OSLO, Nov. 3 (Xinhua) -- Norway's central bank has concluded that higher debt in the households and strong increase of property prices made the Nordic country's economy vulnerable, newspaper Aftenposten wrote on Thursday.
In the fresh Financial Stability Report 2016, Norges Bank concluded that Norwegian banks had been more robust since the financial crisis.
"At the same time there is a feature of Norwegian economy that make the financial system vulnerable. This particularly concerns the strong growth in the property prices combined with high debt in the households," said Jon Nicolaisen, deputy governor of Norges Bank.
According to the report, the central bank also stated that higher property prices could lead to private persons taking bigger loans, which could make them more vulnerable to a sudden drop in the economy.
"There is an increased risk that the property prices can fall later," Nicolaisen said.
Increased property prices can make the risk of price fall bigger and, combined with high level of debt, can give a strong decline in the economy, according to the report.
"We have noticed that the use of consumer loans had picked up sharply," Nicolaisen said, while expressing satisfaction that the politicians were more focused on these loans.
He pointed out that the profitability of the banks was holding up, in spite of the increased losses, which mainly referred to the loans to oil related business.
Torbjorn Haegeland, director of the bank's Financial Stability department, has shown concern for those who offer retirement saving with guaranteed returns.
"Low returns, due to the low interest rate, present challenges for life insurance companies and pension funds, since they have to cover themselves the difference between the guaranteed and the actual returns," he said. Enditem