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.

Use of measure

No information to date.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Sector specific set of companies	Does not apply to citizens

Actors and funding

Actors	Funding
National government	No special funding required

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Consulted	Consulted
Form	Direct consultation outside a formal body	Direct consultation outside a formal body

Social partners' role in the implementation, monitoring and assessment phase:

• Social partners jointly
• Main level of involvement: Unknown

Involvement

N/A

Views and reactions

Social partners have been consulted regularly during design and implementation of the measure.

Sectors and occupations

This case is not occupation-specific.

Sources

• 13 April 2020: Advice on the countercyclical capital buffer 2020 Q1 (www.norges-bank.no)
• 17 April 2020: Motsyklisk kapitalbuffer settes ned (www.regjeringen.no)