The Bank of Finland’s activities and strategy
The Bank of Finland fosters economic stability
Stable prices, secure payment systems and a reliable financial system foster sustainable economic growth, employment and the welfare of Finnish society.
The Bank of Finland’s vision is to be known as a forward-looking and effective central bank and a constructive and influential member of the Eurosystem.
To fulfil its vision, the Bank of Finland
- bases its influence on expertise, reliability and research;
- ensures the availability of competitive central banking services in Finland;
- contributes to maintaining the service level of the financial markets and related infrastructure;
- maintains the capital adequacy and liquidity required in performing its tasks and actualises its financial accountability towards Finnish society;
- ensures that its working processes are of high quality, technically advanced and sustainable;
- builds its expertise and professional competitiveness with an eye to the future at the same time as caring for the long-term wellbeing of its personnel.
Near-term challenges for the Bank of Finland
The key near-term challenges for the Bank of Finland relate to the monetary policy strategy, safeguarding financial stability, the payments revolution and influencing economic policy. In addition, controlling climate change will also require a response from the central bank.
Monetary policy strategy
The operating environment of monetary policy has changed. The slowing of productivity growth, an ageing population and the after-effects of the financial crisis have caused a strong drop in interest rates and reduced the room for manoeuvre in monetary policy. Moreover, both actual inflation and inflation expectations have fallen below the ECB’s price stability objective. The threats to environmental sustainability, digitalisation, globalisation and changes in funding structures have also been reshaping the operating environment of monetary policy and its transmission to the wider economy. The challenge in reassessing the monetary policy strategy is to be able to evaluate the significance of these factors with an open mind, relying on research-derived knowledge and analysis.
Safeguarding financial stability
The business models and roles of traditional banks and other actors are changing. Finland’s financial markets are very international and their Nordic connections are strong. The importance of cooperation with financial authorities is expected to grow. Assessment of the effects of macroprudential policy and the development of policy instruments remain key areas in the work of safeguarding financial stability.
The digital revolution in payments will test authorities’ expertise and ability to steer and supervise the developments in payment systems. The rapid pace of technological developments will change the field for fintech actors and banks’ business models. In addition, the use of cash in payments will decline, the forms of instant payments will change and cyber risks will grow. Continuity management will also be a key issue in the payments field.
Economic policy influence
From its own field of operations, the Bank of Finland contributes facts and research results to support domestic debate and political decision-making. Key themes are the outlook for the economy, structural reforms and cost-competitiveness. Within the EU, too, there is a need for structural reforms, and solutions are being sought for weaknesses in the Monetary Union.
In 2019, climate change and the response to it became an important component of the Bank of Finland’s strategic risks, and sustainability perspectives are to the fore also in a broader sense in central bank operations.
Operational development at the Bank of Finland
In June 2019, the Board of the Bank of Finland decided on eight key strategic projects and assignments for development of the Bank’s operations. These represent a response to the near-term challenges facing the Bank. Most of the assignments were carried out in cooperation with the Financial Supervisory Authority (FIN-FSA).
In 2019 we also conducted an assessment of the cooperative interfaces between the Bank and the FIN-FSA. This revealed the division of labour to be appropriate, and both authorities were seen to be efficient in their use of resources.
A systematic competence analysis was performed and we established the main foci for developing the expertise within the Bank. The selected key areas were data analysis, exploitation of statistics and data, and macroprudential analysis. In future we will also continue investing in development of management and interactive skills in the workplace.
The Bank of Finland solves challenges responsibly
In autumn 2019, the Bank of Finland assessed its operations from the perspectives of environmental, economic and social impacts. This assessment led to the launch of our sustainability programme, implementation of which will continue in 2020. The main focus will be on sustainable growth, influential application of knowledge and management of climate risks.
The Board also decided in 2019 to launch an international economic policy process. This will support and help the Governor and other Board members as well as Finland’s appointed member of the IMF Board of Governors to exert an influence in international fora.
Towards the end of 2019, preparations were launched for drawing up scenarios for the Bank of Finland’s operating environment and a new vision for the Bank. The time horizon for the scenarios and the vision is 2030. The preparatory work will be carried out in 2020. It is important for the Bank of Finland that it is genuinely able to serve the interests of the public and society also in the long term.