Historical archive

Countercyclical buffer unchanged

Historical archive

Published under: Solberg's Government

Publisher Ministry of Finance

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 19 September 2018, Norges Bank recommended keeping the level unchanged at 2 percent. Norges Bank said that household debt ratios continue to rise further, but debt growth has slowed somewhat over the past year. Looking ahead, gradually rising interest rates, housing completions and low population growth are expected to restrain house price inflation. Norges Bank also said that the pronounced rise in commercial real estate prices in recent years has increased the risk of a marked decline in prices further out. Enterprises have ample access to credit, both from banks and in the bond market. Norges Bank’s assessment is published in its Monetary Policy Report with financial stability assessment 3/18.

In a separate letter of 19 September to the Ministry, Finanstilsynet said that it concurs with Norges Bank’s advice.