OSLO, Dec 13 (Reuters) - Norway will increase its countercyclical capital buffer requirement for banks to 2.5 percent from 2.0 percent, the finance ministry said in a statement on Thursday, while adding the new requirement must be met by the end of 2019.
The decision was in line with a recommendation from the central bank.
“Norges Bank said that household debt ratios are high and rising, and that property prices have risen rapidly for many years and are now at historically high levels. As a result, financial imbalances have built up,” the ministry said.
In December 2016, the ministry decided that banks should hold a countercyclical buffer of 2.0 percent by the end of 2017, an increase from 1.5 percent.
The buffer, set by the ministry, aims to force banks to accumulate extra capital during boom periods on top of capital requirements set through other regulations.
The buffer can be unwound during downturns, enabling banks to continue lending and hence soften the impact of a recession.
Leading Norwegian banks include among others DNB, SR Bank, Sparebank 1 SMN, Sparebanken Vest and Sparebank 1 Nord-Norge. (Reporting by Oslo newsroom)