The Ministry of Finance has today decided to keep the level of the countercyclical capital buffer for banks unchanged. This is in line with the advice from Norges Bank. The Financial Supervisory Authority has stated that it concurs with the advice.
Each quarter, The Ministry of Finance shall make a decision on the level of the countercyclical buffer. The Ministry of Finance decided on the 12th December 2013 that banks shall hold a countercyclical buffer of 1 percent from the 30th of June 2015.
Each quarter, Norges Bank shall draw up a basis for the decision on the level of the countercyclical capital buffer, and provide an assessment and advice about the level of the countercyclical buffer. In a letter from the 26th March 2014 Norges Bank advised the Ministry not to change the countercyclical buffer requirement now. Norges Bank's decision basis is published in the Monetary Policy Report with financial stability assessments 1/14.
The purpose of the countercyclical capital buffer is to strengthen the financial soundness of banks and their resilience to loan losses in a future downturn and mitigate the risk that banks will amplify a downturn by reducing their lending. Banks should hold a countercyclical capital buffer when financial imbalances are building up or have built up. In the Norwegian economy there are signs that financial imbalances have been built up over time. Banks operating in Norway should therefore hold a countercyclical buffer. Even with signs of diminishing financial imbalances, banks should maintain a countercyclical buffer.