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Country Profile, Norway

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Country Profile, Norway Update April 2009 COUNTRY PROFILE, NORWAY Introduction and Country Background 2 Banking Environment 4 Financial Authorities 6 Legal & Regulatory Issues 8 Market Dominant Banks 11 Clearing Systems 14 Payments & Collections Methods & Instruments 16 Electronic Banking 19 Cash Pooling Solutions 21 Tax Issues 23 Source and Contacts 28 Page 1 of 28 Country profile, Norway Introduction and Country Background Norway’s rugged Key Facts coastline facing the North Atlantic sea Capital - Major Cities Oslo – Bergen, Trondheim, Stavanger stretches over 2,500 Area 324,220 km2 km Population 4.799 million (01-2009 estimate) Languages Norwegian Currency NOK (Norwegian Kroner) Telephone Code +47 National/ Bank 2009 — 1 Jan; 9-10, 13 Apr; 1, 17, 21 May; 1 Jun; 25- Holidays 26 Dec Bank Hours Generally from 8:15–15:30 Mon-Fri* Business Hours 10.00–17.00 Mon–Fri, to 19.00 Thu, 9:00–14.00 Sat Stock Exchange Oslo Børs (Oslo Stock Exchange) Leading Share Index OSEBX Overall Share Index OSEAX There is usually a designated day during the week when business hours are ex- tended. However, this day varies from bank to bank. Measured by per cap- Economic Performance ita GDP, Norway is among the wealthiest 2005 2006 2007 2008 countries in the Exchange Rate – NOK/EUR1 8.00 8.05 8.0153 8.2194 world, supported in Exchange Rate – NOK/USD1 6.4450 6.4180 5.8600 5.6361 large part by its ex- Money Market Rate (%)1 2.15 3.02 4.79 6.01 ploitation of oil and Consumer Inflation (%)2 1.6 2.3 0.8 3.2 gas reserves Unemployment Rate (%)3 4.6 3.4 2.5 2.5 GDP (NOK billions)4 1,946 1,995 2,068 2,119 GDP (USD billions)5 295.5 329.5 356.6 375.9 GDP Volume Growth (%)2 2.7 2.5 3,7 2.5 GDP Per Capita (USD) 64,193 71,674 76,442 78,343 Current Account (% of GDP) 16.2 17.2 15.4 19.1 Sources: International Monetary Fund, Statistics Norway, European Central Bank 1 Period average 2 Year on year 3 Per annum (seasons adjusted) 4 Constant prices: index, 2000=100 5 Per average exchange rate Norway remains out- Government side of the EU but is a member of the Euro- Legislature Regime pean Economic Area Norway is a constitutional monarchy with a bi-cameral parliament: The Parliament (Stortinget) consists of 165 members elected for a four years Page 2 of 28 Danske Bank Country profile, Norway term via a proportional representation system. Lower house (Odelsting): Three-fourths of the members of Stortinget form the lower house of parliament Upper house (Lagting): One-fourth of the members of Stortinget form the up- per house of parliament. The members of the Lagting are elected by and among the members of Stortinget following each general election. The next election is due by September 2009. Head of State King Harald V, since 1991 Political Leader The Prime Minister of Norway is Jens Stoltenberg, leader of the Norwegian Labour Party (social democratic), elected in September and appointed by the King in ses- sion of the Council of State on 17 October, 2005. Mr. Stoltenberg was previously Prime Minister from 2000-2001, and now leads a coalition government (the Red- Green Coalition), the first one that the Norwegian Labour Party has entered, form- ing a majority with the Socialist Left Party and the Centre Party (whose focus is on maintaining decentralized economic development and political decision-making). European Union In referenda held in 1972 and 1994, Norway rejected joining the EU. The country is, however, a part of the European Economic Area (EEA). Page 3 of 28 Danske Bank Country profile, Norway Banking Environment The Norwegian bank- Overview ing sector is domi- nated by two large Introduction players and two ma- In the early 1990s the government acquired a significant share of the banking sec- jor savings bank alli- tor. During recent years, however, this pattern was reserved leading to subsequent ances privatisation. In January 2004 the biggest savings bank, Union Bank of Norway (Gjensidige NOR Sparebank) and Den norske Bank (DnB) merged forming by far the largest banking group in Norway, DnB NOR Bank. The other large bank (Nordea) is controlled by the major Nordic banking group and the mid-sized banks all belong to two major savings banks alliance, Sparebank 1 Alliance and Terra Banking Group, apart from Fokus Bank, part of the Danish-based Danske Bank Group. Sector Figures The Norwegian banking sector, as of April 2009, consists of approximately 139 domestically incorporated banks, of which 16 are universal commercial and 123 are savings banks. Additionally there are 12 branches of foreign banks and 3 elec- tronic money institutions in Norway. Collectively the savings banks have around 50% of the market in terms of both lending and deposit taking. The two biggest commercial banks, DnB NOR Bank and Nordea, share around 30–40% of the mar- ket with the remainder divided amongst the remaining commercial banks. The total number of bank branches was 1,330, 784 of which are branches for the savings banks and the remaining belong to the commercial banks. Furthermore, there are 1,487 post branches with banking accessibility. Recent Years To further consolidate their respective market shares, Den norske Bank (DnB Group) and the demutualised Union Bank of Norway (Gjensidige NOR), then the largest savings bank, merged in December 2004 to form DnB NOR. Other mergers included in 2005 Sweden‘s SEB acquired Privatbanken, Iceland‘s Islandsbanki ac- quired BNBank and in 2006 Spain‘s Santander purchased Bankia Bank. Following on the heals of a coordinate eurozone bank bailout plan, Norway an- nounced in October 2008 that it will offer commercial banks as much as $55 bil- lion in government bonds in exchange for mortgage debt. Further, the Norwegian subsidiary of Kaupthing – the Iceland bank put under state administration – has had its assets frozen and shall be liquidated. Depositors in Norway are guaranteed up to 2 million Norwegian kroner. Sector Wide Agreements The directive on capital-adequacy rules, known as Basel II, is implemented. Norges Bank has an Central Bank investment manage- ment division re- Background sponsible for manag- The Central Bank of Norway, Norges Bank, was founded in 1816. The activities of Page 4 of 28 Danske Bank Country profile, Norway ing its petroleum Norges Bank are regulated by Act no. 28 of 24 May 1985 relating to Norges Bank pension fund and the Monetary System (the Norges Bank Act). The management of the bank is executed through the Executive Board consisting of seven members appointed by the King. The Governor of Norges Bank, Mr. Svein Gjedrem, is chairman of the Ex- ecutive Board. The Supervisory Council ensures that the rules governing the Bank‘s activities are observed and adopts the Bank‘s budget. The Council comprises fif- teen members all elected by the Storting. Currency Norges Bank is the sole supplier of banknotes and coins. In June 2003, the actual production of coins was, however, sold to a third party provider. In 2007 the bank expects to outsource the printing of bank notes as well. Since 1 September 2003 Norges Bank has outsourced the technical operation and administration of its clearing system to ErgoIntegration AS. Norges Bank still has the overall responsi- bility, and for the banks it is business as usual, although total settlement costs are expected to decline. Responsibilities The overall objective of the bank is to ‗promote confidence in the Norwegian econ- omy and its financial system‘. The framework for achieving this is defined through the main tasks and responsibilities of the bank, which include: Price stability by means of a monetary policy that is oriented towards low and stable inflation. Financial stability: Responsibility for promoting efficient payment systems and financial markets and in this way contributing to financial stability. A sub- ordinate objective is the supply of credit. o The majority of all inter-bank clearing takes place via accounts with the bank through the Real Time Gross Settlement System, NBO. The bank on an ongoing basis assesses the risks of the financial infrastructure hereunder it oversees the functionality and risks in the BBS system (clearing of low-value payments). Added value in investment management: Ensuring efficient and secure man- agement of the central government's financial assets. Other main responsibilities of Norges Bank include managing the gold and foreign exchange reserves, and ensuring efficient and secure management of the central government's financial assets (e.g., the petroleum pension fund). Page 5 of 28 Danske Bank Country profile, Norway Financial Authorities The legal framework Ministry of Finance for Norges Bank and the financial supervi- Within financial services the Ministry of Finance (the Financial Markets Depart- sory authority reside ment) is responsible for the monitoring and regulation of financial markets and within the Ministry of financial institutions. The principal objectives comprise: Finance Ensuring that the institutions are financially sound, and Securing a fair and transparent environment for competition The Ministry drafts bills and regulations and also handles various tasks, like appli- cations for licenses, authorisations and exemptions. The legal framework that regu- lates the activities of Norges Bank is within the authority of the Ministry as well. The Norwegian Financial Supervisory Authority is an institution under the authority of the Ministry. The Norwegian FSA’s Norwegian Financial Supervisory Authority scope spans the en- tire financial sector The scope of the Norwegian Financial Supervisory Authority‘s (Kredittilsynet, which as well as securities shall changes its name to Finanstilsynet at the change of the year 2009/2010) markets, real estate oversight responsibilities is rather wide spanning from banks, insurance compa- agents and chartered nies and building societies to securities markets, real estate agents and chartered accounts accountants.
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