Norway central bank says “considerable uncertainty” about NOK supply

OSLO (Reuters) – The Norwegian central bank said on Friday it will offer additional short-term

OSLO (Reuters) – The Norwegian central bank said on Friday it will offer additional short-term loans to the country’s banks after considerable uncertainty arose about the supply of the crown currency in recent weeks.

Liquidity had been unevenly distributed between banks, Norges Bank said, and it will now seek to strengthen banks’ incentives to lend to each other as a way to boost the interbank market.

As a result of the imbalance, money market rates have recently risen, analysts said.

The Norwegian currency initially weakened on the news, hitting a four-and-a-half month low against the euro before a partial rebound.

Norges Bank data showed that those banks which had ample liquidity on a some occasions had chosen to deposit it with the central bank at negative rates rather than lending to other banks, DNB Markets analyst Kyrre Aamdal said.

“This indicates a problem in the redistribution of liquidity,” Amdal said.

Norges Bank said it will offer so-called F-loans, at fixed rates and with one-day maturities, which would give banks better access to liquidity.

The first such loan will be made available on Friday, the central bank added.

“Norges Bank will offer these loans as long as the situation in the interbank market suggests that it is appropriate,” it said in a statement.

“Any surplus liquidity resulting from these F-loans will not be withdrawn from the banking system.”

Reporting by Gwladys Fouche and Terje Solsvik, editing by Nora Buli and Chizu Nomiyama

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