Eight Banks Identified as Too Big to Fail for Norway’s Economy
Norway’s financial regulator identified eight banks it said are systemically important to the $500 billion economy and recommended the lenders face the nation’s highest capital requirements.
DNB Bank, Nordea Bank (NDA) Norge, SpareBank 1 Nord-Norge (NONG), SpareBank 1 SR-Bank, SpareBank 1 SMN (MING), Sparebanken Vest (SVEG), Sparebanken Soer and Sparebanken Pluss (PLUG) should be designated as systemically important financial institutions, the Financial Supervisory Authority told the Finance Ministry, according to a statement today. Sparebanken Soer and Sparebanken Pluss are merging, the FSA said.
Banks deemed too big to fail will be subject to an extra 2 percent capital requirement of their risk-weighted assets, raising the total minimum ratio to 11 percent in 2015 and 12 percent in 2016, from the current 9 percent. Norway is pushing ahead with stricter rules than much of the rest of Europe to guard against financial imbalances as household debt surges in Scandinavia’s richest economy.
The eight banks met criteria that included managed capital of at least 10 percent of mainland gross domestic product or the total in Norway, a market share of at least 5 percent of lending to the Norwegian public and 10 percent of corporate lending in one or several regions. Banks with a critical role in the financial infrastructure were also chosen, the FSA said.
Spokespeople at the Finance Ministry weren’t immediately available to comment on the proposal.
Norway is trying to pad its banks against losses after house prices doubled since 2002 and private debt burdens swelled to a record. Lawmakers are moving ahead of international regulators amid concern the oil-rich nation’s mortgage market needs curbs to take effect earlier than implementation dates set by the Basel Committee on Banking Supervision.
DNB ASA (DNB), the largest Norwegian bank, has been raising mortgage rates and loan prices to help cover the cost of more capital. The lender estimated last month a capital need of 40 billion kroner ($6.7 billion) to 60 billion kroner through 2016.
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