be pursued consistently. this is so despite the – perhaps understandable – regulation fatigue that may be gaining ground. the tasks are different depending on the situation in each country or region. in the euro area, the key priority now is completing the banking union with common deposit insurance and by strengthening the european stability mechanism. meanwhile, the us and the uk should protect their regulatory achievements. it would be a big mistake to roll back what was achieved in the post - crisis years. this links to the management of monetary policy normalization, which is a balancing act, where the right course should depend on the particular circumstances of each currency area. this is the logic of the international system of floating exchange rates. however, monetary policy has international repercussions, the severity of which depends on the existing vulnerabilities of the countries that face these spillovers. as a consequence, many emerging market economies need to pay more attention to 1 / 2 bis central bankers'speeches developing macroprudential policies which could limit their particular vulnerabilities. having a large share of foreign currency denominated lending in the domestic market is an obvious example of such vulnerability, which has repeatedly caused serious problems in the past. weak balance sheets in the business sector are a vulnerability even in countries with no current account deficits. 3. a critical issue related to financial resilience is the question how to ensure that the monetary policy toolbox is sufficient when the next recession hits. having sufficient room of manoeuvre for active monetary policy is part of the resilience of the new equilibrium that we strive for. the problem is quite relevant because there are indications that the so - called natural rate of interest ( the medium - term equilibrium real rate of interest ) may have declined in the recent years, and may be clearly below what was thought to be normal in the past. this has several implications. where the convergence to sustainable price stability still requires significant monetary stimulus, as is the case in the euro area, this calls for prudence and for a gradual approach to monetary policy normalisation. in my view it is reasonable to assume that the unconventional monetary policy measures and instruments which were used during the crisis years ( and the ecb, for one, is still using ) will stay permanently in the toolbox, at least in reserve. 4. finally, i think that the word ’ normalization ’ as a description of the monetary policy outlook in the advanced economies is actually misleading, as it suggests a return to

pentti hakkarainen : banking union in the nordic context keynote address by mr pentti hakkarainen, deputy governor of the bank of finland, at the nordic opportunities / seb seminar, london, 3 september 2013. * * * accompanying slides can be found on the bank of finland ’ s website : slides ( pdf ) it is an honor and a great pleasure for me to participate in this seminar here in the heart of the city. it is especially pleasant to do this under the benevolent eye of the present lord mayor. i am proud to say that roger was actually one of the first investment bankers i got acquainted with at the beginning of my career in finance when working for a big industrial company ’ s finance management in the 1980s. the institution which i represent, the bank of finland, has had direct contacts with the city of london for more than 150 years now. it was year 1861 when the bank of finland first opened correspondent accounts with the london bank, n. m. rothschild & sons. that correspondent relationship was our first outside the baltic sea basin and reflected commercial contacts with britain as well as the desire of the finns to take part in the growth of international finance. i should also mention that only a couple of years later, we established banking contacts with a new entrant to the nordic banking scene, the stockholms enskilda bank, which evolved into today ’ s seb. the role of the founder, a. o. wallenberg, became very significant for finland, not least as a trusted advisor in financial policy. those were the early years of international banking, and the beginning of the great “ first wave ” of financial globalization which continued up till the first world war. now, of course, the global integration of finance and banking has reached totally new dimensions which the recent international crisis has underlined. it is now universally acknowledged, as a result of the crisis, that regulation and supervision must be brought up to date with the new realities of the market place. nowhere has the crisis been more sobering than in the eu which has been forced to face the problem of its fragmented structure of supervision and take the bold but long overdue step to establish what is now called the banking union. the banking union is still at an initial phase and much remains to be done before we reach the goal. also some changes are still possible. it is my intention today to describe the most important features of the banking union as they appear from my point of view. i