the Act on the Collection of Taxes and Charges through Execution (367/61). However, the provisions of section 15 shall apply to claims of appeal concerning member organizations’ contributions.
Member organizations may appeal to the Council against the decisions of the Board of Directors concerning member organizations’ contributions. Claims of appeal shall be made within 14 days from the date of receiving notification of the contribution decision.
A Council decision concerning an appeal related to a contribution can be appealed to Helsinki Administrative Court within 30 days from the date of receiving notification of the decision. Appeal does not preclude enforcement of a Council decision. The Municipal Guarantee Board can also appeal a decision issued as a result of claim of appeal. In other respects, the provisions of the Act on the Application of Administrative Law (586/1996) shall apply to the appeal.
What is prescribed on the disqualification of civil servants in the Administrative Procedure Act (434/2003) shall apply to the disqualification of fiduciary persons and employees of the Guarantee Board. (3.11.2006/944)
When carrying out the duties referred to in this Act, the Guarantee Board’s fiduciary persons and employees are subject to official responsibility.
Section 17 has been repealed by Act 21.5.1999/623.
What is prescribed on the employment relationships and pension security of local government officeholders and employees shall apply, as far as applicable, to the employment relationships and pension security of the employees of the Guarantee Board.
The Act on Credit Institutions (1607/93) shall not be applied to the Guarantee Board.
This Act enters into force on July 1, 1996.
At the first time, the Council shall be appointed for the term of office ending on September 30, 1997. Measures needed to enforce this Act can be taken before it comes into effect.
Helsinki, 28 June 1996
President of the Republic of Finland