Norway Faces Severe Credit Shock on Household Debt

Norway faces "severe" imbalances in its credit and property markets as households continue to amass debt at unsustainable levels, according to the head of the country's financial regulator.

"Growth rates on household debt and house prices are not following a sustainable path," Morten Baltzersen, Director General of the Financial Supervisory Authority in Oslo, said in an interview. "The longer these developments go on, the greater the risk is of a severe imbalance evolving."

Norway's credit and property markets continue to show signs of overheating five months after the regulator asked banks to tighten lending standards. Robert Shiller, the co-creator of the S&P/Case-Shiller home-price index, said in January Norway is in the grip of a house price bubble, while the International Monetary Fund on Feb. 2 warned of real estate and credit market risks in Norway.

For more: Norway Faces Severe Credit Shock on Household Debt, FSA Says