Improvements in the banking sector, but more work ahead
«Norwegian banks are better equipped to withstand financial market stress or an economic downturn than prior to the financial crisis. This is a positive development, but there is still some way to go», says Governor Øystein Olsen.
The analyses in Norges Bank's Financial Stability Report for 2013 show that banks have reduced their liquidity risk in recent years. At the same time, the maturity of funding has increased. A number of Norwegian banks still have some way to go in order to meet future international liquidity and funding requirements. Banks should also disclose more information about their liquidity and funding structure.
"Norwegian banks' capital adequacy ratios have increased, but banks must strengthen their equity capital further if they are to be in a position to withstand large losses without serious consequences for the Norwegian economy", says Governor Olsen.
The new international crisis resolution framework is an important step in the work on improving banking regulation. The work must be followed up in Norway and a crisis resolution authority should be designated.
"An important principle in the new framework is that banks' creditors and not only their owners must be prepared to take losses in the event of a crisis", says Governor Olsen.
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