The rapid rebound in oil prices and a weaker krone provided a boost to the economy. The interest rate was lowered sharply to a historically low level and public spending increased markedly. The downturn was milder than we had expected when the interest rate was reduced – partly because oil prices proved to be higher than expected and partly because the policy measures were more effective than we had dared to assume. Therefore, we now expect to raise the policy rate at a gradual pace back to more normal levels. The emerging economies were hardest hit by the global crisis in the late 1990s. This time OECD countries were the most severely affected. But Norway largely escaped both crises. Overall, output fell less in Norway than in other countries and is recovering more quickly. Unemployment has remained low. 1  4  IMF Country Report No. 10/24. Norway: Staff Report for the 2009 Article IV Consultation. BIS Review 44/2010  Norway is not unique We cannot expect underlying forces to be as beneficial in the future. Real interest rates cannot be expected to fall. Another sharp boost to export prices is not likely. In addition, there are vulnerabilities in the Norwegian economy. Labour has never been as costly, and businesses may be at a disadvantage in tenders and competitions given the current high level of spare capacity in other countries. Moreover, it has never been more profitable to relocate activities abroad.
Situations may take unexpected turns. In the face of such uncertainties, being prepared and ready is always a good proposition. 2  BIS Review 74/2007  Reputation risk and fair dealing with consumers Moving on from macroeconomic and financial risks to something closer to home, there is another risk which banks should remain mindful of. Unlike the other risks I had raised earlier, this is a risk which is fully within your bank’s domain. This is reputation risk. You all appreciate the value of a good reputation in doing business. A good reputation takes years to build. It can also be damaged within a short period of time through incidents that undermine consumer confidence and that are not managed properly. You have read the newspaper articles in recent months concerning public unhappiness and questions about the transparency and fairness of practices concerning multiple home loan board rates and promotional fixed deposit rates. You might have asked yourself why these issues should concern you as they may not pose any significant impact on the financial standings of your banks. While of limited short term bottom-line impact, these issues can affect the longer term reputation of and consumer confidence in your banks. The internet has empowered consumers with unprecedented reach. A disgruntled customer can post his or her unhappiness on a forum or blog and quickly reach a wide audience. It has become more important for banks to incorporate good and fair consumer outcomes as integral parts of the way they do business.