The Board has approved the ethical rules of conduct to be complied with at the Bank of Finland, which will enter into force on 1 June 2016. The ethical rules of conduct will replace the Bank of Finland’s previous insider policy rules and ethical rules of conduct for personnel at the Bank.
On 12 March 2015, the Governing Council of the European Central Bank adopted a Guideline laying down the principles of a Eurosystem Ethics Framework (ECB/2015/11). The national central banks were to take the necessary measures to implement the Guideline.
The ECB’s Guideline laying down the principles of the ethics framework is applicable to Eurosystem central banks carrying out Eurosystem duties. The rules approved by the Eurosystem central banks for the purpose of implementing the Guideline are applicable to the members and employees of the central bank's governing bodies. Where appropriate, the rules will also be applicable to other persons who are involved in the performance of the central bank’s duties but who are not employees of the central bank (e.g. workers providing purchased services and temporary agency workers).
On 5 December 2018, the Governing Council of the European Central Bank adopted the Code of Conduct for high-level European Central Bank Officials, which entered into force on 1 January 2019. The Code of Conduct applies to the members and alternate members of the ECB Governing Council and Supervisory Board. On 28 May 2018, the Board of the Bank of Finland decided to apply the Code of Conduct to other Members of the Board to the extent indicated in these rules.
1 GENERAL PRINCIPLES
1.1 INDEPENDENCE AND AVOIDANCE OF CONFLICTS OF INTEREST
An official is expected to refrain from any activities which may present a conflict of interest with respect to conduct of the Bank of Finland’s and the official's duties. If a conflict of interest does arise, the official must so notify their immediate supervisor, head of unit, head of department or head of legal affairs without delay.
A conflict of interest refers to a situation where an official’s personal interests may influence or appear to influence the impartial and objective performance of their duties.
Personal interest refers to any actual or potential benefit of a financial or non-financial nature for officials, their family members or other relatives, or for their circle of friends and close acquaintances.
A person applying for a position at the Bank of Finland must declare any conflicts of interest during the application procedure. Before an appointment is made, the recruiting superior must assess whether the applicant's previous duties or personal relations could pose conflicts of interest with respect to the performance of official duties.
Furthermore, the official must inform their supervisor and the Personnel and Financial Control Division if they have been appointed to a new task and such task could give rise to a conflict of interest, or if a conflict of interest arises during an unpaid leave of absence.
1.2 GIFT, OTHER ADVANTAGE AND HOSPITALITY
An official must not demand, accept or receive a financial or non-financial advantage if this could undermine trust in said official or in the Bank of Finland (Act on the Officials of the Bank of Finland, 1166/1998, section 12).
An advantage refers to any gift, hospitality or other benefit of a financial or non-financial nature which objectively improves the financial, legal or personal situation of the recipient and to which the recipient is not otherwise entitled.
Officials must not request, accept or receive, for themselves or other persons, advantages connected in any way with the tasks or duties conferred upon them. Advantages of a customary or negligible value are an exception. Gifts whose value does not exceed EUR 50 may be allowed. In exceptional cases where a gift in excess of EUR 50 in value cannot be refused, the gift must be turned over to the Bank. Hospitality offered in the context of work-related appropriate meetings may usually be accepted if this can be considered customary and reasonable.
Advantages may not be frequent or repeatedly from the same source. An advantage must not influence nor be perceived as influencing the independence and impartiality of an official. Advantages of a customary nature offered in the context of cooperation with other central banks, authorities, European Union institutions or international organisations may be accepted.
Members of the Board may give gifts to third parties at the expense of the Bank of Finland only if this accords with customary and generally accepted practices. If such a gift exceeds EUR 150 in value, permission from the Board is required.
Officials may neither host nor give, at the expense of the Bank of Finland, any other benefits to each other, unless otherwise permitted under a practice separately agreed upon.
1.3 ACCEPTANCE OF INVITATIONS AND OTHER PARTICIPATION IN EVENTS BY EXTERNAL ORGANISERS
Being mindful of their adherence to the principle of independence and their obligation to avoid any conflict of interest, officials may accept invitations to conferences, receptions or cultural events if their participation in such events is compatible with the fulfilment of their duties or in the interests of the Bank of Finland.
As a general rule, the Bank of Finland will pay travel and accommodation costs incurred by an official if a trip is considered necessary. In particular, officials may accept invitations to events which it is customary to attend. Officials may not themselves accept remuneration for lectures or speeches given in an official capacity.
These rules apply equally to the spouses of such officials if the invitations are also extended to them, their participation is consistent with internationally accepted custom and approval for their participation has been obtained from the official’s superior.
1.4 ACCEPTANCE OF REMUNERATION FOR ACTIVITIES CARRIED OUT IN A PERSONAL CAPACITY
Officials may teach, make academic contributions and pursue other activities within the limits of the rules for secondary occupations. An official may accept remuneration or compensation for activities undertaken in a personal capacity, unless otherwise provided by legislation on the Bank of Finland and on condition that the remuneration or compensation is commensurate with the work performed and remains within customary limits. Such activities include the writing of articles or giving of lectures which can be deemed to have been prepared outside working hours.
Official must annually report their secondary occupations and remuneration received to the Head of Legal Affairs.
Members of the Board must report to the Head of Legal Affairs once a year in writing regarding all activities carried out in a personal capacity and the remuneration received as compensation for such activity.
1.5 PROCUREMENT
Officials must ensure appropriate implementation of procurement procedures by complying with the principles of neutrality, impartiality and equity and by acting in a transparent manner. Offers of advantages must be declined during procurement procedures or if such advantage is offered by another potential supplier.
1.6 LACK OF IMPARTIALITY
An official lacking impartiality thereby disqualifies themself from participating in preparation, presentation or decision-making regarding the matter in hand. Officials of the Bank of Finland must recuse themselves from handling their own matters, or those of their close persons, at the Bank, especially if the settlement of the matter is of particular advantage or disadvantage to them or their close persons. Officials lack impartiality in the handling of matters concerning the guidance or supervision of agencies or institutions of whose boards or other governing bodies they or their close persons are members. An official is also ineligible if their impartiality is endangered for any other reason.
A close person refers to a person defined in section 28, subsections 2 and 3 of the Administrative Procedure Act (434/2003). The grounds for disqualification are listed in section 28, subsection 1 of the Administrative Procedure Act.
2 DUTY OF CONFIDENTIALITY AND GENERAL PROHIBITION ON MISUSING INSIDE INFORMATION
According to section 23 of the Act on the Openness of Government Activities (621/1999, hereafter the ‘Openness Act’), a person in the service of an authority must not use secret information for personal benefit or the benefit of another. Inside information must also be kept secret. The list of secret official documents in section 24 of the Openness Act includes several such documents containing e.g. information on monetary policy or foreign exchange policy, financial markets, market rates and business secrets.1
Misuse of inside information by any official is prohibited.2
The prohibition on misusing inside information covers, as a minimum:
a) the use of inside information for private transactions for one’s own account or for the account of third parties;
b) the disclosure of inside information to any other person unless such disclosure is made in the course of carrying out professional duties on a need-to-know basis; and
c) the use of inside information in order to recommend or induce other persons to enter into private financial transactions.
Every official is responsible for their own compliance with the rules.
3 INSIDER POLICY RULES
3.1 INTRODUCTION
The Bank of Finland’s insider policy rules are based on the Act on the Officials of the Bank of Finland, on the regulation laid down by the Parliamentary Supervisory Council on the basis of said Act, on the ECB’s Guideline laying down the principles of a Eurosystem Ethics Framework and on these present ethical rules of conduct. The insider policy rules are, as a rule, only applicable to those officials of the Bank of Finland who are insiders according to the definition.
According to section 6, subsection 1 of the Act on the Officials of the Bank of Finland, the term ‘insider’ refers to the members of the Board, Directors General, heads of department, heads of unit and advisors to the Board. According to the regulation laid down by the Parliamentary Supervisory Council under section 6, subsections 2 and 6 of the Act on the Officials of the Bank of Finland, the insider reporting obligation relates to all positions at the Bank of Finland that afford access to inside information on a regular basis.
According to the definition used by the departments of the Bank of Finland, insider refers to persons who carry out Eurosystem duties or other duties and have access to inside information on a regular basis. The member of the Board in charge of legal affairs must ensure that uniform principles are applied in all departments in defining an insider. The departments must notify a person if they are classed as an insider and state the grounds for this. The departments must also notify the names of insiders and the grounds for said classification to the Register of Insiders maintained by the Legal Affairs unit.
The departments must ensure that access to inside information is given only to insiders carrying out their professional duties, on a need-to-know basis.
Inside information refers to all kinds of market-sensitive information that is related to Eurosystem duties or other duties carried out by the Bank of Finland and that has not been made public or is not available to the general public.
Inside information may also include other sensitive information that has not been made public. According to section 6, subsection 1 of the Act on the Officials of the Bank of Finland, such information may be related to confidential information on monetary policy, financial markets, national economic statistics, the financial position of private corporations or business secrets.
It is strongly recommended that, in case of a clear conflict of interest or the possibility of such, the official entrust their own investment portfolios to the care of one or more well-known asset managers, with full authorisation to act on their behalf.
3.2 INSIDER DECLARATION
An insider declaration must be submitted by all members of the Board, Directors General, heads of department, heads of unit, advisors to the Board and other officials classed as insiders.
Members of the Board must declare their investment assets and financial liabilities to the Parliamentary Supervisory Council once a year. Declarations are filed with the Secretary to the Parliamentary Supervisory Council.
A person who is appointed as a deputy to an official classed as an insider and subject to the reporting obligation or who is performing the duties of a vacant position will be subject to the reporting obligation during such period of temporary employment (Act on the Officials of the Bank of Finland, section 6, subsection 3). If all employees of a department/unit/office or a certain group of officials, based on their professional duties, are deemed to be subject to the reporting obligation, an official who joins such an entity will also be subject to the reporting obligation. The reporting obligation will cease at the end of the employment relationship or when the official has transferred to a position that is not subject to the reporting obligation. If an official subject to the reporting obligation is absent from their official duties for more than one year, e.g. due to leave of absence or parental leave, the reporting obligation will be suspended at the start and resume at the end of the period of leave.
The Financial Supervisory Authority (FIN-FSA) has its own insider policy system, and the Bank of Finland’s insider policy rules are not applicable to the FIN-FSA.3
3.3 SPECIFIC RESTRICTIONS on INSIDERS
An official of the Bank of Finland must refrain from all transactions when they have information on significant economic policy measures under preparation. Officials who are deemed to have access to inside information on the ECB’s monetary policy or exchange rates must refrain from investment activities during the seven days preceding a monetary policy meeting of the ECB’s Governing Council.4
A private financial transaction is deemed critical if it is or may be perceived to be closely related to the performance of Eurosystem tasks. Critical financial transactions are restricted as described below or are subject to the reporting obligation. Critical financial transactions are:
a) transactions in shares and bonds issued by financial corporations established in the European Union (profit shares of cooperative banks are regarded as equivalent to these);
b) foreign exchange transactions, transactions in gold, trading of euro area government securities;
c) short-term trading, i.e. purchase and subsequent sale or sale and subsequent purchase of the same financial instrument must be separated by at least one month;
d) transactions in derivatives related to the financial instruments listed under a) to c) and collective investment schemes the main purpose of which is to invest in such financial instruments.
Insiders must refrain from private financial transactions related to bonds and shares as well as profit shares issued by financial corporations established in or with a branch in the European Union, derivate contracts or combined instruments related to such bonds and shares, as well as collective investment schemes the main purpose of which is to invest in the above-mentioned bonds, shares and instruments.
The prohibition on short selling is applicable to insiders. Purchase and subsequent sale or sale and subsequent purchase of the same type of security or other financial instrument must be separated by at least one month.
If the management of financial transactions has been entrusted to an independent third party under a written asset management agreement, with full authorisation so that the insider cannot directly or indirectly influence decisions made by the asset manager on financial transactions, the restrictions will not be applicable to the external asset manager. The insider must declare the asset management agreement and, upon request, provide a copy of it.
It is strongly recommended that members of the Board entrust their investment portfolios to the care of one or more custodians with full authorisation to act on behalf of the Board member. This recommendation does not apply to ordinary bank accounts, money market funds or similar short-term instruments and is z prejudice to any opportunity to temporarily use funds for the purchase of specific goods or for investment in real property.
3.4 CONTENT OF INSIDER declaration
Shares of ownership in companies and other significant assets (incl. investment assets)
The reporting obligation concerns shares of ownership in companies and other significant assets such as investment assets. The reporting obligation concerns both domestic and foreign assets.
Insiders must declare securities such as shares and financial instruments giving the right to shares (e.g. convertible bonds, subscription rights, rights of option, warrants, certificates, futures, forwards and other derivative contracts), debt instruments, derivative contracts, investment fund shares, foreign exchange transactions, gold-related transactions, ownership in companies as well as investments in residential and non-residential property.
Insiders must also declare other financial and investment instruments with which they could clearly utilise confidential information related to interest rate decisions, the Eurosystem's financial and investment decisions and changes in the values of currencies.
A basic declaration must be submitted when the total market value of investment assets exceeds the minimum amount to be declared (EUR 40,000). The declaration must cover all investment instruments (irrespective of the amount per type). After this, an annual declaration of investment assets must be submitted by the end of January, irrespective of whether changes have occurred.
Even if the total value of the assets to be declared does not exceed the minimum amount, the insider must make a trading declaration covering all individual changes in investment assets (acquisitions and disposals) when the change in ownership per security is at least EUR 5,000. The value is to be calculated for each company so that e.g. shares and derivative contracts based on shares are added together. If the total value of acquisitions and disposals made during the calendar year is less than EUR 5,000, the changes in ownership are to be declared in the annual declaration and even then only when the total value of ownership in companies and other assets to be declared exceeds EUR 40,000.
However, changes concerning foreign exchange transactions and transactions in gold must be declared without delay if the value of transactions exceeds EUR 10,000 during a single calendar month. The reporting obligation is not applicable to the buying or selling of foreign currency e.g. for the purpose of travel.
The investment assets of a controlled corporation (see below, under ‘Other commitments’), or those of a legally incompetent person (e.g. an underage child) in the trusteeship of the official, must be declared if the above-mentioned reporting requirements are met separately or when combined with the assets of the official.
An insider must also use the insider declaration to declare business activities and possible entrepreneurial or professional activities. Business, entrepreneurial and professional activities usually constitute a secondary occupation, which also requires either a separate authorisation obtained from the Bank or a notification made to the Bank.
Debts, guarantees and other contingent liabilities
As regards contingent liabilities, a basic declaration must be submitted when the total value of debts, guarantees and other contingent liabilities exceeds EUR 40,000. After this, an annual declaration of the liabilities must be submitted by the end of January.
Secondary occupations
Officials’ secondary occupations are governed by Section 14 of the Act on the Officials of the Bank of Finland, and Board members’ secondary occupations by Section 17 of the Act on the Bank of Finland.
The Bank of Finland has approved separate rules on the secondary occupations of its personnel.
Other commitments
In addition to secondary occupations, officials must give an account of their other commitments that may be of relevance in evaluating their capacity to carry out their official duties. This category comprises commitments to enterprises and corporations, as well as certain personal relationships.
Commitment to an enterprise or other corporation refers to e.g. a situation where an official can have control on the basis of a majority of votes either alone or with their family members (a controlled corporation). Reporting is not affected by the legal nature, line of business or size of the enterprise or other corporation. Acting within the supervisory board or board of directors of the enterprise or other corporation, as a managing director, as an accountant, or as a partner in a general partnership or an active partner in a limited partnership (influenced corporation) must be declared.
Furthermore, officials must declare family relationships and other personal relationships as well as relations with an enterprise or other corporation that may prevent them from handling confidential affairs at the Bank of Finland.
3.5 REPORTING OBLIGATION
An insider must make an insider declaration (basic declaration) before being appointed to a position or without delay after having been classed as an insider and entered into the Register of Insiders.
Officials must, without delay, report essential changes in the data contained in declaration, rectify any shortcomings observed and, when necessary, supplement their declaration. The changes must be submitted by means of a basic declaration.
An annual declaration must be submitted by the end of January even if there are no changes to the data previously declared.
Neglect of the insider’s reporting obligation is not compliant with official duties.
3.6 ADMINISTRATION AND SUPERVISION
The member of the Board in charge of Legal Affairs has the competence to administer the insider policy system. In matters that are significant in principle, the Board as a body has the power of decision. The Head of Legal Affairs is responsible for practical measures such as receipt of declarations, registration, guidance and supervision of compliance with insider policy rules. Board members’ declarations must be submitted to the secretary to the Parliamentary Supervisory Council and reported annually to the Council itself. As regards the insider policy system for the personnel, the Head of Legal Affairs must annually report to the Board on the supervisory measures carried out and their essential results.
The Bank of Finland must supervise compliance with the insider policy rules and may, in this context, carry out inspections in order to ensure the correctness of the content of the declarations made by insiders. When requested by the Bank of Finland, officials must provide information on matters related to their declaration (Act on the Employees of the Bank of Finland, section 6, subsection 4).
In addition to the above, separate instructions on procedures for notifying, clarifying and reporting activities not complying with the instructions or rules and other malpractices at the Bank of Finland, as well as the internal reporting system, must be applied, when necessary.
4 RESTRICTIONS RELATING TO TERMINATION OF BOARD MEMBERS’ TERMS OF OFFICE, AND COMPENSATION FOR THE POST-TERMINATION TRANSITION PERIOD
Members of the Board must comply with the cooling-off periods applicable under the Code of Conduct for high-level European Central Bank Officials. The cooling-off period applicable to ECB Governing Council members will apply to the Governor, while the cooling-off periods applicable to alternate members will apply to the other Members of the Board.
In accordance with the decision of the Parliamentary Supervisory Council of 15 March 2019, Members of the Board will from the termination of their term of office be paid 60% of their monthly salary during the cooling-off period, the length of which is to be determined in accordance with the guidelines set forth in the Code of Conduct for high-level European Central Bank Officials. If the recipient of such remuneration takes up other duties during the cooling-off period, receipt of the remuneration will be conditional upon the recipient reporting his or her earnings. Any other earnings or pensions will be deducted from the remuneration.
5 ETHICS ADVISER
If ambiguity arises in the interpretation of these rules, an official may turn to the Ethics Adviser. The Head of Legal Affairs acts as Ethics Adviser. The secretary to the Parliamentary Supervisory Council acts as Ethics Adviser to the Board.
1 Information covered by the prohibition on utilisation need not be information that has had a concrete influence on the market; criminal liability already exists when one uses information that can clearly have an influence on the market. Such an act is punishable as an offence in office as referred to in chapter 40, section 5 of the Criminal Code, unless it is punishable under chapter 38, section 1 or 2 (secrecy offence or secrecy violation) and unless a more severe penalty is prescribed elsewhere in the law.
2 The Decree on the Prohibition of Market Abuse, which enters into force on 3 July 2016, prohibits the misuse of inside information. The new decree gives rise to amendments to the Securities Markets Act, which already prohibits the misuse of inside information by anyone (chapter 14, section 2). The Criminal Code lays down the criminal liability of the misuse of inside information on securities subject to public trading (Chapter 51, sections 1 and 2).
3 The officials of the Bank of Finland’s Internal Audit unit have, due to the nature of their duties, access to confidential information on the activities of the FIN-FSA. Therefore, all officials of the Internal Audit unit are also insiders of the FIN-FSA. This also applies to those Bank of Finland officials who are members of the FIN-FSA Board, as well as to the personnel of the Registry and the Mail Service Centre.
4 The dates of the monetary policy meetings are annually announced in advance on the ECB’s website www.ecb.europa.eu