Norges Banks vitenarkiv
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The rationale for central bank liquidity insurance and liquidity regulation
Get PDFOne of the core functions of a central bank is to provide liquidity insurance, often termed the lender of last resort (LLR) function. During and after the Great Financial Crisis (GFC) in 2007-09 central banks’ role as liquidity insurers evolved. In the aftermath of the crisis, regulation of liquidity risk in the financial sector has been tightened, and central bank policies are under evaluation. This survey gathers insights from the literature on how to design central bank liquidity insuring policies: What institutions to insure, how to price central bank facilities, what collateral to accept, the size of operations, the degree to which they should be on-going facilities or contingent, and the interaction of our liquidity policies with regulation. Some fundamental trade-offs are identified and discussed.publishedVersio
Norges Banks oppgjørssystem : Årsrapport 2019
Get PDFFormålet med Norges Banks oppgjørssystem (NBO) er å gjennomføre sikre og effektive oppgjør av betalinger mellom banker som har konto i Norges Bank. Årsrapporten omhandler hovedaktiviteter og tiltak for å ivareta formålet.publishedVersio
Monetary policy update May 2020
Get PDFForecasts of the Norwegian economy are normally only prepared for the monetary policy meetings in connection with the Monetary Policy Report. In the light of the coronavirus outbreak and the extraordinary situation in the Norwegian economy, updated forecasts were nevertheless presented to the Committee ahead of the monetary policy meeting in May. At its meetings on 24 and 30 April, the Committee discussed the outlook and the monetary policy stance. On the basis of the discussions and recommendation from Norges Bank staff, the Committee made its decision on the policy rate on 6 May 2020. The Committee’s assessment of the economic outlook and monetary policy is presented in “Monetary policy assessment” on page 4.publishedVersio
A macroprudential contagion stress test framework
Get PDFWe develop a macroprudential contagion stress test framework to examine how a network of Norwegian banks can amplify a shock to bank capital at the macro level. The framework looks at how fire sales of common asset holdings can lead to valuation losses for banks (indirect contagion), and how recapitalisation of banks can lead to direct contagion. We perform Monte Carlo simulations to quantify contagion-driven systemic risk and to evaluate the importance of the mechanisms in our model. Using data for 22 banks from 2019 Q2 we find that losses due to contagion can reach 2 percentage points (pp) of the banking sector’s Common Equity Tier 1 (CET1) ratio, but most likely losses are around one-fourth of this. The losses result almost exclusively from indirect contagion. Further, we find that losses are high in the cases where banks quickly run into funding problems. We also find that market liquidity and which assets banks’ fire sale first (pecking order) are important determinants of the results. Last but not least, losses due to contagion are highly correlated with losses on covered bonds.publishedVersio
The cost efficiency improvement of Norwegian banks can be explained by automation and digitalisation
Get PDFOperating costs in the Norwegian banking sector have been reduced considerably in recent decades, both as a share of income and assets. This has increased banks’ resilience to increased losses and reduced the risk of crises. In this article, I analyse how costs have been reduced and the main drivers of the cost efficiency improvement. The results suggest that automation and the digitalisation of banks’ operations have played a key role in improving cost efficiency.publishedVersio
Climate risk and commodity currencies
Get PDFThe positive relationship between real exchange rates and natural resource income is well understood and studied. However, climate change and the transition to a lower-carbon economy now challenges this relationship. We document this by proposing a novel news media-based measure of climate change transition risk and show that when such risk is high, major commodity currencies experience a persistent depreciation and the relationship between commodity price fluctuations and currencies tends to become weaker.publishedVersio
Likviditeten i det norske sertifikat- og obligasjonsmarkedet i første halvår 2020
Get PDFUtbruddet av koronavirus og pandemien som fulgte, bidro til betydelig uro i norske finansmarkeder i mars 2020. Markedslikviditeten i det norske sertifikat- og obligasjonsmarkedet ble i en periode markert dårligere. Norges Banks spørreundersøkelse om markedslikviditet for første halvår 2020 og kontakt med markedsaktører viser at det oppstod ubalanse mellom selgere og kjøpere som ble forsterket av økte krav til sikkerhetsstillelse i valutabytteavtaler. Informasjon om markedspriser bekrefter at det var store utslag i kjøps- og salgskurser. Gradvis gjenåpning av samfunnet og tiltak fra Norges Bank som ble innført i mars, i form av ekstraordinære F-lån og endrede krav til sikkerhet for lån, bidro til å bedre markedsforholdene fram mot sommeren.publishedVersio
Location, location, location! - A quality-adjusted rent index for the Oslo office market
Get PDFIn this paper, we construct a quality-adjusted rent index for the office market in Oslo. Commonly used rent indices are based on average developments or expert opinions. Such indices often suffer from compositional biases or low data coverage. Using detailed data from more than 16,000 rental contracts, we show that compositional biases can have a large impact on rental price developments. By adding building fixed effects to a standard hedonic regression model, we show that the explanatory power increases considerably. Furthermore, indices controlling for micro-location portray a different picture of rent developments than indices that do not take this into account. We also document a considerable rent premium for proximity to a metro station. Finally, we exploit information on contract signature date and find that a more timely detection of turning-points can be achieved by using the signature date instead of the more typically used start date of the lease. The financial system is heavily exposed towards the commercial real estate market and timely detection of turning-points is of major importance to policymakers.publishedVersio