New issue of the Riksbank's journal Economic Review
The Riksbank’s journal Economic Review discusses subjects related to central banking. This year’s third issue of Sveriges Riksbank Economic Review contains the following articles:
The role of the banking system in financial crises – a comparison between the crisis in Asia and the crisis in the Baltic countries
By Ellen Bernhardtson and Jill Billborn
The bankruptcy of the respected investment bank Lehman Brothers in September 2008 set off a wave of distrust between financial players that quickly spread around the world. Uncertainty about the creditworthiness of borrowers increased rapidly and the supply of credit dwindled. This resulted in a widespread economic downturn. One region that was hit particularly hard was Central and Eastern Europe, especially the Baltic countries. Today, almost two years later, the economies have begun to stabilise after major falls in GDP. The recovery has begun but is expected to go slowly, and many challenges still remain..
Why banks prefer leverage?
By Reimo Juks
The aim of this article is to study the implications of the new banking regulations for banks. We restrict our analysis to capital regulation. Even though the new banking regulations entail much more than updated capital regulations, increasing the quality and amount of equity in banks lies at the heart of the new regulations.
We start with a brief overview of the actual capital structure in banks. We then proceed with a detailed and structured discussion of why banks prefer debt as compared to equity. The benefits of debt are used to identify and quantify the effects of the capital regulations on banks.
The price development in the Swedish housing market – a fundamental analysis
By Lars Frisell and Masih Yazdi
During 2009, Sweden’s GDP decreased by 5 per cent, the greatest economic contraction since the 1940s. In the same year, mortgage lending increased by 8 per cent. House prices are now at a higher level than before the financial crisis. This has breathed new life into speculations about a Swedish house price bubble – and an imminent and significant fall in prices. In this article, we analyse the price development since the end of the 1990s. We show that directly quantifiable factors such as higher disposable income and lower real interest rates can explain almost 90 per cent of the price increase. Quantifying the effects of the institutional changes that have increased access to credit is more difficult – but these are probably significant. All in all, it seems unlikely that Swedish housing is, on the whole, overvalued.
Financial consumer protection – goals, opportunities and problems
By Hans Bäckström
The remit of Finansinspektionen the Swedish financial supervisory authority, primarily concerns two things: promoting a stable financial system, and contributing to adequate consumer protection in the financial area.