director general morten baltzersen - finans norge · 25 30 2006 2008 2010 2013 2015 t 300 -< 400...
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Norwegian Regulatory UpdateFinance Norway’s Capital Markets Day, London 6 April 2018
Director General Morten Baltzersen
Norwegian economy
- GDP and unemployment
London 6 April 2018
Non-performing loans
London 6 April 2018
Source: Finanstilsynet,
Non-performing, >30 days past due
Profitability
London 6 April 2018
Source: Finanstilsynet
Pre-tax profit and RoENet interest income, operating
costs and loan losses
Source: Finanstilsynet
Capital in Norwegian banks
London 6 April 2018
Source: Finanstilsynet
Common Equity Tier 1 Capital requirements
Source: Finanstilsynet
Capital levels across Europe
London 6 April 2018
Common Equity Tier 1 Leverage ratio
Source: EBA, 30.09.2017Source: EBA, 30.09.2017
Norwegian requirement as of June 2017:
5 pct. for all banks + 1 pct for SIFIs
CET1 and Leverage ratio
London 6 April 2018
Source: Banks’ quarterly reports, 31.12.2017
Nordic banks
London 6 April 2018
Source: Banks’ quarterly reports and Finanstilsynet, 31.12.2017
6. mars 2018 9
Sources: Finanstilsynet and Statistics Norway
Households’ debt burden and interest burden
Households’ debt burden
London 6 April 2018
Source: Statistics Norway
0
5
10
15
20
25
30
2006 2008 2010 2013 2015
Per
cent
300 -< 400 % 400 -< 500 % 500+ %
Share of households by debt burden Share of new residential mortgages by
interest lock-in period
Sources:Finanstilsynet, Statistics Sweden and Statistics
Denmark
House prices
6. mars 2018 11
House prices deflated by disposable
income per capitaHouse prices
Source: Thomson Reuters Source: OECD
Residential mortgage lending regulations
Present regulations (apply until July 2018):
• Affordability test (interest rate increase of 5 percentage points)
• Debt-to-income (DTI) requirement (five times gross annual income)
• Loan-to-value (LTV) requirement (85% and 60% for secondary homes in
Oslo)
• Amortisation requirement (Mortgage loans with LTV above 60%)
• Flexibility quota (10%, 8% for mortgages in Oslo)
London 6 April 2018
FSA recommendation to the Ministry of Finance:
• Present regulations prolonged with some adjustments
• No differentiation by geography or by primary/secondary homes
• Flexibility quota 8 %
Consumer credit
London 6 April 2018
Domestic credit growth Net interest income and loan losses
Source: Finanstilsynet and Statistics Norway Source: Finanstilsynet
Consumer credit – Government
measures
London 6 April 2018
• New regulation of consumer credit marketing (2017)
• Regulation of invoicing of credit card debt (2017)
• Debt Information Act (2017)
• FSA Guidelines for prudent consumer lending practices (2017)
• Debt-servicing capacity
• Maximum debt-to-income
• Amortisation
London 6 April 2018
BRRD/DGSD implementation I
• Parliament passed legislation implementing both directives on 15 March
2018
– BRRD was incorporated into the EEA Agreement on 9 February 2018
– DGSD has not yet been incorporated into the EEA Agreement
• Finanstilsynet appointed as Resolution Authority
– Decisions of significance for financial stability, on resolution plans for larger
institutions and bail-in are to be approved by MoF prior to implementation
– Operational separation between resolution and supervision
• MREL – Key issues
– MREL – level and scope
– Subordination
BRRD/DGSD implementation II
• DGS still to be managed by the Norwegian Banks’ Guarantee Fund
– Board appointed by Ministry of Finance
• Current fund constitutes 2.7 pct. of covered deposits as of 31.12.2017
• Fund to be split into Deposit Guarantee Fund and Resolution Fund
– 1.2 pct. and 1.5 pct. of covered deposits respectively (DGSG target level 0.8 pct.
and BRRD target level 1 pct. in 2024)
• Models for contributions to be decided upon
– Modest increase in total contributions compared to current level expected
– Risk based contribution regime to be developed
• Business model risk
London 6 April 2018
Life insurance – solvency
London 6 April 2018
Solvency coverage ratio• Solvency II capital
requirements met through:
• Retained profits
• Cost reductions
• Risk mitigating measures
Source: Finanstilsynet
Fintech
• The Norwegian financial industry early adopters of advanced
digitalisation
• Mixed experiences with financial innovation
• Neutral regulation: Similar product/risk should be treated
equally, irrespective of provider (ex. crowdfunding vs. banks)
• Regulation should not impede technological innovation in
financial services, however, consumer protection and financial
stability must be ensured
• Operational risk: Focus on secure and stable services
London 6 April 2018
Summary
• Norwegian banks are well capitalised, profitable and cost
efficient, giving them a good basis going forward
• Systemic risk: Household indebtness and elevated house prices
• Life insurance industry has adapted to Solvency II
• Technological innovation welcome, provided secure and stable
services
London 6 April 2018