Increased borrowing by households
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 accountsQ3 2007



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Increased borrowing by households

Households and non-profit institutions serving households increased their borrowing in the third quarter of 2007. Net incurrence of liabilities in the last four quarters rose by NOK 9 billion to NOK 202 billion.

Household net lending and change in net financial assets over the last four quarters. NOK billion. Net assets as ratio of disposable income.

The debt growth in the third quarter of 2007 can mainly be explained by increased borrowing

in banks and state lending institutions together with growth in other debt. Insurance technical reserves have in the last quarters dominated the development of net lending. Appropriations to insurance technical reserves in the third quarter of 2007 were considerably higher than in the same quarter the year before, while the appropriations in the first and second quarter of 2007 were considerably lower than in the same quarters of 2006.

Household net lending in the four quarters to the end of the third quarter of 2007 was NOK -73.5 billion. The falling trend has come to a halt for the time being and the development in net lending has levelled out during the last three quarters.

Other changes in assets, which mainly comprise holding gains, have increased the value of household financial assets by NOK 93.8 billion. In total, household net financial assets increased by NOK 20.3 billion over the last four quarters and household net financial assets totalled NOK 448.9 billion at the end of the third quarter of 2007.

Local government increases borrowing and draws on bank deposit

The financial accounts for local government show a fall in net lending from NOK -3.9 billion in the previous four quarters period to NOK -12.6 billion in the four quarters to the third quarter of 2007. Net lending showed a growing trend from the second quarter of 2003, but this development reversed from the fourth quarter of 2006. However, the development in the three quarters to the third quarter of 2007 shows a huge decline in net lending.

The fall in net lending in the last four quarter period is due to decreased bank deposits and increased borrowing. Local government borrowed NOK 17.6 billion in mortgage companies in the four quarters to the third quarter of 2007 compared to NOK 16.3 billon in the previous four-quarter period. At the same time, local government’s bank deposit dropped by NOK 2.5 billion in the third quarter of 2007. Local government debt totalled NOK 324.8 billion at the end of the third quarter of 2007.

Net lending abroad rose in third quarter

Norway's net foreign assets were calculated to NOK 1 320 billion at the end of the third quarter of 2007, which is a decrease of NOK 29 billion from the previous quarter. The decrease is attributable to net holding losses of NOK 129 billion and net lending in the rest of the world of NOK 100 billion. The fall in net foreign assets is mainly due to losses on foreign financial assets and liabilities held by domestic sectors caused by currency exchange rate developments. Net lending in the rest of world rose by NOK 22 billion during the third quarter of 2007.

Financial accounts for households and non-profit institutions serving households. NOK billion
  3. quarter 2005 4. quarter 2005 1. quarter 2006 2. quarter 2006 3. quarter 2006 4. quarter 2006 1. quarter 2007 2. quarter 2007 3. quarter 2007
Financial assets 1 970 2 021 2 089 2 109 2 134 2 234 2 278 2 345 2 361
Liabillities 1 526 1 581 1 612 1 668 1 706 1 770 1 795 1 867 1 913
Net financial assets/net financial wealth  444  440  476  440  429  464  483  478  447
  Sum over the last four quarters
Change in net financial assets / net financial wealth 78 69 65 15 -15 24 7 37 19
Other changes 51 22 52 44 39  106 87  128 92
Net lending 27 47 13 -29 -54 -82 -80 -91 -73

Reinvested dividends

Dividend tax for private shareholders was introduced on 1 January 2006. The tax reform initiated huge tax-motivated transactions which have dominated the main pictures in the financial accounts for households and non-profit institutions serving households, especially from 2002. Until the end of 2005, private owners withdrew extraordinarily high dividends with the intention of relocating acquired equity (object for taxation according to new tax rules), inter alia in the form of investments in shares (paid in equity) and loans to unlisted enterprises. After the new tax regime took effect, the payment of extraordinarily high dividends has come to an end. From 2006 onwards, share capital and share premium accounts have been redeemed and paid out to private owners as an alternative to dividends. We have assumed that shareholders have taken out a substantial part of the share capital that was previously ploughed back into the business.

Estimates for reinvested dividends and redeemed share capital are incorporated in the financial accounts. The estimates are based on accounting statistics for limited companies, tax return account statistics and share statistics (see ssb.no). The treatment of unquoted shares in the financial accounts is affected by the general lack of precise information. This leads to significant uncertainty in the computation of transactions and stocks of shares in the financial accounts.

Deviations between financial accounts and source statistics

Financial accounts are based on a list of different statistical sources and among these are accounting statistics for financial corporations and general government. The financial accounts differ from the accounting statistics due to the incorporation of market values in financial accounts and the compilation process in FINSE, which comprises several reconciliation procedures and consistency checks that may change the source statistics.

Statistical discrepancies between financial and non-financial accounts

The link between non-financial and financial accounts is represented by the balancing item “net lending/net borrowing”. In theory, net lending derived from non-financial accounts should be identical to net lending derived from financial accounts. However, experience shows that there are significant discrepancies between the two parts of the accounting system. Net lending is a marginal balancing item which is calculated on the basis of large aggregates. Even relatively small errors in these aggregates may cause significant discrepancies in net lending. The observed discrepancies are caused by flaws and shortcomings in both sets of accounts. Among other factors this is due to lack of information, which has to be replaced by estimates. Examples of the problem addressed in the financial accounts are unquoted shares together with households and NPISH claims towards the rest of the world and non-financial corporations.


A . Non - financial account / National accounts , institutional sectors .

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

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 assets - net incurrence of liabilities

If savings exceed non-financial investments, a sector has surplus of funds and becomes a net lender to other sectors. In the financial transaction account, this means that the sector acquire more financial assets than liabilities. On the other hand, if savings are less than non-financial investments, investments have to be funded 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 assets - total 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.