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UPDATE 1-Norway keeps countercyclical capital buffer for banks unchanged

Fri 27th March, 2015 7:50am
(Adds central bank statement, background) 
    OSLO, March 27 (Reuters) - Norwegian banks must continue 
this year building up reserves against a possible economic 
downturn, the Finance Ministry said on Friday in announcing 
unchanged financial buffer requirements for them. 
    A strong growth in housing prices and the prospect of a 
weaker economy mean the countercyclical capital buffer 
requirement - which forces banks to accumulate extra capital - 
should stay unchanged at one percent from June 30, it said. 
    Norway's central bank recommended the rate remain unchanged, 
the ministry statement added. 
    "The ministry has among other things put emphasis on 
prospects of a weakening Norwegian economy," it said. 
    In a separate statement, the central bank said: "If house 
prices continue to increase rapidly and credit growth rises, it 
will be appropriate to advise the Ministry to raise the level of 
the countercyclical capital buffer effective from summer 2016."  
    Norwegian house prices continued to rise in February with 
year-on-year growth at 8.7 percent, while the latest data on 
household credit, from January, showed an increase of 6.2 
percent from the same month of 2014.  
    The high household debt level was one of the reasons why the 
central bank surprised by not cutting rates in March.     
    The Financial Supervisory Authority (FSA), which also 
advises the ministry, has recommended raising the 
countercyclical buffer level to 1.50 percent from March 2016.  
    The Finance Ministry is currently evaluating proposals from 
the FSA on how to cool the housing market.  ID:nL6N0WJ0ZK  
    The buffer, set by the ministry, aims to force banks to 
accumulate extra capital during boom periods on top of buffers 
required by international authorities. 
 (Reporting by Camilla Knudsen; Editing by Tom Heneghan) 
 ((camilla.knudsen@thomsonreuters.com; +47 2331 6595; Reuters 
Messaging: camilla.knudsen.thomsonreuters.com@reuters.net)) 
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