Document Type

Case Study


Following the Lehman Brothers bankruptcy in September 2008, Norway’s banking system experienced a significant liquidity squeeze. Norwegian banks had relied extensively on short-term funding from foreign funding markets and as the financial crisis evolved, foreign funding dried up. To alleviate pressure, Norwegian authorities responded with a number of emergency programs. In early 2009, the government created the State Finance Fund (SFF) to recapitalize banks. The SFF was capitalized with a NOK 50 billion ($7.07 billion) equity investment from the Finance Ministry. In total, 34 banks applied for capital injections totaling NOK 6.7 billion. By the end of 2009, six banks had withdrawn their applications. The SFF injected a total of NOK 4.1 billion in 28 banks, most of them savings banks. Capital raising efforts both from private markets and from the State Finance Fund significantly improved Norway’s banking system. By December 2009, the central bank’s Financial Stability Report indicated that even in a high-stress scenario, bank Tier 1 capital ratios would remain above the regulatory minimum for the next three years.