Management of financial assets in 2025

During 2025, the Bank of Finland recommenced its euro-denominated fixed income investments and increased its holdings of foreign exchange reserves. In addition, the Bank updated the interim climate targets for its financial assets. The aim is to achieve these targets by the end of 2030. The Bank’s target of reducing by half the weighted average carbon intensity (WACI) of equity investments was achieved at the end of 2025.

Bank of Finland’s management of financial assets strengthened the balance sheet in 2025

At the end of 2025, the value of the Bank of Finland’s financial assets reached nearly EUR 20 billion. The increase in this value during the year was a result of asset performance, the recommencement of euro-denominated fixed income investments and the strengthening of foreign exchange reserves.

The Bank of Finland manages its financial assets in line with its central bank objectives, taking into account the return on investments, the risks attached and the Bank’s responsibility considerations.

Increase in Bank of Finland’s financial assets

In the financial markets, 2025 was a good year overall for investors, despite the uncertainties in the global economy.

The Bank of Finland’s investment activities yielded a return of 5.1%, or EUR 616.3 million. Taking into account gold, items denominated in IMF Special Drawing Rights (SDRs) and the impact of exchange rates, the value of the Bank’s financial assets increased by 7.3%, or nearly EUR 1.3 billion.

At the end of 2025, the Bank of Finland’s financial assets totalled approximately EUR 19.7 billion (Table 9). These assets consist of foreign reserves, euro-denominated fixed income investments, long-term investments and gold holdings.

The Bank of Finland decides on the volume of its financial assets within the framework of the Agreement on Net Financial Assets (ANFA). ANFA is an agreement between the national central banks in the Eurosystem and the European Central Bank (ECB). It sets rules and limits for the holdings of financial assets related to the national tasks of the Eurosystem central banks.

Bank of Finland’s investment policy made it possible to maintain a strong balance sheet

The Bank of Finland’s investments are guided by the investment policy decided annually by the Bank’s Board. The investment policy covers fixed income investments in the foreign reserves portfolio and the euro-denominated fixed income investment portfolio, as well as long-term investments and the principles of responsible investment.

The fixed income investment policy for foreign reserves and euro-denominated fixed income investments sets a strategic allocation for the Bank’s fixed income investments by asset class and determines an appropriate level of interest rate risk for the various currencies.

Long-term investments have a higher expected return and lower liquidity requirement than with other portfolios. The risk-return ratio improves for the balance sheet as a whole when the portfolio of investments is diversified.

The investment policy establishes a strategic market-based index for direct fixed income investments that serves as a benchmark for the Bank’s investment activities.

The Bank’s Asset Management Division may deviate from the strategic index within a pre-set range and in accordance with the investment policy’s risk limits.

A long-term investment policy that takes account of balance sheet risks as a whole ensures that the balance sheet is healthy and promotes the Bank of Finland’s goal of a steady distribution of profit to the state budget without endangering capital adequacy.

Bank of Finland recommenced euro-denominated fixed income investments 

In spring 2025, the Bank of Finland Board decided to recommence euro-denominated fixed income investments.

The aim is to use these investments to achieve an overall return exceeding the ECB deposit rate and thereby strengthen the balance sheet. At the end of 2025, euro-denominated fixed income investments totalled EUR 1,980 million.

Euro-denominated fixed income investments were divided between sovereign bonds (20.3%), supranational or government-related bonds (20.2%), covered bank bonds (39.8%) and corporate bonds (19.7%).

As a measure of interest rate risk, the average duration of the euro-denominated bond portfolio at the end of 2025 was 2.3 years. The Bank of Finland makes fixed income investments in debt securities with high credit ratings.

Management of financial assets and increase in holdings of foreign reserves protected the Bank of Finland’s capital adequacy in 2025

In 2025, the Bank strengthened the level of national preparedness by increasing its holdings of foreign reserves to approximately EUR 9 billion. The overall value of the Bank’s financial assets rose to EUR 19.7 billion and its investment activities yielded 5.1%. The increase in the value of the balance sheet was driven up in particular by the rise in the price of gold and strong equity market performance, although the depreciation of the US dollar reduced the return on investments denominated in foreign currencies.

The long-term investment policy and effective risk management ensured that the Bank of Finland’s statutory tasks were carried out and that the economy remained resilient despite global political uncertainties.

Managing foreign reserves is among the Bank of Finland’s statutory tasks

The Bank of Finland’s statutory tasks include the holding and management of Finland’s foreign reserves. Both the size and currency composition of the Bank’s holdings of foreign exchange reserves are based on the needs of national preparedness and on the obligations inherent in central banking tasks.

Foreign exchange reserves have a key role when it comes to ensuring economic and financial preparedness for dealing with future uncertainties and preparing for crises that could weaken Finland’s external solvency.

Tuomas Välimäki, Member of the Board of the Bank of Finland, explained in more detail the role of foreign reserves in his spring 2025 blog post ‘The Bank of Finland’s foreign reserves: What, why, how’ (in Finnish).

Decisions related to the management of foreign reserves are taken by the Bank’s Board at least once every three years.

The Bank’s foreign reserves comprise foreign currency-denominated fixed income investments and items denominated in IMF Special Drawing Rights (SDRs).

Bank of Finland increased its foreign reserves just before and during 2025

Towards the end of 2024 the Bank of Finland Board decided to increase its holdings of foreign exchange reserves by approximately EUR 2 billion to a total of about EUR 9 billion.

Foreign reserves were increased during the period up to February 2025 by purchasing mainly US dollars, but also pounds sterling and Japanese yen.

The currency-specific foreign reserve targets for the period 2025–2027 are set at USD 6.8 billion, GBP 700 million and JPY 140 billion.

Bank of Finland’s long-term investments consisted of equity, real estate, fixed income and cash investments

The Bank of Finland makes long-term investments in order to maintain the real value of on-balance sheet capital items deemed to be very long-term.

In 2025, the Bank’s long-term investments consisted of equity, real estate, fixed income and cash investments. The value of the long-term portfolio at the end of the year totalled EUR 3,825 million.

Equity investments were made in index funds that mirror the global index for developed markets, some of which incorporate sustainability and climate considerations.

Real estate investments are diversified across a number of large European real estate funds. Each of the funds owns real estate in desirable locations, which makes the properties easy to let.

Strong returns despite geopolitical tensions and a weakening dollar

In the financial markets, 2025 was a good year for investment returns, despite constant global political tensions and uncertainties in the global economy.

The value of the Bank of Finland’s financial assets increased by 7.3%, or EUR 1,284.4 million, during 2025. In 2024, the increase amounted to 14.5%, or EUR 1,949 million (Table 10).

The overall return on investment in 2025, excluding the impact of exchange rate movements, gold holdings and items denominated in SDRs, was 5.1%, or EUR 616.3 million. The overall return in 2024 was 5.8%, or EUR 549.7 million.

The fixed income markets of the United States and the euro area developed in separate directions in 2025. In the United States, government bond yields were already falling early in the year, as the markets began to anticipate a shift in monetary policy and future interest rate cuts.

In the euro area, the ECB kept key interest rates unchanged after the summer and allowed its balance sheet to decline without the reinvestments under monetary policy purchase programmes. This, together with an increase in the supply of loans and debt sustainability concerns, led to higher long-term government bond yields in the euro area, in particular.

The return on the fixed income investments in the Bank of Finland’s foreign reserves portfolio was EUR 398.7 million, of which the majority, or EUR 355.3 million, was from investments denominated in US dollars. The return on sterling-denominated fixed income investments was EUR 44.0 million and the return on those denominated in Japanese yen was slightly negative, at EUR ‑0.8 million.

The return on euro-denominated fixed income investments was EUR 16.3 million.

In the equity markets, 2025 was broadly a strong year. The US equity market continued to rise (S&P 500 +16%) but fell behind the performance of European (Euro Stoxx +21%) and other markets’ equities (e.g. Nikkei +28%). The US market continued to be buoyed by the technology sector and investment in artificial intelligence.

The return on the equity investments in the Bank of Finland’s long-term portfolio in 2025, with currency hedging taken into account, was 10.0%, or EUR 127.8 million.

The return on real estate investments turned positive in 2025, at 5.0%, or EUR 7.9 million. Valuations were underpinned especially by the increase in rental income, which boosted investor confidence in the sector.

The US dollar price of gold rose by around 65% in 2025, supported by central banks’ gold purchases, inflation concerns, geopolitical uncertainty and the weakening of the dollar.

The increase in the gold price was reflected in the balance sheet as a substantial revaluation. The euro-denominated value of the Bank of Finland’s gold holdings increased by 46.1%, or EUR 1,628.9 million, during the year.

The significant depreciation of the US dollar had a negative impact on the value of the Bank's holdings of foreign exchange reserves (‑10.9%, or EUR ‑915.7 million).

The total market risk associated with the Bank’s financial assets (Value-at-Risk 99%, 1 day) varied between about EUR 100 million and EUR 220 million in 2025 (Chart 16). Exchange rate risk, including gold, is the Bank of Finland’s most significant risk associated with its foreign currency-denominated fixed income investment portfolios.

Bank of Finland managed and invested part of the ECB’s foreign reserves together with Eesti Pank

The European Central Bank has foreign reserves of its own. Management and investment of these is distributed among the national central banks in the Eurosystem according to their respective capital keys.

In 2025, the Bank of Finland managed and invested part of the ECB’s foreign reserves together with the Estonian central bank, Eesti Pank. In the investment of ECB foreign reserves, the emphasis is on security and liquidity, as the key purpose of the reserves is to ensure the availability of sufficient resources for the Eurosystem’s foreign exchange operations.

The value of Finland and Estonia’s pooled US dollar-denominated portfolio of ECB foreign reserves at the end of 2025 stood at EUR 1,181 million. For additional information on the management of the ECB’s foreign reserves, see the ECB Annual Report.

Bank of Finland achieved the interim climate targets set for its investment activities

In 2025, the Bank of Finland advanced towards the carbon neutrality target for its long-term investment portfolio. At the end of the year, the Bank achieved its target of reducing by half the weighted average carbon intensity (WACI) of equity investments and set out new interim climate targets up to 2030.

Bank of Finland is committed to responsible investment in various ways

The guiding principles of central banks’ investment activities are typically safety, liquidity and return. The Bank of Finland has added responsibility alongside these as a fourth guiding principle and has closely integrated this into its day-to-day investment activities.

The Bank of Finland signed the UN-supported Principles for Responsible Investment (PRI) in 2019 and is committed to developing responsible investment activities.

The Bank of Finland’s responsible investment principles describe the Bank’s approach to responsible investment and its climate targets. The Annual Report on Responsible Investment contains progress updates on the targets and details of the climate-related key figures by asset class in accordance with the Eurosystem’s common stance on climate-related disclosures.

The Annual Report on Responsible Investment containing the climate-related key figures for 2025 will be published on the Bank’s website during spring 2026.

Bank of Finland has set new interim climate targets

The Bank of Finland has set a carbon neutrality target for its entire investment portfolio, which it aims to achieve by 2050 at the latest. To support the achievement of this target, qualitative and quantitative interim climate targets have been set for the various asset classes. The interim targets for the first phase were in force until the end of 2025.

The target of reducing by half the weighted average carbon intensity (WACI) of equity investment from the first-quarter 2021 baseline was reached at the end of 2025. The reduction was 51%.

At the end of 2025, the Bank of Finland Board decided on new interim targets for the second phase, to be met by the end of 2030. The main changes concern equity and corporate bond investments. The qualitative targets for other asset classes remain unchanged.

The reduction target for the weighted average carbon intensity of equity investments by the end of 2030 has been raised from 50% to 60% compared to the first-quarter 2021 baseline. In addition, 75% of equity investments will have to be in investment products that have a climate and/or ESG (environmental, social and governance) objective.

A new target for corporate bond investments is to bring to an end investments connected with thermal coal mining and coal-based power generation by the end of 2030.

The Bank of Finland’s Responsible Investment Principles 2026 contain more detailed descriptions of the interim targets.

The Bank of Finland will monitor the implementation of the interim targets and reports on them regularly. It will carry out the next review in 2030 at the latest.