NORGES BANK: CCyB Rate Unchanged At 2.5%; Norwegian Financial System Robust

Counter-cyclical buffer rate left unchanged at 2.5%. "Norges Bank’s Monetary Policy and Financial Stability Committee considers the Norwegian financial system to be robust. Banks in Norway are profitable and have liquidity and capital buffers that enable them to withstand considerable losses and financial market turbulence without having to tighten lending". Other highlights from the summary:

• "Even with a reversal of introduced and announced tariffs, the uncertainty generated regarding the framework for international economic relations would likely persist. This increases the risk of shocks that can be a source of both more difficult funding conditions and credit losses. Financial system vulnerabilities may amplify the effects".
• "The high indebtedness of many households is a key vulnerability in the Norwegian financial system"..."However, default rates are low, partly reflecting high employment".
• "Another key financial system vulnerability is banks’ high commercial real estate (CRE) exposure"..."While high employment and rental income growth have so far enabled most CRE firms to service higher interest expenses out of current earnings, the situation is more difficult for real estate developers".
• "The direct effect of trade restrictions on bank losses is likely relatively modest as banks’ exposure to the largest export industries is moderate".
• "Covered bonds account for a large part of banks’ liquidity reserves. If a number of banks need liquidity and have to sell such a large quantity of covered bonds that their value falls, the value of covered bond holdings in the liquidity reserves of all other banks will also fall".

Link to report.