Norway’s financial system


Purpose of this paper is to discourse the features of Norse fiscal system, including the regulative environment in which it operates and in peculiar, the relationship between the fiscal and corporate sectors of the economic system. In order to make this, the first portion analyses Norse banking system while the 2nd portion looks at the fiscal markets.

Banking System


Harmonizing to Author ( 2004 ) , the stable mentality for the Norse banking system is based on the Bankss ‘ strong domestic franchises, sound fiscal basicss and overall low hazard profile. The system can besides be described by intense competition and a diminution in involvement rates. Although the Norse Bankss ‘ plus quality indexs deteriorated in 2002-2003, ratios have improved since. The Norse strong economic enlargement since the summer of 2003 has resulted in Norse banking sector’s best public presentation since 2000 ( Kredittilsynet 2006 ) . The favourable macro-economic developments have translated into improved bank net incomes in 2003 and 2004, driven particularly by a decrease in loan losingss to really low degrees ( IMF 2005 ) . The banking system is extremely automated and computerised ( US Commercial Service 2007 ) . Bank consequences have been solid in 2006 ( Norges Bank 2006 ) . Although banks’ entire pre-tax net incomes as a portion of mean entire assets declined compared to 2005, return on equity in the largest Norse Bankss is solid compared with their Nordic fiscal pudding stones.

Bank Classs

Harmonizing to the US Commercial Service ( 2007 ) , the Norse banking system is comprised of commercial Bankss,nest eggs Bankss and a little figure of state-owned Bankss that provide funding for peculiar intents. Other chief fiscal establishments are mortgage companies, finance companies and insurance companies. Foreign Bankss have been allowed to set up subordinates in Norway since 1985, and since the execution of the EEA Agreement in January 1994, foreign Bankss may besides set up subdivisions in Norway.

Commercial Bankss enjoy a really close relationship with trade and industry. Savings Bankss have a long tradition in Norway and cover a significant portion of the local recognition demands. Merchant Bankss have non achieved the same place in Norway that they enjoy in some states partially because of the market laterality by the really big commercial Bankss. There are particular Bankss for piscaries, agribusiness, transportation, industry, house edifice, and export finance. The province participates in all of these. Foreign exchange controls were abolished in 1990. No licensing demands are in force. The lone demand is a coverage demand for international payments and fiscal minutess. The dealing bank by and large takes attention of this coverage.

Savingss Bankss, and foreign subordinates and subdivisions, are frequently organised as parts of wider groups that besides include mortgage companies, finance companies, securities financess and life and nonlife insurance companies ( IMF 2005 ) . Furthermore, though less so than in some adjacent states, Norway’s banking system is comparatively concentrated, and in peculiar the largest domestic fiscal pudding stone, DNB-NOR continues to keep a really significant market portion. Its importance is further increased through its function as the colony bank for many smaller Bankss in the system.

Number of Banks in Norway

The Norse banking system is comprised of 15 commercial Bankss,129 nest eggs Bankss and a little figure of state-owned Bankss that provide funding for peculiar intents ( US Commercial Service 2007 ) . Harmonizing to IMF ( 2005 ) , as of June 2004 there were 149 Bankss with 884 subdivisions in Norway and abroad, and 2 foreign Bankss with 8 subdivisions in Norway. The largest bank is DnB NOR Bank, followed by Nordea Bank Norge, Fokus Bank and Handelsbanken ( Norse Financial Services Association 2006a ) .

Deposits and Lending

Entire sum of net loans to clients in 2005 was 2,346 billion NOK ( USD383 billion ) , with DnB NOR supplying 692 billion ( USD 113 billion ) on its won ( Norse Financial Services Association 2006b ) .

Entire figure of sedimentations from clients in 2005 was 1,192 billion NOK ( USD 195 billion ) , with DnB NOR taking the manner with 418 billion ( USD 68 billion ) ( Norse Financial Services Association 2006b ) .

Hybrid Capital Instrument

Several Bankss have raised capital in recent old ages by publishing intercrossed capital instruments ( Kredittilsynet 2006 ) . Hybrid capital instruments portion clear similarities with both debt and equity capital instruments. They enjoy better precedence than portion capital but poorer precedence than subordinated loan capital. The figure of Bankss holding issued intercrossed capital instruments rose from 29 in 2004 to 47 in 2005.

Central Bank

The Bank of Norway ( Central Bank ) is organised as a share-issuing company, but the authorities owns all the portions. It is the executive and consultative entity for pecuniary, recognition and exchange policy. The bank is responsible for empowering interbank systems in Norway ( US Commercial Service 2007 ) .

The Main Sources of Finance for Industry

Banks are, by far, the chief beginning of finance for industries. Harmonizing to Statistics Norway ( 2006 ) , Bankss provide 557 billion NOK ( USD 91 billion ) , out of entire 783 billion ( USD 128 billion ) . “Other recognition institutions” provided for 170 billion ( USD 28 billion ) , while province loaning establishments provide 53 billion ( USD 9billion ) .


In June 2004, no bank was owned by the authorities ( IMF 2005 ) . The authorities had the last ownership of a bank in twelvemonth 2000. However, there were three province loaning establishments in 2005 ( Statistics Norway 2006 ) .

Corporate Lending and Mortgages Market

Norse Bankss reported significant growing in loaning in 2005, near to 17 per cent ( Kredittilsynet 2006 ) . Lending growing has been on the rise since the 3rd one-fourth of 2003. Growth in loaning to pay earners has been high for several old ages, and rose by about 15 per cent in the past twelvemonth ( adjusted for portfolio transportations ) . Increased fixed investing has brought accelerating growing in loans ( about 17 per cent in 2005 ) to Norse corporate clients. Growth in loaning to foreign corporate clients rose by 64 per cent in the same period, chiefly through the largest Norse banks’ foreign subdivisions. Foreign subdivisions in Norway posted far higher growing than Norse Bankss, at 34 per cent in December 2005.

Lending in 2005 to industries was 557billion NOK ( USD 91 billion ) . The larges market was “real estate and concern activities” with 284 million ( USD 46 billion ) , “real estate” with 221 billion ( USD 36 billion ) and “wholesale and retail trade, operation of hotels and restaurants” with 59 ( USD 10 billion ) ( Statistics Norway 2006 ) .

All sorts of funding are available to foreign investors ( US Commercial Service 2007 ) . Overdrafts and mortgages are available from Bankss, which will besides help in the issue of such fiscal instruments as price reduction bonds, exchangeable bonds, etc. Fiscal rental agreements are supplied by renting companies. Venture capital and merchandiser banking are non extremely developed, but do be.

Eksportfinans ASA fundss exports of Norse capital goods and services on both market and authorities supported footings. The funding plans are designed to advance the sale of Norse capital goods and services, and funding is besides available to foreign purchasers. Where exports are involved, the Government of Norway is able to offer subsidised fixed-rate loans to most states. Government-supported loans are regulated under the OECD consensus understanding. Norway offers no important funding plans for either domestic or foreign investors. One exclusion is investings in northern Norway.

Competition for place loan clients is intense ( ( Kredittilsynet 2006 ) . Norse banks’ border on loaning to families is below the degree for Swedish and Danish Bankss. This is partially because loans for lodging intents in Sweden and Denmark are provided by mortgage companies as fixed-interest loans. In Norway loans for lodging intents account for more than 60 per cent of entire loans from Bankss and more than 90 per cent of them carry a floating involvement rate. There is besides a strong growing in loaning to the commercial belongings sector ( Norges Bank 2006 ) .


Harmonizing to the US Commercial Service ( 2007 ) , the Financial Supervisory Authority of Norway ( Kredittilsynet ) supervises all Bankss and other fiscal establishments in Norway. The Commercial Banking Act, the Savings Bank Act and the Act on Financing and Finance Institutions modulate banking activities. Norway has revised the ordinances associating to fiscal establishments as a consequence of the EEA Agreement. With regard to fiscal services, the EEA Agreement provides for full version to EU ordinances. The Central Bank of Norway is responsible for empowering interbank systems in Norway.


Deregulation of fiscal markets, liberalization of capital markets, along with technological and demographic alterations, have altered fiscal institutions’ runing environment ( Kredittilsynet 2006 ) . Five ample fiscal groups: DnB NOR, Nordea Bank Norway, Fokus Bank, Handelsbanken and Sparebanken Rogaland, history for a significant portion of the Norse fiscal market. The three largest life insurance companies: Vital, KLP and Storebrand, hold a combined market portion of 87 per cent. The four major participants in the Norse non-life insurance market: Gjensidige Forsikring, If, Vesta and Sparebank skadeforsikring, hold a combined market portion of 75 per cent measured by gross premium grosss.

Foreign ownership portions in the Norse market are particularly big among finance companies ( Kredittilsynet 2006 ) . Branchs and subordinates accounted for a entire market portion of 65 per cent measured by entire assets. There are 33 foreign-owned finance companies runing in the Norse market, half of them foreign subdivisions. In the non-life insurance field, the foreign portion is 42 per cent. If and Vesta Forsikring are the largest foreign-owned companies. Foreign histrions have shown acute involvement in the banking market in recent old ages. Foreign-owned subsidiaries’ market portion is chiefly accounted for by Nordea Bank Norway and Fokus Bank. In add-on, several of the foreign subdivisions, of which Handelsbanken is the largest, reported really high loaning growing in the Norse market in 2005.

Oslo Bors Stock Exchange

Harmonizing to Oslo Bors ( 2007 ) , there are four chief merchandise countries: portions and primary capital certifications, bonds and other fixed income instruments, derived functions and warrants. The market capitalization of Norse companies listed on Oslo Bors came to about tierce of Norway’s GDP at the terminal of 2005 ( Kredittilsynet 2006 ) .

Shares listed on the Oslo Stock Exchange ( OSEBX ) rose by to the full 40.5 per cent in 2005, while turnover of listed portions increased by 67 per cent and amounted to a sum of NOK 1500 billion ( USD 245 billion ) . The rate of turnover has been increasing for many old ages, and in 2005 that of the Oslo Stock Exchange is es­timated to be near to 130 per cent. Large authorities ownership involvement is more outstanding in the instance of Norway than other states. Government increased its ownership from 23 to 34 per cent from 2000 to 2005.

Large figure of new companies have been listed on the Oslo Stock Exchange ( Norse Financial Services Association 2006c ) . At the terminal of 2005, 31 more companies were listed than at the beginning of the twelvemonth, despite the fact that 15 companies had been delisted. There were a sum of 245 companies listed on September 2006.


Harmonizing to Oslo Bors ( 2007 ) , market value in 2006 was 1915 billion NOK ( USD 313 billion ) , which was 512 billion ( USD 84 billion ) addition from 2005. Norse companies accounted for 1748 billion ( USD 285 ) and foreign companies for 167 billion ( USD 27 ) . Foreign companies experienced a important addition by 50 % in regard to 2005. Leader in market portion in 2006 was DnB NOR with 468 billion NOK ( USD 76 billion ) .

Chemical bonds

Harmonizing to Oslo Bors ( 2007 ) , there were 744 issues in 2006, down by 87 since 2005 and the lowest in the last 10 old ages. Banks and insurance group accounted for 267 and industries for 178. Number of issuers was besides down from 201 in 2005 to 186 in 2006, lowest in the last 10 old ages. Industry accounted for 70 and the local authorities for 43. Number of dealing declined from 32589 in 2005 to 28799 in 2006. Government accounted for the largest figure with 15508, followed by 4457 from Bankss and insurance companies. Market value has increased from 538 billion NOK ( USD 88 billion ) in 2005 to 548 billion ( USD 89 ) in 2006, with authorities accounting for 193 billion NOK ( USD 32 billion ) and bank and insurance 129 billion NOK ( USD 21 billion ) . There was a important addition for foreign companies from 4 billion NOK ( USD 653 million ) in 2005 to 9.4 billion ( USD 1.5 billion ) in 2006. Employee turnover increased from 646 billion NOK ( USD 105 billion ) in 2005 to 690 billion ( USD 113 billion ) in 2006.

Derived function

Employee turnover has increased from 5351 billion NOK ( USD 874 billion ) in 2004 and 3823 billion NOK ( USD 624 billion ) in 2005 to 6200 billion NOK ( USD 1012 billion ) in 2005 ( Oslo Bors 2007 ) . Overall there were 43 per cent more minutess in the derived functions market in 2005 than the old twelvemonth ( Norse Financial Services Association 2006c ) .

Securities Market

Although fiscal establishments will retain their dominant function in many states as nest eggs and funding mediators, the importance of securities markets is likely to increase in front. Trading on the securities market showed particularly strong growing in 2005 Norse Financial Services Association ( 2006c ) .

Money Market

Although little, money and forex markets appear to be comparatively good working and adequately liquid in normal times ( IMF 2005 ).There have been no cases of important perturbations in recent old ages. Foreign exchange colony hazards have significantly been reduced since 2003 through Norway fall ining the Continuous Linked Settlement ( CLS ) system. About 10-11 market participants quote steadfast FX monetary values, although it is non a formalistic primary trader system. The short-run interbank money market is less active, with monetary value citations by and large indicative instead than house, and a few big participants ruling the market. But there have been no marks of monopolistic behaviour and market participants have been able to administer liquidness amongst themselves with limited resort to NB’s installations. Trading in both FX-related and involvement rate derived functions is active, and studies indicate the markets are liquid.

Life Insurance and Pensions Market

Positive tendencies both in Norse and in international equity markets have led to increased returns for the life insurance companies ( Norse Financial Services Association 2006c ) . Premium incomes increased further during 2005. The new Act associating to compulsory occupational pensions opens new markets for the sale of pensions ( Norse Financial Services Association 2006c ) . The life companies have increased their proportion of in­vestments in portions during 2005. Increased returns on the portions portfolio are the ground for the companies’ improved value-adjusted return on capital. For 2005 value-adjusted return on capital was on mean 8.1 per cent, against 7.0 per cent in 2004. At the same clip the life companies had on mean capital adequateness of 12 per cent in 2005 and all companies satisfied the capital adequateness demand of 8 per cent.

New Regulations

Developments in the EU have resulted in significant chan­ges in the Norse statute law associating to securities ( Norse Financial Services Association 2006c ) . A Committee on Markets in Financial Instruments was appointed, which has proposed a new Securities Trading Act that might be in topographic point on 31 October 2007. New sup­plementary regulations are besides being developed for the behavior of concern in the market and in relation to clients. Ex­tensive describing systems with handiness throughout the EEA must besides be in topographic point by the aforesaid dead­lines. In 2005, new regulations associating to insider trading and mar­ket use were adopted, and the Commit­tee proposed new regulations for public stamps. New regulations have besides been propo­sed for bettering the efficiency of authorities countenances associated with disputes associating to securities. The new statute law, together with the really extended and elaborate regulations for good concern pattern and behavior, implies a alteration of government for the Norse securities market. The new regulations are far more elaborate than previ­ously, and the governments will hold more effectual sanc­tions for punishing disputes.

New Financial Instruments

In parallel with this, new fiscal instruments are ente­ring the Norse securities market and investing fund statute law, as Norse providers will be able in due co­urse to provide instruments that have antecedently merely been sold by foreign providers ( Norse Financial Services Association 2006c ) . This applies in peculiar to specialized financess, chiefly fudge financess and private equity, where legal amendments are being prepared pursuant to a bill of exchange that was circulated for remark in 2005. Separate regulations and ordinances for banks’ usage of recognition derived functions to cut down single hazards and requi­rements associating to capital adequateness for recognition hazard have been circulated for remark.


The paper has analysed the features of Norse fiscal system, concentrating on Norse banking system and fiscal markets. Largely centralized banking environment has been solid in 2006, with mostly increasing sedimentations and loaning. Banks are the chief beginning of finance for industries, accounting for over 70 % , and are wholly privately-owned.

Small figure of fiscal establishments histories for a big part of the fiscal market. Oslo Bors is the major stock exchange, with an increasing equity and derived functions market and fluctuating bonds market. Securities market is likely to increase farther, with little money selling working good. Life insurance and pensions markets are besides increasing. New ordinances and the new fiscal instrument are shortly to further beef up Norse fiscal system.


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Kredittilsynet ( 2006 ) . “The Fiscal Market in Norway 2005: Hazard Outlook” .

Norges Bank ( 2006 ) . “Financial Stability 2/2006” .

Norse Financial Services Association ( 2006a ) . “Ten Biggest Banks in Norway” . m=1689

Norse Financial Services Association ( 2006b ) . “Market Share – loaning to and sedimentations from customers” . m=1689

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