The Bank of Finland
- prepares and implements monetary policy in Finland
- oversees the stability of the financial system and produces statistics
- conducts research and economic policy analysis
- attends to the settlement of interbank payments and investment of its own financial assets
- maintains the stability and efficiency of payment systems and issues banknotes.
Monetary policy and research
The primary objective of the Eurosystem’s monetary policy is price stability throughout the euro area, which means maintaining a moderate rise in consumer prices. The aim is to keep the inflation rate close to, but below 2% over the medium term. To achieve this objective, the Bank of Finland participates in the Eurosystem’s monetary policy preparation, decision-making and communication, and is responsible for the implementation of monetary policy in Finland. A broad research base provides a solid foundation for this work.
Decisions are taken centrally by the Governing Council of the European Central Bank (ECB), of which the Bank of Finland’s Governor is a member. Each member has one vote in the Governing Council. With monetary policy decisions, the Governing Council influences the interest rate level in the euro area and, at the same time, in Finland. This is done by steering money market rates and the amount of liquidity in the banking system via, for example, changes in the key policy rate and securities purchases and sales. Monetary policy decisions are implemented on a decentralised basis by the national central banks.
The Bank of Finland assesses the impact of the single monetary policy on the Finnish economy and gives its views on domestic economic policy. The Bank’s influence in the Eurosystem is based on internationally recognised high-quality research. The two main areas of focus within the Bank’s research are, on one hand, the interaction between the financial markets and the macro economy plus their stability and, on the other hand, economies in transition (Russia, China).
Financial system oversight and statistical output
The Bank of Finland is responsible for oversight of the financial system and assesses risks to the system jointly with the Financial Supervisory Authority (FIN-FSA). The FIN-FSA, on the other hand, is the main authority responsible for the supervision of banks, insurance companies and pension insurers, other companies active in the insurance sector, investment firms, fund management companies and the stock exchange.
Macroprudential supervision seeks to identify risks threatening the stability of the financial system. The Bank of Finland conducts thorough macroprudential analyses and maintains contingency management procedures. When needed, the Bank of Finland acts as lender of last resort to the banks.
Economic statistics produced at the Bank of Finland support the Bank in its monetary policy tasks and financial stability analysis.
Payments and currency supply
The Bank of Finland is the ‘bank of banks’ in Finland and safeguards liquidity in the domestic financial system. It implements the Eurosystem’s monetary policy in Finland by conducting monetary policy operations with Finnish counterparties, generally banks. Thus, the Bank of Finland handles payment transfers between banks and offers various central bank services to domestic financial market participants.
The Bank of Finland’s activities also cover management of the Bank’s own financial reserves, such as foreign reserves, and the prudent and lucrative investment of the Bank’s share of ECB capital.
The Bank of Finland has sole right to issue cash – new euro banknotes and coins – in Finland. It is also responsible for ensuring the authenticity and quality of cash, through withdrawal of counterfeit and damaged or mutilated notes from circulation. The Bank also sees to the smooth functioning of currency supply.
The Bank of Finland has ongoing cooperation with companies specialised in banking and cash distribution services. Currency distribution is handled through the Vantaa and Oulu regional offices.