SUOMEN PANKKI Bank of Finland Contents Bank of Finland's objective and tasks Photograph: Peter Mickelsson Peter Photograph: The Bank of Finland is Finland's central bank The Bank participates in a wide range of and a member of the European System of Cen- research activities through its Research tral Banks (ESCB). The Bank of Finland's pri- Department and the Institute for Economies mary objective is to maintain price stability, in Transition. The Bank also handles contacts which provides a firm foundation for econo- with numerous international organisations. mic welfare. In working toward this goal, the Bank participates in monetary policy prepar- Key goal: economic stability Central bank ations, decision-making and communications By carrying out its tasks, the Bank of Fin- The authority responsible for monetary policy, whose of the Eurosystem, as well as in the implemen- land promotes a stable operational tasks include influencing the tation of monetary policy in Finland. environment for economic entities and economy's supply of money, market interest rates or ex- The Bank of Finland's tasks, objectives provides a foundation for economic growth change rates. The position and tasks of the central bank and related matters are prescribed in the Act and employment. The same goals motivate vary notably among differ- ent countries. on the Bank of Finland, under which the the Bank's active participation in economic European System of Bank is further obliged to policy discussions, in Finland and in Central Banks (ESCB) – participate in maintaining the reliability various international fora. The ESCB was launched on 1 June1998. Although its and efficiency of the payment system and The Bank of Finland, as one of the coun- membership includes all EU national central banks and overall financial system and in their try's key sources of economic expertise, adds the ECB, only the central banks in the Eurosystem par- development a formidable analytical input to the discussion ticipate in the conduct of the – issue banknotes and, in cooperation with of economic policy. Within the ESCB, the single monetary policy. The excluded EU national central banks and other enterprises, contribute to Bank of Finland functions as an active and banks participate in the co- operative work of the ESCB maintenance of the currency supply constructive member as well as a source of only to a limited extent. – contribute to the holding and manage- special expertise on the Finnish economy. In Eurosystem System comprising the Euro- ment of international reserves the latter role, the Bank provides information pean Central Bank and na- – provide for the compilation and publica- on the impact of the Eurosystem's single tional central banks of the euro area. The Eurosystem tion of statistics as required for carrying monetary policy on the Finnish economy its began conducting the euro area's single monetary policy out its tasks consequences for domestic decision-making. at the start of 1999. Suomen Pankki · Finlands Bank 3 History When Finland gained its independence, the Bank's status as central bank was confirmed. Starting with the period of the Second World War and lasting for several decades, the Bank of Finland had a broad mandate to regulate Finland's foreign currency and cap- ital flows. In the late 1950s a gradual process of deregulation was set in motion, which led Photograph: Brunskow Photograph: The Bank of Finland was The Bank of Finland is one of the oldest central to complete dismantlement of the system in established in 1811 – more than a hundred banks in the world. In connection with the early 1990s. years before Finland's Finland's separation from Sweden and transfer The Bank of Finland's primary objective independence. The picture shows office staff at the to the jurisdiction of Russia in 1809, the was defined as safeguarding the markka's ex- Bank's main office in decision was made to overhaul Finland's ternal value. This was brought about by influ- 1910. monetary framework. In 1811, Tsar Alexander encing the amount of money in circulation, the I decreed the establishment of the 'Waihetus- level of interest rates, and the markka's value Laina- ja Depositioni-Contori' in Turku, the relative to other currencies. The Bank was also then-capital of Finland. From this start, as what charged with maintaining financial stability was primarily an office for exchange of and promoting the security and efficiency cur- banknotes, lending and state cash operations, rency supply operations. The Bank had the sole Finland's first bank developed into the Bank of right to issue banknotes and coins. Finland. In 1819 the Bank was moved to In 1995, after a referendum, Finland Helsinki, which had been named the new joined the European Union. One reason for capital city. entering into membership negotiations had The Bank of Finland began to operate as been the desire to stabilise the country's a true central bank in the latter part of the economic situation. For a small country such 1800s, when Finland obtained its own cur- as Finland, maintaining stable monetary rency and commercial banks were estab- conditions is easier if the country were part lished. The Bank of Finland began to trans- of a single European economic area than if fer payments between banks and to make it were to remain on the outside. emergency loans to them as the need arose. Introduction of the euro in 1999 did not In 1875 a regulation concerning the Bank essentially change the Bank of Finland's tra- stated that it was charged with ensuring that ditional tasks. The biggest change was that, financial institutions remained stable and instead of acting solely on a national basis, secure and with promoting and facilitating the Bank now functions as a part of the Euro- the smooth flow of money in the economy. system of central banks. 4 Suomen Pankki · Finlands Bank Position and administration Parliament President appoint Board members elects Bank of Finland Parliamentary Supervisory Government Council supervises dialogue membership, ownership European System of Central Banks According to the Constitution, the Bank of In carrying out its tasks within the Euro- Finland operates under the guarantee and pean System of Central Banks, the Bank of supervision of Parliament. The Bank is re- Finland acts under the guidance and di- sponsible for its operations to Parliament rection of the European Central Bank and thus to the Finnish people as a whole. (ECB). Otherwise, it functions independent- The Bank of Finland's administration and ly or, as necessary, in cooperation with the operations are supervised by the nine-mem- Finnish Government and other authorities. ber Parliamentary Supervisory Council, which is elected by Parliament for an election term and is usually composed of Members of Parliament. The Council annually reports on its operations and administration to Parlia- Jaakko Koskentola Photograph: ment's Economy Committee. The operations of the Bank of Finland are not financed by tax revenues but by its own earnings. One of the ways the Bank earns in- European Central Bank come is by investing its international reserves (ECB) The administrative centre of in income-earning assets. By law, half of each the ESCB and Eurosystem, established on 1 June 1998. year's profit is transferred to the state and half The ECB is owned by the na- is added to the Bank's reserves. The Council, tional banks of all the EU countries. It is located in where there is sound reason, can decide on Frankfurt, Germany, and its staff numbered 1200 at some other division of the profit. end-2003. Suomen Pankki · Finlands Bank 5 Board Board of the Bank of Finland, 1 Jan 2004: Deputy Governor Matti Louekoski, Governor Matti Vanhala, and Board members Sinikka Salo and Pentti Hakkarainen. Johan Ahlroth Photograph: The Board is responsible for seeing that the context, the Parliamentary Supervisory Bank carries out its assigned tasks. The Council makes its own proposal to the Board decides on a division of responsibil- Government. The Governor's term of ities such that each member oversees speci- office is seven years; and five years for other fied departments and units. members of the Board. The same person The law requires that the Bank's opera- may be appointed to the Board for up to tions be organised in an effective and effi- three terms. However, a person who has cient manner. The Board regularly reports served on the Board may still be named to the Parliamentary Supervisory Council Chairman for up to two terms. on the implementation of monetary policy The Bank of Finland's Governor is a and other Bank operations. member of the Governing Council of the The Board may comprise, in addition ECB, the highest decision-making body in to the Chairman (Governor of the Bank), the Eurosystem, as well as the General up to five other members. The President of Council of the ECB, which deals with issues the Republic appoints a member on the affecting the whole European System of basis of a Government proposal. In this Central Banks. 6 Suomen Pankki · Finlands Bank Staff and organisation Organisation of the Bank of Finland 1.1.2004 Parliamentary Supervisory Council Financial Supervision Authority Board Matti Vanhala Matti Louekoski Sinikka Salo Pentti Hakkarainen Governor Deputy Governor Member of the Board Member of the Board • Overall responsilibity • Financial Markets • Research • Market Operations for ESCB affairs • Currency Supply • Institute for • Payments • Economics • Personnel Economies in • Information • Communication • Legal Affairs Transition Technology • International • Management • Statistics • Administration Secretariat Secretarial Staff • Development and • Security • Internal Audit Budget At the end of 2003, the Bank of Finland's out in the Bank's branch offices, in Kuopio, staff totalled 627. The number of employees Oulu, Tampere, Turku and Vantaa.