First principles modeling of metallic alloys and alloy surfaces

By alloying metals with other materials, one can modify the metal’s characteristics or compose an alloy which has certain desired characteristics that no pure metal has. The field is vast and complex, and phenomena that govern the behaviour of alloys are numerous. Theories cannot penetrate such complexity, and the scope of experiments is also limited. This is why the relatively new field of ab initio computational methods has much to give to this field. With these methods, one can extend the understanding given by theories, predict how some systems might behave, and be able to obtain information that is not there to see in physical experiments. This thesis pursues to contribute to the collective knowledge of this field in the light of two cases. The first part examines the oxidation of Ag/Cu, namely, the adsorption dynamics and oxygen induced segregation of the surface. Our results demonstrate that the presence of Ag on the Cu(100) surface layer strongly inhibits dissociative adsorption. Our results also confirmed that surface reconstruction does happen, as experiments predicted. Our studies indicate that 0.25 ML of oxygen is enough for Ag to diffuse towards the bulk, under the copper oxide layer. The other part elucidates the complex interplay of various energy and entropy contributions to the phase stability of paramagnetic duplex steel alloys. We were able to produce a phase stability map from first principles, and it agrees with experiments rather well. Our results also show that entropy contributions play a very important role on defining the phase stability. This is, to the author’s knowledge, the first ab initio study upon this subject.

Analysis and Control of Excitation, Field Weakening and Stability in Direct Torque Controlled Electrically Excited Synchronous Motor Drives

Direct torque control (DTC) is a new control method for rotating field electrical machines. DTC controls directly the motor stator flux linkage with the stator voltage, and no stator current controllers are used. With the DTC method very good torque dynamics can be achieved. Until now, DTC has been applied to asynchronous motor drives. The purpose of this work is to analyse the applicability of DTC to electrically excited synchronous motor drives. Compared with asynchronous motor drives, electrically excited synchronous motor drives require an additional control for the rotor field current. The field current control is called excitation control in this study. The dependence of the static and dynamic performance of DTC synchronous motor drives on the excitation control has been analysed and a straightforward excitation control method has been developed and tested. In the field weakening range the stator flux linkage modulus must be reduced in order to keep the electro motive force of the synchronous motor smaller than the stator voltage and in order to maintain a sufficient voltage reserve. The dynamic performance of the DTC synchronous motor drive depends on the stator flux linkage modulus. Another important factor for the dynamic performance in the field weakening range is the excitation control. The field weakening analysis considers both dependencies. A modified excitation control method, which maximises the dynamic performance in the field weakening range, has been developed. In synchronous motor drives the load angle must be kept in a stabile working area in order to avoid loss of synchronism. The traditional vector control methods allow to adjust the load angle of the synchronous motor directly by the stator current control. In the DTC synchronous motor drive the load angle is not a directly controllable variable, but it is formed freely according to the motor’s electromagnetic state and load. The load angle can be limited indirectly by limiting the torque reference. This method is however parameter sensitive and requires a safety margin between the theoretical torque maximum and the actual torque limit. The DTC modulation principle allows however a direct load angle adjustment without any current control. In this work a direct load angle control method has been developed. The method keeps the drive stabile and allows the maximal utilisation of the drive without a safety margin in the torque limitation.

Covariant Phase Observables in Quantum Mechanics

The aim of this thesis is to present a solution to the quantum phase problem of the single-mode optical field. The solution is based on the use of phase shift covariant normalized positive operator measures. These measures describe realistic direct coherent state phase measurements such as the phase measurement schemes based on eight-port homodyne detection or heterodyne detection. The structure of covariant operator measures and, more generally, covariant sesquilinear form measures is analyzed in this work. Four different characterizations for phase shift covariant normalized positive operator measures are presented. The canonical covariant operator measure is definded and its properties are studied. Finally, some other suggested phase theories are introduced to investigate their connections to the covariant sesquilinear form measures.

Influence of stationary phase and eluent properties on chromatographic separation of carbohydrates

In this thesis, the sorption and elastic properties of the cation-exchange resins were studied to explain the liquid chromatographic separation of carbohydrates. Na+, Ca2+ and La3+ form strong poly(styrene-co-divinylbenzene) (SCE) as well as Na+ and Ca2+ form weak acrylic (WCE) cation-exchange resins at different cross-link densities were treated within this work. The focus was on the effects of water-alcohol mixtures, mostly aqueous ethanol, and that of the carbohydrates. The carbohydrates examined were rhamnose, xylose, glucose, fructose, arabinose, sucrose, xylitol and sorbitol. In addition to linear chromatographic conditions, non-linear conditions more typical for industrial applications were studied. Both experimental and modeling aspectswere covered. The aqueous alcohol sorption on the cation-exchangers were experimentally determined and theoretically calculated. The sorption model includes elastic parameters, which were obtained from sorption data combined with elasticity measurements. As hydrophilic materials cation-exchangers are water selective and shrink when an organic solvent is added. At a certain deswelling degree the elastic resins go through glass transition and become as glass-like material. Theincreasing cross-link level and the valence of the counterion decrease the sorption of solvent components in the water-rich solutions. The cross-linkage or thecounterions have less effect on the water selectivity than the resin type or the used alcohol. The amount of water sorbed is higher in the WCE resin and, moreover, the WCE resin is more water selective than the corresponding SCE resin. Theincreased aliphatic part of lower alcohols tend to increase the water selectivity, i.e. the resins are more water selective in 2-propanol than in ethanol solutions. Both the sorption behavior of carbohydrates and the sorption differences between carbohydrates are considerably affected by the eluent composition and theresin characteristics. The carbohydrate sorption was experimentally examined and modeled. In all cases, sorption and moreover the separation of carbohydrates are dominated by three phenomena: partition, ligand exchange and size exclusion. The sorption of hydrophilic carbohydrates increases when alcohol is added into the eluent or when carbohydrate is able to form coordination complexes with the counterions, especially with multivalent counterions. Decreasing polarity of the eluent enhances the complex stability. Size exclusion effect is more prominent when the resin becomes tighter or carbohydrate size increases. On the other hand,the elution volumes between different sized carbohydrates decreases with the decreasing polarity of the eluent. The chromatographic separation of carbohydrateswas modeled, using rhamnose and xylose as target molecules. The thermodynamic sorption model was successfully implemented in the rate-based column model. The experimental chromatographic data were fitted by using only one adjustable parameter. In addition to the fitted data also simulated data were generated and utilized in explaining the effect of the eluent composition and of the resin characteristics on the carbohydrate separation.

Streptavidin - A Versatile Binding Protein for Solid-Phase Immunoassays

Streptavidin, a tetrameric protein secreted by Streptomyces avidinii, binds tightly to a small growth factor biotin. One of the numerous applications of this high-affinity system comprises the streptavidin-coated surfaces of bioanalytical assays which serve as universal binders for straightforward immobilization of any biotinylated molecule. Proteins can be immobilized with a lower risk of denaturation using streptavidin-biotin technology in contrast to direct passive adsorption. The purpose of this study was to characterize the properties and effects of streptavidin-coated binding surfaces on the performance of solid-phase immunoassays and to investigate the contributions of surface modifications. Various characterization tools and methods established in the study enabled the convenient monitoring and binding capacity determination of streptavidin-coated surfaces. The schematic modeling of the monolayer surface and the quantification of adsorbed streptavidin disclosed the possibilities and the limits of passive adsorption. The defined yield of 250 ng/cm² represented approximately 65 % coverage compared with a modelled complete monolayer, which is consistent with theoretical surface models. Modifications such as polymerization and chemical activation of streptavidin resulted in a close to 10-fold increase in the biotin-binding densities of the surface compared with the regular streptavidin coating. In addition, the stability of the surface against leaching was improved by chemical modification. The increased binding densities and capacities enabled wider high-end dynamic ranges in the solid-phase immunoassays, especially when using the fragments of the capture antibodies instead of intact antibodies for the binding of the antigen. The binding capacity of the streptavidin surface was not, by definition, predictive of the low-end performance of the immunoassays nor the assay sensitivity. Other features such as non-specific binding, variation and leaching turned out to be more relevant. The immunoassays that use a direct surface readout measurement of time-resolved fluorescence from a washed surface are dependent on the density of the labeled antibodies in a defined area on the surface. The binding surface was condensed into a spot by coating streptavidin in liquid droplets into special microtiter wells holding a small circular indentation at the bottom. The condensed binding area enabled a denser packing of the labeled antibodies on the surface. This resulted in a 5 - 6-fold increase in the signal-to-background ratios and an equivalent improvement in the detection limits of the solid-phase immunoassays. This work proved that the properties of the streptavidin-coated surfaces can be modified and that the defined properties of the streptavidin-based immunocapture surfaces contribute to the performance of heterogeneous immunoassays.

Highly functional binding surface for miniaturised solid-phase immunoassays. - A spot story -

Several bioaffinity assays are based on the detection of an analyte which is bound on a solid substrate via biochemical interaction. These so called solid phase assays are based on the adhesion of the primary binding partner on a solid surface, which then binds the analyte to be detected. In this thesis work a novel solid phase based assay technology, known as spot technology, was developed. The spot technology is based on combination of high-capacity solid phases, concentrated in a spot format, utilising modified streptavidin molecules and recombinant antibody fragments. The reduction of the solid phase binding surface to a size of a spot enabled denser binding of the target molecules, providing improved signal intensities and signal-to-background ratio when applied in different solid phase immunoassays. Streptavidin-biotin interactions are commonly utilised in numerous different bioaffinity assays and the ultimate nature of streptavidin to bind biotin is among the strongest non-covalent interaction reported between two biomolecules. In this study native core streptavidin was chemically modified to provide polymerised streptavidin molecules with altered adsorption properties. These streptavidin conjugates, when coated onto polystyrene surface, provided enhanced biotin binding capacity and surface stability when compared to a reference coating constructed with native streptavidin. Furthermore, the combination of chemically modified streptavidin, sitespecifically biotinylated antibody fragments and the spot coating technology provided highly dense solid phase coating with improved binding properties. The performance of the spot assay technology was further demonstrated in different immunoassay configurations. Human thyroid stimulating hormone (TSH) and human cardiac troponin I (cTnI) were used as model analytes to show the applicability of the highly sensitive spot-based solid-phase immunoassay for detection of very low levels of analytes. It was demonstrated that the spot technology provided an assay concept with enhanced sensitivity and short turn-around times, characteristics that are highly suitable for point-of-care applications.

Behavioral Responses in Mice Selectively Bred for High and Low Levels of Open-Field Thigmotaxis

In animal psychology, the open-field (OF) test is a traditional method for studying different aspects of rodent behavior, with thigmotaxis (i.e., wallseeking behavior) being one of the best validated OF parameters employed to measure emotionality. The main purpose of the present study was to investigate the selection response in mice selectively bred for high and low levels of OF thigmotaxis (the HOFT and LOFT lines, respectively). The mice (N = 2048) were selected for 23 generations, resulting in bidirectional phenotypic divergence between the two lines; that is, the HOFT mice were more thigmotactic (i.e., more emotional) than the LOFT mice across the different generations. The origin of the line difference in thigmotaxis was further investigated by using the crossfostering paradigm, with the results suggesting that the divergence between the two lines was primarily innate in origin and not influenced by differing maternal behavior. The stability of the selection trait was examined by testing the animals at different ages as well as in varying conditions. The results indicated that the line difference in thigmotaxis was not affected by age at the time of testing, and it also persisted in the different OF testing situations as well as during pregnancy and lactation. The examination of a possible coselection of other characteristics revealed that the more thigmotactic HOFT mice lived longer than the less thigmotactic LOFT mice. In addition, the HOFT mice tended to rear and explore less than the LOFT mice, supporting the general assumption that emotionality and exploration are inversely related. The two lines did not generally differ in ambulation and defecation, that is, in the traditional OF indexes of emotionality, conforming to the suggestion that emotionality is a multidimensional construct. The effects of sex on different OF parameters were also assessed, with the results suggesting that among the HOFT and LOFT lines, the female mice were more emotional than the male mice. The examination of the temporal changes in the HOFT and LOFT lines’ OF behavior revealed some contradictory findings that also partially conflicted with general assumptions. Although this study did not show prominent differences in maternal responsiveness between the HOFT and LOFT mothers, the results suggested that the line divergence in emotionality was more pronounced in the presence of a pup after parturition than during pregnancy. The present study clearly demonstrates that OF thigmotaxis is a strong characteristic for producing two diverging lines of mice. The difference in thigmotaxis between the selectively bred HOFT and LOFT mice seemed to be a stable and robust feature of these animals, and it appeared to stem from a genetic background.

The pH-dependent phase distribution of wood pitch components in papermaking processes

Wood contains only a very small amount of lipophilic extractives, commonly known as wood pitch. The pitch is known to cause severe problems in papermaking processes. The amount of pitch in process waters can be decreased by seasoning of the raw material prior to pulping, pulp washing, removal of pitch by flotation, adsorption of pitch onto various mineral surfaces, and retention of pitch to the fibre material by cationic polymers. The aim of this study was to determine the influence of pH on some of the methods used for pitch control. Experiments were performed using laboratory-made wood pitch emulsions with varying pH, salt concentration, hemicellulose concentration and pitch composition. These emulsions were used to study the phase distribution of resin and fatty acids, the colloidal stability of pitch with and without steric stabilisation by galactoglucomannans, and the interactions between wood pitch and mineral particles. Purification of unbleached and peroxidebleached mill process water was performed by froth flotation in combination with a foaming agent. The distribution of resin and fatty acids (RFAs) between colloidal pitch droplets and the water phase was very dependent on pH. At pH 3, almost all of the RFAs were attached to the pitch droplets, while increasing the pH led to increasing concentration of dissolved RFAs in the water phase. The presence of salt shifted the release of RFAs towards higher pH, while lower ratio of neutral pitch in the emulsion resulted in release of RFAs at lower pH. It was also seen that the dissolution and adsorption of RFAs at sudden pHchanges takes place very quickly. Colloidal pitch was more stable against electrolyte-induced aggregation at higher pH, due to its higher anionic charge. The concentration of cationic polymers needed to aggregate colloidal pitch also increased with increasing pH. The surface characteristics of solid particles, such as amount of charged groups, were very important for understanding their interactions with colloidal wood pitch. Water-soluble galactoglucomannans stabilised the colloidal pitch sterically against aggregation, but could not completely prevent interactions between wood pitch and hydrophilic particles. Froth flotation of unbleached and peroxidebleached process water showed that the pitch could be removed more effectively and selectively at low pH, compared to at neutral pH. The pitch was removed more effectively, using lower concentrations of foaming agent, from peroxide-bleached water than from unbleached water. The results show that pH has a major impact on various pulping and papermaking processes. It determines the anionic charge of the colloidal pitch and the solubility of certain pitch components. Because of this, the pH influences the effectiveness of pitch retention and removal of pitch. The results indicate that pitch problems could be diminished by acknowledging the importance of pH in various papermaking processes.

Stability of Natural Colorants of Plant Origin

In recent years, there have been studies that show a correlation between the hyperactivity of children and use of artificial food additives, including colorants. This has, in part, led to preference of natural products over products with artificial additives. Consumers have also become more aware of health issues. Natural food colorants have many bioactive functions, mainly vitamin A activity of carotenoids and antioxidativity, and therefore they could be more easily accepted by the consumers. However, natural colorant compounds are usually unstable, which restricts their usage. Microencapsulation could be one way to enhance the stability of natural colorant compounds and thus enable better usage for them as food colorants. Microencapsulation is a term used for processes in which the active material is totally enveloped in a coating or capsule, and thus it is separated and protected from the surrounding environment. In addition to protection by the capsule, microencapsulation can also be used to modify solubility and other properties of the encapsulated material, for example, to incorporate fat-soluble compounds into aqueous matrices. The aim of this thesis work was to study the stability of two natural pigments, lutein (carotenoid) and betanin (betalain), and to determine possible ways to enhance their stability with different microencapsulation techniques. Another aim was the extraction of pigments without the use of organic solvents and the development of previously used extraction methods. Stability of pigments in microencapsulated pigment preparations and model foods containing these were studied by measuring the pigment content after storage in different conditions. Preliminary studies on the bioavailability of microencapsulated pigments and sensory evaluation for consumer acceptance of model foods containing microencapsulated pigments were also carried out. Enzyme-assisted oil extraction was used to extract lutein from marigold (Tagetes erecta) flower without organic solvents, and the yield was comparable to solvent extraction of lutein from the same flowers. The effects of temperature, extraction time, and beet:water ratio on extraction efficiency of betanin from red beet (Beta vulgaris) were studied and the optimal conditions for maximum yield and maximum betanin concentration were determined. In both cases, extraction at 40 °C was better than extraction at 80 °C and the extraction for five minutes was as efficient as 15 or 30 minutes. For maximum betanin yield, the beet:water ratio of 1:2 was better, with possibly repeated extraction, but for maximum betanin concentration, a ratio of 1:1 was better. Lutein was incorporated into oil-in-water (o/w) emulsions with a polar oil fraction from oat (Avena sativa) as an emulsifier and mixtures of guar gum and xanthan gum or locust bean gum and xanthan gum as stabilizers to retard creaming. The stability of lutein in these emulsions was quite good, with 77 to 91 percent of lutein being left after storage in the dark at 20 to 22°C for 10 weeks whereas in spray dried emulsions the retention of lutein was 67 to 75 percent. The retention of lutein in oil was also good at 85 percent. Betanin was incorporated into the inner w1 water phase of a water1-in-oil-inwater2 (w1/o/w2) double emulsion with primary w1/o emulsion droplet size of 0.34 μm and secondary w1/o/w2 emulsion droplet size of 5.5 μm and encapsulation efficiency of betanin of 89 percent. In vitro intestinal lipid digestion was performed on the double emulsion, and during the first two hours, coalescence of the inner water phase droplets was observed, and the sizes of the double emulsion droplets increased quickly because of aggregation. This period also corresponded to gradual release of betanin, with a final release of 35 percent. The double emulsion structure was retained throughout the three-hour experiment. Betanin was also spray dried and incorporated into model juices with different pH and dry matter content. Model juices were stored in the dark at -20, 4, 20–24 or 60 °C (accelerated test) for several months. Betanin degraded quite rapidly in all of the samples and higher temperature and a lower pH accelerated degradation. Stability of betanin was much better in the spray dried powder, with practically no degradation during six months of storage in the dark at 20 to 24 °C and good stability also for six months in the dark at 60 °C with 60 percent retention. Consumer acceptance of model juices colored with spray dried betanin was compared with similar model juices colored with anthocyanins or beet extract. Consumers preferred beet extract and anthocyanin colored model juices over juices colored with spray dried betanin. However, spray dried betanin did not impart any off-odors or off-flavors into the model juices contrary to the beet extract. In conclusion, this thesis describes novel solvent-free extraction and encapsulation processes for lutein and betanin from plant sources. Lutein showed good stability in oil and in o/w emulsions, but slightly inferior in spray dried emulsions. In vitro intestinal lipid digestion showed a good stability of w1/o/w2 double emulsion and quite high retention of betanin during digestion. Consumer acceptance of model juices colored with spray dried betanin was not as good as model juices colored with anthocyanins, but addition of betanin to real berry juice could produce better results with mixture of added betanin and natural berry anthocyanins could produce a more acceptable color. Overall, further studies are needed to obtain natural colorants with good stability for the use in food products.

JNK regulates dendrite and spine architecture in the central nervous system influencing spatial learning and motor tasks

JNK1 is a MAP-kinase that has proven a significant player in the central nervous system. It regulates brain development and the maintenance of dendrites and axons. Several novel phosphorylation targets of JNK1 were identified in a screen performed in the Coffey lab. These proteins were mainly involved in the regulation of neuronal cytoskeleton, influencing the dynamics and stability of microtubules and actin. These structural proteins form the dynamic backbone for the elaborate architecture of the dendritic tree of a neuron. The initiation and branching of the dendrites requires a dynamic interplay between the cytoskeletal building blocks. Both microtubules and actin are decorated by associated proteins which regulate their dynamics. The dendrite-specific, high molecular weight microtubule associated protein 2 (MAP2) is an abundant protein in the brain, the binding of which stabilizes microtubules and influences their bundling. Its expression in non-neuronal cells induces the formation of neurite-like processes from the cell body, and its function is highly regulated by phosphorylation. JNK1 was shown to phosphorylate the proline-rich domain of MAP2 in vivo in a previous study performed in the group. Here we verify three threonine residues (T1619, T1622 and T1625) as JNK1 targets, the phosphorylation of which increases the binding of MAP2 to microtubules. This binding stabilizes the microtubules and increases process formation in non-neuronal cells. Phosphorylation-site mutants were engineered in the lab. The non-phosphorylatable mutant of MAP2 (MAP2- T1619A, T1622A, T1625A) in these residues fails to bind microtubules, while the pseudo-phosphorylated form, MAP2- T1619D, T1622D, Thr1625D, efficiently binds and induces process formation even without the presence of active JNK1. Ectopic expression of the MAP2- T1619D, T1622D, Thr1625D in vivo in mouse brain led to a striking increase in the branching of cortical layer 2/3 (L2/3) pyramidal neurons, compared to MAP2-WT. The dendritic complexity defines the receptive field of a neuron and dictates the output to the postsynaptic cells. Previous studies in the group indicated altered dendrite architecture of the pyramidal neurons in the Jnk1-/- mouse motor cortex. Here, we used Lucifer Yellow loading and Sholl analysis of neurons in order to study the dendritic branching in more detail. We report a striking, opposing effect in the absence of Jnk1 in the cortical layers 2/3 and 5 of the primary motor cortex. The basal dendrites of pyramidal neurons close to the pial surface at L2/3 show a reduced complexity. In contrast, the L5 neurons, which receive massive input from the L2/3 neurons, show greatly increased branching. Another novel substrate identified for JNK1 was MARCKSL1, a protein that regulates actin dynamics. It is highly expressed in neurons, but also in various cancer tissues. Three phosphorylation target residues for JNK1 were identified, and it was demonstrated that their phosphorylation reduces actin turnover and retards migration of these cells. Actin is the main cytoskeletal component in dendritic spines, the site of most excitatory synapses in pyramidal neurons. The density and gross morphology of the Lucifer Yellow filled dendrites were characterized and we show reduced density and altered morphology of spines in the motor cortex and in the hippocampal area CA3. The dynamic dendritic spines are widely considered to function as the cellular correlate during learning. We used a Morris water maze to test spatial memory. Here, the wild-type mice outperformed the knock-out mice during the acquisition phase of the experiment indicating impaired special memory. The L5 pyramidal neurons of the motor cortex project to the spinal cord and regulate the movement of distinct muscle groups. Thus the altered dendrite morphology in the motor cortex was expected to have an effect on the input-output balance in the signaling from the cortex to the lower motor circuits. A battery of behavioral tests were conducted for the wild-type and Jnk1-/- mice, and the knock-outs performed poorly compared to wild-type mice in tests assessing balance and fine motor movements. This study expands our knowledge of JNK1 as an important regulator of the dendritic fields of neurons and their manifestations in behavior.

Analytic evaluation of three-phase short circuit demagnetization and hysteresis loss risk in rotor-surface-magnet Permanent-Magnet Synchronous Machines

Permanent magnet synchronous machines (PMSM) have become widely used in applications because of high efficiency compared to synchronous machines with exciting winding or to induction motors. This feature of PMSM is achieved through the using the permanent magnets (PM) as the main excitation source. The magnetic properties of the PM have significant influence on all the PMSM characteristics. Recent observations of the PM material properties when used in rotating machines revealed that in all PMSMs the magnets do not necessarily operate in the second quadrant of the demagnetization curve which makes the magnets prone to hysteresis losses. Moreover, still no good analytical approach has not been derived for the magnetic flux density distribution along the PM during the different short circuits faults. The main task of this thesis is to derive simple analytical tool which can predict magnetic flux density distribution along the rotor-surface mounted PM in two cases: during normal operating mode and in the worst moment of time from the PM’s point of view of the three phase symmetrical short circuit. The surface mounted PMSMs were selected because of their prevalence and relatively simple construction. The proposed model is based on the combination of two theories: the theory of the magnetic circuit and space vector theory. The comparison of the results in case of the normal operating mode obtained from finite element software with the results calculated with the proposed model shows good accuracy of model in the parts of the PM which are most of all prone to hysteresis losses. The comparison of the results for three phase symmetrical short circuit revealed significant inaccuracy of the proposed model compared with results from finite element software. The analysis of the inaccuracy reasons was provided. The impact on the model of the Carter factor theory and assumption that air have permeability of the PM were analyzed. The propositions for the further model development are presented.

THE COSTS OF RAISING EQUITY RATIO FOR BANKS Evidence from publicly listed banks operating in Finland

The solvency rate of banks differs from the other corporations. The equity rate of a bank is lower than it is in corporations of other field of business. However, functional banking industry has huge impact on the whole society. The equity rate of a bank needs to be higher because that makes the banking industry more stable as the probability of the banks going under will decrease. If a bank goes belly up, the government will be compensating the deposits since it has granted the bank’s depositors a deposit insurance. This means that the payment comes from the tax payers in the last resort. Economic conversation has long concentrated on the costs of raising equity ratio. It has been a common belief that raising equity ratio also increases the banks’ funding costs in the same phase and these costs will be redistributed to the banks customers as higher service charges. Regardless of the common belief, the actual reaction of the funding costs to the higher equity ratio has been studied only a little in Europe and no study has been constructed in Finland. Before it can be calculated whether the higher stability of the banking industry that is caused by the raise in equity levels compensates the extra costs in funding costs, it must be calculated how much the actual increase in the funding costs is. Currently the banking industry is controlled by complex and heavy regulation. To maintain such a complex system inflicts major costs in itself. This research leans on the Modigliani and Miller theory, which shows that the finance structure of a firm is irrelevant to their funding costs. In addition, this research follows the calculations of Miller, Yang ja Marcheggianon (2012) and Vale (2011) where they calculate the funding costs after the doubling of specific banks’ equity ratios. The Finnish banks studied in this research are Nordea and Danske Bank because they are the two largest banks operating in Finland and they both also have the right company form to able the calculations. To calculate the costs of halving their leverages this study used the Capital Asset Pricing Model. The halving of the leverage of Danske Bank raised its funding costs for 16—257 basis points depending on the method of assessment. For Nordea the increase in funding costs was 11—186 basis points when its leverage was halved. On the behalf of the results found in this study it can be said that the doubling of an equity ratio does not increase the funding costs of a bank one by one. Actually the increase is quite modest. More solvent banks would increase the stability of the banking industry enormously while the increase in funding costs is low. If the costs of bank regulation exceeds the increase in funding costs after the higher equity ratio, it can be thought that this is the better way of stabilizing the banking industry rather than heavy regulation.

THE COSTS OF RAISING EQUITY RATIO FOR BANKS Evidence from publicly listed banks operating in Finland

The solvency rate of banks differs from the other corporations. The equity rate of a bank is lower than it is in corporations of other field of business. However, functional banking industry has huge impact on the whole society. The equity rate of a bank needs to be higher because that makes the banking industry more stable as the probability of the banks going under will decrease. If a bank goes belly up, the government will be compensating the deposits since it has granted the bank’s depositors a deposit insurance. This means that the payment comes from the tax payers in the last resort. Economic conversation has long concentrated on the costs of raising equity ratio. It has been a common belief that raising equity ratio also increases the banks’ funding costs in the same phase and these costs will be redistributed to the banks customers as higher service charges. Regardless of the common belief, the actual reaction of the funding costs to the higher equity ratio has been studied only a little in Europe and no study has been constructed in Finland. Before it can be calculated whether the higher stability of the banking industry that is caused by the raise in equity levels compensates the extra costs in funding costs, it must be calculated how much the actual increase in the funding costs is. Currently the banking industry is controlled by complex and heavy regulation. To maintain such a complex system inflicts major costs in itself. This research leans on the Modigliani and Miller theory, which shows that the finance structure of a firm is irrelevant to their funding costs. In addition, this research follows the calculations of Miller, Yang ja Marcheggianon (2012) and Vale (2011) where they calculate the funding costs after the doubling of specific banks’ equity ratios. The Finnish banks studied in this research are Nordea and Danske Bank because they are the two largest banks operating in Finland and they both also have the right company form to able the calculations. To calculate the costs of halving their leverages this study used the Capital Asset Pricing Model. The halving of the leverage of Danske Bank raised its funding costs for 16—257 basis points depending on the method of assessment. For Nordea the increase in funding costs was 11—186 basis points when its leverage was halved. On the behalf of the results found in this study it can be said that the doubling of an equity ratio does not increase the funding costs of a bank one by one. Actually the increase is quite modest. More solvent banks would increase the stability of the banking industry enormously while the increase in funding costs is low. If the costs of bank regulation exceeds the increase in funding costs after the higher equity ratio, it can be thought that this is the better way of stabilizing the banking industry rather than heavy regulation.