Press release | Date: 20/01/2021 | Ministry of Finance| No: 2/2021
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There is still considerable uncertainty about the economic outlook in Norway and internationally. Banks should therefore, in line with recommendations from the European Systemic Risk Board (ESRB), apply caution in distributing profits until 30 September.
"We are still facing an unusual level of uncertainty, and banks may over time incur significant credit losses. Provided that they apply great caution and do not exceed a certain threshold, well-capitalized banks should nevertheless be able to distribute some of their profits in the coming months," says minister of finance Jan Tore Sanner.
The Ministry of Finance expects that Norwegian banks which, after a careful assessment and based on the ESRB's recommendation, find grounds for distributing profits, will keep total distributions within a maximum of 30 per cent of cumulative annual profits for the years 2019 and 2020, until 30 September 2021. This is conveyed in a letter that the Ministry today has sent to Finanstilsynet, in response to Finanstilsynet's proposal for such a threshold of 25 per cent. The Ministry emphasizes in the letter that the 30 per cent threshold should only apply to the distribution of profits for 2019 and 2020, and that it should not prevent banks from using the entire threshold on distribution of 2019 profits, if relevant. Banks should in any case not distribute 2019 profits until the annual result for 2020 is determined.
"I agree with Finanstilsynet that we should set a general threshold that well-capitalized banks may base their assessments on in the months ahead. However, as Norwegian banks are profitable and well-capitalized, and because much of Norwegian saving banks' distributions are donations to charitable causes that may be in great need of funds, I believe that the threshold should be set at a slightly more generous level than the Finanstilsynet proposal," says the minister of finance.