Stability and supervision

One of the main objectives of the authorities operating in the financial markets is to make it possible to preserve the stability of the markets. The Ministry of Finance's contribution concentrates particularly on the development of related legislation and a variety of mechanisms for protecting and reinforcing stability. These vary from preventive regulations and practices to mechanisms required to cope with a variety of disturbances to stability. The changing and internationalizing operating environment places a premium on coordination and cooperation between authorities.

Division of responsibilities between the authorities

The Ministry of Finance is responsible for banking and securities market legislation and related national and international cooperation. The Bank of Finland is responsible within the European System of Central Banks for monetary policy and for ensuring the effective working of payment systems. In Finland, supervision of the banking, securities and insurance markets is divided between the Financial Supervision Authority, which operates in connection with the Bank of Finland, and the Insurance Supervision Authority, an agency under the Ministry of Social Affairs and Health. The Financial Supervision Authority supervises the banks, other credit institutions and the securities markets, while supervision of insurance and pension institutions is the task of the Insurance Supervision Authority. The Ministry of Social Affairs and Health is responsible for legislation relating to supervision of the insurance market.

The Financial Supervision Authority's work aims to foster stability on the financial markets and confidence in the work of the supervised operators and the market itself. The Authority's authority is based on the Act on the Financial Supervision Authority, but there are also separate provisions on supervision in a number of individual laws pertaining to the financial markets. The Authority supervises around 500 companies and issuers, of which the largest single group are the Finnish credit institutions. The Authority also supervises the Deposit Guarantee Fund and the guarantee funds of the various banking groups. Other operators supervised by the Financial Supervision Authority include investment firms, the Investor Compensation Fund, fund management companies, the Helsinki Exchanges including the stock exchange and the derivatives exchange, clearing houses, clearing parties, the Central Securities Depository and account operators.

Two of the key fora for cooperation between authorities are the boards of the Financial Supervision Authority and the Insurance Supervision Authority, which contain representatives from all the main official quarters, including the Ministry of Finance, the Ministry of Social Affairs and Health, the Bank of Finland and the Financial Supervision Authority and the Insurance Supervision Authority themselves. There is also continuous unofficial cooperation and exchange of information on supervision, stability and legislative issues. Inter-authority working groups are set up as needed.

EU co-operation in stability and supervision matters

All the financial markets supervisory authorities in the EU have extensive international co-operation networks. EU committees and working groups constitute the most central international network of the Ministry of Finance in matters concerning stability and legislation. Such bodies are inter alia the European Banking Committee (EBC) and the European Securities Committee (ESC). The role of the Economic and Financial Committee (EFC) and the Financial Services Committee (FSC) is particularly important in stability matters. Among the results of practical committee work it should inter alia be mentioned that the financial supervision agencies, the central banks and the ministries of finance of the European Union in May 2005 signed a co-operation protocol to be applied in case of possible cross border disturbances of the financial markets.

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