Still an uncertain Financial Market

After the financial crisis was triggered in the USA before Christmas, it became a sport to prove that one had predicted it would happen. Still, it is uncertain how big the crisis has been as well as the consequences for the real economy.

22.05.2008 - Eva Melvær Langaas (translated by Jessica Hartenberger)

Emil Steffensen, departmental director for Finance and Insurance at the Financial Supervisory Authority (Kredittilsynet), made these remarks during his introduction at the spring conference on Tuesday. However, he will not conclude that the Authority is therefore superfluous.

"We can see and point out where the vulnerability is, but we cannot say what causes a crisis," said Steffensen to a full auditorium.

Expensive Living

It was the many mortgages in the USA which homeowners could not pay that triggered the crises at the American banks, a crisis which quickly spread to financial markets all over the world. In Norway, we have been minimally affected by the crisis, from the banks' standpoint. However, Terra-communes were worse off.

"None of the Terra-banks bought the products that Terra Securities sold to the people in the north of Norway," says Steffensen, as an example of how Norwegian banks act reasonably and avoid the most risky investments.

Even if he has heard of banks that do not consider corporate debt in their evaluation of a loan owner's ability to pay, which may have been a cause for the increase in housing prices.

"Low interest rates on loans has attributed to the increase in prices which may have affected the equilibrium," stresses Steffensen. He thinks that both standard interest rates and interest differentials for home loans will increase from now on, making it even more expensive to secure such a loan.

RESEARCH PERSPECTIVE. Aksel Mjøs from SNF comments on Ellingsen's analysis.

Foto: Trond Hansen

Trust Problems in the Finance Arena

For the finance arena, Steffensen also predicts that there will be less money in times to come.

"The global upturn is over and this will also affect the Norwegian finance arena," thinks Steffensen.

Both in Norway and in the rest of the world, the lack of trust in the finance arena is now one of the biggest problems. Monica Salthella, CEO at Formuesforvaltning Vest thinks that the new requirements for the finance arena MiFID can rebuild trust. The new rules include, among others, obligation to obtain a licence for advisors.

"The problem up until now has been that the people who sell these kinds of products have been less and less professional than the clients," says Salthella. She continues, "The new requirements are some of the most important things that have happened in current times."

Aksel Mjøs, researcher at SNF agrees that trust is crucial for the arena.

"We cannot slip away from the foundational problem of information symmetry; here, it is as if the things we do not know can hurt us."