Browsing by Subject "macroprudential instruments"

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Now showing items 1-11 of 11
  • Topi, Jukka (2015)
    Bank of Finland. Bulletin 2/2015
    Financial crises and other serious financial disruptions may be caused by several different types of risks. Macroprudential policy, designed to prevent such crises, needs a more diversified set of tools than are available in Finland at present. Although the Board of the Financial Supervisory Authority already has access to a number of macroprudential instruments, there is reason for the toolkit to be supplemented. There is a need for instruments to ensure capital adequacy in the Finnish banking sector and, if necessary, prevent the housing market overheating.
  • Voutilainen, Ville (2019)
    Bank of Finland. Bulletin 2/2019
    Finnish household debt relative to income has grown significantly since the turn of the millennium. In future, excessive borrowing could be stemmed by, for example, restricting the amount of credit available to households relative to their levels of income
  • Nykänen, Marja (2021)
    Bank of Finland. Bulletin 1/2021
    Household behaviour and business activity continue to be very much influenced by the COVID-19 pandemic. The prospects for the economic environment returning to a state of normalcy are improving, however, as vaccine rollouts gather pace in Finland and abroad. The Finnish economy has held up better than feared in the worst-case scenarios envisaged one year ago, and the financial system has continued to function well. The economy's better-than-expected performance can be attributed especially to the policy measures put in place domestically and in the euro area, and to the ability of households and businesses to adjust to the emergency conditions.
  • Nykänen, Marja (2019)
    Bank of Finland. Bulletin 2/2019
    Finland's financial system is structurally vulnerable due to the country's high levels of household debt and proportionately large banking system. Indebted households respond to declining economic conditions and increased uncertainty by reducing their levels of consumption and investment. Companies see their business conditions deteriorate, and the risks to the financial system are amplified.
  • 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.
  • Vauhkonen, Jukka (2016)
    Bank of Finland. Bulletin 2/2016
    Finland's neighbouring countries have actively adopted macroprudential instruments to counter stability risks relating to lending for house purchase. Sweden and Norway are taking strong measures to restrain housing credit growth and the associated risks. Of the Baltic States, Estonia and Lithuania, in turn, have imposed limits on the maximum loan servicing costs and length of housing loans so as to prevent risks proactively. Finland has adopted new macroprudential instruments more slowly. The loan-to-value cap that will enter into force in Finland in summer 2016 is more lenient than the requirements imposed in neighbouring countries.
  • 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.
  • 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.
  • Hakkarainen, Pentti (2016)
    Bank of Finland. Bulletin 2/2016
    Euro area monetary policy and domestic fiscal and structural policies are supporting Finland’s slowly recovering economy. In a weak cyclical environment, there are no signs of acute threats to financial stability. The low level of interest rates has the potential to increase the risk of over-indebtedness and further feed asset prices. This sort of development could add risks to the Finnish financial system and reinforce structural vulnerabilities. Close monitoring is necessary to preserve the stability of the financial markets. Addressing stability threats requires access for the authorities to an adequate set of macroprudential instruments, which must be created in good time.
  • Nykänen, Marja (2017)
    Bank of Finland. Bulletin 2/2017
    There is no indication of growth in cyclical risks to the financial system in Finland. Finnish banks and insurance companies are financially sound. The financial system is, however, structurally vulnerable against the backdrop of households’ high and unevenly distributed indebtedness. To ensure households’ debt-servicing capacity, a more diverse macroprudential toolkit is needed than the one currently in place. Structural changes in the banking sector may have an impact on risk spillovers between the Nordic countries.
  • Haajanen, Jyrki; Putkuri, Hanna; Vauhkonen, Jukka (2015)
    Bank of Finland. Bulletin 2/2015
    The foreseeable tightening of bank capital requirements will only marginally add to bank costs and, by extension, to loan margins. The other side of the coin is that the most important tool at the disposal of the Financial Supervisory Authority for preventing threats to stability from excessive credit growth – the countercyclical capital buffer requirement – may turn out to be a more ineffective macroprudential instrument than hoped for. Regulation of minimum risk weights for housing loans is likely to be a more effective tool for reining in excessive growth in lending for house purchase.