Norway Bank Liquidity Worsened by Market Turmoil, FSA Says

Norwegian banks are finding it harder to secure funding because of Europe’s debt crisis and a U.S. credit downgrade, the country’s financial watchdog said.

“Access to financing with long maturities has become more demanding,” Norway’s Oslo-based Financial Supervisory Authority said today in a statement.

Rune Bjerke, chief executive Officer at Norway’s biggest lender DnB NOR ASA, told newspaper Dagens Naeringsliv last week that the bank had steady access to funding throughout a period of reduced liquidity earlier in the month. Shares of the Oslo-based bank have dropped 25 percent this month compared with a 22 decline in the Bloomberg Europe Banks and Financial Services Index. DnB shares fell 0.95 krone, or 1.6 percent, to 59.25 kroner as of 4:00 p.m. in Oslo, sliding for a fourth day.

Shares in Swedish lenders fell last week after Lars Frisell, chief economist at Sweden’s financial regulator, said banks need to do more to shore up funding to prepare for the next potential crisis in bank lending markets.

Norway’s banks have improved liquidity reserves and long-term funding over the past two years and are better prepared for turmoil than before the 2008 financial crisis, the FSA said in the statement. Still, the banks would be affected by “a prolonged weakness in international money and capital markets,” Morten Baltzersen, the head of the FSA, said.

Market turmoil has also reduced the buffer capital of insurance companies, the watchdog said, adding that household debt and house prices have reached “very high” levels and are a source of future instability.