Tightening of credit conditions must not be taken too far
Norwegian banks have felt the impact of the financial crisis to a greater extent than we envisaged a few months ago. A number of financial institutions abroad have failed as a result of large losses and liquidity shortages. Funding has also become more expensive for Norwegian banks. Redistribution of loans in the banking system has been impaired, and liquidity risk has increased. The Norwegian authorities have therefore implemented a number of measures to make it easier for banks to obtain funding.
- It is important that Norwegian banks now avoid excessive tightening of credit conditions, as this may amplify the downturn in the Norwegian economy. So far, Norwegian banks have fared better than banks in many other countries. However, the outlook for financial stability has deteriorated, and uncertainty is unusually high, says Governor Svein Gjedrem.
The report includes boxes on the following themes: international financial crisis measures, banks’ capital requirements and stress testing of banks’ losses and results.
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