IMPLEMENTATION OF CRD IV INTO NORWEGIAN LAW
The implementation of the CRD IV package into Norwegian law has created some challenges in Norway. The CRD IV framework will not be directly applicable in Norway as it is a non-EU member state. The CRD IV framework is, however, EEA-relevant and is intended to be incorporated into the EEA Agreement. Due to certain constitutional challenges in Norway in connection with the transfer of decision-making-powers to the European Banking Authority (“EBA”) and other EU institutions, this incorporation is still outstanding. At this point in time, the CRD IV framework cannot be implemented into Norwegian law, however, the Norwegian authorities have started to revise and adopt transition legislation to mitigate the delay.
Implementation process in Norway of the CRD IV package
New high level rules were adopted in June 2013 setting out the new minimum capital requirements, the capital requirement buffers (the buffer range and not the actual level), the institution-specific assessment of total capital needs and requirements to disclose information as well as some other provisions.
With respect to the more detailed rules applying to the capital buffers, the proposals for new regulations have been published during autumn 2013. The proposals are on hold until February 2014 and we are awaiting the revised regulation from the Ministry of Finance (save for the counter-cyclical buffer regulation which has already been implemented). In Norway, the capital conservation buffer will be 2.5% as of 1 July 2013. The systemic risk buffer will be 2% for the period covering 1 July 2013 to 30 June 2014 and after that 3%. Based on the advice from the Norwegian Central Bank, the Ministry of Finance announced in November 2013 that the counter-cyclic buffer rate will be 1% as of 1 July 2015. The systemic institution risk buffer will be 2% for the period covering 1 July 2015 to 30 June 2016 and then 2% from 1 July 2016 onwards. According to the proposed regulation on systemic institution risk buffer, the buffer requirement will most likely be 2% and shall not differ between banks. The following banks have been proposed to be systematic risk institutions: DNB, Nordea Bank Norge, SpareBank 1 Nord-Norge, SpareBank 1 SR Bank, SpareBank 1 SMN, Sparebanken Vest, Sparebanken Sør and Sparebanken Pluss. The Ministry of Finance has stated in its press release that the existing capital requirement regime will continue to apply until the CRD IV/CRR regulations have been adopted.
The proposal for implementing the rules on capital, implementing the basis of calculation of own funds, large engagements, liquidity requirements, reporting requirements, supervision, etc. were published in January 2014. It will also be a revision of the local Norwegian rules applying to branches of banks domiciled in EU/EEA area.
The EBA technical standards and guidelines constitute an important part of the CRD IV framework by ensuring harmonised application of the rules. The Norwegian regulatory financial authority has published the EBA regulatory technical standards and guidelines on its website and stated that they will be followed in practice. The Norwegian authorities have currently only adhered to six EBA guidelines as set out on their website: http://www.finanstilsynet.no/no/Bank-og-finans/Banker/Regelverk/EBA-anbefalinger/.
IMPACT ON BANK BRANCHES BY EARLY CRD IV IMPLEMENTATION
The Norwegian authorities decision to introduce new capital requirements at an earlier stage than the CRD IV framework requires, risks causing some confusion for branches operating in Norway. However, the rule is clear, a Norwegian branch of a foreign institution domiciled within the EU/EEA territory, will be subject to its home member states implementation of the CRD IV framework. Due to this early implementation in Norway, this may result in a situation whereby Norwegian institutions are subject to the capital requirements, but the branches of foreign banks are not.
According to publicly available sources, the Norwegian regulatory authorities have in July 2013 contacted the competent authorities in Sweden to seek their approval of the Norwegian counter-cyclical capital buffer applying to Swedish exposures in Norway. Whilst the approval has not yet been granted, political meetings between the Nordic authorities to seek further collaboration are currently on-going.
THE POSSIBILITIES FOR NORDIC SUPERVISION COORDINATION
On a political level, the key focus is being put on the close integration of Nordic financial markets given that most Nordic foreign institutions operating in the Nordic countries are domiciled in other Nordic countries. Due to the close integration, financial stability in the Nordic region may depend on the soundness of financial institutions in the Nordic region as a whole. A Nordic working group reviewed and recommended inter alia to strengthen cooperation and coordination when it comes to the supervision of branches in general, mutual recognition of counter-cyclical capital buffers, internal ratings based (“IRB”) calibrations and real estate risk weights issues. Part of the discussions refers to applying a coordinated approach as a supervisory tool and reporting standards, to ease comparison and improve transparency for Nordic institutions. The working group report was established in 2012. However, then the work lapsed and it has been put back on the agenda after the change of government in Norway.