A countercyclical capital buffer will give banks more to draw on
"The risk of financial imbalances suggests that banks should increase their capital. A countercyclical capital buffer will give banks more capital to draw on in an economic downturn," says Øystein Olsen, Governor of Norges Bank.
Credit and asset prices have been rising for several years, and total debt is now at a high level. House prices and household debt are still rising faster than income, heightening the risk that financial imbalances may trigger or amplify an economic downturn.
"The size of the countercyclical capital buffer and how quickly it should be increased must be viewed in the light of other requirements applying to banks. Norges Bank will issue concrete advice on the level and timing for introducing the buffer when new capital requirements are in place later this year," says Governor Olsen.
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