The Bank of Finland's financial assets consist of the foreign reserve, euro-denominated fixed-income assets, gold, property and equities. The foreign reserve consists of investment assets in foreign currencies and items denominated in IMF Special Drawing Rights (SDR). At the end of 2019, the Bank of Finland’s financial assets totalled a little over EUR 11 billion.
The objectives guiding the management of the assets are security, liquidity and return. Management of the reserves serves to maintain the value of the Bank' financial assets and its ability to support the liquidity of the banking system and the economy. The assets are invested according to international commitments and crisis management requirements.
The financial assets of the Bank of Finland are invested in bonds with the highest credit ratings and in equities. A significant part of the financial assets is invested in government bonds. In addition to government bonds, the financial assets include investments in bonds involving credit risk, in order to seek a higher return and better risk-reward ratio for the investments. The equity investments and property fund investments, which are allocated globally, diversify the total risk of the portfolio, which is otherwise heavy on fixed-income instruments.
By currency, the investments are distributed so that the foreign reserves, which comprise mainly US dollars, make up more than half of the Bank of Finland’s financial assets. The rest of the foreign reserves comprises pound sterling and Japanese yen holdings as well as IMF Special Drawing Rights (SDRs). Gold accounts for about a fifth of the assets, while a small share is held in euro-denominated fixed-income assets.
The Bank of Finland sets a strategic allocation for the investments and an average maturity for the fixed-income investments. It is possible to deviate from the strategic allocation in the investment operations in order to generate additional returns by active position-taking within a pre-set range and stringent risk limits. The active positions have a relative return target benchmarked against the strategic allocation.