Browsing by Subject "indebtedness"

Sort by: Order: Results:

Now showing items 1-20 of 25
  • Alakiuttu, Antti (2021)
    Bank of Finland Bulletin. Blog
    A larger share of household and corporate finance than previously now comes from outside the banking sector. As a result of digitalisation, the number of different companies providing consumer credit and corporate finance services in Finland has increased. This has aroused concerns about increasing indebtedness among households and companies, although the number of these lenders has decreased following the interest rate cap imposed on consumer credit in September 2019.
  • Bank of Finland (2018)
    Bank of Finland. Bulletin 5/2018
    Housing company loans and consumer credit add to high and rising levels of household indebtedness. The macroprudential toolkit needs to be replenished with borrower-based instruments that take into account loan applicants’ repayment ability and are able to address the rise of household indebtedness as a whole. Nordea's redomiciliation has increased the size and structural vulnerability of the Finnish banking sector. Italy's budget crisis and Brexit proceedings have contributed to uncertainty in Europe. Cyber risks and climate change pose yet further challenges for financial stability.
  • Bank of Finland (2021)
    Bank of Finland. Bulletin 1/2021
    The vulnerabilities related to housing finance have increased in Finland during the COVID-19 pandemic. Long housing loans are being taken out more than ever and a larger proportion of new mortgages are being granted to borrowers whose total debts will then be very high relative to income. The persistent upward trend in household indebtedness will undermine the economy’s ability to withstand future economic crises. A debt-to-income cap and a limit on the maturity of housing loans should be introduced without delay to stop the loosening of credit standards.
  • Bank of Finland (2019)
    Bank of Finland. Bulletin 2/2019
    Whereas recent economic and financial developments in Finland do not pose any immediate threats to financial stability, the permanent risks related to household indebtedness and the structure of the banking system have increased further.
  • Bank of Finland (2017)
    Bank of Finland. Bulletin 5/2016
    The European Systemic Risk Board (ESRB), which is responsible for macroprudential oversight of the EU’s financial system, has issued a warning to Finland concerning the medium-term vulnerabilities related to household indebtedness and lending for house purchase. For purposes of risk mitigation, more efficient instruments should be made available to the Finnish authorities to limit the maximum size of new housing loans relative to the loan applicant’s debt-servicing capacity. There are, however, no threats to the stability of the Finnish financial system in the short term.
  • Bank of Finland (2017)
    Bank of Finland Bulletin. Analysis
    There are no immediate threats to the stability of the Finnish financial system. The relocation of Nordea’s corporate headquarters will, however, increase the banking sector’s exposure to structural vulnerabilities. The regulatory and supervisory reforms already implemented and participation in the European Banking Union will serve to mitigate the risks associated with the expansion of the banking sector, but adoption of a common European Deposit Insurance Scheme remains an important measure yet to be implemented within the Banking Union. An income-related cap on loans is needed to rein in the increase in household indebtedness.
  • Putkuri, Hanna (2016)
    Bank of Finland. Bulletin 2/2016
    Finland’s financial system is, by structure, vulnerable to risks associated with lending for house purchase. Housing loan volumes are large relative to other lending by banks and requirements on banks’ own funds. The fact that household debt levels have increased and that housing wealth constitutes a large proportion of household assets also increases the vulnerabilities. In addition, covered bonds secured by housing loans play a significant role in bank funding and investment. However, the increase in vulnerabilities has largely levelled off in the 2010s.
  • Putkuri, Hanna (2015)
    Bank of Finland. Bulletin 2/2015
    The trends of the early post-millennium years – a larger average loan size and longer loan repayment periods – have permanently increased household vulnerability to debt-related risks in Finland. Household indebtedness embraces another four features that amplify the risks to the economy: the debt level is high relative to GDP, risks are unevenly distributed, loans are tied to variable interest rates and, in part, loans are large relative to the collateral provided. The stabilisation of debt developments in the 2010s has been positive for financial stability.
  • Koskinen, Kimmo; Putkuri, Hanna (2018)
    Bank of Finland. Bulletin 2/2018
    Household indebtedness and overheating of the housing market have contributed to financial crises throughout history. However, a considerable proportion of banks’ losses during crises have resulted from corporate loans. The situation arises when indebted households cut down their spending during an economic downturn, increasing companies’ financial difficulties. The current situation in Finland is twofold: household indebtedness is record-high and has been increasing for a long time, but housing market developments have for the most part remained moderate. The percentage of loans related to housing and real estate is high.
  • Topi, Jukka; Vauhkonen, Jukka (2017)
    Bank of Finland. Bulletin 2/2017
    Finland has prepared for risks on residential mortgage loan markets by setting a maximum loan-to-value ratio for housing loans. In addition, preparations are currently underway for imposing minimum risk weights on housing loans granted by banks. On top of these, to curb borrowing it would be advisable to consider the adoption of tools that take household income into account, such as loan-to-income caps. In this article, we use simple examples to illustrate how such instruments could be deployed to restrain dangerous growth in lending for house purchase and household debt, but will not express an opinion on the superiority of one tool over the others. Different instruments supplement each other, and no individual tool can solve all problems.
  • Koskinen, Kimmo; Voutilainen, Ville (2021)
    Bank of Finland. Bulletin 1/2021
    Housing company loans are contributing to household indebtedness and are changing the composition of household debt. Housing company loans can also incentivise residential property investors to become highly leveraged. Imposing a loan-to-value limit of 60% on housing company loans would mitigate the issues associated with large housing company loans and make it easier to assess their risks. The impact of a loan-to-value limit would largely fall on owner-occupied housing output. Housing company loans are generally not used to finance the construction of rental housing. Imposing a loan-to-value limit on housing company loans might increase the number of pre-sales required by small construction companies or raise their borrowing costs.
  • Kauko, Karlo; Norring, Anni (2018)
    Bank of Finland. Bulletin 2/2018
    Borrower-based instruments generally refer to measures aimed at mitigating the indebtedness of individuals or households. These instruments have most commonly been used to impose limits on housing loans. The purpose of borrower-based instruments is to contain household indebtedness and prevent house price bubbles. The most common instrument in Europe is the maximum loan-to-value (LTV) ratio for housing loans, i.e. the loan cap, which is also in use in Finland. Research has proven the effectiveness of borrower-based instruments in preventing both price bubbles and excessive indebtedness.
  • Liikanen, Erkki (2016)
    Bank of Finland. Bulletin 3/2016
    The euro area economy continued to grow in 2015, and forecasts for 2016 indicate a continuation of this positive trend. The unemployment rate has come down gradually from its previous high level. Notwithstanding the favourable general trend in the economy, euro area inflation has remained much slower than the target.
  • Liikanen, Erkki (2016)
    Bank of Finland. Bulletin 5/2016
    Of the various factors of uncertainty surrounding the international economic outlook at the present time, a substantial proportion relates to policy choices. Much expectation focuses on US economic policy in the immediate years ahead, but so far no details are known. Meanwhile, the United Kingdom’s new arrangements in respect of its international economic relations remain undecided, while the UK Government’s detailed objectives are not entirely clear. Politically motivated uncertainties regarding the economic outlook are also to be found elsewhere in Europe and beyond.
  • Aaltonen, Markus; Koskinen, Kimmo (2019)
    Bank of Finland. Bulletin 2/2019
    Consumer credit to households keeps increasing, and roughly one in four Finns held consumer credit in 2019 (Finance Finland).
  • Putkuri, Hanna; Voutilainen, Ville (2021)
    Bank of Finland. Bulletin 1/2021
    New mortgage-borrowers’ total debt relative to income has increased in recent years. A higher proportion of new loans for house purchase are granted to highly indebted households relative to income. High debt-to-income ratios are less common in the case of first-home loans than in regard to other new housing loans. High debt-to-income ratios are more common in growth centres than elsewhere in Finland. The proposed debt-to-income cap would curb growth in indebtedness relative to income.
  • Putkuri, Hanna (2015)
    Bank of Finland. Bulletin 2/2015
    Regional divergence is a strong feature of the Finnish housing market and household debt. House prices are higher in growth centres than in the rest of the country, and households in growth centres also have more housing debt both in absolute terms and relative to their income. In the long term, the mutually reinforcing cycles and vulnerabilities in housing and credit markets could turn out to be detrimental to financial stability and the macroeconomy.
  • Alakiuttu, Antti (2021)
    Euro & talous. Blogi
    Entistä suurempi osa kotitalouksien ja yritysten rahoituksesta tulee pankkisektorin ulkopuolelta. Digitalisaation myötä erilaisten kulutusluotto- ja yritysrahoituspalveluja myöntävien yhtiöiden määrä on lisääntynyt Suomessa. Se on herättänyt huolta kotitalouksien ja yritysten velkaantumisen kasvusta, vaikka syyskuussa 2019 kulutusluotoille asetetun korkokaton jälkeen niitä myöntävien yhtiöiden määrä onkin vähentynyt.
  • Nykänen, Marja (2018)
    Bank of Finland. Bulletin 2/2018
    The primary purpose of the macroprudential measures that restrict lending for house purchase is to reduce the economy’s exposure to risks stemming from high household indebtedness. These risks are realised when indebted households respond to disturbances in the economy by sharply reducing consumption. Macroprudential policies that impose capital buffer requirements for banks, on the other hand, are designed to ensure that the banking system's lending capacity and ability to function remain satisfactory under all economic conditions.
  • Kaaresvirta, Juuso (2016)
    Bank of Finland. Bulletin 1/2016
    The total amount of public and private debt in China has increased rapidly since the financial crisis. The country’s debt-to-GDP ratio has already reached the level seen in many advanced economies. The rapid rise in debt in many countries has led to financial sector problems and to a marked slowing of economic growth. Sustainable management of the economy in China would require a slowdown in the debt build-up. There are no indications of this as yet. Curbing debt accumulation would require China’s readiness to accept lower growth targets.