Finland: Staff Report for the 2010 Article IV Consultation—Informational Annex

Owing to the high dependence of its exports on countries and commodities, Finland experienced the worst recession in the euro area. Executive Directors encouraged authorities to focus on improving bank cost efficiency, preventing excessive risk taking, and limiting liquidity and funding risks. Directors welcomed the establishment of the Nordic-Baltic Stability Group, and stressed the need to strengthen the effectiveness of cross-border supervision and crisis management arrangements. Directors welcomed structural reforms and also emphasized the need of a strong fiscal consolidation to secure fiscal sustainability.

Abstract

Owing to the high dependence of its exports on countries and commodities, Finland experienced the worst recession in the euro area. Executive Directors encouraged authorities to focus on improving bank cost efficiency, preventing excessive risk taking, and limiting liquidity and funding risks. Directors welcomed the establishment of the Nordic-Baltic Stability Group, and stressed the need to strengthen the effectiveness of cross-border supervision and crisis management arrangements. Directors welcomed structural reforms and also emphasized the need of a strong fiscal consolidation to secure fiscal sustainability.

Annex I. Finland: Fund Relations

(As of May 31, 2010)

Mission: May 27 to July 8, 2010 in Helsinki. The concluding statement of the mission is available at http://0-www-imf-org.library.svsu.edu/external/np/ms/2010/060710.htm. The mission’s concluding statement and press conference received wide coverage in the Finnish media. The authorities intend to publish the staff report.

Staff team: Messrs. Figliuoli (Head), Kanda, Lutz, Ms. Zoli (all EUR), and Mr. Roca (RES). Mr. Korhonen (OED) participated in the discussions.

Country interlocutors: Mr. Liikanen, Governor of the Bank of Finland; Mr. Katainen, Minister of Finance; other senior officials of the central bank, economic ministries, the Financial Supervisory Authorities; Parliamentary authorities; social partners; and members of the business, financial sector and research communities.

Fund relations: The previous Article IV consultation discussions took place during October 23 to November 3, 2008. The Executive Board’s assessment and staff report are available at: http://0-www-imf-org.library.svsu.edu/external/pubs/cat/longres.cfm?sk=22667.0

I. Membership Status: Joined January 14, 1948; Article VIII.

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans: None

V. Latest Financial Arrangements: None

VI. Projected Payments to Fund:

(SDR million; based on existing use of resources and present holdings of SDRs)

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VII. Exchange Arrangements:

Finland’s currency is the euro, which floats freely and independently against other currencies.

Finland has accepted the obligations under Article VIII, Sections 2(a), 3 and 4 of the Fund’s Articles of Agreement, and maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions, except for those measures imposed for security reasons in accordance with Regulations of the Council of the European Union, as notified to the Executive Board in accordance with Decision No. 144-(52/51). An updated and comprehensive list of all EU restrictions can be found at: http://ec.europa.eu/external_relations/cfsp/sanctions/measures.htm

VIII. Article IV Consultation:

Discussions for the 2008 Article IV consultation were held in Helsinki during October 23–November 3, 2008 and the Executive Board concluded the consultation on January 30, 2008. Country Report No. 09/39, summarizing the views of the Executive Board, was published.

IX. FSAP

An update of the Financial Sector Assessment Program (FSAP) was completed at the time of the 2010 Article IV Consultation.

Annex II. Finland: Recent Fund Staff Recommendations and Implementation 1/

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Annex III. Finland: Statistical Issues

(As of June 28, 2010)

D. Assessment of Data Adequacy for Surveillance

General: Data provision is adequate for surveillance.

E. Data Standards and Quality

Subscriber to the Fund’s Special Data Dissemination Standard (SDDS) since June 3, 1996. Uses SDDS flexibility option on the timeliness of data for central government operations.

A data ROSC was electronically published on October 31, 2005

(http://0-www-imf-org.library.svsu.edu/external/pubs/cat/longres.cfm?sk=18675.0).

Finland: Table of Common Indicators Required for Surveillance

(As of June 28, 2010)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government, including National Insurance Scheme, and local governments.

Including currency and instrument composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC published in October 2005, and based on the findings of the mission that took place during May 10–25, 2005 for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 8, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies