Norway’s Biggest Bank Bets Against Olsen Rate Rise on Krone Risk

Norway’s biggest bank, DNB ASA (DNB), said the central bank won’t risk fueling krone appreciation with an interest rate increase even as the nation’s housing market shows signs of overheating.

“For the time being, it’s difficult for the central bank to touch the steering rate,” Bjoern Erik Naess, chief financial officer at DNB in Oslo, said today in an interview. “If the central bank decides to raise, it may have a negative impact on the exchange rate, so there are limits, and then you have to look for other tools in the tool box that might be available.”

Western Europe’s largest oil producer, which emerged as an investor haven at the height of the euro area’s debt crisis, has seen its currency climb about 22 percent against the euro since early 2009. The gains prompted policy makers in 2011 and 2012 to cut their benchmark rate twice, ignoring the threat of a potential housing bubble.

The government said Dec. 17 it wants to triple the risk weights assigned to mortgage assets, bringing the minimum requirement to 35 percent. DNB moved to raise rates on housing loans by 30 basis points on March 8, in response to the proposed changes. That was followed by similar increases by Nordea Bank AB and SpareBank 1 SMN today.

Norway’s central bank is trying to counter the risk of a housing bubble after low rates sent property values to a record. House prices jumped and annual 8.5 percent last month, while household debt levels will rise to more than 200 percent of disposable incomes this year, the central bank estimates.

To contact the reporter on this story: Stephen Treloar in Oslo at

To contact the editor responsible for this story: Christian Wienberg at

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