Financial problems can emerge unexpectedly, spread rapidly and give rise to substantial economic costs. The authorities seek to prevent financial crises and have elaborated contingency plans so that they are prepared to manage a crisis. Crisis preparedness is an important part of Norges Bank’s work on financial stability.
Contingency planning for the payment system
Central banks have a special responsibility to ensure that payment systems function at all times and that society’s needs for notes and coins are also met in extraordinary situations. Norges Bank works on payment system preparedness, which also includes the supply of notes and coins, as well as externally with regard to financial sector infrastructure, including in its role in authorising and overseeing interbank systems.
Lender of last resort
Central banks have traditionally acted as lender of last resort (LLR). This means that when liquidity demands cannot be met from other sources, the central bank can provide extraordinary liquidity to individual banks or the wider banking system.
Cooperation among government authorities
When financial crises occur, central banks work closely with other government authorities, especially Finanstilsynet and the Ministry of Finance. In the event of systemic crises, the authorities will closely assess the situation and take the necessary actions.