Lender of last resort

Norges Bank can provide extraordinary liquidity to the entire banking system or individual banks when access to liquidity from other sources is impaired. The extraordinary liquidity that Norges Bank can provide may prevent financial problems from spreading and thus prevent a broader crisis from arising.

Liquidity to the entire banking system

Norges Bank can provide extra liquidity to the banking system in the form of F-loans and D-loans. If the required liquidity need is large, collateral requirements may differ from those laid down in the Regulation on the Access of Banks to Borrowing and Deposit Facilities in Norges Bank etc. (the "Lending Regulation") for D-loans and F-loans (cf Section 9 of the Regulation).

Liquidity to individual banks, emergency liquidity assistance (ELA)

Norges Bank can provide extraordinary liquidity to individual banks if liquidity problems are limited to one or a few banks. Norges Bank extends credit on special terms or emergency liquidity assistance (ELA) only in cases where financial stability is at risk if such a loan is not extended. Norges Bank may then extend ELA to improve liquidity (see Section 19, third paragraph, of the Norges Bank Act).

Norges Bank sets requirements for eligible collateral for ELA. The terms of an ELA will also be determined on an individual basis, and the interest rate on such a loan shall be above a normal market rate.

Guidelines for applying for credit on special terms (ELA)

An application for an ELA should be submitted to the Executive Director of Norges Bank Financial Stability.

In addition to the desired loan amount and maturity, the following information must be included with the loan application:

  1. An overview of the institution's profit and loss and balance sheet situation with updated capital adequacy calculations on the application date, including COREP, the bank's most recent ICAAP and any feedback from Finanstilsynet (Financial Supervisory Authority of Norway) on the ICAAP (SREP). The bank must report whether its balance sheet and capital adequacy calculation on the application date has been reviewed by an external or internal auditor. A statement from the auditor, if any, must be attached.
  2. An overview of up-to-date projections of the bank's expected income statement and balance sheet budgets and associated capital adequacy forecasted at least two years into the future (divided into quarterly periods), with and without any disposals of assets and taking into account the need for changes in loan impairments and other factors affecting the income statement, balance sheet and capital adequacy, eg - possible loss or income recognition on equity, fixed income and foreign exchange positions, increased funding costs and changes in risk weights. See also point 8.
  3. A plan for recapitalising the bank and a forecast for capital adequacy at least two years into the future starting from the application date (divided into quarterly periods) (see point 8). Descriptions of other measures to improve capital adequacy, including plans for dividend payments.
  4. The most recent liquidity reports for the bank, including the LCR and long-term funding indicator (eg liquidity indicators 1 and 2).
  5. An assessment of how long the bank's current liquidity buffers will last (excluding ELA) and information on the background for the bank's liquidity problems. An overview of maturities over the next six months of assets and liabilities, on a weekly basis for the first four weeks and on a monthly basis thereafter. An overview of maturities of assets that may be associated with considerable uncertainty over the next six months.
  6. An overall assessment of the bank's funding situation and future maturities, excluding ELA.
  7. An assessment of mark-to-market values of securities portfolios, including equities. Larger banks must also provide an assessment of derivatives/off-balance sheet portfolios. Items established as hedges for balance sheet items must be assessed along with the balance sheet, and the assessment must include gross and net exposures, with a detailed account of possible risks that the hedges will not function as assumed.
  8. Impairment of loans and other claims:
    1. A description of the bank's processes and routines for testing loans for impairment, including impairment of non-performing loans based on 30, 60 or 90 days' delinquency and the criteria applied by the bank for considering a loan to be a problem loan, with associated assessment of collateral values and the need to recognise impairment losses. In particular, the bank is requested to disclose cumulative losses as a percentage of non-performing loans.
    2. The bank is requested to report the total volume of non-performing and problem exposures in the corporate and retail customer segments on the application date, and overall individual impairment losses and associated impairment losses as a share of total lending in each category: non-performing – corporate, non-performing – retail, problem loans – corporate and problem loans – retail.
    3. The bank must report the extent of collective impairment losses on the date of application, the share of collective impairment losses relative to gross loans less individual impairment losses and give an account of the assessments and estimates (including estimates based on models) that form the basis for the size of collective impairment losses.
    4. The bank must explain how changes in impairment losses on corporate and retail customer exposures and expected losses or gains on equity, fixed income and foreign exchange positions affect the budgeted income statement, balance sheet and capital adequacy. The bank must provide a detailed account of the individual customers and individual effects expected to be of the greatest significance in this regard.
    5. An assessment of the bank's 10 largest problem loans and its 10 largest exposures, the latter regardless of whether they are regarded as at risk.
    6. A description of scenarios used by the bank for loss assessments/simulations.
Published 16 January 2017 10:55


Financial Stability Department

Executive Director: Torbjørn Hægeland
Tel. +47 22 31 65 33 / +47 22 32 64 22

Director, Banking Analysis, Sindre Weme
Tel. +47 22 31 62 65