Advice on the countercyclical capital buffer
"Indicators of financial imbalances are still at high levels. More capital will increase banks' resilience to future loan losses," says Governor Øystein Olsen.
The analyses in Monetary Policy Report 1/14 form the decision basis for the quarterly advice that Norges Bank submits to the Ministry of Finance on the level of the countercyclical capital buffer.
Recent developments suggest that financial imbalances are not building up further. Low house price inflation may eventually slow the growth of household debt. But the ratio of total credit to GDP is at a historically high level, and household debt has risen faster than disposable income.
"Banks are well on the way to meeting new, higher capital requirements, but will have to raise capital ratios further in the years ahead," says Governor Øystein Olsen.
Norges Bank has submitted its quarterly advice on the countercyclical buffer requirement for banks to the Ministry of Finance. The advice will be published when the Ministry has issued its decision. In December 2013, Norges Bank advised that the buffer rate should be set at 1 percent as from 1 January 2015. The Ministry set the buffer rate at 1 percent as from 30 June 2015.
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