IMF Reports on the 2017 Article IV Consultation with Norway
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
Keywords: Europe, Norway, IMF, Basel III, FSAP, CRD IV, Article IV, Banking
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
IMF Managing Director Christine Lagarde Nominated as ECB PresidentRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
