Higher house prices and high debt makes financial system vulnerable

Norges Bank mortgage policy rateNorges Bank (Bank of Norway), Headquarters Photo: Norges Bank

Strong growth in house prices and high household debt is increasing the vulnerability of the Norwegian financial system, according to Norges Bank.

An abrupt decline in demand, in other words a residential crack, can provide banks increased loan losses over time, the Bank wrote in its latest Financial Stability Report.

The oil crisis has hit banks in terms of loan losses for oil-related activities.
Simultaneously the liquidity of banks themselves is holding well, the report shows.

– Norwegian banks have become more robust. The stress test report shows that the capital adequacy of banks may fall significantly by a setback, but still remain well above the minimum requirements, says Deputy Governor Jon Nicolaisen.


Source: NTB scanpix / Norway Today