Bjø lo, Ma in; Hagen, Ma ius
Resea ch Repo
S uc u al liquidi y: Wha has d i en he his o ical
de elopmen and wha migh occu in he yea s ahead?
S a Memo, No. 2/2024
P o ided in Coope a ion wi h:
No ges Bank, Oslo
Sugges ed Ci a ion: Bjø lo, Ma in; Hagen, Ma ius (2024) : S uc u al liquidi y: Wha has d i en he
his o ical de elopmen and wha migh occu in he yea s ahead?, S a Memo, No. 2/2024, ISBN
978-82-8379-323-9, No ges Bank, Oslo,
h ps://hdl.handle.ne /11250/3170071
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/310419
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S a Memo
S uc u al liquidi y: Wha has d i en he his o ical
de elopmen and wha migh occu in he yea s ahead?
05.06.2024
Ma in Bjø lo
Ma ius Hagen
Ma ke s, No ges Bank
Keywo ds:
S uc u al liquidi y,
go e nmen ’s accoun , money
ma ke , LCR
2 | 2024
S a Memos p esen epo s and documen a ion w i en by s a membe s and a ilia es o No ges Bank,
he cen al bank o No way. Views and conclusions exp essed in S a Memos should no be aken o
ep esen he iews o No ges Bank.
© 2024 No ges Bank
The ex may be quo ed o e e ed o, p o ided ha due acknowledgemen is gi en o sou ce.
S a Memo inneholde u edninge og dokumen asjon sk e e a No ges Banks ansa e og and e
o a e e ilkny e No ges Bank. Synspunk e og konklusjone i a beidene e ikke nød endig is
ep esen a i e o No ges Banks.
© 2024 No ges Bank
De kan si e es a elle hen ises il de e a beid, gi a o a e og No ges Bank oppgis som kilde.
ISSN 1504-2596 (online)
ISBN 978-82-8379-323-9 (online)
1. Backg ound
The p ima y objec i e o No ges Bank’s liquidi y policy is o ensu e ha sho - e m money ma ke
a es a e close o he policy a e. No ges Bank achie es his by se ing he e ms and condi ions
o bank loans and deposi s and by con olling he quan i y o un es ic ed o e nigh deposi s in
he cen al bank (cen al bank ese es). No ges Bank ensu es ha banks’ o al cen al bank
ese es a e close o he a ge o 35bn No wegian K one (NOK) by ei he p o iding liquidi y ia
F-loans agains colla e al o wi hd awing liquidi y ia F-deposi s. S uc u al liquidi y is he le el o
banks’ deposi s in No ges Bank p io o he Bank’s ma ke ope a ions.
His o ically, he le el o s uc u al liquidi y has luc ua ed, bu has a e aged somewha abo e ze o
(Cha 1). The go e nmen ’s easu y single accoun sys em in NOK is main ained by No ges Bank
and he go e nmen ’s ansac ions wi h he banking sys em ha e been he main eason o bo h
nea - e m and long- e m luc ua ions in s uc u al liquidi y. In 2022, s uc u al liquidi y was a a
gene ally low le el because unds had buil up in he go e nmen ’s accoun . A eco d-high
paymen o pe oleum ax in Oc obe 2022 caused s uc u al liquidi y o all o a his o ically low
le el. As a esul , sho - e m money ma ke a es ose sha ply, which also spilled o e o a es
u he ou on he yield cu e (see Huse, Pe e sen and Sæ a eid (2023)).
Agains he backd op o he u bulence in he money ma ke in au umn 2022, he Minis y o
Finance appoin ed a wo king g oup in 2023 o examine go e nmen ansac ions and hei impac
on he money ma ke . In sp ing 2024, he wo king g oup published i s epo wi h se e al speci ic
ecommenda ions ha will a ec s uc u al liquidi y (see Minis y o Finance (2024a)). I he
wo king g oup’s ecommenda ions a e adop ed, s uc u al liquidi y will, all else equal, inc ease
ma kedly in he coming yea s (Cha 1). S uc u al liquidi y is expec ed o ise o a ound
NOK 150bn a he end o 2025 and close o NOK 200bn in 2027. In p ac ice, his means a
ansi ion o a conside ably highe le el o s uc u al liquidi y.
Highe s uc u al liquidi y means ha banks’ deposi s in he cen al bank inc ease. Wi h he cu en
liquidi y managemen sys em, deposi s in excess o NOK 35bn a e wi hd awn using F-deposi s.
Rega dless o whe he su plus liquidi y is in he o m o un es ic ed o ixed- e m deposi s, banks’
liquidi y will be s eng hened and he isk p emium on swapping USD o NOK in he FX swap
ma ke will p obably be educed. Inc eased deposi s om banks on No ges Bank’s balance shee
may hus a ec money ma ke liquidi y p emiums. One o he objec i es o he liquidi y policy is o
p o ide a amewo k o liquidi y and c edi isk o be bo ne as a as possible by he p i a e agen s
in he inancial sys em, which implies ha he cen al bank shall, as li le as possible, in luence
money ma ke isk p emiums a ma u i ies beyond a ew days (see No ges Bank (2021)).
Following he publica ion o he wo king g oup’s epo , No ges Bank s a ed ha once i has been
cla i ied which o he wo king g oup’s ecommenda ions ha will be adop ed, hen No ges Bank
will assess whe he he e is a need o adjus he liquidi y policy o he balance shee (see No ges
Bank (2024)).
This Memo is s uc u ed as ollows: Sec ion 2 desc ibes in mo e de ail he ela ionship be ween
s uc u al liquidi y, he Liquidi y Co e age Ra io (LCR) and in e es a e o ma ion in he money
ma ke . Sec ion 3 discusses a decomposi ion o ac o s ha ha e a ec ed he le el o s uc u al
liquidi y o e ime. Sec ion 4 con ains echnical p ojec ions o how he le el o s uc u al liquidi y
may de elop in he yea s ahead in he ligh o he p oposals om he wo king g oup on go e nmen
ansac ions. The p ojec ions do no ake in o accoun any po en ial balance shee adjus men s
made by No ges Bank.
Cha 1: S uc u al liquidi y in he banking sys em. Daily obse a ions and one-yea mo ing
a e age. 1 Janua y 2010 – 26 Ap il 2024. P ojec ed le el a yea -end 2024-2027.
1
In billions o
NOK
Sou ce: No ges Bank
2. S uc u al liquidi y, No ges Bank's liquidi y managemen and LCR
Bo h banks and he go e nmen ha e deposi accoun s wi h No ges Bank. On No ges Bank’s
balance shee , hese deposi s a e shown on he liabili y side (Cha 2). No ges Bank de e mines
he sum o he o al deposi s on he balance shee , bu no he dis ibu ion be ween banks and he
go e nmen . No ges Bank can c ea e new deposi s ei he by p o iding loans agains colla e al o
banks o by pu chasing o he asse s.
The p ima y objec i e o No ges Bank’s liquidi y policy is o ensu e ha he sho es money ma ke
a es a e kep close o he policy a e. No ges Bank achie es his by s ee ing he o al olume o
banks’ cen al bank ese es owa ds NOK 35bn, h ough ei he liquidi y-p o iding F-loans o
liquidi y-d aining F-deposi s. Cen al bank ese es a e he inal means o se lemen be ween
banks and hei mos liquid asse .
1
See Sec ion 4 o de ails.
-200
-150
-100
-50
0
50
100
150
200
250
-200
-150
-100
-50
0
50
100
150
200
250
2010 2013 2016 2019 2022 2025
Cha 2: Illus a ion o No ges Bank’s balance shee
S uc u al liquidi y is he le el o banks’ deposi s in No ges Bank p io o cen al bank ma ke
ope a ions. Changes in s uc u al liquidi y a e in luenced by au onomous ac o s. The mos
impo an au onomous ac o s a e:
1. Paymen s be ween he go e nmen 's accoun wi h No ges Bank and he gene al public’s
accoun s in he banking sys em
2. No ges Bank’s o eign exchange ansac ions
3. Go e nmen bo owing
4. Changes in he amoun o bankno es and coins in ci cula ion
As an example, when i ms pay axes o he go e nmen , liquidi y is wi hd awn om he banking
sys em while go e nmen deposi s ise. When he go e nmen pays pensions and social secu i y
bene i s, liquidi y is supplied o he banking sys em. When No ges Bank buys o eign exchange
and sells NOK, liquidi y is supplied o he banking sys em. When banks buy bankno es and coins
om No ges Bank, hey pay using deposi s in he cen al bank and s uc u al liquidi y alls. The
pa e n o go e nmen paymen s and eceip s, ma u i ies and issues o go e nmen bonds and
No ges Bank’s o eign exchange ansac ions no mally leads o luc ua ions in s uc u al liquidi y
wi hin each yea , bu he go e nmen has had as a p inciple ha hei ansac ions should no
a ec he le el o s uc u al liquidi y o e ime. Howe e , Cha 1 shows ha he le el o s uc u al
liquidi y has luc ua ed o e ime. The le el was ma kedly highe in he pe iod be ween 2011 and
2019 han in he yea s be o e and since, owing o easons discussed in Sec ion 3.
The in oduc ion o he Liquidi y Co e age Ra io (LCR) in NOK o banks has likely inc eased he
impo ance o s uc u al liquidi y o money ma ke p emiums (see Hagen and S iansen (2023)).
The LCR equi emen implies ha banks mus hold a po olio o liquid asse s ha is su icien o
co e hei ne liquidi y ou low du ing a 30-day s ess pe iod (Equa ion 1). No wegian banks mus
mee LCR equi emen s o all cu encies and indi idually o NOK and o he signi ican cu encies.
A o al LCR equi emen o 100 pe cen was in oduced o No wegian banks a he end o 2015.
In au umn 2017, a 50 pe cen LCR equi emen in NOK was in oduced o la ge No wegian banks
ha ha e he eu o o USD as hei signi ican cu ency. In ecen yea s, se e al o he No dic banks
ha e also been equi ed o mee speci ic LCR equi emen s in NOK by hei espec i e supe iso y
au ho i ies.
(1) 𝐿𝐶𝑅𝑁𝑂𝐾 = 𝐻𝑖𝑔ℎ 𝑄𝑢𝑎𝑙𝑖𝑡𝑦 𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
𝑂𝑢𝑡𝑓𝑙𝑜𝑤𝑠 − 𝑀𝐼𝑁(𝐼𝑛𝑓𝑙𝑜𝑤𝑠, 0.75 ∗ 𝑂𝑢𝑡𝑓𝑙𝑜𝑤𝑠) ≥50 %,
A all in s uc u al liquidi y educes banks’ LCR a ios. When s uc u al liquidi y alls, banks lose
deposi s on he liabili y side and cen al bank ese es on he asse side. In isola ion, he loss o
deposi s leads o a s eng hening o banks’ LCR. This is because deposi s ha e a un-o ac o in
LCR o be ween i e and one hund ed pe cen , depending on he ype o deposi . When banks
lose deposi s, ou lows a e educed and he e o e also he denomina o in banks’ LCR. The all in
he denomina o will be g ea e he highe he un-o ac o is o he deposi s ha banks lose. A
he same ime, he nume a o in bank’s LCR alls as banks lose ese es ha a e included as a
liquid asse in he LCR wi h a weigh ing o one hund ed pe cen . Since he deposi s he bank loses
a e mul iplied by a un-o ac o o be ween i e and one hund ed pe cen , he nume a o will
usually all mo e han he denomina o in he banks’ LCR when s uc u al liquidi y alls, educing
he LCR.
2
F-loans will no no mally help banks main ain hei LCR when s uc u al liquidi y alls, since he
colla e al hey p o ide in F-loans is essen ially he same as hose app o ed as liquid asse s in he
LCR. Banks can eplace he ese es hey lose in he e en o a all in s uc u al liquidi y wi h F-
loans bu mus hen deduc colla e al p o ided in he calcula ion o liquid asse s in he LCR. Banks
may o some ex en pledge secu i ies ha a e no included in he NOK-LCR as colla e al o F-
loans, such as hei own co e ed bonds o secu i ies denomina ed in o eign cu ency. Howe e ,
i he F-loans ma u e wi hin 30 days, he ules a e designed so ha banks mus ake in o accoun
epaymen in he o m o ese es a ma u i y o he F-loan when calcula ing he limi s o he
composi ion o he liquidi y bu e , i.e. he unwinding mechanism. This means ha banks’ holdings
o Le el 1A asse s in he LCR may ac as a cons ain on how much banks can bo ow in F-loans,
e en i hey do no use hese o bo ow om No ges Bank.
When s uc u al liquidi y alls, banks can main ain hei LCR in NOK and inc ease he p edic abili y
o hei own liquidi y posi ion by ob aining NOK agains o eign cu ency in FX swaps a ma u i ies
exceeding 30 days. The ma ke o NOK FX swaps is he la ges and mos liquid pa o he
No wegian money ma ke (see S iansen (2022)). No mally, a all in s uc u al liquidi y leads o a
ise in he implied in e es a e on bo owing NOK in he FX swap ma ke . In addi ion, he
unwinding mechanism may en ail ha banks a e less able o o e NOK a ma u i ies o less han
30 days when s uc u al liquidi y becomes e y nega i e.
3
Fo example, a eco d-high pe oleum
ax paymen in he au umn o 2022 con ibu ed o s uc u al liquidi y alling o a his o ically low
le el. This led o a subs an ial ise in he sho es - e m No wegian money ma ke a es (see Huse,
2
As an example, i s uc u al liquidi y alls by 100, liquid asse s (nume a o ) will all co espondingly. Banks
will lose deposi s o 100, which a e included unde ou lows in he denomina o mul iplied by a un-o
ac o . Fo example, i he a e age un-o ac o is 50 pe cen , he denomina o will all by 50 and he LCR
will all.
3
A le e om No ges Bank o he Minis y o Finance on he ea men o No ges Bank’s F-loans in he
LCR da ed 9 Feb ua y 2024 is a ached o he epo o he wo king g oup (see Minis y o Finance
(2024a)).
Pe e sen and Sæ a eid (2023)). Money ma ke p emiums wi h somewha longe ma u i ies also
ose ma kedly.
A low long- e m le el o s uc u al liquidi y inc eases he isk ha la ge paymen s o he
go e nmen will ha e a subs an ial impac on sho - e m money ma ke a es and he eby a ec ing
he a ainmen o No ges Bank’s liquidi y policy objec i es.
3. Decomposi ion o s uc u al liquidi y
3.1 The pe oleum und mechanism and o he public sec o paymen s
The go e nmen ’s ne cash low om pe oleum ac i i ies (pe oleum e enues) is ei he used o
co e he non-oil budge de ici o sa ed in he Go e nmen Pension Fund Global (GPFG). I
pe oleum e enues a e la ge han he non-oil de ici , he excess is alloca ed o he GPFG, and i
pe oleum e enues a e smalle han he de ici , unds a e wi hd awn om he GPFG. The
pe oleum und mechanism is he sys em ha channels pe oleum e enues o spending o
sa ing.
Pe oleum e enues consis o e enues om he go e nmen ’s own oil company in o eign
cu ency ( he S a e’s Di ec Financial In e es (SDFI) e enues) and pe oleum axes and
di idends om Equino in NOK. SDFI e enues a e sold on an ongoing basis o No ges Bank’s
pe oleum bu e po olio. The ans e o he GPFG is gi en by:
(2) 𝑇𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑠 𝐺𝑃𝐹𝐺 = 𝑆𝐷𝐹𝐼 + 𝑝𝑒𝑡𝑟𝑜𝑙𝑒𝑢𝑚 𝑡𝑎𝑥𝑒𝑠 𝑎𝑛𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 + 𝑛𝑜𝑛 𝑜𝑖𝑙 𝑑𝑒𝑓𝑖𝑐𝑖𝑡
The go e nmen ’s need o o eign cu ency o ans e s o he GPFG is co e ed by FX pu chases
om No ges Bank on behal o he go e nmen and is gi en by:
(3) 𝐹𝑋 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 𝐺𝑃𝐹𝐺 = 𝑇𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑠 𝐺𝑃𝐹𝐺 − 𝑆𝐷𝐹𝐼
Al e na i ely, he abo e equa ions can be combined and FX pu chases exp essed as:
(4) 𝐹𝑋 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 𝐺𝑃𝐹𝐺 = 𝑃𝑒𝑡𝑟𝑜𝑙𝑒𝑢𝑚 𝑡𝑎𝑥𝑒𝑠 𝑎𝑛𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 + 𝑛𝑜𝑛 𝑜𝑖𝑙 𝑑𝑒𝑓𝑖𝑐𝑖𝑡
Equa ion (4) shows ha he o eign exchange pu chases co espond o he go e nmen ’s su plus
o de ici in NOK. I pe oleum axes and di idends exceed he non-oil de ici , hen No ges Bank
sells NOK on behal o he go e nmen and ice e sa i he pe oleum axes a e less han he
non-oil de ici .
Cha 3.1: Pe oleum und mechanism when pe oleum e enues in NOK exceed he non-oil de ici
Cha 3.1 illus a es he pe oleum und mechanism when pe oleum e enues in NOK exceed he
non-oil de ici , as has been he case in ecen yea s. Paymen o pe oleum axes and di idends
om Equino o he go e nmen d ains liquidi y om he banking sys em, and ne paymen s om
he go e nmen , which in o al will equal he non-oil de ici , supply liquidi y o he banking sys em.
No ges Bank sells excess pe oleum e enues in NOK and pu chases o eign cu ency o he
pe oleum bu e po olio o ans e o he GPFG. The o eign exchange pu chases supply
liquidi y o he banking sys em and a e planned and smoo hed e enly o e he yea . The liquidi y-
d aining e ec om pe oleum axes and di idends is, in p inciple, ully o se by liquidi y p o ision
om he go e nmen ’s non-oil de ici and o eign exchange pu chases. This means ha he
pe oleum und mechanism has a neu al e ec on s uc u al liquidi y o he banking sys em
(liquidi y neu ali y). Box 1 illus a es he pe oleum und mechanism and liquidi y neu ali y using
a nume ical example.
has allen by NOK 14bn. When banks sell no es and coins back o No ges Bank, banks’ deposi
accoun s wi h he cen al bank a e c edi ed and s uc u al liquidi y ises (Cha 3.5). Fu he mo e,
No ges Bank’s own o eign exchange ansac ions ha e educed s uc u al liquidi y by NOK 3.5bn.
The amoun is en i ely de i ed om in e en ions in he o eign exchange ma ke in he sp ing o
2020, when No ges Bank bough NOK and sold o eign exchange o imp o e he unc ioning o
he No wegian k one ma ke . When No ges Bank buys NOK om banks, banks pay by d awing
on hei deposi s in he cen al bank, and s uc u al liquidi y alls. Since 2010, T easu y bills
ou s anding ha e allen by NOK 2.5bn. In o al, ne in lows om bankno es and coins, No ges
Bank’s o eign exchange ma ke in e en ions and T easu y bills amoun ed o NOK13 bn since
2010, which is a e y small sha e o he o al change in s uc u al liquidi y compa ed wi h he e ec
om o he componen s.
Cha 3.5: Bankno es and coins, No ges Bank’s own o eign exchange ansac ions and T easu y
bills. Cumula i e liquidi y e ec . 2010-2023. In billions o NOK
Sou ce: No ges Bank
3.4 Decomposi ion o changes in s uc u al liquidi y
Cha 3.6 shows he cumula i e change in s uc u al liquidi y since 2010 b oken down by
con ibu ion om he a ious componen s discussed in he sec ions abo e. Toge he , he
componen s cons i u e he cumula i e change in s uc u al liquidi y. The cha shows ha he long-
e m le el o s uc u al liquidi y was a i s highes in 2014, when i was close o NOK 60bn abo e
he 2010-le el. In 2020, he le el was a i s lowes , close o NOK 50bn below he 2010-le el. In
he pe iod o 2014, ce ain delibe a e choices by he go e nmen o educe cash holdings
con ibu ed o an inc ease in s uc u al liquidi y. Since 2020, insu icien ans e s o he GPFG and
associa ed o eign exchange ansac ions ha e con ibu ed o educing he le el o s uc u al
liquidi y. In 2022, he ex ao dina y e e sal o he GPFG con ibu ed in he opposi e di ec ion. In
addi ion, planned d awdowns on cash holdings and highe g ow h in loans om s a e banks han
g ow h in ou s anding go e nmen bonds led o an inc ease in s uc u al liquidi y in 2023.
-25
-20
-15
-10
-5
0
5
10
15
20
-25
-20
-15
-10
-5
0
5
10
15
20
2010 2012 2014 2016 2018 2020 2022
Bankno es and coins
No ges Bank's own FX ansac ions
T easu y bills
Ne
Changes in he long- e m le el o s uc u al liquidi y a e o impo ance bo h o banks and No ges
Bank. In pe iods when he long- e m le el o s uc u al liquidi y is low, such as in he yea s 2020-
2022, he lowes le el wi hin he yea will, all else equal, be lowe han in pe iods when he long-
e m le el is highe . No ges Bank will always p o ide liquidi y h ough ma ke ope a ions in he
o m o F-loans o b ing he le el o o al liquidi y o he a ge o be ween NOK 30bn and 40bn.
Howe e , i ma e s o banks whe he liquidi y is p o ided ia F-loans o s uc u ally (see Sec ion
2).
Cha 3.6: Decomposi ion o s uc u al liquidi y. Cumula i e liquidi y e ec . 2010-2023. In billions
o NOK
Sou ce: No ges Bank
4. S uc u al liquidi y in he yea s ahead
Agains he backd op o he money ma ke u bulence in au umn 2022, he Minis y o Finance
appoin ed a wo king g oup in 2023 o examine go e nmen ansac ions and hei impac on he
money ma ke . In Ap il 2024, he wo king g oup published i s epo . The epo con ained se e al
ecommenda ions ha , i implemen ed, will a ec s uc u al liquidi y in he yea s ahead. Cha 4.1
shows he cumula i e change in s uc u al liquidi y and he a ious componen s since 2010,
including echnical p ojec ions o he end o 2024, 2025, 2026 and 2027, aking in o accoun he
i s -hand e ec s o he wo king g oup's ecommenda ions. The p ojec ions hus no ake in o
accoun any po en ial balance shee adjus men s om No ges Bank.
The wo king g oup ecommends e u ning insu icien p o isions om he go e nmen ’s accoun
o he GPFG, amoun ing o NOK 82.1bn. The Re ised Na ional Budge o 2024 s a es ha he
Go e nmen will p opose in he 2025 iscal budge ha hese unds be e u ned o he GPFG in
2025 (see Minis y o Finance (2024c)). I he e e sal is ca ied ou in 2025, he go e nmen ’s
need o o eign exchange o alloca ions o he GPFG will inc ease by NOK 82.1bn, all else equal.
Fo eign exchange pu chases on behal o he go e nmen will also inc ease co espondingly. In
2025, NOK sales unde “ne go e nmen ansac ions e c.” will hus add NOK 82.1bn. In addi ion,
he wo king g oup ecommends in oducing an au oma ic mechanism ha co ec s e oneous
ans e s o he GPFG ela ed o disc epancies be ween he p ojec ed and ealised non-oil de ici s
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1) Ne go e nmen ansac ions e c.
2) Ne go e nmen bo owing
3) O he
4) S uc u al liquidi y = 1) +2) +3)
in he ollowing yea . I he ecommenda ion is ca ied ou , he pe oleum und mechanism will be
liquidi y-neu al o e a pe iod o wo yea s.
In addi ion, he Minis y o Finance has decided o cease neu alising ans e s om No ges Bank
o he go e nmen , which means ha he go e nmen ’s use o he ans e s o e he budge is no
longe ma ched by liquidi y d ain om go e nmen bond issuances. This en ails liquidi y
p o isioning co esponding o he in e es and di idends ans e ed om No ges Bank o he
go e nmen each yea om 2025 onwa ds. The p ojec ions assume ha ans e s in 2025 o 2027
co espond o NOK 25bn each yea , which is equal o he a e age o ans e s in 2022, 2023 and
he es ima e o ans e s in 2024. In he yea s 2024-2027, “ne go e nmen ansac ions e c.” will
hus con ibu e liquidi y equi alen o abou NOK 160bn
9
(see da k blue b oken line in Cha 4.1).
In Go e nmen Deb Managemen ’s S a egy and bo owing p og amme o 2024, d awdowns on
cash holdings a e planned o be ween NOK 11.4bn and 21.4bn. The p ojec ion in Cha 4.1
assumes he midpoin o close o NOK 16bn o 2024. As discussed ea lie , ou s anding
go e nmen deb has inc eased less han he bo owing equi emen o e ime, sugges ing
go e nmen deb bo owing will ha e a es ic i e e ec on s uc u al liquidi y in he pe iod ahead.
Acco ding o he wo king g oup’s epo , go e nmen deb bo owing is expec ed o d aw in some
liquidi y in he yea s ahead o ake accoun o he liquidi y supply in 2023 (see Minis y o Finance
(2024a)). O he conside a ions besides liquidi y neu ali y a e also made in he managemen o
go e nmen deb , including p edic abili y o bo owing olumes and well- unc ioning go e nmen
secu i ies ma ke s. Bo owing ahead is no ye known and will be published in he bo owing
p og ams in he coming yea s. As a echnical assump ion, i is he e o e assumed ha go e nmen
bo owing in he yea s 2025-2027 has a neu al e ec on liquidi y
10
.
9
T ans e s om he go e nmen ’s accoun o he GPFG in 2025 o NOK 82.1bn + non-neu alised
ans e s o NOK 25bn each yea om 2025 = NOK 157.1bn in he pe iod.
10
The bo owing o he ollowing yea is announced each yea in he “S a egy and Bo owing
P og amme”. The au ho s ha e no knowledge o Go e nmen Deb Managemen 's assessmen s o
bo owing ahead.
Cha 4.1: Decomposi ion o s uc u al liquidi y wi h echnical p ojec ion. Cumula i e liquidi y e ec .
Ac ual igu es in he pe iod 2010-2023. P ojec ions om 2024 - 2027
11
. In billions o NOK
Sou ce: No ges Bank
O e all, de elopmen s in he componen s discussed abo e mean ha s uc u al liquidi y will
inc ease by close o NOK 170 bn
12
in he pe iod be ween end-2023 and end-2027, o a le el
exceeding NOK 200bn, all else equal (see also Cha 1). This means ha s uc u al liquidi y wi hin
he yea will luc ua e a ound a g adually highe le el he coming yea s. No ges Bank aims o keep
o al liquidi y in he banking sys em close o NOK 35bn. This means ha No ges Bank will ha e o
o e liquidi y-abso bing ma ke ope a ions in he o m o F-deposi s o a g ea e ex en han be o e
in o de o d aw in excess liquidi y om he banking sys em. Rega dless o whe he he deposi s
a e un es ic ed o ixed- e m deposi s, banks’ LCR will imp o e. This will likely lead o lowe
money ma ke isk p emiums.
13
14
Beyond he sho es ma u i ies, No ges Bank aims o in luence
isk p emiums in he money ma ke as li le as possible. A subs an ial inc ease in s uc u al liquidi y
may hus make he ade-o s in he liquidi y managemen mo e challenging. Following he
publica ion o he wo king g oup’s epo , No ges Bank announced ha i will assess whe he he e
is a need o changes o he liquidi y policy o o he balance shee once he decision has been
made on how o ollow up he wo king g oup’s ecommenda ions.
11
The p ojec ions assume ha he pe oleum und mechanism will be liquidi y-neu al in he pe iod ahead.
12
NOK 157bn, c oo no e 9 + planned d awdown on cash holdings o NOK 16bn in 2024 = NOK 173bn
o he pe iod.
13
See also S iansen (2024).
14
The o wa d p icing o he Nibo p emium ell somewha when he wo king g oup’s epo was published.
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1) Ne go e nmen ansac ions
2) Ne go e nmen bo owing
3) O he
4) S uc u al liquidi y = 1) +2) +3)
e c.
5. Summa y
The le el o s uc u al liquidi y is impo an o he a ainmen o liquidi y policy objec i es. Owing
o he in oduc ion o he LCR equi emen in NOK, s uc u al liquidi y is likely mo e impo an o
money ma ke p emiums han p e iously. Low s uc u al liquidi y inc eases he isk ha la ge
paymen s o he go e nmen will ha e a subs an ial impac on sho - e m money ma ke a es. On
he o he hand, high s uc u al liquidi y s eng hens banks’ liquidi y and he eby in luences money
ma ke liquidi y p emiums.
His o ically, s uc u al liquidi y has luc ua ed somewha bu a e aged sligh ly abo e ze o, p ima ily
e lec ing de ia ions om liquidi y neu ali y in go e nmen ansac ions. In au umn 2022, a eco d-
high pe oleum ax paymen led o u moil in he money ma ke . A wo king g oup was he e o e
appoin ed o look a he go e nmen ansac ions and he impac on he money ma ke . In he
sp ing o 2024, he wo king g oup published i s epo wi h a numbe o speci ic ecommenda ions.
I he ecommenda ions a e adop ed, all else equal, one consequence, will be a highe le el o
s uc u al liquidi y. No ges Bank has s a ed ha i will assess whe he he e is a need o
adjus men s o he liquidi y policy o o he balance shee once i has been cla i ied which o he
ecommenda ions will be adop ed.
6. Re e ences
Minis y o Finance (2024a). “Recommenda ions om he wo king g oup on go e nmen
ansac ions and he money ma ke ”. Recommenda ions om he wo king g oup on go e nmen
ansac ions and he money ma ke - egje ingen.no
Minis y o Finance (2024b). Le e o No ges Bank – Lik idi e s i kningen a s a sbudsje e [The
liquidi y e ec o he cen al go e nmen budge ].
h ps://www. egje ingen.no/con en asse s/23d0891 60b145 b92a132ec76de49cb/b e - il-no ges-
bank-lik idi e s i kningen-a -s a sbudsje e .pd (in No wegian only)
Minis y o Finance (2024c). P oposi ion 104 S (2023-2024). Tilleggsbe ilgninge og
omp io i e inge I s a sbudsje e 2024 [Addi ional alloca ions and ep io i isa ion in he 2024
na ional budge ]. h ps://www. egje ingen.no/no/dokumen e /p op.-104-s-20232024/id3039096/
(in No wegian only)
Hagen and S iansen (2023). “Does s uc u al liquidi y ha e a g ea e impac on he Nibo p emium
han ea lie ?”. No ges Bank S a Memo 14/2023. h ps://www.no ges-bank.no/en/news-
e en s/news-publica ions/Pape s/S a -Memo/2023/sm-14-2023/
Huse, Pe e sen and Sæ a eid (2023). “The u bulence in he No wegian money ma ke in au umn
2022”. No ges Bank S a Memo 15/2023. URL: The u bulence in he No wegian money ma ke
in au umn 2022 (no ges-bank.no)
No ges Bank (2021). “No ges Bank's liquidi y policy: P inciples and design” No ges Bank Pape s
3/2021. No ges Bank’s liquidi y policy: p inciples and design (no ges-bank.no)
No ges Bank (2024). “Repo om he Minis y o Finance on go e nmen ansac ions”. News
i em. No ges Bank. Repo o he Minis y o Finance on go e nmen ansac ions (no ges-
bank.no)
S iansen (2022). "De no ske pengema kede ” [The No wegian money ma ke ]. No ges Bank S a
memo 4/2022. De no ske pengema kede (no ges-bank.no) (in No wegian only)
S iansen (2024). “Ni åe på s uk u ell lik idi e og måloppnåelsen i lik idi e ss y ingen” [The le el
o s uc u al liquidi y and pe o mance o liquidi y managemen ]. P esen a ion a No ges Bank's
Ma ke Semina 2024. Ma kedssemina 2024 (no ges-bank.no)
S o (2023). “H o gode e s a sbudsje e s anslag o s a ens lånebeho ?” [How accu a e a e
he cen al go e nmen budge ’s es ima es o he go e nmen ’s bo owing equi emen ?]. No ges
Bank Go e nmen Deb Memo 2/2023. H o gode e s a sbudsje e s anslag o s a ens
lånebeho ? (no ges-bank.no)(in No wegian only)
