Unfair competition

Countercyclical buffer at 1 % introduced

The Ministry of Finance today decided that from 1 July 2015, a countercyclical buffer requirement of 1 % shall apply to Norwegian banks. The level will apply equally for Norwegian branches of foreign banks from 2016, however earlier if the home state regulatory authorities of those banks decide.

The countercyclical buffer is one of several capital adequacy requirements under Basel III. The purpose of the countercyclical buffer is to make banks more resilient to loan losses by requiring them to maintain a countercyclical capital buffer when financial imbalances are building up or have been built up.  The Ministry of Finance, Norges Bank and  the Norwegian FSA have all for a long time warned about signs of financial imbalances in the Norwegian mainland economy. In line with the advice from Norges Bank, the countercyclical buffer requirement for Norwegian banks will be 1 % of the banks’ risk-weighted assets. At the time the countercyclical buffer has been implemented in other jurisdictions, Norwegian banks shall apply local requirements for their risk-weighted assets in those countries.

If Norwegian authorities see further signs of financial imbalances in the Norwegian economy, the countercyclical buffer requirement may be further increased. Contrary, if a severe downturn in the economy causes major bank losses the countercyclical buffer may be released.

The decision-making basis which Norges Banks has provided along with its advice, is published in its Monetary Policy Report with financial stability assessment, and can be found here.

The Author

Klaus Henrik Wiese-Hansen
Klaus Henrik Wiese-Hansen Klaus Henrik Wiese-Hansen is a partner at Steenstrup Stordrange’s office in Oslo, and is a member of the M&A and Corporate Practice as well as the Banking and Finance group. He has 14 years' experience in all aspects of financial markets legislation and asset management, including Private Equity, Investment Fund Management, Securities Legislation, Banking and Finance, Insurance, and M&A with respect to these areas. He has advised numerous Norwegian and foreign institutional clients in all aspects of their businesses relating to the aforementioned legal areas.

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