Sirkka Hamalainen, Finland’s first female central bank governor and a founding member of the European Central Bank, is returning to the region’s highest policy circles to help reshape its banks.
“The only thing which is still missing in the banking union structure is the question of how to deal with too-big-to-fail banks,” Hamalainen said in an interview in Helsinki on April 11, three weeks before taking up her role as a member of the ECB’s new Supervisory Board. “The link between the banks and the sovereigns will never be totally and finally broken, but certainly it will be weakened crucially. The principle that the losses are socialized and the profits privatized can’t be accepted in the future. Both must be privatized.”
The ECB, founded in 1998 to conduct monetary policy, is about to become Europe’s most powerful financial watchdog in response to a crisis that almost destroyed the single currency it was created to defend. Hamalainen, 74, was appointed in March to the new panel, which will run financial supervision directly for about 130 of Europe’s biggest banks from November.
“Banking-sector and financial-market functioning are vitally important for the whole economy,” Hamalainen said. “That’s why these preventive measures are also vital.”
Hamalainen served as governor of Finland’s central bank from 1992 to 1998 before being appointed to the Frankfurt-based ECB’s six-strong Executive Board. She left the ECB in 2003, and hasn’t played a front-line role in European policy until now. She has sat on the board of Kone Oyj, a Finnish manufacturer of elevators and escalators, since 2004. The job at the ECB marks her return to the European arena after more than a decade.
“All the board members representing the ECB, we are as such independent,” Hamalainen said. “Personally, I see that with my background my role is more from the ’helicopter view.’ I’m there to look at things from the European point of view.”
The board is currently involved in preparing both an unprecedented review of the assets of European banks, and for the operational start of supervision. Results of the assessment are due to be released in October. Hamalainen takes up her part-time post on May 1.
“The main purpose of the Single Supervisory Mechanism is to have equal treatment, similar principles, and to guarantee that all the banks are supervised thoroughly so that there will be stability of the banking sector as a whole,” she said.
While the Supervisory Board, chaired by France’s Daniele Nouy with Germany’s Sabine Lautenschlaeger as deputy, will have to defer to the ECB’s Governing Council -- as dictated by European Union law -- Hamalainen says she sees no impediment to rapid decision-making.
“The efficiency can be found very easily -- everybody knows how important this is,” she said. “The motivation for efficient, objective supervision and good cooperation seems to be very high inside the ECB.”
Hamalainen is one of only three women ever to have served on the ECB’s Executive Board, the others being Lautenschlaeger and Austria’s Gertrude Tumpel-Gugerell. Still, she opposes any quota system to promote the presence of women at the highest levels of policy making.
“I am quite worried about this kind of quota discussion,” she said. “There must be a trend from the bottom up that women can proceed and get professional experience.”
The Supervisory Board is made up of six ECB appointees plus the heads of banking supervision from the 18 countries currently in the euro area. While EU members who don’t use the euro are also free to join, none have so far expressed the intention to do so.
“For small countries in particular deeper integration is important,” Hamalainen said. “All European countries actually are small in the global context, so it’s very important to work closely together.”
A discussion about whether the ECB should be responsible for banking oversight already took place at the central bank in its earliest days, led by Italian economist and fellow board member Tommaso Padoa-Schioppa, Hamalainen said.
“Politically it wasn’t possible to have supervision at the European level and particularly not in the ECB,” she said. “Already giving the right for monetary policy to the supranational level wasn’t so easy politically.”
More than 15 years later, the ECB is hiring about 1,000 people to conduct banking supervision and writing instruction manuals for officials probing the books of lenders from Helsinki to Lisbon.
“I’m very happy to be a part of this process,” Hamalainen said. “I didn’t expect to be involved anymore in any way. I suppose that my appointment reflects the fact that Finland has been rather constructive in all areas in supporting the European integration.”