Financial Stability 1/08

Financial stability implies that the financial system is robust to disturbances in the economy and can channel capital, execute payments and redistribute risk in a satisfactory manner. Pursuant to the Norges Bank Act and the Payment Systems Act, Norges Bank shall contribute to a robust and efficient financial system. Norges Bank therefore monitors financial institutions, securities markets and payment systems in order to detect any trends that may weaken the stability of the financial system. Should a situation arise in which financial stability is threatened, Norges Bank and other authorities will, if necessary, implement measures to strengthen the financial system. Experience shows that the foundation for financial instability is laid during periods of strong debt growth and asset price inflation. Banks play a key role in credit provision and payment services – and they differ from other financial institutions in that they rely on customer deposits for funding. Banks are thus important to financial stability. The Financial Stability report therefore focuses on the prospects for banks’ earnings and financial strength and the risk factors to which banks are exposed. The report is published twice a year. The main conclusions of the report are summarised in a submission to the Ministry of Finance. The submission is discussed at a meeting of Norges Bank’s Executive Board. Norges Bank’s annual Report on Payment Systems provides a broader overview of developments in the Norwegian payment system.publishedVersio