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Countercyclical buffer at 1 pct.

The Ministry of Finance has today decided that the level of the countercyclical buffer should be 1 per cent from the 1st of July 2015. Norges Bank has given advice that the level of the buffer should be 1 per cent. The Financial Supervisory Authority has stated that it concurs with the advice.

 

Norges Bank has advised that the requirement shall be effective as of the 1st of Januar 2015. – I have decided to give banks more time to meet the new requirement. The countercyclical buffer will therefore be effective as of the 30th of June 2015, says Minister of Finance Siv Jensen. In line with the advice from Norges Bank, the countercyclical buffer requirement shall be 1 per cent of the banks' risk-weighted assets. When other countries implement the countercyclical buffer, Norwegian banks shall use the requirement implemented by local authorities for their risk-weighted assets in that country.

The purpose of the countercyclical buffer is to make banks more resilient to loan losses. Banks should maintain a countercyclical capital buffer when financial imbalances are building up or have been built up.

- There are now signs of financial imbalances in the Norwegian economy. Banks should therefore hold a countercyclical capital buffer. It will make them more robust against future loan losses, says Minister of Finance Siv Jensen.

- The introduction of a countercyclical buffer must be weighed against the other capital requirements for banks. According to Norges Bank and the Financial Supervisory Authority, banks are on track to meet new capital requirements, also when accounting for an expected countercyclical capital buffer. I share this view, says Minister of Finance Siv Jensen.

Even with signs of diminishing financial imbalances, the banks should maintain a countercyclical buffer If there are signs that financial imbalances build up further , it may be appropriate that the buffer requirement is increased further . In the case of a severe downturn in the economy and heavy losses in banks, the countercyclical buffer will be released. The decision-making basis which Norges Banks has provided along with its advice, is published in its Monetary Policy Report with financial stability assessment.

 

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