Monetary policy implemented with tools old and new in 2020
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Olli Rehn is the Governor of the Bank of Finland. Governor Rehn is responsible for monetary policy preparation, domestic economic policy, external communications, international affairs and internal audit.
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Marja Nykänen has been a member of the Bank of Finland Board since 1 February 2017. She is responsible for financial stability issues, macroprudential policy, statistics, legal affairs, financial and personnel administration, and security and real estate issues.
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Tuomas Välimäki has been a member of the Bank of Finland Board since 12 July 2018. He is responsible for investment of the Bank’s financial assets, monetary policy implementation, market operations, academic economic research and research on transition economies.
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At year-end 2020 the Bank of Finland staff totalled 359.
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Chart 1. The Bank of Finland's key staff indicators
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Chart 2. European Central Bank's strategy review.
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Share on Facebook: Chart 3. Granting credit to the banks.Share on Twitter: Chart 3. Granting credit to the banks.Share on LinkedIn: Chart 3. Granting credit to the banks.Share by email: Chart 3. Granting credit to the banks.
Chart 3. Granting credit to the banks.
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The Eurosystem's deposit facility rate, main refinancing operations rate, and marginal lending facility rate were held at their historical lows in 2020, at −0.50%, 0.00% and 0.25%, respectively.
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Chart 4. Key ECB interest rates and money market rates
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Non-standard longer-term refinancing operations played a key role in the Eurosystem’s response to the COVID-19 crisis in 2020.
Share on Facebook: Chart 5. The Eurosystem’s liquidity-providing operations (tender operations and asset purchase programmes)Share on Twitter: Chart 5. The Eurosystem’s liquidity-providing operations (tender operations and asset purchase programmes)Share on LinkedIn: Chart 5. The Eurosystem’s liquidity-providing operations (tender operations and asset purchase programmes)Share by email: Chart 5. The Eurosystem’s liquidity-providing operations (tender operations and asset purchase programmes)
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The liquidity surplus in the euro area banking system, i.e. the amount of central bank reserves held by banks in excess of their minimum reserve requirements, increased by about EUR 1,700 billion in 2020, totalling about EUR 3,500 billion.
Share on Facebook: Chart 6. Current account holdings with the Eurosystem: averages per maintenance periodShare on Twitter: Chart 6. Current account holdings with the Eurosystem: averages per maintenance periodShare on LinkedIn: Chart 6. Current account holdings with the Eurosystem: averages per maintenance periodShare by email: Chart 6. Current account holdings with the Eurosystem: averages per maintenance period
Chart 6. Current account holdings with the Eurosystem: averages per maintenance period
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The overall volume of collateral delivered to the Eurosystem increased significantly (+47%) in 2020 due to the COVID-19 crisis.
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Chart 7. Collateral provided to the Eurosystem
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The Bank of Finland's counterparties especially favoured covered bank bonds as collateral; their share of all collateral deposits increased to 42%.
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Chart 8. Collateral put forward to the Bank of Finland (average shares in 2020)
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As in previous years, the Bank of Finland's counterparties held a significant amount of deposits with the Bank of Finland. The volume of deposits grew larger still in 2020.
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Chart 9. Liquidity deposits with the Bank of Finland
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The Finnish banking sector faced the COVID-19 pandemic with much stronger capital buffers than the financial crisis over ten years ago. In addition, the non-performing loans of Finnish banks have been at a very low level by European comparison for years.
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Chart 10. Share of non-performing loans by country, Q3/2020
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The Bank of Finland has for a long time expressed concerns about the increase in household debt. In 2020, the Bank of Finland continued the analysis by, for example, monitoring the debt-to-income ratios of new housing loan borrowers. The focus was also on estimating the appropriate maximum loan amount relative to the borrower’s annual income (maximum debt-to-income ratio) in Finland
Share on Facebook: Chart 11. Finnish households’ debt relative to annual disposable income has been on an upward trend for more than 20 yearsShare on Twitter: Chart 11. Finnish households’ debt relative to annual disposable income has been on an upward trend for more than 20 yearsShare on LinkedIn: Chart 11. Finnish households’ debt relative to annual disposable income has been on an upward trend for more than 20 yearsShare by email: Chart 11. Finnish households’ debt relative to annual disposable income has been on an upward trend for more than 20 years
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Despite the notable dip in the number of housing transactions in spring, the markets recovered rapidly. Towards the end of the year, housing prices rose in the other Nordic countries.
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Chart 12. Housing prices in the other Nordic countries rose in 2020
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Due to the crisis, there was a rapid increase in the demand for credit flexibility from businesses and households. Credit institutions offered their customers payment holidays in large numbers in the period March–April 2020. These appear in the statistics as renegotiations of loans.
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Chart 13. Renegotiated mortgages
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Banknote returns are generally a good reflection of the use of cash. They increased only slightly in 2020. In late 2020, they were actually notably smaller than in previous years.
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Chart 14. Banknote orders from and returns to the Bank of Finland in 2019 and 2020
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Lokakuussa 2020 tehtiin Suomen Pankin kuluttajakysely käteisen käytöstä. Tuloksista havaittiin muun muassa, että kuluttajat, jotka käyttivät tavallisesti yhtä paljon sekä käteistä että kortteja, siirtyivät koronakriisin aikana käyttämään enemmän korttimaksuja. Sen sijaan kuluttajat, jotka yleensä käyttävät pääasiallisesti käteistä, jatkoivat edelleen käteistä suosivaa maksukäyttäytymistään.
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Chart 15. Users of cash payments in the Bank of Finland consumer survey
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The number of bank branches providing cash services continued to decrease steadily.
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Chart 16. Cash ATMs and banks’ cash supply branches
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There was a particularly marked decrease in the issuance of EUR 50 banknotes.
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Orders from and returns to the Bank of Finland of other banknote denominations have also decreased during the pandemic, as the distribution and use of cash decreased more rapidly than in previous years.
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Chart 18. Banknote orders and returns have decreased during the pandemic
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The number of euro counterfeits detected in circulation in Finland increased slightly in 2020. In Finland, a total of 1,496 counterfeit euro banknotes and 750 counterfeit euro coins were found.
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Chart 19. Counterfeit euro banknotes and coins in Finland in 2002–2020
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The total market risk associated with the Bank’s financial assets (Value-at-Risk 99%, 1 day) varied between EUR 52 million and EUR 176 million in 2020.
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Chart 20. VaR figures for market risk in the Bank of Finland’s financial assets in 2020
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The main approaches to responsible investment are ESG integration, thematic investment and norm-based screening.
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Chart 21. Bank of Finland's approaches to sustainability.
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Share on Facebook: Chart 22. Developments in Eurosystem balance sheet itemsShare on Twitter: Chart 22. Developments in Eurosystem balance sheet itemsShare on LinkedIn: Chart 22. Developments in Eurosystem balance sheet itemsShare by email: Chart 22. Developments in Eurosystem balance sheet items
Chart 22. Developments in Eurosystem balance sheet items
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As the total risk estimate, the Bank of Finland uses a loss that would occur in the following year with a probability of 1% (expected shortfall). At the end of 2020, the total risk estimate was EUR 2.2 billion. This figure does not include gold price risk, as the gold revaluation accounts cover a significant decline in value.
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The Bank of Finland’s capital adequacy is sufficient to cover the risks arising from the performance of its tasks.
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Chart 24. Risks and risk buffers excl. gold and gold revaluation accounts
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Finnish exports will begin to gradually recover from the collapse in 2020, once the export markets take a turn for the better. The growth contribution of net exports, i.e. the difference between exports and imports, will be negligible during the forecast years. The recovery of Finland’s external operating environment will take time, and investments in Finland’s export markets, in particular, will remain well below pre-pandemic forecasts.
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Chart 25. The economy will take time to recover.
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International cooperation is an important part of the Bank of Finland’s work. The Bank participates in the work of international and European institutions and committees and cooperates closely with the national central banks of other countries.
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Chart 26. The Bank of Finland is a respected international influencer and partner
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Share on Facebook: Chart 27. In 2020 a good 2 million people made use of the Bank of Finland's information supply. Share on Twitter: Chart 27. In 2020 a good 2 million people made use of the Bank of Finland's information supply. Share on LinkedIn: Chart 27. In 2020 a good 2 million people made use of the Bank of Finland's information supply. Share by email: Chart 27. In 2020 a good 2 million people made use of the Bank of Finland's information supply.
Chart 27. In 2020 a good 2 million people made use of the Bank of Finland's information supply.
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