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OP Corporate Bank plc

OP Corporate Bank plc is the senior unsecured bond issuing entity of OP Financial Group.

OP Corporate Bank plc is the central bank and a wholly owned subsidiary of OP Cooperative. In its wholesale funding, OP Corporate Bank aims at broad diversification, according to which it diversifies risks by maturity, counterparty, product and market area. OP Corporate Bank has two debt programmes:

  • EUR 20-billion Euro Medium Term Note (EMTN) programme for the issuance of long-term debt instruments

  • EUR 18-billion Euro Commercial Paper (ECP) programme for the issuance of short-term debt instruments.

When assessing OP Corporate Bank's credit rating, credit rating agencies take account of entire OP Financial Group's financial standing, because they monitor the Group as a single entity and OP Cooperative and Group Member Credit Institutions (including OP Corporate Bank) are liable for each other's debts and commitments.

OP Cooperative and OP Corporate Bank plc

OP Financial Group ("Group") is the largest financial services group in Finland, offering banking, 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)("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 142 member cooperative banks (together the "Member Credit Institutions"). The Group is supervised on a consolidated basis. The Member Credit Institutions and the Central 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 Corporate Bank plc, incorporated as a public limited company in Finland, is a wholly owned subsidiary of OP Cooperative and it was established in 1902. OP Corporate Bank serves as the central bank of the Group being responsible for the Group's liquidity management and international operations.

In addition to the Act on Credit Institutions (laki luottolaitostoiminnasta 121/2007, as amended), OP Corporate Bank operates pursuant to the Companies Act (osakeyhtiölaki 624/2006, as amended) and the Act on Investment Firms (laki sijoituspalveluyrityksistä 9227/2007, as amended).

Joint liability

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.

OP Corporate Bank plc's Interim Report Q1/2020

  • Consolidated earnings before tax were EUR 27 million (64). Net interest income increased by 21% to EUR 81 million (67) and net insurance income by 20% to EUR 131 million (109). Impairment loss on receivables, EUR 49 million, increased by EUR 45 million year on year. Impairment loss on receivables was especially increased by the adoption of the new definition of default used in the impairment loss calculation, and the effects of the coronavirus pandemic on the credit risk outlook. Investment income decreased by 48% to EUR 25 million (48), mainly due to the coronavirus pandemic.

  • Corporate Banking earnings before tax fell by 81% to EUR 9 million (45). Impairment loss on receivables weakened earnings by EUR 47 million (5). Net interest income increased by 12% to EUR 101 million (90). The loan portfolio increased in the year to March by 8% to EUR 24.3 billion (22.5).

  • Insurance earnings before tax rose by 34% to EUR 39 million (29). Net insurance income, EUR 131 million, increased by EUR 22 million. Investment income fell by 49% to EUR 14 million (27). The operating combined ratio was 92.7% (97.5).

  • Other Operations earnings before tax were EUR –20 million (–11). Liquidity remained good despite the coronavirus crisis.

  • The Group's CET1 ratio was 13.6% (14.9). The lower ratio was especially affected by the adoption of the new definition of default.