Essays on bank regulation, mortgages and effects on the real estate market TEST

Norwegian banks are in the midst of a situation of ever-increasing international competition and rapid changes to the risks they are exposed to. In this situation, they are dependent on making the right strategic choices and seeking knowledge of how strategic choices affect profitability, how mortgage risk varies from geography and market conditions, how regulatory conditions affect strategy choices and how such strategic choices help to influence a bank's total risk. Relevant topics will be highlighted in a series of articles, and together provide new knowledge about banks' risk and scope. The project will provide a better basis for the correct pricing of loans, and help to highlight the negative and positive consequences of regulation, as well as necessary adjustments. Two of the articles from the project is published in an international journal, and the others are in different stages in review processes pending acceptance and international publication.

Husholdningenes bruk av lånekilder og ikke minst hvordan banker kan bidra til å øke risiko - ikke bare for seg selv, men også for husholdningene og finansiell stabilitet er viktig i utforming av effektiv regulering av banknæringen. Prosjektet har bidratt til ny kunnskap om dette samspillet mellom banker og forbrukere, og hvordan de tilpasser seg endringer i reguleringer. Med bakgrunn i resultatene fra prosjektet er det mulig å forbedre risikovurderinger og ikke minst å få en bedre forståelse av utsatte husholdninger, og hvordan bankene samlet kan bidra til å skape finansiell ustabilitet ved å opptre individuelt rasjonelt, men kollektivt ufornuftig.

The debt levels of households is at record breaking levels fueled by low interest rates, and high willingness from banks to supply more debt in pursuance of market shares. This means that mortgage lending is facing increasing uncertainty, but is still perceived low risk due to low historical losses. The main objective of this project is to explore how regulations influence the banks’ strategic choices, and how this in turn has implication for the real estate markets and overall risk. Through exploring data on customer mobility between banks, default on unsecured lending, and implications on defaults and risk in mortgage lending, the project plans to explore how regulations have influenced lending, and how in turn these implications affect overall risk levels. This is intended to be achieved through the discovery and generation of relevant primary data, the application of suitable statistical/econometric techniques to this data, and the evaluation and interpretation of the relationship between these findings and their implications for effective regulations, and monitoring of risk.