Norges Bank

Financial Stability Report

Financial Stability Report 2019: vulnerabilities and risks

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Financial Stability Report 2019 in a nutshell

The financial system must be able to absorb serious shocks

Banks are essential to the economy and perform important tasks for society. Financial stability implies that banks and the rest of the financial system are able to perform these tasks adequately, even in the event of serious downturns and economic crises.

High debt levels and high property prices are the primary vulnerabilities

High household debt levels and high property prices are the key financial system vulnerabilities in Norway. In Norges Bank’s assessment, these vulnerabilities have changed little over the past year, although debt growth and property price inflation have slowed.

Risk of shocks from abroad

Global uncertainties, especially related to trade tensions and the UK’s relationship with the EU, pose risks to financial stability in Norway. Turbulence abroad can spread to Norway and be amplified by vulnerabilities in the domestic financial system.

Measures by the authorities are mitigating household vulnerabilities

Requirements for banks’ credit standards limit excessive borrowing by the most vulnerable households. Norges Bank is of the view that these requirements have functioned as intended and supports continuation of the regulation on new residential mortgage loans.

Norwegian banks are resilient

Norwegian banks are currently profitable, solvent and have ample access to funding. The stress test in this year’s Report shows that banks may still amplify a downturn by tightening lending. To counter this, the authorities can lower the countercyclical capital buffer and allow banks to draw on the other buffers.

The financial system is also affected by climate risks

Climate change and measures to mitigate climate change may result in losses and funding problems for banks. This entails risks to financial stability, which is why it is important for the financial sector to include climate risks in overall risk assessments.

The annual Financial Stability Report communicates Norges Bank assessments of the financial stability outlook. The Report discusses cyclical and structural developments at banks and other financial institutions and in financial markets and the Norwegian economy that are of importance for vulnerabilities and risks in the financial system. The Report also points out measures that can contribute to financial stability.

ISSN 1502-2749 (print). ISSN 1503-8858 (online).

Coverimage of the publication Financial Stability Report 2019: vulnerabilities and risks
Published 5 November 2019 10:00
Published 5 November 2019 10:00