OP Mortgage Bank

OP Cooperative and OP Mortgage Bank

OP Financial Group ("Group") is the largest financial services group in Finland, offering banking, non-life insurance and wealth management services for over four million customers. 

The Group began its operations in its present form as the amalgamation of the Member Cooperative Banks as provided for in the Act on Cooperative Banks and Other Credit Institutions in the Form of a Cooperative (laki osuuspankeista ja muista osuuskuntamuotoisista luottolaitoksista 1504/2001) (the "Cooperative Bank Act") in 1997.

In accordance with the Act on Deposit Bank Amalgamations (Laki talletuspankkien yhteenliittymästä 599/2010) (the "Amalgamations Act"), OP Financial Group comprises: (a) OP Cooperative as OP Financial Group's central institution; (b) the companies belonging to the consolidation groups of OP Cooperative; and (c) the Member Credit Institutions of OP Cooperative, which consist of OP Corporate Bank plc as the central bank of OP Financial Group, OP Mortgage Bank (OP-Asuntoluottopankki Oyj in Finnish), Helsinki Area Cooperative Bank, OP Card Company Plc and member cooperative banks (together the "Member Credit Institutions"). The Group is supervised on a consolidated basis. The Member Credit Institutions and OP Cooperative are liable for each other's debts and commitments.

The member cooperative banks are independent, local deposit banks that are engaged in retail banking. OP Cooperative is the Group's strategic owner institution, which is owned by the member cooperative banks. As a central institution, it is in charge of Group steering and control. Product and service development as well as support functions have been centralised in OP Cooperative's subsidiary OP-Services Ltd.

OP Mortgage Bank is incorporated as a public limited company in Finland and it is a wholly owned subsidiary of OP Cooperative. It has been established in 2000 as a mortgage bank under the Act on Mortgage Credit Banks (kiinnitysluottopankkilaki 1240/1999) (the "MBA"). The MBA has been abolished by the Finnish Covered Bond Act (laki kiinnitysluottopankkitoiminnasta 688/2010) (the "Covered Bond Act"). OP Mortgage Bank grants housing loans against securing collateral and buys loans in accordance with the Covered Bond Act. In addition to the above mentioned Covered Bond Act, OP Mortgage Bank operates pursuant to the Amalgamations Act, the Act on Credit Institutions (laki luottolaitostoiminnasta 121/2007, as amended) and the Companies Act (osakeyhtiölaki 624/2006, as amended).

OP Mortgage Bank issues covered notes (kiinteistövakuudelliset joukkovelkakirjalainat) which constitute direct, unconditional and unsubordinated obligations of OP Mortgage Bank. The covered notes will be covered in accordance with the Covered Bond Act and will rank pari passu among themselves and with derivative transactions and bankruptcy liquidity loans with respect to the statutory security over the cover asset pool in accordance with the Covered Bond Act. Under Section 25 of the Covered Bond Act, this priority is limited to 70 per cent in respect of housing loans and 60 per cent in respect of commercial loans of the current value of the properties or the shares in the property owning companies which stand as collateral for such loans.

Joint liability (the "Liability") within OP Financial Group is based on the Amalgamations Act. OP Cooperative and its Member Credit Institutions are liable for each other's debts and commitments in accordance with the Amalgamations Act.

In accordance with the Amalgamations Act OP Cooperative is responsible for issuing guidelines on risk management, reliable administration, internal surveillance and guidelines for the application of coherent accounting principles in compiling the consolidated financial statements of OP Financial Group to the Member Credit Institutions, with the aim of ensuring their liquidity and capital adequacy. OP Cooperative also supervises the Member Credit Institutions' compliance with the applicable rules and regulations in respect of their financial position, any provisions issued by the relevant supervising authorities, their statutes and articles of associations.

The obligation to issue guidelines and exercise supervision does not however give OP Cooperative the power to determine the business operations of the Member Credit Institutions or the Member Cooperative Banks. Each Member Credit Institution carries on its business independently within the scope of its own resources.

On the basis of this Liability, OP Cooperative must pay to each Member Credit Institution an amount that is necessary in order to prevent such Member Credit Institution's liquidation. OP Cooperative is responsible for the payments of any debts of a Member Credit Institution that cannot be paid using such Member Credit Institution's own funds.

A Member Credit Institution must pay to OP Cooperative a proportionate share of the amount which OP Cooperative has paid either to another Member Credit Institution as part of the support action described above, or to a creditor of such Member Credit Institution as payment of a due debt for which the creditor has not received payment from his debtor. Furthermore, upon the insolvency of OP Cooperative a Member Credit Institution has an unlimited liability to pay the debts of OP Cooperative as set out in Chapter 15 of the Cooperative Bank Act.

Each Member Credit Institution's liability, for the amount which OP Cooperative has paid on behalf of one Member Credit Institution to its creditors, is divided between the Member Credit Institutions in proportion to their last confirmed balance sheet totals.

If the funds of any Member Credit Institution fall below the minimum set out in the Act on Credit Institutions or the Amalgamations Act, as the case may be, OP Cooperative is entitled to receive credit from the other Member Credit Institutions by collecting from such other Member Credit Institutions additional repayable payments to be used to support actions to prevent liquidation of the Member Credit Institution. The annual aggregate amount of the payments collected from the Member Credit Institutions on this basis may in each accounting period be a maximum amount of five thousandths of the last confirmed balance sheet total of each Member Credit Institution.

A creditor who has not received payment from a Member Credit Institution on a due receivable (principal debt) may demand payment from OP Cooperative, when the principal debt falls due.

In respect of OP Mortgage Bank as a Member Credit Institution, the covered notes issued (along with derivative transactions and bankruptcy liquidity loans) have a statutory priority over a certain portion of the assets of OP Mortgage Bank standing as collateral for the covered notes. Under Section 25 of the Finnish Covered Bond Act, this priority is limited to 70 per cent in respect of mortgage loans and 60 per cent in respect of commercial loans of the current value of the property which stands as collateral for such mortgage loans. In the case of the liquidation of any Member Credit Institution other than OP Mortgage Bank, the assets of OP Mortgage Bank standing as collateral for the covered notes will not be available to cover such other Member Credit Institution's obligations until OP Mortgage Bank's obligations under the covered notes have been satisfied in accordance with the percentages described above.