Risk Outlook – December 2025

Economic growth has remained strong so far in 2025, both in Norway and internationally, despite geopolitical changes and increased tariffs.

”Heightened international tensions and uncertainty about the impact of shifts in trade policy contribute to elevated geopolitical and real economic risks. The higher level of tension has also raised awareness of digital vulnerabilities and the risk of systemic cyber incidents,” says Finanstilsynet’s Director General, Per Mathis Kongsrud.

Share indices have risen to new record highs, largely due to the share price performance of companies within technology, especially artificial intelligence. High valuations of shares and other capital assets, combined with generally low risk premiums, entail a risk of sudden and significant price corrections. The strong growth in stablecoins and other crypto assets creates new vulnerabilities in the financial system.

Norwegian households' debt burden has decreased in recent years but is still at a high level, both historically and compared to other countries. Finanstilsynet's 2025 residential mortgage lending survey shows that the average loan-to-value (LTV) ratio for new residential mortgages has increased, and there is a clear shift of loans towards the new requirement in the Lending Regulations for a maximum LTV ratio of 90 per cent for instalment loans.

”Experience from previous crises shows that it can be particularly challenging to deal with incidents that are compounded by or originate from imbalances in the domestic economy. High debt burdens and LTV ratios elevate the risk for both the borrower and the lender,” says Kongsrud.

Property development companies are facing growing challenges. Finanstilsynet's analyses show that property development companies with high bankruptcy risk account for an increasing share of debt, and many of these have weak debt servicing capacity. This may indicate that the risk of losses on loans to these companies has increased. Some property development companies have already caused significant loan losses for individual banks.

”Our analyses show that the risk within property development has increased. Lending to this industry represents a substantial share of Norwegian banks’ corporate portfolios and, after real estate activities, is the industry to which the banks are most heavily exposed,” says Kongsrud.

Norwegian banks are profitable, well capitalised and competitive. Since the banks started raising interest rates in 2022, higher net interest income has been the main contributor to the strong results. There has been a substantial increase in banks’ deposit spread, which is significantly higher than in the period prior to the interest rate hike. Losses on loans are still low. Compared to banks in the Nordic countries and Europe, Norwegian banks maintain strong profitability and solvency, and their return on equity has surpassed that of Swedish and Danish banks over the past two years.

The banks meet the regulatory capital requirements by a margin. Changes to the capital adequacy framework (CRR3) in 2025 have given a reduction in risk-weighted assets for banks using the standardised approach, resulting in an increase in their measured capital adequacy ratios. For banks using internal models for calculating risk weights (IRB approach), the combined effect of changes in CRR3 and the increased risk weight floor for residential mortgages is somewhat stricter capital requirements. The effect on the common equity Tier 1 capital ratio varies by ± one percentage point for the IRB banks.

”Banks' ability to bear losses and provide new loans to creditworthy customers during downturns requires that they have sufficient equity. In order to maintain the solvency of the Norwegian banking sector, it is important that banks retain an adequate margin above the regulatory requirements,” says Kongsrud.

Norwegian insurers and pension funds have a satisfactory solvency position and strong profitability, although reduced investment income contributed to weakening the results for the first three quarters of 2025 compared to the same period of the previous year. There was a rise in non-life insurers' operating profits.

During the transition to defined-contribution occupational pension schemes, members have increasingly had to choose allocation and bear the return risk themselves, while individual investment products have shown significant growth during the period. The undertakings are responsible for helping customers make informed decisions, in addition to safeguarding their interests during the management process.