Household debt in Norway is at a historically high level. The vulnerabilities that built up during the lead-up to the financial crisis are still present. This could amplify a future downturn in the Norwegian economy. The analyses in the 2014 Financial Stability Report show that increased capital buffers will improve banks' capacity to withstand a period of large loan losses without a substantial reduction in bank lending.

Liquidity buffers reduce bank vulnerability to market turbulence. A new liquidity coverage standard, the Liquidity Coverage Ratio (LCR), will be phased in across the EU from 2015. The requirement will also be made applicable to Norwegian banks. There is a limited supply of highly liquid securities in NOK. Bank liquidity regulation must therefore be adapted to Norwegian conditions.

"It would not be appropriate for Norges Bank to set up a new central bank facility to enable banks to meet the LCR requirement. Instead, banks can hold more liquidity in foreign currency," says Deputy Governor Nicolaisen.