July 05, 2017

IMF published its staff report and selected issues report in the context of 2017 Article IV consultation with Norway. The assessment highlights that significant policy actions have been taken to address financial stability risks. However, vulnerabilities in the financial system have increased in the context of high and rising property prices and elevated household debt.

The staff report highlights that Norway has been well ahead of schedule in terms of implementing the CRD IV/Basel III requirements. The risk-weighted capital ratios of Norwegian banks have improved markedly since 2008, with all banks comfortably meeting Pillar 1 and Pillar 2 requirements and the upcoming leverage ratio requirements by ample margins. Bank stress tests by both the Financial Sector Assessment Program (FSAP) mission in 2015 and the Norges Bank in 2016 suggest that banks’ buffers render them well-positioned to withstand severe shocks. Important steps have been taken to cope with the build-up of financial imbalances, including recent decisions to raise the countercyclical capital buffer to 2% from December 31, 2017, tighten mortgage regulations (effective from 2017 to mid-2018), and introduce the debt-to-income limit and leverage ratio requirements of 5% (with an exception for DNB—the largest bank―at 6%) from June 30, 2017. The authorities have been vigilant about the key risks and have made important progress with implementing Article IV and FSAP recommendations.

 

The staff report points out that further efforts are needed to address several key FSAP recommendations that remain outstanding, including limiting banks’ wholesale funding including on the mismatch between the maturity of currency swaps and underlying exposures; enhancing the Financial Supervisory Authority of Norway’s (FSA) de jure operational independence; and strengthening the legal and institutional framework for crisis management, safety nets, and bank resolution. Moreover, Norway has been leading its European peers in the adoption and use of macro-prudential tools. In addition, the FSA has submitted a proposal―currently under consultation—to introduce liquidity coverage ratio requirements in significant currencies. The report also reveals that bank profitability declined slightly, partly due to a rise in loan provisions requested by the FSA, but remains high compared to peers. The nonperforming loan ratio edged up—reflecting losses on oil-related exposures―but stayed low.

 

The selected issues report examines various factors driving the uptrend in house prices; evaluates the key tax reform measures to identify the remaining gaps in the current tax system relative to the best practice; and discusses ways to support long-term growth in Norway through high-quality labor supply.

 

Related Links

Staff Report (PDF)

Selected Issues Report (PDF)

Keywords: Europe, Norway, IMF, Basel III, FSAP, CRD IV, Article IV, Banking

Related Articles
News

BIS Report Discusses Regulatory Issues Related to Big Techs in Finance

BIS has pre-released a chapter of the BIS Annual Economic Report; this chapter focuses on the risks and opportunities presented by large technology firms (big techs) in the financial services sector.

June 23, 2019 WebPage Regulatory News
News

IOSCO Report Examines Liquidity in Corporate Bond Markets

IOSCO published a report that examines the factors affecting liquidity, under stressed conditions, in the secondary corporate bond markets.

June 21, 2019 WebPage Regulatory News
News

FED Publishes Results of the 2019 Stress Tests for Banks

FED published a report presenting results of the Dodd-Frank Act Stress Test (DFAST) exercise for 2019.

June 21, 2019 WebPage Regulatory News
News

BCBS Report Examines Global Pillar 2 Supervisory Review Practices

BCBS published a report that examines the Pillar 2 supervisory review practices and approaches in Basel member jurisdictions.

June 21, 2019 WebPage Regulatory News
News

IASB Publishes Work Plan and Meeting Updates for June 2019

IASB published an updated work plan and a summary of its June meeting, which presents preliminary decisions of the Board.

June 21, 2019 WebPage Regulatory News
News

HKMA Publishes Banking Exposure Limits Code Under Banking Ordinance

HKMA issued a circular to all authorized institutions informing that the Banking (Exposure Limits) Code has been published in the Gazette on June 21, 2019.

June 21, 2019 WebPage Regulatory News
News

OSFI Proposes Guideline on Internal Model Oversight for Insurers

OSFI proposed the draft guideline E-25 on the internal model oversight framework for federally regulated property and casualty (P&C) insurance companies.

June 21, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Third Update for June 2019

Under the Single Rulebook question and answer (Q&A) updates for this week, EBA published one answer regarding the calculation of institution-specific countercyclical capital buffer rates.

June 21, 2019 WebPage Regulatory News
News

BCBS Publishes Summary of the Meeting in June 2019

BCBS published a summary of its June meeting in Basel.

June 20, 2019 WebPage Regulatory News
News

OCC Bulletin on Risk Management Guidance for Home Mortgage Lending

OCC published Bulletin 2019-28 on risk management guidance for higher-loan-to-value (LTV) lending activities in communities targeted for revitalization.

June 19, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3298