Macroprudential supervision seeks to identify risks to financial stability
In Finland, as in all Eurosystem countries, promotion of financial stability is a statutory task imposed on central banks. Promotion of stability is also laid down in the Statute of the ECB/ESCB and the Treaty on the Functioning of the European Union. The Act on the Bank of Finland requires that the Bank of Finland contribute to maintaining the reliability and efficiency of the payment system and the overall financial system and participate in their development.
A stable and reliable financial system is a prerequisite for price stability and stable economic growth. Financial stability creates overall social stability. Banking crises and other serious disruptions affecting the operation of the financial system lead to high costs across economic sectors. Of key concern is therefore to identify and minimise in advance any major risks that may endanger financial stability.
The Bank of Finland seeks to maintain confidence in the financial system. When instability threatens, the central bank may need to take a more active role in order to maintain the operational ability of the financial system, because, ultimately, the central bank is the safeguard of last resort of the financial system's liquidity situation. This was the case in Finland, for instance, during the banking crisis at the beginning of the 1990s.
Macroprudential analysis is the primary responsibility of the Bank of Finland, whereas the Financial Supervisory Authority (FIN-FSA) is responsible for institution-level microprudential analysis. The aim of macroprudential analysis is to identify, at a sufficiently early stage, systemic risks threatening the stability of the financial system as a whole. Macroprudential analysis is made use of in order to assess the resilience of financial companies, financial markets and financial market infrastructures to various endogenous and exogenous shocks.
Interconnectedness between different financial market participants is of vital importance for stability. Analysis and surveillance of financial system structures, structural changes and integration provide a basis for assessing how these interconnections change over time.
The Bank of Finland supervises the payment and settlement system infrastructure as a whole by regularly monitoring, analysing and assessing the status and development of the system (oversight). In performing this task, the Bank of Finland also participates in the development of payment and settlement systems.
The Bank of Finland carries out its prudential task in close cooperation with domestic and foreign authorities. As a member of the Eurosystem, the Bank of Finland conducts its oversight functions in compliance with jointly agreed policies and requirements.
The Bank of Finland publishes its official assessment of the stability of financial markets in the Financial Stability review. The publication come out as a special issue of the Bank of Finland Bulletin in May. An update of the assessment is included in the Bank of Finland Bulletin, released towards the end of the year.