seppo honkapohja : brief remarks of finnish financial history welcome remarks by mr seppo honkapohja, deputy governor of the bank of finland, at the dinner for the suerf conference, helsinki, 14 september 2017. * * * speakers, organizers and participants of the 33rd suerf colloquium, it is my pleasure to welcome you to the dinner. shadow banking, the theme of the conference is of course highly topical and is also a central concern for financial regulation. i will not try to comment on the conference theme but instead thought to tell you a little bit of finnish financial history in my short welcoming remarks. finland has not experienced any major problems in banking or financial markets during the recent global financial crisis. finland did, however, go through a major financial crisis in the early 1990 ’ s. in fact, the finnish crisis was one of the big five in the table of 18 financial crises in advanced economies in the period from wwi to 2007 ( i. e. before the current global crisis ) developed by ken rogoff and carmen reinhard in 2008. 1 incidentally, both norway and sweden are also among big five. the finnish crisis was a boom - bust cycle, which was to large extent caused by problems in the deregulation of the financial system in the 1980s. before the deregulation, the finnish financial system was tightly controlled with interest rates mostly set by the central bank and controls of external capital movements. financial deregulation led to a huge credit expansion and large inflows of capital. the growth rate in bank lending reached to about 45 % at the end of 1980 ’ s2. the boom period came to an end in 1990 when a rapid decent in real activity ensued. this development led to a major banking crisis which stared in september 1991. large amounts of public funds and some other forms of support had to be employed to counter the crisis. major restructuring of the banking system was carried out to improve the efficiency of the banking system. the banking crisis came to its end in 1996 – 7 when the banks began to show positive profits, though structural changes in the banking system continued much longer. this is in brief the story of the finnish financial crisis in the 1990 ’ s. i should note that shadow banks did not have any major role in the finnish financial system in 1980s and in the financial crisis. however, we saw a little bit of the shadow bank phenomenon in what was called “ grey economy ” and “ grey financial

employment by the members of the ecb ’ s executive board, governing council and supervisory board. 5 this new initiative complements the single code of conduct for highlevel ecb officials and demonstrates our strong commitment to integrity and good governance. it will facilitate public scrutiny, thereby enhancing trust in the ecb and ultimately in its decisions. this leads me on to my final point on good working relations requiring trust. trust, on the one hand, that criticism of the ecb reflects concerns raised by european citizens on matters that fall within the ecb ’ s mandate. and trust, on the other hand, that the ecb listens and takes such criticism into account. this trust forms the basis for our constructive dialogue, both formal and informal, and ensures that our relationship delivers. and so it does : in response to your call for the ecb to reflect on ways of reducing the reporting burden associated with the collection of statistical and prudential data – an activity which costs the banking sector several billion euro each year – we proposed practical solutions in cooperation with other european authorities and the banking industry, while improving the quality of the data collected. 6 at the very beginning of my term of office, you invited the ecb – in full respect of its mandate and independence – to reflect on how its policies could support the green transition. the ecb ’ s governing council has now decided that, from 2021, the eurosystem will accept bonds with coupons linked to certain sustainable performance targets as collateral for credit operations and outright purchases for monetary policy purposes, provided that they comply with all other eligibility criteria. building on these three criteria, we should continue to do what we have been doing all along : ensuring that our accountability practices remain commensurate by letting them evolve in a flexible manner and by adapting them in line with the demands for scrutiny from european citizens. and because we can only make improvements if we are aware of people ’ s expectations and concerns in relation to the ecb and its policies, we are inviting everyone in the euro area to share their ideas and comments through the ecb listens portal on our website. conclusion let me conclude. our regular exchanges are crucial in explaining the ecb ’ s actions to people across europe and to you as their representatives. this is even truer in testing times when the people of europe expect the eu to rise to the challenge. a recent survey commissioned by this parliament shows that more than two - thirds of europeans would like to see the eu have more