olli rehn : global economy - fragmentation, decoupling or slowbalisation? keynote speech by mr olli rehn, governor of the bank of finland, at a conference coorganised by the european central bank, hong kong institute for monetary and financial research and bank of finland institute for emerging economies, hong kong, 13 january 2025. * * * presentation accompanying the speech distinguished guests, ladies and gentlemen, dear friends, let me start by thanking the hong kong monetary authority for hosting this topical and thought - provoking conference. discussing the changing global economy in " asia's world city " is, of course, very appropriate. i would also like to thank the representatives of the european central bank for their involvement in putting together the programme for this excellent event. this conference is a good example of fruitful cooperation between central banking authorities from different parts of the world, and certainly a tradition worth preserving. as the title of the conference implies, the global economy is undergoing a transformation. in my talk today i would like to address a key aspect of this transformation, namely decoupling and fragmentation in the global economy. is there evidence of geoeconomic fragmentation in the global trade and investment data? or is global trade simply following the same trajectory as global economic output? there is, of course, an important difference between the paths of global trade and global output. slide 2. a period of normalisation after hyper - globalisation? we can, in my view, reasonably start the analysis of any decoupling or fragmentation with a slide like this, which shows the value of the global goods trade in relation to the global gross domestic product ( gdp ). we can observe how this percentage climbs in the late 1990s and 2000s, pushed by the integration of china and former socialist countries into the global economy and global value chains. in the early 1990s global trade was roughly 30 % of the global gdp, and by 2008 this had increased to over 50 %. as the graph shows, the global financial crisis marked a clear turning point. since then, the level of global trade in relation to global gdp has fluctuated between 45 % and 50 %. should we call it'slowbalisation '? 1 / 4 bis - central bankers'speeches there are of course many reasons for this relative stagnation, but here in hong kong we should note at least one factor. whereas in the early 2000s many value chains in east asia were international, by the 2010s a larger share of production had

an intensive “ prep course ” for the ssm supervision. the comprehensive assessment was a laborious joint exercise and generated a lot of useful experience for those involved. in finland, and in other countries in which the assessment was carried out largely based on the existing staff of the national authorities, the exercise built up valuable human capital that bears fruit in the years to come – not to mention the fact that the assessment could be carried out with relatively low costs. the exercise also made very clear from the beginning what the ssm supervisory model is about : joint work, using best local knowledge, with a clear lead by the ecb. the ssm operates as a system, gathering all the expertise of national supervisors and at the same time having a strong decision - making centre. the natural justification for the two - tier system is that local supervisors have an information advantage with respect to local banks. the centralised decision making is required to address cross - border issues and to minimise the risk of excessive forbearance on the part of local supervisors. bis central bankers ’ speeches common methods and processes, relying on an integrated and harmonised information base, have been – and are being – developed for carrying out ssm supervision. the ssm goes considerably deeper than the work of the eba in adopting the single rule book and harmonising supervisory practices, also reflecting the different mandates of the two bodies. the ecb ’ s overall responsibility for supervision is matched by controlling powers over the system as a whole. the ecb has the power to overtake direct supervision of any bank or group of banks, if this is deemed necessary in order to preserve financial stability and confidence in the institutional framework. the centre monitors also that adequate supervisory quality prevails in national competent authorities. second, we are getting uniform rules and supervisory practices. the ssm was established to ensure that strong supervisory standards are applied in a consistent manner across the euro area. we also needed the ssm to strengthen the confidence and resilience in the banking sector which has been shaken quite severely over the past few years. to achieve these goals, the ssm, with the ecb at its centre, has been entrusted with an extensive set of micro - and macro - prudential powers, covering all key tasks relating to the prudential supervision of credit institutions. moreover, it is expected that the ssm adopts a european approach to decision - making without any national bias. the ecb, as an established and strong european institution,