olli rehn : bretton woods @ 75 – what is new with the international monetary system? remarks by mr olli rehn, governor of the bank of finland, at the panel discussion on " bretton woods @ 75 – what is new with the international monetary system? " in the context of the imf spring meetings, washington dc, 12 april 2019. * * * accompanying slides of the speech. your excellencies, ladies and gentlemen, 1. as we are celebrating the 75 - year anniversary of the bretton woods system, let me start by noting that fostering economic and financial stability has been and will continue to be the key objective in developing the international monetary system – as reflected in the establishment of the bretton woods system in 1944, and, more recently, underlying the adoption of europe ’ s single currency, euro. my home country, finland, is a case in point of a small, open economy in search of a stable monetary regime. throughout the 20th century, finland had just one currency, markka, but several changes in its monetary regime – ranging from frequent devaluations to literally cutting large value banknotes in halves. eventually, we decided to join the european single currency, euro, 20 years ago. this has greatly enhanced stability, but also brought challenging adjustment needs. learning by doing, in 2016, after realising that finland ’ s labour cost growth had significantly outpaced that of our peers, an agreement was reached with the social partners that helped to narrow the gap of price competitiveness to our main competitors. the competitiveness pact reduced unit labour costs by 6½ % in the period of 2014 - 17. assisted by strong global demand, the pact was an important factor underlying finland ’ s rebound from zero growth to 2 - 3 % growth in 2017 - 18. one might say, it ’ s small - country open - economy macroeconomics in action! 2. in the international monetary system, the us dollar has been the most important international currency since the birth of the bretton woods system. while we have moved to a more multipolar currency system, with the euro gaining ground since 2000 in international trade and currency markets, and the renmimbi making headway as well, the central scenario is still that the us dollar continues to play the dominant role, and retain its exorbitant privilege as the global reserve currency. when the financial crisis hit with full force, the dollar swap - lines of the fed with e.

the integrated structures of banking business in the real world. before i continue to the banking union, i would like to recall ideas that stefan ingves raised in 2006 “ i propose the establishment of a new pan - european body, a european organization for financial supervision ( eofs ). the idea is to create a separate agency to follow the major cross - border banking groups in europe ”. “ the eofs should only focus on the presently about 40 truly cross - border banking groups and not deal with the about eight thousand european banks with a predominately national character. ” bis central bankers ’ speeches “ the eofs should have three tasks : it should gather information about the banking groups and their activities in different countries. importantly, it should also create unified risk - assessments of each cross - border banking group. finally, it should also oversee the activities and risks of these banking groups. ” “ to achieve these tasks, there is a need for a separate agency, staffed with a sufficient number of competent employees. initially, these employees could of course be recruited from the existing national supervisors. also the staff of the eofs would have to cooperate with the national supervisors. ” at the moment, after eight years and severe crises, we are taking steps pretty much towards the direction proposed by stefan. however, he also mentioned that the authority should be independent and not the ecb or the european commission, but as we know according to the current eu - treaties this was not a feasible option.. the european union is now taking a significant step forward by establishing the single supervisory mechanism for the euro area and the non - euro area member states have a possibility to join in the form of “ close co - operation ”. therefore, it may be fair to ask whether we someday see sweden to join the single supervisory mechanism. banking union as part of the economic and monetary union and as a remedy for the crisis, the eu leaders agreed in june 2012 on creating a true banking union. the single rulebook provides a foundation for the banking union. it is based on the idea of identical regulatory requirements, such as capital adequacy rules for banks. these are achieved through european legislation and lower - level technical standards. one of the main pillars of the banking union is the single supervisory mechanism. i will come back to the recent developments in its construction later on. another important pillar is the single resolution mechanism. as you know, intensive talks in the form of eu trilogue ended in march and