Countercyclical buffer unchanged

The Ministry of Finance has today decided to keep the countercyclical capital buffer requirement for banks unchanged, in line with the quarterly advice from Norges Bank.

The buffer requirement currently stands at 2 percent, as decided by the Ministry in December 2016.

The purpose of the countercyclical capital buffer requirement is to strengthen banks’ solvency and resilience to absorb loan losses, in order to mitigate the risk that banks will amplify a downturn by reducing their lending. Banks should hold a countercyclical capital buffer when financial imbalances are building up or have been built up.

Each quarter, Norges Bank shall provide advice to the Ministry on the level of the countercyclical capital buffer requirement. In a letter of 14 March 2018, Norges Bank recommended keeping the level unchanged at 2 percent. Norges Bank stated that financial imbalances have built up, owing to a persistent rise in household debt ratios and high property price inflation over a long period. Norges Bank also said that the housing market correction has reduced the risk of an abrupt and more pronounced decline further out, and that lower house price inflation over time will curb household debt accumulation. Norges Bank’s assessment is published in its Monetary Policy Report with financial stability assessment 4/17. In a separate letter of 14 March to the Ministry, Finanstilsynet said that it concurs with Norges Bank’s advice.

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