Large fall in household net lending
National accounts and business cycles
finsek, Financial accounts, financial investments, households and non-profit organisations, general government, abroad, balance sheets, FINSEFinancial accounts , National accounts and business cycles

Financial accountsQ4 2006



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Large fall in household net lending

The financial accounts for households and non-profit institutions serving households were characterised by a high level of borrowing and decreasing investments in financial assets in the fourth quarter of 2006. This has led to a substantial fall in net lending for the third consecutive quarter.

Household net lending was NOK -20.6 billion in the fourth quarter of 2006 compared with NOK 1.7 billion in the fourth quarter of 2005. Net lending fell to NOK -60.9 billion in 2006, a drop of NOK 91.4 billion from 2005. Net holding gains contributed to the increase in the value of household financial assets by approximately NOK 70 billion in 2006. Revised input statistics for securities were incorporated in the last quarter and thus the household security portfolio was adjusted upwards by approximately NOK 22 billion. Changes in net financial assets totalled NOK 31.2 billion and household net financial assets were estimated to NOK 459.1 billion at the end of 2006.

The decline in net lending is mainly explained by a significant fall in household investments in shares and loans to unlisted companies. Until the end of 2005 there was a high level of such investments and they were financed by extraordinarily high share dividends. Dividend tax for shareholders was introduced in 2006 and the payment of extraordinarily high dividends has now come to an end. Reduced investments in financial assets can also be explained by the net sale of quoted shares, shares in unit trusts and bonds during 2006.

Growth in local government bank deposits

The financial accounts for local government show an increase in net lending from NOK -3.9 billion in 2005 to NOK 5 billion in 2006. Net lending has shown a growing trend from the second quarter of 2003. The investments in financial assets continued to increase from the third quarter to the fourth quarter of 2006. Bank deposits in particular contribute to net lending in 2006, but the local government sector also acquired shares in unit trusts during the last year.

Total local government debt is estimated to about NOK 305.5 billion at the end of 2006. Net debt accumulation was NOK 15.1 billion in 2006, compared with NOK 19 billion in 2005.

Holding gains on shares owned by foreigners

Norway's net foreign assets were calculated to NOK 1 394 billion at the end of 2006, an increase of NOK 265 billion compared to 2005(1). The increase can be explained by net lending in the rest of the world of almost NOK 385 billion and net holding losses of NOK 120 billion.

Increasing share prices at Oslo Børs is an important factor behind the development, and resulted in holding gains on domestic shares owned by foreigners of approximately NOK 140 billion in the fourth quarter of 2006 to NOK 880 billion in total by the end of the year. Shares listed on Oslo Børs amounted to NOK 631 billion, which constitutes an owner interest of about 36 per cent. Foreigners also bought domestic shares for nearly NOK 15 billion in the fourth quarter of 2006, the majority of which were bought in unlisted companies.


Financial accounts for households and non-profit institutions serving households. NOK billion
  1. quarter 2005 2. quarter 2005 3. quarter 2005 4. quarter 2005 1. quarter 2006 2. quarter 2006 3. quarter 2006 4. quarter 2006
  Stocks, end of quarter
Financial assets 1 819 1 890 1 941 2 005 2 075 2 095 2 123 2 221
Liabillities 1 425 1 486 1 522 1 577 1 608 1 664 1 702 1 761
Net financial assets / net financial wealth  395  405  420  428  467  431  421  459
  Sum over the last four quarters
Change in net financial assets / net financial wealth 27 40 56 62 73 26 2 31
Other changes 13 20 40 31 56 48 40 92
Net lending 15 19 16 30 17 -22 -39 -61

Concepts in capital and financial accounts

The link between non-financial and financial accounts is established by the balancing item “net lending/net borrowing”. In theory, net lending derived from capital account should be identical to net lending derived from financial accounts. However, experience shows that significant discrepancies occur between the two parts of the accounting system.

A. Capital account / National accounts, institutional sectors

Saving + net capital transfers = net acquisition of non-financial assets + net lending

Disposable income may be used either for finale consumption or savings. Savings can be invested in financial or non-financial assets.

B. Financial accounts

Net lending = net acquisition of financial assetsnet incurrence of liabilities

If savings exceed non-financial investments, a sector has a surplus of funds and becomes a net lender to other sectors. In the financial transactions account, this means that the sector acquires more financial assets than liabilities. On the other hand, if savings are less than non-financial investments, investments have to be financed either by selling financial assets or incurring debts. Household investments in non-financial assets mainly reflect the purchase of new housing and fixed investments by unincorporated enterprises. They typically finance substantial parts of these investments by incurring debt in the form of loans.

Net financial assets (net financial wealth) = total financial assetstotal liabilities

The financial balance sheet shows the financial position of a sector at the end of the reference period and is broken down into categories of financial assets and liabilities. Insurance technical reserves, currency and deposits are the predominant assets held by households, while loans provided by financial corporations (banks etc) constitute the main proportion of liabilities.

Changes in net financial asset = net lending + other change in assets, net

The change in the financial balance sheet during the reference period is a result of accumulated financial transactions and other changes in assets. The latter category mainly reflects revaluations due to changes in market prices of financial instruments.

(1) This figure may deviate somewhat from preliminary figures in the balance of payments.