So far this year, the market capitalisation of the Oslo Stock Exchange has declined by more than 15 per cent, or more than NOK 300 billion. When the interbank market seized up, many central banks injected extra liquidity. In periods, Norges Bank has also provided additional loans to banks. This has reduced swings in interbank rates. Norwegian banks borrow dollars short in the European market for their interbank trading. Banks also borrow in foreign markets to finance lending in NOK. The banks raise foreign currency loans, which are exchanged into NOK. The premia on such loans are passed on to customers that borrow in NOK. This is why the increase in US and European premia has quickly fed through to Norwegian interest rates even though Norwegian banks are profitable, retain confidence and have limited loss exposures. In recent years, debt accumulation among Norwegian businesses and households has increased markedly. At the same time, Norwegian banks’ foreign short-term liabilities have tended upwards. The banks hedge against the exchange and interest rate risk associated with these loans. But the turbulence in the latter half of last year showed that banks cannot as readily hedge against liquidity risk. Norges Bank supplies NOK to the Norwegian banking system. In that respect, we can be generous when the markets are seized by fear and uncertainty. But when banks borrow in foreign currency, they are more on their own. Crises and turbulence are built into the workings of the market.
This time, the banks, instead of asking for financial statements, obtained alternative data from various data providers through CDI. For instance, from integrated online shopping platforms, banks learnt the amount of chilled chicken Chu Kee supplied to different supermarkets, and their value. 11. With the data, the banks understood Chu Kee’s latest operating conditions better and made credit decisions speedily. Needless to say, before the data was used and shared, prior consent from Chu Kee was obtained. In the end, Mr Chu secured a substantial loan at a competitive interest rate, and was very pleased with the hassle-free experience. 12. Now, what if I tell you that the above is based on a true story?2 Yes, during the technical exploration stage, CDI has already, in real life, helped SMEs in Hong Kong take more control of their own digital footprint, and use their own data to improve their access to financial services. Importers of chilled food and sneakers, and manufacturers of phone accessories have already enjoyed the benefits of CDI firsthand. As more and more banks and data providers join CDI, we expect that an increasing number of SMEs will benefit from the platform. 13. For CDI to reach its full potential and successfully connect the digital islands, your active participation is crucial. CDI is definitely a team sport, and we all have a role to play as members of Team Hong Kong. 14. The HKMA, as a regulator, will facilitate a conducive environment, and we are doing that by building the infrastructure and offering guidance.