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High household debt makes Norwegian financial system vulnerable -c.bank
November 2, 2017 / 9:00 AM / a month ago

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

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)

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