Norway: Financial Sector Assessment Program-Technical Note-Systemic Liquidity

International Monetary Fund

No 2020/264, IMF Staff Country Reports from International Monetary Fund

Abstract: Norwegian banks and other financial institutions rely heavily on capital markets for liquidity and risk management. Liquidity conditions in the Norwegian financial sector are affected by central bank operations and the lending and funding activities of financial institutions, both domestically and abroad. Nearly 40 percent of the funding of Norwegian banks is obtained from market sources, using commercial paper, covered bonds, and senior unsecured bonds issued both domestically and abroad. Correspondingly, money markets, foreign exchange (FX) swap markets and bond markets are crucial to the credit intermediation process and a dislocation in these markets—the inability of financial institutions to roll over, or obtain new, funding—could have significant consequences for financial stability. Against this background, this note analyzes core funding markets for Norwegian banks and assesses Norges Bank’s capacity to manage systemic liquidity conditions and counteract liquidity shocks in normal times and in times of stress.

Keywords: ISCR; CR; spot market; commercial paper; cross holdings; FX swap market; liquidity support; government bond; central bank; U.S. dollar; secondary market; mortgage loan; government bond market; market development; Liquidity; Covered bonds; Currency swaps; Sovereign bonds; Collateral; Global (search for similar items in EconPapers)
Pages: 43
Date: 2020-08-12
New Economics Papers: this item is included in nep-mac
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