Norwegian banks have posted solid earnings, but are being affected by the turbulence
”The turbulence in international financial markets has intensified. Norwegian banks have posted solid earnings, but they are also being affected by the turbulence”, says Governor Øystein Olsen in connection with the publication of Norges Bank’s November Financial Stability report (2/11).
“Through autumn, wholesale funding costs have increased and accessibility has become more limited. It would be to banks’ own advantage to ensure that their liquidity situation is sufficiently robust to withstand financial market turbulence. Banks should therefore make use of opportunities to raise more long-term market funding where possible”, says Governor Olsen.
Owing to high household debt and rising house prices, there is a risk of instability in the Norwegian economy further ahead.
Banks’ capital requirements are being raised internationally, and stricter requirements will be imposed on bank funding structure. Criteria and separate rules for systemically important banks are being established. The European supervisory authorities’ provisional requirement of a 9% Core Tier 1 capital ratio for the largest banks in the EU may lead to the establishment of higher minimum capital adequacy requirements in the market.
“The largest Norwegian banks should therefore strengthen their Core Tier 1 capital ratios. In order to ensure relatively stable credit standards, it would be preferable if this was mainly achieved through earnings retention”, says Governor Olsen.
Press telephone: +47 21 49 09 30