Implementation of monetary policy means implementation of the monetary policy decisions made by the Governing Council of the ECB. The Eurosystem implements monetary policy mainly by adjusting the quantity, price and maturity of central bank funding granted to monetary policy counterparties, meaning credit institutions.
As part of the Eurosystem, the Bank of Finland is responsible for implementation of the ECB's monetary policy in Finland. The counterparties are credit institutions operating in Finland, i.e. Finnish banks or foreign credit institutions’ subsidiary banks or branches in Finland.
Banks can seek financing through monetary policy tender operations conducted on a regular basis. The operations of a central bank have an impact on short-term interbank money market rates, which in turn determine the most common reference rates for retail loans to the public, such as the Euribor rates.
During the financial crisis and thereafter, the Eurosystem has conducted monetary policy mainly through non-standard monetary policy measures. These include
- targeted longer-term refinancing operations (TLTROs),
- asset purchase programmes and
- forward guidance on monetary policy measures.
Implementation of monetary policy is also inherently linked to the risk management of central bank funding, which is a function separated from use of the monetary policy instruments. In the risk management process, the central bank assesses the financial soundness of banks acting as, or applying to become, monetary policy counterparts and defines the collateral requirements for access to central bank funding.