6.4 The Bank of Finland and international cooperation in 2021

Economic and financial issues related to central bank policies are cross-border in nature, so measures to address them call for close international cooperation. Due to the COVID-19 pandemic, cooperation was largely virtual in 2021.

The Eurosystem is the Bank of Finland’s most important network for cooperation.

The Bank also participates in the work of international and European institutions and committees and cooperates with the national central banks of other countries.

The Bank of Finland is represented in a number of ECB bodies and other international fora. The representatives are listed on the Bank of Finland website.

The Bank of Finland is responsible for Finland’s relations with the International Monetary Fund

The International Monetary Fund (IMF) is an organisation of 190 member countries, working to foster international cooperation, open and rules-based foreign trade, sustainable economic growth and financial stability.

The Governor of the Bank of Finland, Olli Rehn, is Finland’s representative on the highest governing body of the IMF, the Board of Governors.

The Bank of Finland also influences the activities of the IMF via the Nordic-Baltic constituency, which has a joint representative on the Executive Board of the IMF. In 2020, this post was taken up by Mika Pösö for a three-year term running until the end of 2022.

Policy positions on topics discussed by the IMF Executive Board are agreed between the countries of the constituency. In 2020–2022, the lead role in preparing the positions is taken by Finland. This preparatory work is carried out in collaboration between the Bank of Finland and the Finnish Ministry of Finance.

The activities of the constituency are guided by the Nordic-Baltic Monetary and Financial Committee (NBMFC). The Deputy Governor of the Bank of Finland, Marja Nykänen, is a member of the Committee.

IMF meetings were held in virtual and hybrid format in 2021

Due to the COVID-19 pandemic, the meetings of the International Monetary and Financial Committee (IMFC), organised in connection with the IMF Spring and Annual Meetings, were held virtually in the spring and in a hybrid format in the autumn.

In the spring, the Nordic and Baltic countries were represented on the IMFC by Norway’s Minister of Finance Jan Tore Sanner and in the autumn by Lars Rohde, the Governor of Danmarks Nationalbank.

Discussions at the IMF Spring and Annual Meetings focused on the post-pandemic recovery and the global promotion of vaccination uptake.

Kristalina Georgieva, Managing Director of the IMF, emphasised in her contributions at these meetings the divergence between different country groups in the economic impacts of the COVID-19 pandemic.

She also stressed that policy measures should be targeted correctly, while speeding up economic reforms, so that future economic growth would be green, digital and inclusive.

An important decision taken by the IMF in 2021 was to increase the allocation of Special Drawing Rights (SDRs) by an equivalent of USD 650 billion in August 2021.

This was a global crisis measure of historic proportions, which the IMF approved to reinforce the liquidity buffers of its member countries and to support economic recovery. It also improved the opportunities to continue combating the pandemic.

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Bank of Finland participation in the work of EU institutions and committees

The Bank of Finland is a member of the EU’s Economic and Financial Committee (EFC). The EFC has been set up to promote economic policy coordination among EU Member States and participate in the preparatory work for the EU’s Economic and Financial Affairs Council, commonly known as the Ecofin Council.

In 2021, the EFC convened 14 times in its full composition, i.e. with the national central banks.

At its meetings, the EFC discussed, among other things, the impacts of the COVID-19 pandemic on the economy and the financial markets, the Next Generation EU package, development of the banking and capital markets union, prevention of money laundering, and the need to modernise the global financial architecture.

The EFC also prepared joint positions for international meetings.

In 2021, the Bank of Finland also participated in the work of many EU committees and institutions promoting the stability of the banking and the financial system. An important example of these is the European Systemic Risk Board (ESRB). The Governor of the Bank of Finland is a member of the General Board of the ESRB.

In 2021, the ESRB assessed, among other things, the financial stability implications of the COVID-19 pandemic for the EU, and discussed, for example, issues relating to the vulnerabilities associated with the corporate sector, real estate markets and money market funds. The ESRB also discussed the EU countries’ macroprudential policies and measures.

The Conference on Systemic Risk Analytics, which is co-organised by the Bank of Finland, the ESRB and the RiskLab Finland research group at Arcada and Hanken School of Economics, was held for the first time entirely virtually.

The Bank for International Settlements promotes central bank cooperation and dialogue

The Governor of the Bank of Finland participates in the regular meetings of the Governors of the member central banks of the Bank for International Settlements (BIS).

These meetings discuss developments and current issues relating to the global economy and the financial markets, and matters of interest to central banks.

In 2021, the meetings were held virtually. While the topics largely focused on the economic consequences of the COVID-19 crisis, the Governors also discussed, for example, the role of central banks in the work to address climate change.

Bank of Finland cooperates with other Nordic central banks

The Bank of Finland maintains close contacts with the central banks of the other Nordic countries. Nordic central bank governors convene annually to discuss topical issues.

In 2021, the governors convened once in a virtual meeting and once in Oslo in a hybrid meeting. Deputy governors, in turn, held one virtual meeting, and also an in-person meeting in Stockholm.

These various events discussed, for example, the prospects of the economies recovering from the pandemic, payment systems-related issues and other topical matters.

Cooperation between Nordic central bank experts was furthered in 2021 mainly in virtual meetings covering a wide array of different departmental activities.