High household debt makes Norwegian financial system vulnerable -c.bank

Sparebank 1 Ostfold Akershus

02/11/2017 09:00

OSLO, Nov 2 (Reuters) - Norwegians' high debt level makes 
the Nordic country's financial system vulnerable even though an 
ongoing correction in the housing market may lower the risks 
further out, the central bank said in its annual financial 
stability report on Thursday. 
    "High debt increases the risk of a tightening of household 
consumption in response to a substantial fall in housing prices 
and a pronounced rise in the interest level," Norges Bank's 
Deputy Governor Jon Nicolaisen said in the report. 
    "This could in turn lead to increased corporate losses for 
banks," he added. 
    Norway's red hot housing market has cooled down in recent 
months as tighter mortgage regulations, slower population growth 
and a boom in construction during the last several years dampens 
demand. 
    "Subdued house price inflation will curb household debt 
growth, but it will take time for vulnerabilities to recede," 
Nicolaisen said, adding that the correction in the housing 
market "may lower the risk of an abrupt and more pronounced 
decline further out".     
    Stress tests performed showed the largest banks are 
resilient to a severe downturn in the economy, the report 
showed.  
    The report also noted that there was an increased risk of 
cybercrime against Norwegian banks.  
 
 (Reporting by Camilla Knudsen, editing by Gwladys Fouche) 
 ((camilla.knudsen@thomsonreuters.com; +47 2331 6595; Reuters 
Messaging: camilla.knudsen.thomsonreuters.com@reuters.net)) 
 
Keywords: NORWAY BANKS/CENBANK