Finland is exploring a law that would tell its day-to-day bank supervisor to factor in growth and lender competitiveness. The ECB isn't sold. In an August letter, President Christine Lagarde said the extra objective could clash with the priority of ensuring financial soundness and that a competitiveness mandate isn't necessary. She also pointed to a practical problem: each tweak to a macroprudential tool could require FIN-FSA to document how it considered competitiveness, which she said may lead to "inaction bias" as supervisors shy away from tackling systemic risks lest they be faulted for slowing growth. The discussion is ongoing as the government works on the bill, according to a person familiar with the matter who requested anonymity. The ECB said it still had concerns even after Finland clarified the competitiveness aim would only be pursued when it doesn't conflict with the primary objective.
This fight sits inside a long-running EU question: how much to tilt financial rulebooks toward growth without loosening the post-crisis safeguards. Finland's move resembles 2023 changes to the mandates at the Bank of England's rule-setting wing and the Financial Conduct Authority. Inside the 27-country EU, though, officials have so far shied away from embedding similar growth-focused duties, even as they push competitiveness initiatives. And the EU's promised overhaul of banking regulation is still months from being nailed down and likely years from being put into practice, leaving national efforts like Finland's to grab attention in the meantime.
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The proposal would cover only the Financial Supervisory Authority (FIN-FSA), and it supervises banks' daily operations. The Bank of Finland wouldn't get the new task. The ECB oversees Finland's four biggest banks - OP Financial Group and Nordea among them - while FIN-FSA is responsible for dozens of smaller institutions under the ECB's umbrella. The idea stems from Prime Minister Petteri Orpo's program to safeguard market stability and competitiveness and to avoid rules that unnecessarily raise costs or squeeze credit availability.
There's domestic unease too. One worry is that banks might contest sectorwide capital buffers by arguing the cushions damage competitiveness. Marja Nykänen, a member of the Bank of Finland's board, argued the existing framework fosters growth by lowering the likelihood of crises and questioned the case for a mandate that, in her view, lacks a close European precedent outside the UK.
Economic Affairs Minister Sakari Puisto said the government has taken the ECB's feedback on board and is aiming for balanced wording. He added that the provision would not extend to case-by-case supervision of regulated entities or to licensing.
When the ECB objects publicly, national plans usually change. Get the free Market Briefs daily newsletter and follow it.
