Browsing by Author "Kauko, Karlo"

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  • Andersen, Kaare Guttorm; Kauko, Karlo (1996)
    Suomen Pankin keskustelualoitteita 13/1996
    The possibilities to improve households' eligibility for long-term housing loans at fixed interest rates has been a current topic of public discussion.Yet, credit institutions have difficulties in granting such loans, unless they themselves can acquire fixed-rate funding.In many cases, the only feasible way for them to raise such funding is to issue bonds.In a number of countries, such arrangements are already in use. In this paper we present a cross-country study of housing finance by mortgagebacked bonds.The paper describes and analyses mortgage credit markets in Denmark, Sweden and the United States of America with respect to the institutional structure, loans and bonds characteristics, legal framework and the security underlying the system.We have found that all three markets differ and that these differences originate from the respective countries' national characteristics and financial histories.In Sweden and the United States in particular, the public sector has been involved in developing the system. Generally, long-term credit is offered in all three countries through relatively well-functioning, efficient markets. However, certain problems are common to all.First, the number of outstanding bond series is relatively large.Second, in many housing loans, the borrower has the option to repay the debt prematurely.In these cases, the credit institution may have to avoid maturity matching problems by issuing bonds with unknown maturity. We briefly review the history and present circumstances of Finnish bond issuing credit institutions to elucidate why such institutions play a marginal role.Long ago, bond-issuing mortgage institutions were an essential part of the Finnish financial market, but legislative obstacles to their operations almost killed the industry after World War II.The tax system favoured ordinary banks, and bond emissions were restricted by government regulations.Now, these legal obstacles have been abolished.In the light of both foreign and past domestic experience, such institutions have a market niche.Finally, we discuss some of the problems related to setting up a bond- financed mortgage credit market in Finland. Key words: Housing loans, bonds, mortgage banks
  • Kauko, Karlo (2017)
    Economic Notes 1 ; February
    The Net Stable Funding Ratio (NSFR) regulation stipulates that banks’ available stable funding shall be at least equal to the required stable funding. This should reduce banks’ liquidity risks. In the current monetary system, deposit money is created by lending, but the NSFR requirement restricts the possibilities to grant loans, limiting the availability of stable funding. In a closed economy, this contradiction poses no macroeconomic problems. However, the outcome may be unstable if there is a substantial amount of foreign debt financed via the international interbank market; a minor shock can have a drastic impact on loan and deposit stocks.
  • Kauko, Karlo (2009)
    Suomen Pankki. Rahoitusmarkkinaraportti 1
    Asuntojen ja kiinteistöjen hinnat kääntyivät laskuun vuoden 2008 aikana. Asuntolainakannan kasvu on hidastunut. Toimistotilojen markkinoilla hintojen lasku on todennäköistä. Kiinteistösijoitusyhtiöiden pörssikurssit laskivat loppuvuoden 2008.
  • Kauko, Karlo (2016)
    Euro & talous. Blogi
    Asuntomarkkinoiden liiallista hintakehitystä on ehkäistävä ennakolta. Siksi riskipainojen nostaminen on järkevää. Mieluiten niin pitää tehdä ennen kuin kupla on muodostumassa.
  • Kauko, Karlo (World Scientific, 2018)
    Singapore Economic Review 3
    Policy discussions are dominated by the view that governmental safety nets offered to banks cause moral hazard and encourage risk-taking. However, [Cordella, T and E Levy Yeyati (2003). Bank bailouts: moral hazard vs. value effect. Journal of Financial Intermediation, 12, 300–330.] proposed that government support offered during crises may increase bank franchise value, resulting in less risk-taking. This paper presents additional theoretical results on the franchise value effect. The franchise value effect can dominate over the moral hazard effect even when there are no specific crisis periods. The franchise value effect dominates if bank shareholders have a weak time preference and if the decision on the intensity of risk monitoring is a long-term choice.
  • Kauko, Karlo (2005)
    Bank of Finland Research Discussion Papers 9/2005
    This paper presents econometric analyses on the determination of bank deposit and lending rates using longitudinal Finnish data. Interest rate pass-through is very strong, possibly complete, in the case of lending rates; in the case of deposit rates the pass-through is far from complete, even in the long term.The monetary union has benefited customers by decreasing the average rate on new loans.Credit and interest rate risk premiums are clearly observable in banks' lending rates.The impact of money market rates on loan stock rates seems to have been non-linear; no obvious explanation for this phenomenon has been found. Key words: banking, interest rates JEL classification numbers: G21, E43, E44
  • Kauko, Karlo; Tölö, Eero (2019)
    Applied Economics Quarterly 4
    Also as BoF Economics Review 4/2019
  • Kauko, Karlo; Tölö, Eero (2019)
    BoF Economics Review 4/2019
    Published in Applied Economics Quarterly 2019 ; 65 ; 9
    Indicators based on the ratio of credit to GDP have been found to be highly useful predictors of banking crises. We study the difference in this ratio as an early warning indicator. We test a large number of different versions of the differenced credit-to-GDP ratio with data on Euro area members. The optimal time interval of the difference is about two years. Using the moving average of GDP instead of the latest annual data has little impact on forecasting performance. The indicator is a particularly promising choice at relatively short forecasting horizons, such as two or three years.
  • Kauko, Karlo (2019)
    BOFIT Discussion Papers 25/2019
    Benford’s law states that the leading significant digits in real-world data sets, provided the data span several orders of magnitude, are not normally uniformly distributed. Deviations from this law may indicate human intervention, even fraud. The data on Chinese banks’ non-performing loans has sometimes deviated from Benford’s law. Up to 2012, the frequency of ones as leading significant digits was lower than predicted by Benford’s law. Surprisingly, the number of ones well exceeded the expected level for large and government-owned banks during 2015–2018.
  • Grym, Aleksi; Heikkinen, Päivi; Kauko, Karlo; Takala, Kari (2017)
    BoF Economics Review 5/2017
    Central banks have traditionally issued cash to the general public. With digitalisation, banknotes are becoming a technically outdated payment instrument, and some central banks have explored the possibility of central bank-issued electronic money applicable to retail payments. Electronic central bank money would offer the public the possibility to hold central bank money in a potentially cashless future. In its present form, blockchain technology would probably not be a suitable solution, since it is unable to process a sufficiently large number of transactions. Electronic central bank money would potentially have significant implications for other areas of central bank policy, which should be meticulously analysed.
  • Kauko, Karlo (2008)
    Bank of Finland. Financial market report 4
    The amount of corporate loans on banks' balance sheets continued to grow rapidly in autumn 2008. Use of other sources of finance has become more difficult, and companies are anticipating liquidity problems.
  • Kauko, Karlo (2005)
    Bank of Finland. Financial market report 4
    New data on EU countries' banking sectors indicate much similarity in the structure of income in almost all the countries. There are significant differences in funding sources. Differences in accounting practices still hamper cross-country comparisons.
  • Kauko, Karlo (2016)
    Bank of Finland. Bulletin 2/2016
    Nordea Group intends to merge its large subsidiary banks operating in other Nordic countries to the Swedish parent company, which is supervised by the Swedish supervisory authority, Finansinspektionen. The importance of the change for Finland is heightened by Nordea's large market share.
  • Kauko, Karlo; Savolainen, Eero; Tuomikoski, Olli; Vauhkonen, Jukka (2019)
    Bank of Finland. Bulletin 2/2019
    The Finnish corporate loan stock has grown in recent years. Corporate loans are riskier than household loans, yet the default rates on corporate lending have almost returned to the levels prevailing before the financial crisis.
  • Kauko, Karlo (2012)
    Bank of Finland. Financial market report 1
    Capital adequacy requirements imposed on banks may amplify cyclical fluctuations by forcing banks to cut lending in a downturn. One solution would be to tighten capital requirements in an upswing and to ease them in a downswing. A countercyclical capital buffer regime will be introduced in, for instance, the EU as part of the new Capital Requirements Directive. It is difficult to put forward a simple principle according to which additional capital requirements should be imposed. The proposal that has gained the most attention may perhaps not be suitable for an economy like Finland that is sensitive to economic fluctuations.
  • Kauko, Karlo (2012)
    Bank of Finland. Bulletin. Financial stability 2
    Banks have been found to step up their credit supply in a cyclical upswing and to cut it back in a downswing. This tends to both amplify cyclical fluctuations and increase the threat of banking crises. According to the relevant draft directive, in order to ease this procyclicality problem, authorities could tighten the capital adequacy requirement in response to an overly fast credit stock growth. Internationally proposed criteria for setting an additional capital requirement may not perhaps be suitable for a country like Finland that is sensitive to economic fluctuations.
  • Kauko, Karlo (1998)
    Suomen Pankin keskustelualoitteita 28/1998
    In this paper a game theoretic duopoly model is developed to analyse the development of an interbank payment system.There are two competing banks in the model, and payment services offered to the public are among their main products.The customer of the larger bank uses mainly intrabank payment services; these services are assumed to be of high quality.This creates a so-called network externality, meaning that many customers prefer to use the large bank for quality reasons.The development of interbank payment systems reduces the significance of this factor and hence benefits the small bank.A big bank has a sufficient incentive to develop the system only if a fee is charged for using payment systems.The role for public investment depends critically on the pricing of payment services.If banks offer payment services free of charge, their incentives to develop the system are strongly biased, and it would be efficient for the central bank to have an active role in developing the system.If instead payment services are directly priced, eventual distortions are much less serious, and the role of the central bank need not be as prominent. JEL Classification Numbers: G18, G21, L13 Keywords: banks, payments systems, network externality, duopoly
  • Kauko, Karlo (2018)
    Scandinavian Economic History Review 1; January ; 2018
    Chartalist theories assume the government determines the currency used by the public. Finland’s experience following the Russo-Swedish war in 1808–1809 would seem to contradict the chartalist view. Having become a Grand Duchy under Russia, the Finnish Government sought to replace Swedish riksdalers in circulation with roubles. However, due to a resilient trade surplus with Sweden and the resulting flood of Swedish money into Finland, bans on the riksdaler were largely ineffective. Taxation proved a particularly clumsy tool for leveraging the switch to roubles. Taxpayers almost forced the government to accept payments in a foreign currency. Even the government had to use Swedish money. Issuing roubles was of limited use. As a result, the rouble failed to establish itself as Finland’s main currency until the introduction of a silver standard in 1840–1842.
  • Grym, Aleksi; Heikkinen, Päivi; Kauko, Karlo; Takala, Kari (2017)
    BoF Economics Review 4/2017
    Keskuspankit ovat perinteisesti laskeneet liikkeeseen seteleitä yleisön käytettäviksi. Digitalisaation myötä setelit alkavat olla teknisesti vanhentunut maksuväline, ja jotkut keskuspankit ovat harkinneet vähittäismaksamiseen soveltuvaa elektronista keskuspankkirahaa. Elektroninen keskuspankkiraha tarjoaisi yleisölle mahdollisuuden pitää hallussaan keskuspankkirahaa mahdollisessa setelittömässä tulevaisuudessa. Lohkoketjuteknologia nykyisellään todennäköisesti sopisi tarkoitukseen huonosti, sillä se ei pysty käsittelemään riittävän suurta määrää transaktioita. Elektronisella keskuspankkirahalla olisi todennäköisesti muille keskuspankkipolitiikan lohkoille merkittäviä vaikutuksia, joita olisi selvitettävä huolellisesti.
  • Kauko, Karlo (2017)
    Euro & talous. Blogi
    Viime aikoina olemme voineet lukea lehdistä, miten työtehtävät eräissä pankeissa vähenevät voimakkaasti lähivuosina. Syyksi on mainittu etenkin digitalisaatio. Nämä uutiset ovat sopusoinnussa ns. teknologisen työttömyyden hypoteesin kanssa: kun asiat tehdään koneellisesti ja automatisoidusti, työvoiman kysyntä vähenee ja työttömyys pahenee.