Consultation on the collateral framework for loans from Norges Bank
Norges Bank has today circulated for comment amendments to the Lending Regulation and the guidelines for pledging securities and fund units as collateral for loans from Norges Bank. The rules are intended to ensure that banks have adequate access to the borrowing facilities while limiting Norges Bank’s exposure to risk.
When Norges Bank calculates banks’ access to loans from the central bank, a haircut is applied to the market value of securities pledged as collateral. This mitigates the risk that the collateral’s recoverable value will be lower than the amount lent. Substantial price volatility in recent years has shown that the current haircut rates are too low. Norges Bank now proposes higher haircut rates. The proposal entails limited changes in banks’ access to loans. Banks were notified in 2010 that Norges Bank would increase haircut rates.
Moreover, Norges Bank proposes an additional provision to the Lending Regulation that clarifies that Norges Bank may change collateral requirements for loans that have not yet matured.
Norges Bank requests comments from the Norwegian Financial Services Association and Finanstilsynet (Financial Supervisory Authority of Norway) by 2 December 2011.
Consultation: Amendments to the rules on collateral for loans from Norges Bank, Norges Bank’s letter to Finanstilsynet of 21 October 2011.The consultation letter has also been sent to the Norwegian Financial Services Association. The Ministry of Finance has received a copy of the letter for information.
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