- On balance, the risk of financial instability appears to have increased since the previous report, says Governor Svein Gjedrem, primarily as a result of greater uncertainty as to international economic developments. We will focus on four factors in particular:

• Uncertainty surrounding further developments in the US mortgage market and the turbulence in international money and credit markets has increased. This may after a period result in lower economic growth and could impact on Norwegian banks through higher losses and lower income. 
• The turmoil in money and credit markets has also resulted in higher liquidity risk for banks. Adverse developments in securities markets have led to capital losses on Norwegian banks’ bond holdings. The turmoil is not over.
• The household debt burden in Norway is historically high and still rising. The saving ratio has fallen considerably over the past year and is now unusually low. The risk of a turnaround in saving has increased. 
• Developments in the commercial property market reflect considerable optimism. Prices have risen sharply in the past few years. There is a risk that some participants’ expectations will not be met. A large share of banks’ loans consists of loans to property companies.

The themes presented in more detail in this issue of the Financial Stability report include the US mortgage market, problems in interbank markets and stress testing of banks’ results.