Countercyclical buffer unchanged
Published under: Solberg's Government
Publisher: Ministry of Finance
Press release | No: 47/2017 | Date: 14/12/2017
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 is 2 percent from 31 December 2017, as decided by the Ministry last December. The buffer requirement currently stands at 1.5 percent.
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 13 December 2017, Norges Bank recommended keeping the level unchanged at 2 percent, effective from 31 December 2017. 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 referred to the decline in house prices in 2017, but stated that it will take time for household sector vulnerabilities to recede. Norges Bank’s assessment is published in its Monetary Policy Report with financial stability assessment 4/17. In a separate letter of 13 December to the Ministry, Finanstilsynet said that it concurs with Norges Bank’s advice.