Norwegian Banking Regulations: An Overview of the FSAN, FSD, and Key Policies

In the European banking landscape, Norway’s regulatory framework stands out as unique due to its non-membership in the European Union (EU) but participation in the European Economic Area (EEA) agreement. This article provides an overview of the regulatory framework and key banking policies in Norway, focusing on the Financial Supervisory Authority of Norway (FSAN) and the Financial Stability Department (FSD) within the Central Bank of Norway.

The FSAN’s Role and Responsibilities

The Financial Supervisory Authority of Norway (FSAN), an independent government agency, was established under the Financial Supervisory Authority Act of 1956. Its primary responsibilities include:

1. Promoting financial stability and well-functioning financial markets
2. Prudential and market conduct supervision for:
   • Banks
   • Insurance and pension funds
   • Securities firms and markets
   • Debt collection
   • Accounting and revision activities
   • Real estate brokerage
3. Contributing to regulatory framework development

The FSD’s Role and Responsibilities

The Financial Stability Department (FSD) is part of the Central Bank of Norway and is governed by the Central Bank Act of 1985. Its primary responsibilities include:

1. Monitoring financial stability
2. Advising on measures to prevent systemic risk
3. Contributing to regulatory framework development
4. Acting as the licensing authority for interbank systems
5. Monitoring payment systems

EU Regulatory Influence and Adherence

Despite not being an EU member, Norway is subject to EU legislative acts considered EEA relevant. This includes participation in:

• The European Supervisory Authorities (European Banking Authority) (EBA)
• European Insurance and Occupational Pensions Authority (EIOPA)
• European Securities and Markets Authority (ESMA)
• European Systemic Risk Board (ESRB)

Norway has a permanent observer role in these entities to maintain alignment with EU regulations.

Relevant Legislation and Changes

The Norwegian banking sector is guided by primary statutes like the Financial Enterprises Act of 2015 and the Financial Contracts Act of 1999. Recent changes introduced by the Financial Enterprises Act include:

• New capital requirements
• Cooperation agreements
• Holding companies as parents in financial groups
• Exchange of customer information
• Removal of banks’ obligation to have control committees and boards of representatives
• Abandoning securitisation regulations
• Changes in cash-handling requirements

Deposit Insurance and Government Ownership

Deposits in Norway are partially insured by the Norwegian Banks’ Guarantee Fund. The government’s ownership interest in Norway’s largest bank, DNB ASA, through its 34% shareholding, aims to ensure that DNB remains headquartered in Norway. The government intends to maintain this interest but has not expressed any intentions to expand it further.

Current Challenges and Future Expectations

The Norwegian banking sector faces regulatory challenges similar to other European countries, including the implementation of stricter, complex, and frequent regulations in pursuit of a unified European market. Norwegian authorities also voice concerns about a potential housing bubble in Norway, leading to countercyclical measures for local banks.

Looking ahead, the Norwegian regulatory landscape is expected to evolve with the implementation of EU directives, potentially leading to harmonized regulations and larger, more dominant regulatory bodies.