Norway offers plan to stabilize bank sector
On Feb. 8 the Norwegian Government proposed to establish two new funds with a total capital of NOK 100 billion ($14.5 billion). “The funds will ease the access to loans for companies and households, and contribute to stabilise the financial market,” says Norwegian Prime Minister Jens Stoltenberg.
“This is important in order to launch good industrial projects that will uphold existing jobs and create new jobs,” says Minister of Finance Kristin Halvorsen.
“In order to avoid that failing access to loans leads to a situation where good industrial projects and normally profitable activities come to a halt, the Government now proposes measures that will help financial markets work better,” Minister of Transport and Communication Liv Signe Navarsete says.
The Government proposes to establish a Norwegian State Finance Fund with a capital of NOK 50 billion. The State Finance Fund will be a separate entity. At present, Norwegian banks are financially sound, but they need to strengthen their core capital in order to counter a weaker economy and enhance their competitiveness.
In a situation of failure in the financial markets, the Norwegian state should offer capital to strengthen the banks and improve their ability to uphold normal lending activity. A core capital of NOK 50 billion may in itself correspond to a lending capacity of NOK 400-500 billion.
“We are now making community resources available, and will therefore require that payment and profits for bank leaders be limited,” Halvorsen says.
The Government also proposes to establish a Norwegian State Bond Fund with a capital of NOK 50 billion. This will make it possible for industrial companies to get funding not only directly from banks, but also in a strengthened bond market. The State Bond Fund will be administered by Folketrygdfondet.
“Traditionally the bond market is an important source of funding for banks and other enterprises, but the market is now no longer functioning well. By a considerable state involvement in this market, we may contribute to improving it,” Minister of Finance Kristin Halvorsen says.
Comprehensive measures against the finance crisis have been adopted
Since late 2008 insecurity and fear of new losses have dominated international finance markets. The financial crisis may lead to a profound global recession. Internationally, comprehensive measures have been introduced to improve money and credit markets and reduce the effects of the finance crisis on market economy.
“Norway has already done much to improve the situation. The measures we are now presenting come in addition to the comprehensive measures that have already been introduced. These are measures that will benefit industry and households all over the country,” Minister of Transport and Communication Liv Signe Navarsete says.