Norway’s financial system is resilient, but the risk of serious events that could weaken financial stability has increased, Norges Bank said on Wednesday in its bi-annual Financial Stability Report, pointing to geopolitical tensions and cyber threats, high and rising government debt in many countries and uncertainty about the implications of artificial intelligence. “The Norwegian financial system is resilient. Households and firms have ample debt-servicing capacity, and banks are solid,” Deputy Governor Pål Longva said.
At home, the bank judged the main domestic vulnerability to be easing: households are highly indebted, but debt has grown more slowly than income, debt burdens have fallen most among the most indebted, and liquid buffers are rising again after declining following the pandemic. Commercial real estate remains the pressure point, with banks’ exposures substantial, higher interest rates pressing on property values, bankruptcies up markedly and banks reporting a higher risk of default, even as sector solvency has improved somewhat over two years. Banks’ losses are low and capital and liquidity requirements are met by an ample margin; the Monetary Policy and Financial Stability Committee decided on November 4 to keep the countercyclical capital buffer rate unchanged at 2.5 percent.