Countercyclical buffer unchanged

The buffer requirement currently stands at 2 percent, and will be increased to 2.5 percent from 31 December 2019, as decided by the Ministry in December 2018. 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 20 March 2019, Norges Bank recommended keeping the level unchanged, and said that its assessment of financial imbalances has not changed substantially since the past quarter. Norges Bank also said that household debt is still growing faster than income, although the pace of growth has slowed. Corporate credit growth remains elevated and is higher than the rate of growth in the economy. Housing market activity is high, but house price inflation is moderate. Following several years of rapidly rising commercial real estate prices, the rise in estimated selling prices has edged down in the past quarter. In the period ahead, Norges Bank expects that gradually rising interest rates and moderate house price inflation will dampen household debt growth, and there are signs that the rapid rise in commercial real estate prices may slow. Norges Bank’s assessment is published in its Monetary Policy Report with financial stability assessment 1/19.

In a separate letter of 20 March 2019 to the Ministry, Finanstilsynet said that it concurs with Norges Bank’s advice.

More:

• Norges Bank’s advice (pdf)
• Monetary Policy Report with financial stability assessment 1/19 (pdf)