Subsequently, growth in labour costs picked up, and the rise in prices for goods and services produced for the Norwegian market accelerated. The upturn peaked in 1997, with mainland GDP  BIS Review 43/2003  1  growth approaching 5 per cent. In 1997 and 1998, the economy shifted from an upturn with high growth rates to an expansion with lower growth but low unemployment, labour shortages in many sectors and strong growth in labour costs. Capacity utilisation in the mainland economy has subsequently fallen again and is now on a par with the level in the years 1995-1997, before cost inflation accelerated. The output gap has again closed. At the same time, wage growth has dropped to a more sustainable level. Labour costs rose more rapidly in Norway than among its trading partners due to the high pay increases negotiated by the social partners during the period of strong economic expansion after 1997. Until 2000, this was counteracted by the depreciation of the krone. Companies with income in foreign currency could cover the higher labour costs with the increased revenues which were a result of the weaker krone. When the krone began to appreciate, however, it did not take long before relative labour costs measured in a common currency rose sharply. Despite this development, the strong wage growth continued. This contributed to a deterioration in the exposed sector’s competitiveness. Despite a pronounced downturn among many of our trading partners last year, annual wage growth in Norway increased to 5¾ per cent.
Within the context of the exercise of the asset quality review the non-performing exposures of the banks were increased by € billion, out of which come, of course, the € billion that have to be adjusted. Another measure of the strictness of the exercise is given by the fact that the combination of the AQR with the stress test results in a drop in the median capital ratio of the banks of 4 percentage points, which is higher than in previous exercises. And in terms of billions, this means that the exercise leads to a decrease of € billion overall for all the banks, out of which € billion corresponds to the capital shortfall, meaning the banks that came below the threshold of 5.5%. But this is a measure of the strictness of the exercise that it had such an impact on the balance sheet of the banks, and it’s a usual measure of the impact of such types of exercises. But it’s also a measure of the resilience of the system because, in spite of this drop of € billion, the vast majority of banks stayed above 5.5% and were able to support such a shock, and still have a capital ratio above the threshold. And let me underline that the threshold of 5.5% is well above the regulatory minimum, because as you know the regulatory minimum for common equity capital ratio will be in 2018 4.5%, so we have chosen a more demanding threshold.