Minutes of the Executive Board meeting of 14 March 2018
Øystein Olsen, Jon Nicolaisen, Egil Matsen, Kjetil Storesletten, Karen Helene Ulltveit-Moe, Kathryn M. Baker, Steinar Juel and Kristine Ryssdal
Arne Hyttnes and Kristine Landmark
Mona H. Sørensen (items -and Nina Larsson Midthjell (items 63-65)
Ida Wolden Bache (56-59), Per Espen Lilleås (56-59), Ingrid Solberg (56-59), Øistein Røisland (56-59), Torbjørn Hægeland (56-60), Henrik Borchgrevink (56-60), Ylva Søvik (56-58), Kjersti-Gro Lindquist (60), Olav Bø (56-59, 61, 63-64), Arne Kloster (56-58), Anders Svor (61), Roger Rake (63-64), Andreas Andersen (56-65), Ingunn Valvatne (56-65), Bjarne Gulbrandsen (56-65)
There were no comments on the meeting notice and agenda.
Item 56/2018 Advice to the Ministry of Finance on the countercyclical capital buffer 2018 Q1
- Advice on the countercyclical capital buffer 2018 Q1, STRICTLY CONFIDENTIAL memo from Financial Stability of 13 March 2018
- Presentation from Financial Stability
Jon Nicolaisen provided an update on the basis for the recommendation to the Ministry of Finance on the countercyclical capital buffer. The basis for the recommendation is to be presented in Monetary Policy Report 1/18 (cf. item 57/2018).
In its discussion, the Executive Board gave weight to the build-up of financial imbalances owing to a persistent rise in household debt ratios and high property price inflation over a long period. The housing market correction has reduced the risk of an abrupt and more pronounced decline further out. At the same time, growth in household debt remains high. Over time, lower house price inflation will curb household debt accumulation, and thereby help to reduce the vulnerability of the household sector. Enterprises have ample access to credit and bank losses are low and profitability is solid.
The Executive Board has decided to advise the Ministry of Finance to keep the buffer rate unchanged at 2%. The decision was unanimous.
Item 57/2018 Monetary Policy Report 1/18 with financial stability assessment
- STRICTLY CONFIDENTIAL memo from Monetary Policy of 13 March 2018
Jon Nicolaisen gave a briefing on some adjustments made to the report after the Executive Board's meeting on 7 March 2018.
The Executive Board discussed the economic outlook, the monetary policy stance and the need for a countercyclical capital buffer for banks. The Executive board approved the proposed "Executive Board's Assessment" (cf. the interest rate decision under item 58/2018).
Item 58/2018 The current monetary policy outlook – interest rate decision
- Norges Bank's key policy rate – meeting of 14. March 2018, STRICTLY CONFIDENTIAL memo from Monetary Policy of 13 March 2018
- Report from the meeting between the Ministry of Finance and Norges Bank on Tuesday, 23 January 2018.
- Presentation from Monetary Policy
Jon Nicolaisen presented a review of economic developments since the previous Executive Board meeting with a particular emphasis on developments in money, foreign exchange and capital markets.
In its discussion of monetary policy, the Executive board gave weight to the sustained upturn in both the global and Norwegian economy. Economic growth appears to be somewhat stronger than expected, and the output gap for Norway is closing. Underlying inflation is low, but rising capacity utilisation will probably push up price and wage inflation further out.
Monetary policy is expansionary. The outlook for the Norwegian economy suggests that it will soon be appropriate to raise the key policy rate. The uncertainty surrounding the effects of a higher interest rate suggests a cautious approach. Overall, the changes in the outlook and the balance of risks imply a somewhat earlier interest rate increase than in the December Report.
The Executive Board decided to keep the key policy rate unchanged at 0.5%. The Executive Board's current assessment of the outlook and balance of risks suggests that the key policy rate will most likely be raised after summer 2018. The decision was unanimous.
Item 59/2018 Norges Bank Watch 2018
- Memo from Monetary Policy of 9 March 2018
Ida Wolden Bache presented the matter for discussion.
The Executive Board had an exchange of views and took note of the Norges Bank Watch report and its suggestions.
Item 60/2018 Consultation on amendments to and retention of the regulation on new residential mortgage loans
- Memo from Financial Stability of 8 March 2018
In the consultation letter of 28 February 2018, the Ministry of Finance requested Norges Bank's comments on the proposal by Finanstilsynet (Financial Supervisory Authority of Norway) to retain the regulation on bank credit standards with some amendments.
Torbjørn Hægeland presented the draft consultation response. He also referred to Norges Bank's letter of 9 February 2018 to Finanstilsynet containing the Bank's assessment of the regulation on new residential mortgage loans.
The Executive Board discussed the matter and authorised the Governor to finalise the consultation response to the Ministry of Finance in line with the discussion document and the discussions at the meeting.
Item 61/2018 Government debt management 2017 – annual report
- Memo from Markets and ICT of 7 March 2018
Since 1 January 2015, Norges Bank has been responsible for the management of government debt within the framework of a mandate laid down by the Ministry of Finance. Under the mandate, the Bank is to prepare an official annual report on its management of government debt.
Olav Bø and Anders Svor presented the report and key elements of its preparation in 2017
The Executive Board discussed the matter and took note of the annual report on government debt management in 2017. The report is to be submitted to the Ministry of Finance for information prior to publication.
Item 62/2018 Briefing on relevant matters for Norges Bank Central Banking Operations
The Governor gave a briefing on relevant matters for Norges Bank Central Banking Operations.
Item 63/2018 Minutes of the Executive Board meeting of 7 March 2018
- Draft minutes
The Executive Board approved the minutes of its meeting of 7 March 2018.
Item 64/2018 The Executive Board's principles for bonus arrangements in Central Banking Operations – updates
- Memo from Markets and ICT of 9 March 2018
- Memo from the Remuneration Committee of 12 March 2018
Olav Bø presented proposed updates to the principles for bonus arrangements in Central Banking Operations.
Arne Hyttnes reported on the Remuneration Committee's discussions and the issues of particular concern to the Committee. The Committee recommended that the Executive Board follows management's guidance.
The Executive board had an exchange of views and decided that:
- A clawback provision is to be included in the principles.
- A provision is to be included in the principles requiring the review of remuneration system practices at least once a year, and the preparation of a written report for review by Internal Audit and for consideration by the Remuneration Committee and the Executive Board.
Item 65/2018 Any other business
The Executive Board discussed leader groups' salaries and will revisit the matter in connection with a review of wage norms.