Central securities depositories (CSDs) have opened mutual links, but most of them are seldom used. Why are idle links established? By allowing a foreign CSD to offer services through the link the domestic CSD invites competition. The domestic CSD can determine the cost efficiency of the rival by...

The NSFR regulation reduces banks’ liquidity risks by encouraging the use of deposit funding. Deposit money is created by lending, but the requirement restricts possibilities to grant loans. This contradiction may be destabilising if there is a substantial foreign debt.

The innovation activities of companies has long been a topic of interest in economics. Game theory models of oligopoly have since the start of the 1980s played a central role in the economics of innovation. In this study three game theory duopoly models are presented and each is used to analyse...

Bank managers often claim that equity is expensive relative to debt, which contradicts the Modigliani-Miller irrelevance theorem. This paper combines dividend signalling theories and the Diamond-Dybvig bank run model. An opaque bank must signal its solvency by paying high and stable dividends in...

It has been proposed that the potential procyclicality of Basel II could be alleviated by using through-the-cycle (TTC) ratings in IRBA models. A TTC rating would be based on the structural component of the debtor’s credit risk ignoring cyclical fluctuations. This paper tests for the existence...

This paper presents a duopoly model of the securities settlement industry. Because pooling a large amount of payments can help in using liquidity efficiently, issuers prefer systems where a large number of securities are issued. If the central securities depositories establish a mutual link that...

This paper presents a model on the demand for money market funds (MMFs). These funds are a very close substitute for M1 deposits, except that MMFs do not satisfy immediate transaction requirements. The demand for MMFs strengthens when the intended volume of transactions is low. A high interest...

This discussion paper presents a microsimulation model of household distress. We use logit analysis to estimate the extent to which a household’s risk of being financially distressed depends on net income after tax and loan servicing costs. The impact of assumed macroeconomic shocks on this...

This paper presents evidence on the impact of managers on cost efficiency in banking. Stochastic frontier analysis is applied to a unique Finnish data set. The paper finds that manager age and education have strong yet complicated effects. University education enhances efficiency if the manager...

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...