The regulatory regime applicable to banksi General
Norway is not a member of the European Union, but through the EEA agreement, it is committed to implementing the relevant directives for the finance industry. This means that the free establishment rule applies for EEA institutions wishing to provide services in Norway, and for Norwegian institutions wishing to offer their services within the EEA.
The combination of accepting deposits and providing credit triggers a requirement for a banking licence under Norwegian law. The main regulation applicable to banks can be found in the Act on Financial Undertakings and Financial Groups 2015 (Financial Undertakings Act). The Financial Undertakings Act is an attempt to consolidate the main financial regulations, which were previously scattered in various pieces of legislation, into one comprehensive act (implementing, inter alia, the key elements of the Capital Requirements Directive (CRD IV) and the Capital Requirements Regulation (CRR)). The Act regulates the following financial undertakings:
- banks and other credit institutions;
- finance companies;
- holding companies in financial groups;
- payment institutions;
- electronic money institutions; and
- insurance and pension institutions (not discussed in this chapter).
Banks providing investment services or investment fund services are also subject to the Securities Trading Act 2007 (implementing, inter alia, the Markets in Financial Instruments Directive (MiFID II)) or the Investment Fund Act 2011 (implementing, inter alia, the Undertakings for Collective Investments in Transferable Securities Directives).
A new Anti-Money Laundering Act was enacted with effect from 15 October 2018. The new Act and regulations have provided that the key parts of Norwegian legislation are assumed to be in compliance with the EU's fourth Anti-Money Laundering Directive and the Financial Action Task Force Recommendations.
A widely discussed subject related to this area is trade with cryptocurrencies. There has been little clarification concerning how the anti-money laundering and anti-terror financing regulations will affect this trade. This has already led to some insecurity and conflicts between financial institutions and clients that are trading such currencies. The new Norwegian legislation is aiming to address this, in particular by imposing a duty to notify the FSA before conducting such business, and that providers are subject to supervision by the FSA. The legislation is implementing the fifth Anti-Money Laundering Directive in this respect.
Finally, all financial undertakings are subject to the Financial Supervision Act 1956.
The main regulator is the Financial Supervisory Authority of Norway (FSAN). The FSAN's resources come from fees paid by the institutions it supervises. Its main purpose is to promote financial stability and a well-functioning market.
The FSAN's instruments are:
- supervision and monitoring;
- regulatory development; and
- information and communication.
Norwegian financial undertakings that wish to take deposits from the public must have a licence as a bank. Non-banking credit institutions may receive repayable funds from the public (other than deposits) by way of the issue of bonds or other comparable securities. EEA credit institutions providing services in Norway based on their home state licence (passporting) may take deposits in Norway if their home state licence allows them to do so.iii Lending
Lending is a regulated activity, and a licence or a passport is needed. Norwegian financial undertakings without a banking licence may grant loans based on a licence as a non-banking credit institution or as a finance company, and will normally fund themselves in the bond market. Typical today are mortgage credit institutions operating in the covered bond market. These are normally owned by banks or savings bank groups, and acquire loan portfolios from the banks.
Investment firms need a separate licence to provide loans in connection with their investment activities.iv Foreign exchange
Spot foreign exchange trading can be carried out by banks, payment institutions, electronic money institutions and finance companies as well as by foreign passported credit institutions, payment institutions and electronic money institutions, all subject to having an appropriate licence to do so.
Dealings in foreign exchange derivatives can only be carried out by an institution with an investment firm licence.v Payment services
The Payment Services Directive (PSD1) was fully implemented into the Norwegian legislation in 2010, and the regulations implementing the public law parts of PSD2 will be effective from 1 April 2019. Simultaneously, the Ministry of Finance (MOF) has declared that the Ministry of Justice and Public Security will lay down a regulation implementing the private law parts of the Directive. The time frame for the latter is, however, still uncertain.vi Investment services
Licences to provide investment services may be granted to banks and limited liability companies.
Banks may obtain licences in their own names or through their subsidiaries. Foreign passported firms may also provide investment services in Norway; see further below.vii Legal structure of banks
There are two legal structures of banks available: commercial and savings.
Commercial banks have to be organised either as public limited liability companies or private limited liability companies. Pursuant to the Financial Undertakings Act, banks established after 1 January 2016 must be organised as public limited liability companies; however, those established as subsidiaries in a financial group may be organised as private limited liability companies.
Savings banks were originally organised as independent entities without external owners. Hence, their equity capital historically consisted mainly of retained profits from earlier years. Since 1987, savings banks have been entitled to bring in external equity by issuing equity instruments, called equity certificates. These differ from shares in that they do not give holders ownership of a bank's entire equity capital. Moreover, holders have limited voting rights to a maximum of two-fifths in total in the bank's highest body, the general meeting. Around 30 savings banks, including several of the largest ones, have issued such instruments.
All banks must have a total of share capital and other equity capital of at least €5 million.viii Branches and cross-border services
Foreign banks established within the EEA may establish branches in Norway in accordance with the EU or EEA banking directives. The prime regulator of a foreign branch is its home state regulator, but branches of foreign banks are also regulated by Norwegian rules to a certain extent, pursuant to, inter alia, the Financial Undertakings Act, and supervised by the FSAN pursuant to, inter alia, Regulation No. 1257 of 28 December 1993.
Foreign banks established within the EEA may also provide cross-border services in Norway pursuant to EU or EEA passporting rules. Foreign banks providing cross-border services in Norway are to a lesser degree regulated and supervised by the FSAN.
Banks established outside the EEA must have a Norwegian licence to provide banking services in Norway through a branch. A licence to provide cross-border services is not available for such entities.