Property prices have risen substantially in recent years, and many households are highly indebted. Such vulnerabilities may amplify an economic downturn. In autumn, residential and commercial property prices have fallen, and they are expected to fall further. Creditworthy firms and households appear to have ample access to credit, even if there are some signs of a tightening of banks’ credit standards.

Norwegian banks satisfy the capital requirements and are highly profitable. Bank losses are expected to be low ahead. Analyses in Financial Stability Report 2022 show that banks are resilient and able to absorb losses and maintain lending in a severe economic downturn.

“The countercyclical capital buffer rate of 2.5 percent helps to ensure that banks have ample capacity to absorb losses”, says Governor Ida Wolden Bache.

From 2023, Norges Bank will publish Financial Stability Report twice a year (in May and November). At the same time, the decision on the countercyclical capital buffer will be made at the monetary policy meetings in January, May, August and November. The next decision on the countercyclical capital buffer will be published on 19 January, together with the policy rate decision.

The objective of the countercyclical capital buffer is to strengthen banks’ solvency and mitigate the risk that banks’ lending standards amplify an economic downturn. The countercyclical capital buffer was reduced from 2.5 to 1.0 percent in March 2020. Decisions have been made to raise the buffer rate to 1.5, 2.0 and 2.5 percent, effective from 30 June 2022, 31 December 2022, and 31 March 2023, respectively.