The Finnish finance ministry said Tuesday that Madrid had agreed to provide collateral to Finland in exchange for its participation in an European Union bailout for ailing Spanish banks.
"In the collateral arrangement, the Spanish Deposit Guarantee Fund provides Finland with collateral, in order to limit the risks for Finnish taxpayers in the issuing of loans to the stabilisation programme" for Spanish banks, the ministry said in a statement.
Finnish Finance Minister Jutta Urpilainen said she was "very pleased with the results."
"Despite a tight, tough schedule, we have been able to get for Finland and Finnish taxpayers a collateral arrangement that safeguards our position, and limits Finland's risks," she was quoted by the STT news agency as saying.
Finland, one of few EU countries to enjoy a triple-A credit rating, has long taken a tough line when it comes to eurozone bailouts.
Last month, Spain formally requested a banking rescue of up to 100 billion euros ($123 billion) but Urpilainen said at the time that her country "would want shares of viable Spanish banks in exchange for support for those banks," and that Spain's weak banks should be shut down.
The finance ministry said the deal reached with Madrid was modeled on a similar agreement with Athens last October which cleared the way for Helsinki to take part in the eurozone's second rescue package for Greece.
"Also in this case, collateral is set (against) a 40-percent presumed loss, which is based on ratings by Standard & Poors' historical data based on an estimate of the expected loss in the case of insolvency," it added.
In exchange, "Finland abandons a part of the interest generated profit margin of the Spanish loans," Urpilainen said Tuesday, according to public broadcaser YLE, adding that the margin at the moment is very small.
She stressed that Finland was the only country to reach a collateral deal with Spain.
Finland's total share of the bailout amounts to about 1.9 billion euros, and the finance ministry said the total collateral required came to 763 million euros ($932 million).
The collateral will be paid in cash into Finland's collateral account and Urpilainen explained Tuesday that "Spain is expected, like in the case Greece, to transfer money to the deposit account with each loan installment."
She said the loan period had been set to 12-and-a-half years.
Prime Minister Jyrki Katainen also welcomed the deal, insisting that "the collateral limits Finland's financial risk in the Spanish programme."
The government is set to present the deal Wednesday to parliament, which will debate it Thursday and vote on Friday -- the same day eurozone finance ministers are expected to formally approve the bank deal for Spain.
"I hope parliament approves the package so that Finland can take part in securing the stability of the European and Finnish economies, which is the government's priority," Katainen said.
Source: AFP Global Edition