Norges Bank has advised the Ministry of Finance to keep the countercyclical capital buffer at 2.5 percent from the end of 2019.
Financial imbalances have built up over a long period. Household debt is high and has long risen faster than income. Household debt growth has recently slowed somewhat. Enterprises have ample access to credit. Housing market activity is high, but house price inflation is moderate. In the commercial real estate market, there are signs that the rapid rise in prices may slow. Bank profitability is solid and losses are low, and banks have ample access to wholesale funding.
Under the Financial Institutions Act, the countercyclical capital buffer shall as a rule be set between 0 and 2.5 percent of banks’ risk-weighted assets, but may be set higher in exceptional circumstances.
“The assessment of financial imbalances has not changed substantially since 2018 Q4. Norges Bank has advised the Ministry of Finance to keep the countercyclical capital buffer at 2.5 percent from the end of 2019”, says Øystein Olsen.
The Ministry of Finance decided today to follow Norges Bank’s advice.
- Ministry of Finance press release
- Norges Bank’s advice is issued in the letter: Advice on the countercyclical capital buffer 2019 Q1 2019
- The decision basis for Norges Bank’s advice is presented in Section 5 of the March 2019 Monetary Policy Report and Indicators of financial imbalances