Factsheet for measure
NO-2020-11/800
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Updated
– measures in Norway
Countercyclical capital buffer is reduced
Motsyklisk kapitalbuffer settes ned
Background information
The Ministry of Finance has decided to follow Norges Bank's advice to reduce the countercyclical capital buffer requirement for banks from 2.5 to 1 per cent with immediate effect. In Norges Bank's estimation, there is a risk of a marked setback in the Norwegian economy as a result of the outbreak of the coronavirus. The buffer requirement is lowered to counteract a tightening of lending practices in the banks. The social partners have been consulted regularly during design and implementation of the measure.
Content of measure
Norges Bank’s Monetary Policy and Financial Stability Committee has decided to advise the Ministry of Finance to reduce the buffer rate to 1%. Norges Bank shall advice the Ministry of Finance on the level of the countercyclical capital buffer for banks. The countercyclical capital buffer rate is currently 2.5%. In recent weeks, there has been considerable financial market volatility.
The outbreak of coronavirus (COVID-19) and the measures to limit contagion will have a significant negative impact on growth in the Norwegian economy. There is substantial uncertainty about the duration and the consequences of the outbreak, with a risk of a pronounced economic downturn. Norwegian banks are solid. They have sufficient capital to absorb losses in the event of a severe downturn. A tightening of lending standards may, however, amplify the downturn in the economy. Against this background, the Committee has decided to advise the Ministry of Finance to reduce the buffer to 1% with immediate effect. The decision was unanimous.
Updates
The following updates to this measure have been made after it came into effect.
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24 March 2022
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In March 2020, the Ministry of Finance, following Norges Bank's advice, reduced the countercyclical capital buffer requirement for banks from 2.5% to 1.0% to mitigate the economic impact of the COVID-19 pandemic. As the economic situation improved, Norges Bank recommended a gradual increase in the buffer rate:
- June 2021: Advised raising the buffer to 1.5%, effective from 30 June 2022.
- December 2021: Advised further increases to 2.0% from 30 June 2022.
- March 2022: Advised raising the buffer to 2.5% from 31 March 2023.
These recommendations were implemented as planned, with the buffer rate reaching 2.5% on 31 March 2023, reflecting a stable economic environment and the absence of significant financial imbalances. Norges Bank continues to monitor the financial system and will adjust the buffer rate as necessary to promote financial stability.
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Use of measure
No information to date.
Target groups
Actors and funding
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Actors
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Funding
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National government
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No special funding required
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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Consulted
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Consulted
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Form
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Direct consultation outside a formal body
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Direct consultation outside a formal body
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Social partners' role in the
implementation, monitoring and assessment phase:
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Social partners jointly
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Main level of involvement: Unknown
Involvement
The social partners have not been directly involved.
Views and reactions
Social partners have been consulted regularly during design and implementation of the measure.
Sectors and occupations
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This case is sector-specific
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Economic area
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Sector (NACE level 2)
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K - Financial And Insurance Activities
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K64 Financial service activities, except insurance and pension funding
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This case is not occupation-specific.
Sources
