Norges Bank Urges Banks To Strengthen Capital Base

(RTTNews) - Norway's banks have improved their capital ratios, but needs to do more to withstand shocks, the country's central bank said in a report on Friday.

In its latest Financial Stability Report, the Norges bank said banks have reduced their liquidity risk in recent years. "Norwegian banks are more resilient to financial market shocks than in the pre-crisis period," Norges Bank Governor Oeystein Olsen said.

"Banks' capital adequacy ratios have increased, but banks must strengthen their equity capital further if they are to be in a position to withstand large losses without serious consequences for the Norwegian economy."

But, a number of Norwegian banks still have some way to go in order to meet future international liquidity and funding requirements, the report said.

"Banks should meet international requirements, preferably by an ample margin," Olsen said. The central bank also urged banks to disclose more information about their liquidity and funding structure.

Yesterday, Norway's Ministry of Finance asked banks to build a countercyclical buffer of 1 percent of the banks' risk-weighted assets from July 1, 2015, in addition to other capital requirements.

"There are now signs of financial imbalances in the Norwegian economy. Banks should therefore hold a countercyclical capital buffer," Finance Minister Siv Jensen said. "It will make them more robust against future loan losses."

Norges Bank also suggested that the country's laws regarding banking crisis resolution must be updated and must provide for bank creditors to take part in banks' losses.

Olsen sought to designate an authority to deal with the resolution of failing banks, similar to the one proposed in the EU.

"The role of resolution authority should be assigned either to Finanstilsynet or to a unit under the Ministry of Finance," he said. Finanstilsynet is the financial watchdog of Norway.