In Financial Stability Report - 2023 H1, Norges Bank discusses the key vulnerabilities and risk factors in the Norwegian financial system.   

“The Norwegian financial system is characterised by profitable, liquid and solid banks. Growth prospects have improved somewhat over the past six months, but future developments in both the markets and the economy are uncertain. Overall, the financial stability outlook has not changed substantially since the previous Report”, says Deputy Governor Pål Longva.   

Problems at some US and Swiss banks have led to large movements in financial markets. There has been little impact on Norwegian banks so far, but the turbulence may intensify and spread. Bank funding may become more costly, and borrowing may become more difficult for Norwegian households and firms.

The economy is marked by high inflation, higher interest rates and geopolitical tensions. How households and firms will adjust to this situation is uncertain. 

High indebtedness makes households vulnerable to loss of income, higher interest rates or a fall in house prices. Many households have experienced a tightening of their finances over the past year, but low unemployment and accumulated savings better equip households to meet higher expenses.  

A large share of bank loans are secured on commercial real estate (CRE). Funding costs for this sector have risen sharply, and the outlook for commercial property prices is more uncertain than usual. Banks’ exposures to CRE firms at the greatest risk of losses is moderate, but if property prices and rental income fall sharply, bank losses may be considerable.

Solid profitability in the banking sector is the first line of defence for absorbing losses. In the event of a sharp downturn, credit losses may become so large that banks drawn down the capital buffers that they have built up. Banks are well-positioned to deal with higher losses while maintaining lending. The countercyclical capital buffer rate of 2.5 percent makes a contribution in this regard.