The Financial Stability Authority’s sustainability report for 2022
Management’s endorsement of the report
The Financial Stability Authority’s Management Group is committed to the sustainability work undertaken by the Authority. It has been involved in the selection and fine-tuning of sustainability goals as the work has evolved, and in judging the progress that has been made in achieving those goals since 2021.
The Management Group has contributed to the production of the sustainability report for 2022, especially as regards the choice of example cases that give a good picture of the diverse nature of the development work that was done in 2022.
The Authority’s Director General adopted the second sustainability report on 14 February 2022.
Read the Authority's sustainability report for 2022 (pdf)
Read the Authority’s first sustainability report for 2021 (pdf)
Sustainability in the work of the Authority
The Financial Stability Authority is an independent body set up in 2015 to act as Finland’s national resolution and deposit guarantee authority. In summer 2022 the Authority acquired a new statutory function as administrator of the national backup account system.
Read more about the work of the Authority
Sustainability is linked in many ways to the Authority’s core functions. The Authority is a responsible operator that promotes the stability of the financial market and confidence in the banking sector and financial market by improving the crisis management preparedness of institutions and authorities and by evaluating and developing the viability of the deposit guarantee system, the resolution framework and the backup arrangements for daily payments. Crisis management preparedness as well as effective and relevant regulation are necessary to ensure that the impact and costs of banking crises on society remain as small as possible. The Authority also ensures that the administrative fees charged to institutions are used by the Authority appropriately and in accordance with the law. The Authority also suggests areas in which public administration may be made more efficient through its association with the administrative branch of the Ministry of Finance.
Sustainability is part of the Authority’s values. Everyone can promote sustainability in the work they do, and in partnership with other authorities and the institutions that are under the Authority’s jurisdiction. Staff commitment to the values is measured each year on the job satisfaction barometer.
The Authority staff adhere to the organisation’s ethical guidelines in everything they do. The purpose of the guidelines is to ensure the independence and impartiality of the staff and the high ethical standards that must apply. The Director General and the deputy Director General are also bound by the Code of Ethics that applies to the Members of the SRB's Plenary Session.
Sustainability management
The work on sustainability was started at the Authority in 2021 with an identification of what UN sustainable development goals would be relevant from the resolution and deposit guarantee authority’s perspective. Two experts and the Authority’s Management Group were involved in this process.
Since the start of 2022, the chief economist has been given the responsibility for monitoring issues connected with sustainability, in particular the green transition, and for exploring what aspects of the green transition are the most relevant for the resolution and deposit guarantee authority. Furthermore, the new statutory function assigned to the Authority in summer 2022 was accounted for in monitoring and investigative work.
The chief economist will also going forward be responsible for monitoring the achievement of the sustainability goals and drafting the sustainability report. To enhance the process, the chief economist will organise discussions with the entire staff to hear ideas on how to develop sustainability work and evaluate the achievements made. The chief economist will be reporting to the Management Group on the work connected with the sustainability goals as it progresses. The chief economist will, in particular, report on any identified risks that might be associated with the achievement of the sustainability goals or would result in excessively increasing the Authority’s footprint, and proposals for action to reduce risks. The Management Group will decide on the policies to be adopted in response to the chief economist’s proposals and on how work on sustainability should possibly be reflected in the Authority’s operational planning.
The approach employed in drafting the report
In January 2023, the chief economist and Management Group selected the example cases that would best represent the progress made in 2022 to achieve the sustainability goals chosen. The descriptions of the chosen goals, targets and indicators were brought in line with the Authority’s new function, while it was not seen to be necessary to change them otherwise. A draft of the sustainability report was then produced and presented to the Authority staff in early February 2023. The comments received were duly considered, and the chief economist finalised the report in mid-February 2023, when it was submitted to the Management Group for approval by the Director General.
In the years to come too, implementation of the goals will be examined in the beginning of the year and the Authority’s sustainability report will be drafted and finalised in February. At the same time consideration will also be given to whether the selected goals or targets and the indicators used need to be refined.
The sustainability goals
The Financial Stability Authority has identified four UN Agenda 2030 Sustainable Development Goals of relevance to its work on which it can have a positive influence and leave its handprint:
- To eradicate poverty in all its forms everywhere (goal 1)
- Decent work and economic growth (goal 8)
- Reduced inequality (goal 10)
- Responsible consumption (goal 12)
UN Sustainable Development Goals (Agenda 2030)
The work of the authority also has a footprint, that is a negative impact from the perspective of sustainable development.
Identification of the goal and targets
The Financial Stability Authority is in the best position to promote target 1.1.5: By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters.
The Authority maintains and promotes a credible deposit guarantee system and resolution mechanism to ensure that all depositors have equal access to their money in time of economic shocks. One aim of resolution is to secure depositors’ funds and the customer funds held by institutions. In the event of bankruptcy, the Authority would ensure that depositors received their funds up to a guaranteed limit of EUR 100 000.
In 2022, the Finnish security policy situation changed significantly, creating a need to prepare differently to safeguard backup and emergency supply arrangements in the financial sector in all circumstances. In summer 2022 the Authority acquired a new statutory function providing a backup arrangement for daily payments in times of serious disruption in the society and state of emergency. The backup account system will guarantee the supply of key daily payment services in situations in which normal payment systems are not available. Also this new function will allow the Authority to reduce the exposure to shocks and disasters among those in especially vulnerable situations.
Indicators of progress
Of the indicators cited in the indicator framework for the 2030 Agenda for Sustainable Development target programme, the most relevant indicator for the Authority’s chosen target is indicator 2: Direct economic loss attributed to disasters in relation to global gross domestic product (GDP), with the notion of ‘disaster’, however, being restricted to a shock linked to, or affecting, the financial system. The institutions within the direct jurisdiction of the Authority are Finnish, and the activities of the Authority therefore directly impact mainly the Finnish GDP.
During the monitoring period in Finland there have been no cases of resolution, deposit guarantee claims or any serious disruption or state of emergency that has warranted deployment of the backup account system. Hence it is not possible to determine the value of the selected indicator.
It is worth noting that the purpose of the deposit guarantee and resolution mechanisms is to prevent crises from happening in the first place, and so the continued faith of depositors in the system together with the fact that the probability of a bank run have remained very low can be seen as an attest to their effectiveness.
Example case: taking on the new function
The new backup account function is also a means whereby the Financial Stability Authority can reduce the exposure and vulnerability of the poor and those in vulnerable situations to economic shocks and disasters.
The new backup account system established and administered by the Authority consists of a backup account service and a card payment backup service. The customers of a failed bank will be able to use certain vital account and payment services. The secured services will include checking account transactions, receipt of bank transfers and payments, limited cash services, payments by debit card on terminals and ATM withdrawals using a debit card. The customer relationship with the original bank will remain unchanged, as the backup account system will provide essential daily payment services on behalf of the dysfunctional bank.
The new function meant that in August 2022 the Authority had to carry out a speedy organisational change and start new recruitments. The Authority switched to a three-unit model, where backup account system matters are dealt with in the same unit as deposit guarantee issues to achieve synergy benefits, and administrative matters are handled in a separate unit where also tasks related to the management of the Financial Stability Fund are located. The adoption of the new function was a good example of the Authority’s crisis management capability and resilience.
The costs of maintaining the system will be covered by the administrative fees charged to institutions, as is the case the Authority’s other operational expenditure. If the backup account system is introduced, each bank using the system would be liable for the costs of its use. The use of the daily payments backup system will be free of charge to the customers of the bank, as long as they themselves do not incur costs for which they are liable. These might include, for example, opening a business account with another bank.
Identification of the goal and targets
The Financial Stability Authority is in the best position to promote target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all.
The aim of the work of the Authority is to promote the credibility of the deposit guarantee system and resolution mechanism and ensure that daily payment services will continue to run by means of the backup account system. The Authority is prepared for an escalation of problem situations, so that the collapse of a bank, or its threatened collapse, can be dealt with by the authorities in a controlled manner. In this way, the effects of the collapse on the customers of the bank and the real economy, for example, as flow of bank credit would decline, can be minimised. The effective implementation of resolution measures would also help avoid a situation where one bank’s problems lead to a widespread banking crisis, which in turn could even result in a long-term recession.
The Authority regularly draws up a resolution plan for the institutions within its jurisdiction and sets their minimum requirement for own funds and eligible liabilities (MREL), at the same time identifying possible hindrances to accomplishing resolution. The Authority also continuously improves its own level of preparedness by developing its procedures and tools that would be used in the event of an institution facing serious problems.
Indicators of progress
In cases of resolution, basic banking and other critical functions would have to continue. Bank deposit and payment functions are normally defined as critical because disruption to them would affect customers widely and fast. In case of a pay-out situation under the deposit guarantee scheme, the funds must be available to customers within seven working days. Now also the new backup account system will help ensure the continuity of crucial daily payment services. The Authority can thus see to it that customers have undisrupted access to banking services. For this reason, it is more appropriate to judge the effectiveness of the Authority’s activities with reference to the length and extent of any disruption rather than rely on indicators based on numbers of branches and the availability of banking services as suggested in the indicator framework.
During the monitoring period there have been no cases of resolution, deposit guarantee claims or any serious disruption or state of emergency that has warranted deployment of the backup account system in Finland. Hence it is not possible to determine the value of the selected indicators.
As with the previous goal, however, it should be borne in mind that the existence and credibility of the deposit guarantee and resolution mechanisms create financial stability, and the fact that there have been no shocks in the financial market during the monitoring period would seem to attest to their effectiveness.
Example case: feasibility of bank resolution
A key component of bank resolution planning is to judge whether an institution is well prepared for any crisis, so that it is possible to apply resolution in an effective and controlled manner. This is known as resolvability assessment, and it affects virtually all parts of banks. In 2022 the less significant institutions under the direct jurisdiction of the Authority promoted several resolvability themes: the development of a bail-in playbook, the information needed for valuation and the bail-in tool, safeguarding liquidity in resolution, and the guarantee of operational continuity and access to the financial market infrastructures in resolution. In 2022 the Authority adopted the method devised by the SRB to ensure that assessments are made in a consistent way for every institution.
In 2022 too, the Authority increased its efforts to ensure that the tools requiring restructuring of activities were feasible. Especially where assets and debts of an institution are transferred entirely or partly to a third party when transfer tools are applied in resolution, the feasibility of the tools requires that separability is ensured beforehand. Even though the resolution strategy would entail bail-in, an understanding of the separability of the business areas or asset classes is necessary. In the event of a bail-in, the bank in question will also need to undergo restructuring to ensure that it will have a healthy business model in the future. The Authority during the year stressed the importance of the matter at the briefing for institutions in December and in its blog on the theme, which was also published as an SRB blog and as an abridged version as an opinion article in the newspaper Kauppalehti.
- Authority briefing to institutions (7.12.2022)
- Blog: The Liikanen report and the proposal for a resolution framework – 10 years on
- SRB guest blog: Guest blog: The Liikanen Report and the proposal for a resolution framework – 10 years on
- Kauppalehti: The legacy of the Liikanen report on the prevention of bank crises lives on (in Finnish)
Identification of the goal and targets
The Financial Stability Authority is in the best position to promote target 10.5: Improve the regulation and monitoring of global financial markets and institutions and strengthen the implementation of such regulations.
The statutory functions of the Financial Stability Authority extend to making proposals and introducing initiatives with regard to improving the rules and regulations on crisis management in the financial sector. The Authority is actively involved in the development of national and EU legislation where it concerns substantive issues related to the banking sector, the purpose being to strengthen the stability of the financial market throughout the regulatory framework.
Indicators of progress
Very many factors contribute to the indicators for economic stability mentioned in the indicator framework, and the Authority has limited powers of influence these. The Authority therefore believes that it is more appropriate to monitor an indicator derived from the target: ‘legislative proposals, in the preparation of which the Authority has been actively involved.’
The Authority was involved in the following EU-level legislative work in 2022:
- Review of the EU Crisis Management and Deposit Insurance (CMDI) framework. The Authority submitted its views to the Ministry of Finance and also made known its opinion, for example, when the Director General attended the SRB annual conference. In 2022 the Authority took an active role in the European Forum of Deposit Insurers (EFDI) working groups and events covering the CMDI reform. It commented, for example, on the EFDI publications on the creditor hierarchy, the use of deposit guarantee funds and State aid. The Authority also considered whether the resolution and deposit guarantee framework should be refined to account for climate change and the green transition.
- Recovery and resolution of central counterparties. The Authority attended a consultation session of the Finnish Parliament’s Commerce Committee and commented on the Government’s statement on the matter.
- The EU Commission proposal to amend the regulation on banks’ capital requirements (Basel III). The Authority took part in Parliament’s Commerce Committee and Grand Committee consultation sessions, expressing its views on the Government’s statement on the matter.
- Reform of the macroprudential framework. The Authority took part in the consultation run by the European Commission and passed on its views to the Ministry of Finance. It also presented its opinion at discussions with the other macroprudential authorities and in connection with preparations for macroprudential decision making.
- Reform of the (Finnish) Act on Mortgage Credit Banks. The Authority gave its opinion to Parliament’s Commerce Committee and was involved in the work of the group drafting the Act.
- Commission’s consultation on information sharing among authorities. The Authority took part in the consultation organised by the Commission.
- The Authority was also involved in the drafting of EBA guidelines and regulatory technical standards (RTS). It also commented on several EU legislative projects via the preparative sub-committees for EU affairs.
- SRB Conference 2022 - European banks: resolvable and ready for crisis?
- EFDI Papers and Positions 2022
- Blog: Why should the green transition be of interest to the resolution and deposit guarantee authorities?
The Authority took part in the following national legislative projects in 2002:
- Safeguarding the backup system in the financial sector. The Authority helped draft the law and took part in Parliament’s Commerce Committee and Grand Committee consultation sessions, expressing its views on the Government proposal (bill) on the matter.
- Positive credit register. The Authority commented on the Government statement on the matter.
- Development of the ASP (Finnish help-to-buy scheme). The Authority commented on the Government statement on the matter.
- Digital identity development project. The Authority commented on the Government statement on the matter.
- Automatic decision-making in public administration. The Authority commented on the Government statement on the matter.
- Prevention of money laundering and financing terrorism. The Authority gave its views on the Finnish Financial Supervisory Authority’s draft provisions and guidelines on the matter.
- Transparency register. The Authority gave its views on the report by the parliamentary steering group and expert group.
- Availability of Government services. The Authority commented on the Government statement on the matter.
The press releases, blogs and statements published by the Authority in 2022 are listed in the final press release (in Finnish) for the year.
Example case: review of the resolution and deposit guarantee framework
The Financial Stability Authority has participated actively in discussions and made known its views to the Ministry of Finance on the backup arrangements for the financial sector. On 22 June 2022, the Government issued a proposal for an Act on certain backup and emergency arrangements in the financial sector. It was proposed that the Authority should be given the new function as administrator and controller of the backup account system. The Authority was involved in drafting the Act and gave its views on the proposal to the Commerce Committee. It stated that it supported the Government proposal.
The Act on certain backup and emergency arrangements in the financial sector entered into force on 11 July 2022. The Act established arrangements whereby vital payment services and transactions would be guaranteed even in times of serious disruption and state of emergency.
Identification of the goal and targets
The Financial Stability Authority is in the best position to promote target 12.7: Promote public procurement practices that are sustainable, in accordance with national policies and priorities by means of its own procurement exercises.
The Authority takes the sustainability goals into account in its own procurement exercises and endeavours to influence the external impacts of its procurement, with reference, for example, to its internal guidelines on procurement and travel arrangements. It adheres to the state procurement strategy and observes the regulations on procurement
Effectiveness is mainly the result of the activities of corporate services actors, whose services the Authority makes extensive use of. In its procurement activities, the Authority utilises the centralised government framework arrangements when it involves joint procurement. In 2022 joint procurement accounted for 2.49% of all the Authority’s procurement.
The Authority has limited resources, so partners are often relied upon in procurement exercises other than joint ones. The partners are procurement specialists, so the opportunities to take account of sustainability issues are a lot greater than if the Authority were not to use an external partner in procurement.
Indicators of progress
Since 2021 Hansel Oy has recorded for each joint procurement exercise what sustainability goals dealt with in the analysis have been met. An agreement might thus contain a financial responsibility label, an ecolabel or a social responsibility label. Hansel also estimates the carbon footprint of procurement. Rather than monitor the indicator cited in the indicator framework, the Authority has decided to use two more pragmatic indicators;
- the extent to which there are responsibility labels in the joint procurement agreements concluded through Hansel Oy, and
- the Authority’s procurement carbon footprint.
Of the joint procurement agreements that the Authority uses, there is a Hansel Oy financial responsibility label in all of them. In 2022 12.43% of the joint procurement were based on agreements that had achieved an ecolabel, and 8.76% were based on agreements that had a social responsibility label.
The Authority’s purchase invoice carbon footprint in 2022 was 664 451 kgCO2eq, according to Hansel’s calculations. This excludes the effect of travel, which is monitored using different indicators as described in section 3.5, which deals with the Authority’s footprint.
Example case: measuring procurement responsibility/sustainability
The Financial Stability Authority has told Hansel that its sustainability report include the size of the Authority’s carbon footprint and provide data on the extent to which agreements contain a financial responsibility label, an ecolabel or a social responsibility label. As state agencies are widely interested in sustainability of procurement, this will provide also Hansel with a greater incentive to promote sustainability in its procurement.
The footprint: the adverse impact on the operating environment
The main identified adverse impacts of the operations of the Financial Stability Authority result from business travel, the use of office space, the equipment and provision of services as well as the use of paper.
As the COVID-19 pandemic is easing, physical presence at meetings of the SRB, EBA, EFDI and International Association of Deposit Insurers (IADI) became again possible. The Government travel strategy and the Authority’s travel guidelines updated in 2022, however, encourage the Authority’s staff to utilise alternative forms of communication and consider the need to travel more carefully. The staff flew to international conferences in 2022 on 21 occasions. There were two connecting domestic flights taken, 10 flights to Brussels, six to another Nordic country, 24 to other destinations in Europe and two to destinations outside Europe. The total distance flown was 115 000 kilometres, which is approximately 5 400 kilometres on average per employee. The flights were mainly taken in the second half of the year.
In March 2022 the Authority switched to a new hybrid working model, where the decision on working hours was updated as regards remote work. This allows staff to work remotely on several days of the week. The Authority’s footprint is reduced if staff do not come into the office every day. The option to use sports and cultural tokens as work perks to pay for public transport services was continued in 2022.
The size of the Authority’s carbon footprint is also affected by the use of equipment, the maintenance of the data centre for IT purposes, and the provision of other services. The equipment and IT services used by the Authority are leased from the Government IT Centre Valtori.
The Authority’s office space is rented from Keva. The led lighting at the office is energy-efficient, and the ventilation and cooling systems and electricity and cable networks now entirely meet current requirements. In 2022 Keva’s measures aimed at saving energy include optimising the ventilation and temperature controls to avoid times of peak demand, reducing heat loss substantially, and making conditions more comfortable in bitterly cold weather, when energy sufficiency is likely to be the biggest problem. Furthermore, necessary but carefully considered changes to lighting levels and indoor temperature settings are made.
The Authority introduced its first electronic case management system in September 2022. It is a service provided by the Government ICT Centre Valtori. The Authority’s archives are no longer produced on paper, and that has resulted in a considerable reduction in the use of paper and the need to acquire supplies for storing paper documentation. The footprint is also reduced by the fact that the case management system’s signature function, independent of time and place as it is, does not require staff to come into the office to sign documents. The agency specific induction and training material produced to support the onboarding of the new system is in digital format and created on the shared state learning platform. The solution has not caused the Authority to incur additional maintenance or training expenses, the inductions and materials are accessible via remote links, and after the system has started to be used it is cost-effective to edit the material.
During the year, a representative of the Authority took part in a webinar in which, under the auspices of the WWF and Keva, it was explained how environmental sustainability in the workplace can be improved and managed.
Conclusion
The Financial Stability Authority’s work in matters of sustainability continues. The Authority will continue to promote the credibility of the deposit guarantee scheme, resolution framework and the daily payments contingency arrangements and develop them further. For example, in 2023 the Authority will promote process-based. It also needs to be assessed as to whether and how the work of banks in promoting green transition should be reflected in the Authority’s sustainability work. Similarly, the start of active investment of the Financial Stability Fund assets will bring a new perspective to the Authority’s sustainability work. The switch to the electronic case management system will continue, with the use of paper diminishing further. The Authority also intends to investigate the Green Office environmental management system and assess whether it would be appropriate to introduce it.