Norway’s largest bank is prepared if western Europe’s biggest oil producer joins the negative rate club.
Taking lessons from Sweden and Denmark, DNB ASA has been drilling its back office functions to test its capabilities should key rates dip below zero also in Norway. The bank has also looked into “how to keep up profitability in such a situation,” Chief Executive Officer Rune Bjerke said in an interview in London Thursday, Bloomberg reported.
“We have planned for a situation with negative rates,” he said. “We expect Norway to keep rates positive, but we need to be prepared if a situation occurs.”
Norway’s central bank is widely expected to lower its main rate to 0.5% next week as it fights off stalling growth in western Europe’s largest oil exporter. The European Central Bank on Thursday added pressure on policy makers on the fringes of the continent by adding to its massive stimulus package.
Bjerke said that the verdict on whether negative rates work is still out and that he’s more in favor of other tools, such as fiscal policy, than such a “dramatic and radical” monetary policy.
“One should be aware of the negative long term effects of a regime with negative rates,” he said. “It’s very hard to get a sense of the right prices for consumers, for mortgage holders, for banks, when you have a system with negative rates.”
“The Norwegian banking system is very robust and has been able to adjust quickly to the new demands in regulatory framework,” Siv Jensen said recently in Oslo. “They are robust enough to face changing economic times in Norway.”
That change may even mean negative interest rates, which have spread across the continent and are pressuring bank earnings.
