Helsinki, Finland – In a keynote speech at the 2023 RiskLab/BoF/ESRB Conference on Systemic Risk Analytics, Governor Olli Rehn of the Bank of Finland addressed the critical topic of financial stability in an era of geopolitical fragmentation and rapid technological change. The conference, jointly organized by the RiskLab at Arcada, the Bank of Finland, and the European Systemic Risk Board, brought together experts to discuss systemic risk analytics and the challenges facing the global financial system.
Governor Rehn emphasized the resilience of the global financial system and banking sector since the 2008 global financial crisis, despite recent shocks such as the COVID-19 pandemic, Russia’s aggression against Ukraine, and rising inflation. However, he cautioned that recent events, including the collapse of Silicon Valley Bank and the forced sale of Credit Suisse to UBS, serve as reminders that financial stability should never be taken for granted.
The governor expressed his anticipation for Steven Cecchetti’s keynote speech on banking safety, highlighting the importance of making the financial system safer and more resilient. He also commended the conference’s focus on non-bank financial intermediation and climate risks, acknowledging the increasing role of non-banks in the global financial system and the potential risks posed by climate change.
Governor Rehn pointed out that the world has experienced crises of unexpected forms, with the recent war in Europe erupting just as the global economy was recovering from the pandemic. He highlighted the rapid geopolitical changes, including the emergence of a new Cold War and a breakdown in international cooperation, with autocratic powers challenging the rules-based international order. These geopolitical headwinds have had adverse effects on the global economy, leading to concerns about the future of globalization.
Against this backdrop, Governor Rehn stressed the need to strengthen and maintain the resilience of the financial system. He called for rigorous financial regulation and supervision, as well as high-quality macroprudential analysis and policy. The conference’s focus on macroprudential measures and their impact on various sectors, including housing, labor markets, and climate change, was lauded as an essential contribution to achieving financial stability.
Governor Rehn proposed several suggestions to enhance macroprudential policymaking in Europe. Firstly, he advocated for more uniform criteria for capital-based macroprudential tools across the EU to ensure a level playing field for banks with equal systemic importance. Secondly, he emphasized the importance of establishing common EU-level requirements for borrower-based tools targeting housing loans and household indebtedness. Finally, he called for EU legislation to explicitly allow the use of positive neutral countercyclical capital buffer requirements, providing flexibility to support bank lending and economic recovery during crises.
In conclusion, Governor Rehn expressed his enthusiasm for the conference’s other keynote speeches, which covered topics such as machine learning and AI-generated synthetic data. While acknowledging the potential benefits of artificial intelligence and machine learning in the financial sector, he urged caution in addressing the potential risks and misuse of these powerful tools. Governor Rehn encouraged policymakers to deepen their understanding of these technologies to make informed policy choices.
The 2023 RiskLab/BoF/ESRB Conference on Systemic Risk Analytics promises to be a stimulating and productive platform for experts to exchange insights and explore strategies for ensuring financial stability in an evolving global landscape.