Board Member Tuomas Välimäki
ICMA & NCMF Joint Annual Conference: Sustainability, IBOR transition, Brexit – key issues for the EU capital market
Helsinki, 6 February 2019
opening remarks at the ICMA & NCMF Joint Annual Conference: Sustainability, IBOR transition, Brexit – key issues for the EU capital market HOSTED BY THE BANK OF FINLAND, HELSINKI, 6 february 2019
Ladies and Gentlemen,
Welcome to the Bank of Finland Museum, to the conference on the key issues for the EU capital market jointly organized by the International Capital Markets Association and the Nordic Capital Market Forum.
I am Tuomas Välimäki, Executive Board Member at the Bank of Finland. At the Bank I am responsible, for Research, Payments Systems, Information Management and last but not least Market Operations.
Although, the Bank of Finland joined ICMA as an Associate Member quite recently, we’ve been using ICMA services and training programmes for a long time. Also, quite a few of our staff members hold ICMA certificates, such as Fixed Income Certificate or Operations Certificate. Therefore, it is a particular pleasure for us to host today’s event.
As a central banker responsible for Market Operations, I have a twin interest in the future of the capital markets. First, as a policy maker, during and after the Global Financial Crisis, a large part of our monetary policy implementation – the unconventional monetary policy – has taken place via the capital markets; Second, as an investor, we invest our own reserves, FX and euro denominated, in the global capital markets - including bonds, equities and real estate instruments.
When it comes to monetary policy implementation, we have had a dual role in the bond markets. First, in the early phases of the crisis, we initiated several programmes, like the first CBPP, to facilitate market functioning. In the aftermath of the Lehmann failure, the covered bond market in the euro area had practically ceased. The first Eurosystem monetary policy intervention with outright purchases, CBPP1, was clearly the game changer in unlocking the market segment that was and still is an integral part of European financial transmission.
Later on, the focus of our programmes shifted from repairing impaired market segments to easing financing conditions in the economy in general via the large scale asset purchases. The extended asset purchase programme initiated in early 2015, better known as QE, was effective in removing the fear of deflationary cycle that had started to shadow price and economic developments back then.
Currently, we implement the ECB's Asset Purchase Programme in Finnish government bonds and covered bonds, and because of our expertise, we are also one of the six euro area National Central Banks conducting purchases under the ECB’s Corporate Sector Purchase Programme.
When it comes to investing our foreign and euro denominated reserves, we behave more like the rest of the market. From this perspective, I find one of the presentations we’ll be hearing soon extremely appealing. Sustainability in finance. In line with the trend, we at the BoF have started to pay increasing attention to environmental, social and governance aspects. We take sustainability very seriously.
Since two years, we have been applying a responsible investment policy. This extends to every asset class we invest in. Our firm belief is that sustainability is the only way to go in the future. Investing in a sustainable manner will be both ethical and profitable.
We expect that the sustainable investment market will soon become more liquid and transparent, and that widely accepted standards will be set for it in the not-so-distant future. EU is working heavily to make this happen. The BoF actively participates in sustainable finance discussions. We are a member of the Network for Greening the Financial System.
The Bank of Finland also encourages other financial companies to acknowledge and account for sustainability risks in their own functions and investment actions. We also welcome your participation in the discussions on climate change and its impact on financial stability.
The other two issues covered here this afternoon, Brexit preparations in the capital markets and the transition from IBOR to risk-free rates, are also extremely topical.
The end of March is getting closer. Brexit preparations should now be at their final stage. Yet, we really don’t even know what one should prepare herself for – hard, soft or no Brexit. I believe we all agree that all banks and other financial institutions should prepare themselves for several scenarios. I am eager to hear at which stage the market participants’ preparations stand now, less than two months before D-day.
Benchmark interest rates play an integral role in the financial markets. IBORs are used in a wide range of market instruments. Not the least here in Finland – almost all Finnish mortgages carry EURIBOR as their reference rate. The transition from IBORs will be a major issue for banks and their customers here.
Now, let me once again welcome you to this event, and without further due, I would like to give the floor to Johan Wijkström from ICMA to give his opening remarks before we proceed with the substance.