Financial institutions sell various financial savings products to consumers, with mixed results for investors. Following the collapse of Lehman Brothers in 2008, many investors suffered huge losses on various structured products. In order to strengthen consumer protection, the Financial Supervisory Authority recently proposed amendments to the securities legislation, which contains provisions to increase sellers' obligations.
In 2012 the Ministry of Finance asked the Norwegian Financial Supervisory Authority (NFSA) to evaluate the system for fixing the Norwegian Interbank Offered Rate (NIBOR). The NFSA recently delivered its findings, concluding that it had found no evidence that NIBOR has been manipulated or that there had been attempts to manipulate it; however, it could not confirm that manipulation had not taken place.
Under Norwegian civil disputes legislation, it is a general rule that a party may not grant power of attorney to another party to represent it. The main rule is that the party wishing to obtain a judgment must appear as a party. However, bondholders' trustee Norsk Tillitsmann has tested this general rule by suing bond issuers as a party acting on behalf of bondholders. The Oslo City Court dismissed the lawsuit.
The deposit guarantee scheme, which covers aggregate deposits of each depositor up to Nkr2 million, is mainly funded by member institutions through an annual fee. However, this fee is not paid if the guarantee fund's own capital exceeds the minimum legal requirement. The Ministry of Finance recently proposed to abolish the use of the guarantee fund's upper limit to establish an exemption from paying the annual fee.
Until recently, Norwegian credit institution Eksportfinans ASA administered the government-supported export credit scheme and provided fixed-rate loans to buyers of capital goods – so-called commercial interest reference rate loans. Under the amended Capital Requirements Directive, the Ministry of Finance determined changes to the regulations concerning capital requirements and large exposures.
When dealing with buy-out and cross-border transactions, lenders often encounter financial assistance issues in relation to a proposed guarantee and security package, which may result in the proposed guarantee or security being refused or granted with limitations. If recent proposals are adopted, part of the uncertainty that exists will be removed – to the advantage of lenders.
Regulatory body Finanstilsynet has reported that Norwegian financial institutions enjoyed good results in the first half of 2011, but that uncertainties in the financial markets have resulted in a more challenging liquidity situation for Norwegian banks. They are also believed to be better prepared to weather market turmoil than they were before the financial crash of 2008.
The Norwegian Financial Supervisory Authority has published its 2010 Annual Report. The report outlines the most important events of last year with regard to regulatory issues and trends in the relevant markets, and sums up the results of 2010's supervisory activities.
The Norwegian financial supervisory authority, Finanstilsynet, recently accomplished an extensive survey of Norwegian banks' sales of financial instruments. The summary of its findings has been published, with banks asked to provide detailed statements of all completed sales of financial instruments as part of their customer investment services. In addition, eight banks were chosen to undergo on-location supervision.
A new regulation on remuneration arrangements in banks and other financial institutions has come into force. The regulation lays down guidelines to enable financial institutions to put in place a remuneration arrangement valid for the entire institution which will set incentives for proper governance and control of risk taking, counteract excessive risk taking and help to avoid conflicts of interest.
The Norwegian financial authorities have implemented requirements to seek a concession for carrying out payment services business in Norway. Payment services can now be carried out only by specified parties, including credit institutions, undertakings that issue means of payment in the form of electronic moneys and the Norwegian Central Bank in its capacity as a non-official authority.
The Financial Supervisory Authority has proposed to amend Norway's capital requirements regulations by incorporating provisions on remuneration and bonuses in financial institutions. Among other measures, larger banks would be required to appoint a compensation committee, which would make all decisions on compensation.
Banks can now exchange covered bonds issued by covered bond issuers against short-term government papers. Another new measure is the creation of the Government Finance Fund, to which Parliament has allocated Nkr50 billion. Its purpose is to make temporary contributions to the core capital of Norwegian banks in order to strengthen them and place them in a better position to maintain normal lending activities.
Parliament has recently passed further amendments to the covered bond legislation. Pursuant to the new rules, Norwegian mortgage credit institutions will be able to issue bonds with preferential rights to all assets placed in the cover pool of the credit institution.
The EU Financial Collateral Directive was implemented in Norwegian law by virtue of the Law on Financial Collateral, which came into force on July 1 2004. The law allows for financial collateral where one of the parties is a public authority, a central bank or a specified international institution.
In 2003 Parliament passed an act amending the Financial Services Act 1988 to allow financial institutions to issue covered bonds and enter into securitization transactions. The Ministry of Finance has authority to issue detailed regulations applying to covered bonds. No regulations will be issued with respect to securitization.
A recent amendment to the Financial Services Act introduces new rules on covered bonds and securitization transactions. Subject to certain conditions, credit institutions that fund themselves primarily through the bond market can now issue covered bonds. The amendment also allows financial institutions to assign claims against borrowers for the purpose of securitization.
The government recently submitted a proposal for new legislation governing the ownership of financial institutions. Under the proposal, the existing 10% ownership limitation will be removed in favour of a discretionary system based on EU directives, in which larger shares in financial institutions may be acquired subject to consent being obtained from the relevant authority.
A report released earlier this year by the Banking Law Commission regarding the activities of financial institutions may be included in new legislation. The report discusses dividends, ownership of shares and other property, supervisory authorities and money laundering. Meanwhile, changes to securitization legislation have been passed.
The Norwegian Parliament has enacted controversial new legislation allowing the conversion of savings banks to public or private limited companies. The Ministry of Finance has also submitted a proposal for amendments to create a more favourable regime for certain securitization transactions.