Finance Finland’s EU objectives

The financial sector is subject to a large amount of regulation, most of which originates at the EU level. This regulation should be equally applicable in all member states. But just like no two member states are alike, neither are the financial sectors of different countries. Regulation that suits one might not suit another. No wonder we are sometimes scratching our heads over the decisions being debated in Brussels.

Although the EU is not perfect and unfailing, the heart of the EU is unquestionably the best place for Finland. It is in the best interests of the Finnish financial services sector and Finnish citizens alike. The EU grants us stability and benefits that only a large single market can offer.

The Finnish financial sector stands with the EU. But a union can only be as strong as its members – it does not benefit either if we do so at our own expense. It is now time for Finland to step up and take on the role of a much bigger country.

• Finland must be an active member in a strong and unified EU while actively promoting its own national specificities.
• The financial sector plays a key role in the EU’s strategic autonomy and security. Regulation must enable the sector to operate in as smooth and versatile a manner as possible.
• The EU must not cripple its own competitiveness when drafting regulation. It must enhance the functioning of the single market and ensure a level playing field for all member states. Excessive regulation is detrimental to private and retail investment and the green transition.

• Before drafting new regulation, existing regulation must be examined critically to determine whether the desired outcome could be achieved by amending the existing regulation or enhancing its application.
• EU regulation must not be reviewed before there is enough experience of how existing regulation functions.
• The European Commission’s objectives must be consistently aligned, and conflicts between proposals must be identified.
• Impact assessments must be improved, and the combined impact of different regulations must be assessed during the drafting process.
• Adequate time must be reserved for the implementation of regulation. Regulation must not enter into force before supplementary lower-level regulation is complete.
• When EU regulation is implemented, additional national regulation must be avoided.

• Finland must continue to help shape a stable operating environment through the Economic and Monetary Union, the Banking Union and the single currency.
• Member states’ responsibility for their own finances and the role of market discipline must be highlighted. The limits of economic risk sharing must be clearly defined. There must also be credible sanctions for violating commonly agreed rules.
• The risks of each member state’s banks must be reduced, and their present problems must be fixed. If a European deposit guarantee scheme is implemented, it must be based on liquidity support in the form of lending and avoid joint liability for losses.
• The predictability and transparency of macroprudential tools must be improved. Only one capital requirement or restriction must be set for one risk, and the overall level of capital requirements must not increase. Banks cannot be saddled with the risks of other sectors.
• The use of macroprudential tools must be uniform across the EU to guarantee a level playing field in the single market.

• The work on a stronger and more integrated capital markets union must continue in the EU. The diversity of private funding and the movement of capital must be guaranteed.
• The development of functioning and versatile capital markets must be primarily market-driven. The functioning of healthy national markets must not be hampered.
• Regulation that blocks the cross-border flow of capital must be dismantled.
• Member states’ national regulation and supervision must be harmonised. A fragmented regulatory environment hinders cross-border activity.
• No decisions must be made to implement the financial transaction tax (FTT) or any other measure that strongly impairs the functioning of capital markets.

• High-quality investor protection, common rules and harmonised supervision are in the best interests of sector participants and customers alike. 
• EU-level regulation cannot fix some member states’ poor implementation or inefficient supervision of investor protection, and these issues must instead first be fixed at the national level.
• The quality and consistency of regulation must be improved. Retail investors must not be overwhelmed with excessive and inconsistent information. Investor protection must not be built by adding new, mismatched layers upon existing ones. 
• Information on investment products must be intelligible, clear and comparable. A diverse range of products encourages investment, which increases the capital available for the green transition and digitalisation. 
• Good financial literacy is part of functional investor protection, and its promotion should be invested in. Public authorities should also take part in raising consumers’ awareness and knowledge of various scams and other topics.  

• New tools are needed in fraud and scam prevention. Online criminals utilise new technology and new vulnerabilities and operate across international borders. It is essential to enhance countermeasures at the Union level and also in non-financial sectors, such as the telecom sector, by enacting binding legislation, if necessary.
• Anti-money laundering and counter-terrorism financing regulation must be clear, risk-based and uniform across the entire EU. Financial sector undertakings’ capability to exchange information with each other and with the authorities must be strengthened.
• Banks’ ability to intercept payments that raise suspicions of money laundering or other criminal activity must be improved. The threshold to halt or cancel payments must be sufficiently low, and banks and other financial sector entities must be permitted to exchange information on suspected criminal activity and actors.

• Financial sector digitalisation enables innovation, versatile services and more efficient operating models. The regulatory field must be level for both financial and non-financial undertakings. The principle of ‘same activity, same risks, same rules’ is essential.
• Under the open finance framework, the financial sector must have reciprocal access to third-party data.
• The combined impact of regulatory projects must be paid attention to. In addition to evaluating the cost-benefit aspects of the reforms, it is important to assess their usability, benefits and clarity from the customer perspective.
• Policymakers must strike a balance between leeway that facilitates innovation and restrictions that prevent adverse effects. Regulation must enable the provision of solutions that are sustainable for business. It must be market-based and technology-neutral and address key risks in the market and in investor protection.
• The functionality of financial sector services requires that the infrastructures of the other sectors of society are also fully functional. The operability and resilience of critical infrastructures, such as electric power distribution, must be safeguarded.

• The Finnish financial sector is committed to the EU’s sustainable development goals, but misdirected regulatory burden can jeopardise their achievement. In addition to the mitigation of climate change, important priorities include the prevention of biodiversity loss and the improvement of social responsibility.
• Quantity does not make up for quality. The sector needs time to adapt and develop. Rushed entry into force and incompleteness cause problems during implementation. All ESG regulation must be based on careful impact assessments.
• The definitions of sustainable finance must be clarified and harmonised. This will also reduce the risk of greenwashing and support the commensurability of markets.
• The financial sector needs comparable and clear data to enable the green transition, fulfil its obligations and reduce the risk of greenwashing. Access to information throughout the sector’s value chain must be improved.
• The impact of sustainable finance regulation must be examined especially from the viewpoint of the green transformation of the real economy. Key players in the green transition are the companies that have not yet finished or begun their transition. The market must maintain its flexibility and enable different ways of doing sustainable finance.
• Climate-adverse and environmentally detrimental business activity must be subject to regulation that is based on the ‘polluter pays’ principle.