Background 

Owing to vulnerabilities in the financial system, negative shocks may have serious consequences for the financial system and the Norwegian economy. The SyRB is designed to ensure that banks hold sufficient capital to withstand future downturns. The SyRB should reflect the assessment of structural vulnerabilities in the financial system, ie persistent features of the financial system that change little or rarely from year to year.

The Ministry of Finance sets the SyRB requirement. Norges Bank is responsible for preparing a decision basis and advising the Ministry of Finance on the level of the SyRB at least every other year.

The SyRB requirement was introduced in Norway in 2013 and was increased to 4.5% in 2020. In 2022 and 2024, the Ministry of Finance decided to keep the requirement unchanged at 4.5%, in line with Norges Bank’s advice.

The Norwegian SyRB has a materiality threshold for reciprocity for foreign banks of NOK 5 billion in risk‑weighted exposures. The requirement has been reciprocated by all jurisdictions with banks whose exposures exceed this threshold.

The capital adequacy framework has become more extensive and complex over the past 15 years. The European Commission has announced that it will propose changes to bank regulation in 2026. One aim is to simplify the regulatory framework for capital adequacy and reporting. There are good reasons to explore opportunities to simplify complex and comprehensive regulations, but this should not be at the expense of financial system resilience. Under the current capital requirements, Norwegian households and firms have had ample access to credit, and the banking services markets overall appear to function well.

The decision basis for the advice on the systemic risk buffer comprises this letter and the reports Financial Stability Report 2026 H1 and Financial Stability Report 2025 H2. Norges Bank’s framework for advice on the SyRB is also attached. In preparing its advice, Norges Bank has exchanged information and assessments with the Financial Supervisory Authority of Norway (see also the letter from the Financial Supervisory Authority).

Structural vulnerabilities in the financial system remain elevated 

In the assessment of the SyRB, Norges Bank places particular emphasis on two structural vulnerabilities in the Norwegian financial system: i) the high indebtedness of many households and ii) banks' high exposure to commercial real estate (CRE). The Committee also gives weight to the fact that banks have substantial exposure to customers that are vulnerable to climate transition and that one bank’s funding is another bank's liquidity reserve.

Norwegian households are highly indebted, both historically and compared with other countries. If interest rates rise, income is reduced or house prices fall markedly, high debt levels, especially when combined with low liquidity, increase the risk of sharp falls in consumption. In recent years, overall debt growth has been slower than income growth. While debt-to-income (DTI) ratios have declined broadly across households and most for those with the highest debt, DTIs are still high (see Section 2 in Financial Stability Report 2025 H2).

Norwegian banks have substantial exposure to the real estate firms, and this share has remained stable in recent years. Experience from banking crises in Norway and abroad has shown that losses on CRE exposures have been an important factor behind solvency problems in the banking sector.

The banks are interconnected through interbank exposures and common or similar securities in their liquidity reserves. Covered bonds issued by other Norwegian banks and secured on residential mortgages account for a substantial share of banks’ liquidity reserves and funding, and this share has changed little in recent years. If liquidity problems become widespread among banks, this could trigger fire sales of covered bonds and funding difficulties for the banking sector as a whole, while profitability may weaken.

Climate change and the energy transition may lead to increased costs and changed framework conditions for many households and firms in the years ahead. Norway will probably be less severely affected by extreme weather events than many countries further south but could be more adversely affected by a shift in climate policy as the petroleum sector still plays an important role in the Norwegian economy. In the event of abrupt changes, higher costs and lower earnings among businesses and households may entail higher losses for banks than would otherwise have been the case. At the same time, new transition-related investment needs may increase. 

Different macroprudential instruments take into account different aspects of risk 

Financial system vulnerabilities are addressed with a range of measures. Requirements for banks’ capital, liquidity and credit standards help improve financial system resilience and may also mitigate vulnerabilities. 

The vulnerabilities addressed by the SyRB are not fully addressed by other capital requirements. Vulnerabilities related to high household indebtedness are also partly why the Lending Regulations were introduced. However, the Regulations act more directly on household borrowing, while the SyRB strengthens banks’ loss‑absorbing capacity. Floors for risk weights address vulnerabilities related to both households and CRE but are primarily a backstop that prevent banks’ capital levels from becoming too low as a result of a fall in risk weights. While the countercyclical capital buffer (CCyB) should reflect the assessment of cyclical vulnerabilities in the financial system, the SyRB should reflect structural vulnerabilities. Systemically important banks are required to maintain a larger capital buffer because problems in these banks can have severe negative consequences for the economy. This is a structural vulnerability that does not form part of the basis for the SyRB.    

Since the SyRB was last assessed in 2024, Norway has transposed the European Capital Requirements Regulation (CRR III) into Norwegian law. Amendments to the capital adequacy regulatory framework in 2025 provided capital relief for standardised approach banks and some tightening for banks using internal risk models (IRB banks). The capital relief for standardised approach banks may have strengthened competition somewhat for mortgage customers. Overall, however, the changes provide the banking sector with broadly unchanged capital adequacy requirements. 

Insufficient capital in banks may prove costly for society in a downturn

In 2022, Norges Bank analysed the economic costs and benefits of capital requirements for banks (See Financial Stability Report 2022). The analysis shows that Norwegian banks’ current capital levels are within a reasonable interval of what banks' capital adequacy should be in the long-term. The analysis further shows that economic costs are higher if banks adjust to capital adequacy ratios that are too low rather than too high. There is also reason to believe that the cost of maintaining a high level of capital is moderate once the capital has been built up. Studies published in recent years support this conclusion.[1] 

Stress tests conducted by Norges Bank and the Financial Supervisory Authority show that sharp economic downturns can result in bank losses that are so substantial that banks must tighten credit supply substantially in order to not draw down their capital buffers. Norges Bank’s stress tests take into account that financial system vulnerabilities amplify economic downturns, and the depth of the crisis therefore depends on current vulnerabilities. The stress tests indicate that waiving variable buffer requirements can make it easier for banks to maintain credit supply in a crisis, which may help cushion the fall in economic activity.

The SyRB rate should apply to all exposures in Norway, with a materiality threshold

The SyRB requirement should apply to both Norwegian and foreign banks’ exposures in Norway. This is because the requirement reflects structural vulnerabilities in the Norwegian financial system, and foreign banks account for a large share of the Norwegian lending market. If Norwegian authorities are to maintain national control long term, it is important that other countries reciprocate Norwegian regulations, requiring foreign banks to follow Norwegian capital requirements for exposures in Norway. Similarly, Norwegian authorities impose SyRBs that are set in other EU countries on Norwegian banks’ exposures in these EU countries, which facilitates regulatory reciprocity. 

Foreign banks with risk‑weighted exposures below NOK 5 billion are exempt from the SyRB requirement in Norway. Data from the Financial Supervisory Authority show that a considerable number of foreign banks have risk-weighted exposures in Norway below this materiality threshold. Having a materiality threshold is recommended by the European Systemic Risk Board (ESRB) and is common practice in Europe. The ESRB generally recommends a materiality threshold of 1% of the total calculation basis. The Norwegian threshold is far lower.

In connection with this year’s assessment of the SyRB, Finanstilsynet (the Financial Supervisory Authority of Norway), on behalf of the Ministry of Finance, has assessed the design and level of the materiality threshold and recommends that the current materiality threshold of NOK 5 billion be maintained.

The purpose of the materiality threshold is to avoid making it unnecessarily onerous for supervisory authorities and banks with small cross-border exposures to keep track of which requirements apply at any given time in different countries. This is in particular the case for the systemic risk buffer, which is not standardised across countries. A materiality threshold therefore facilitates reciprocity.

The systemic risk buffer should be maintained at 4.5% 

In Norway, the financial system has proven resilient to major market shocks and higher interest rates in recent years. Since the financial crisis, regulatory reforms and their implementation in Norway have strengthened resilience. There have been no material changes in the level of key structural vulnerabilities in the Norwegian financial system since the SyRB requirement was last assessed in 2024. It is important to maintain system resilience so that vulnerabilities do not amplify an economic downturn. 

Norges Bank’s Monetary Policy and Financial Stability Committee has unanimously decided to advise the Ministry of Finance to keep the systemic risk buffer requirement unchanged at 4.5%.  

Footnotes

[1] See inter alia McInerney, N., O'Brien, M., Wosser, M., and Zavalloni, L. (2026): “Rightsizing Bank Capital: The Role of Macrofinancial Structure” International Journal of Central Banking, 22(2), Jakubik, P., and Moinescu, B. G. (2023). “What is the optimal capital ratio implying a stable European banking system?” International Finance, 26(3), 324–343 and Lang J.H., Menno D. (2025) “The state-dependent impact of changes in bank capital requirements” Journal of Banking & Finance, 176, Article 107439.