Advice on the countercyclical capital buffer 2020 Q2
Norges Bank’s Monetary Policy and Financial Stability Committee has advised the Ministry of Finance to keep the buffer rate unchanged at 1.0 percent.
On the advice of Norges Bank, the Ministry of Finance reduced the countercyclical capital buffer rate from 2.5 percent to 1.0 percent in March. A lower buffer rate reduces the risk that tighter lending standards could amplify an economic downturn.
The Covid-19 pandemic has led to a sharp downturn in the Norwegian economy. Increased credit losses have reduced banks’ profitability, but Norwegian banks are solid and can absorb losses. Both households and businesses appear to have ample access to credit.
“The Monetary Policy and Financial Stability Committee has advised the Ministry of Finance to keep the countercyclical capital buffer at 1.0 percent”, says Governor Øystein Olsen.
The Ministry of Finance decided today to follow Norges Bank’s advice.
- Ministry of Finance press release
- Norges Bank’s advice is issued in the letter: Advice on the countercyclical capital buffer 2020 Q2
- The decision basis for Norges Bank’s advice is presented in Section 4 of the June 2020 Monetary Policy Report.
- Norges Bank’s framework and indicators for advice on the countercyclical capital buffer
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