Norway International Update – Q4 2023
This update explores some high-level trends and legal developments in Q4 2023 across some of Norway's key sectors that have an international impact.
Introduction
In 2023, some important changes in Norwegian company law legislation were made, such as a mandatory registration deadline for attending shareholder meetings. These rules mainly affect listed companies and other companies which shares are registered with the Norwegian Central Securities Depository. In addition, new rules for the gender composition of boards of directors in limited liability companies were introduced comprising both shareholder-elected board representatives and those elected by employees (Norway has had rules for gender composition in public limited liability companies for several years).
The year 2023 saw macroeconomic instability due to rising interest rates, inflation, and increased global geopolitical tension leading to more protectionism. In December 2023 the Norwegian National Bank somewhat surprisingly increased the key policy rate by an additional 0.25% to 4.5%. These factors affected the Norwegian M&A markets, resulting in lower activity levels compared to the record highs of 2020 and 2021. In 2022, GDP growth ended at 3.0% down from 3.9% in 2021 and it is expected that this trend will continue for 2023. In 2022, GDP per capita ended at NOK 1,045,341, which brought Norway to third place in Europe after Luxembourg and Ireland.
Key take-aways:
- In 2023, the number of IPOs on Oslo Børs remained consistent with 2022, with two IPOs completed, and one additional IPO on Euronext Expand. However, the total listings on Oslo Børs’ marketplaces significantly declined.
- The ESG regulatory landscape has developed significantly, with new regulations such as the Corporate Sustainability Due Diligence Directive (CSDDD) and changes to the EU Emission Trading System.
- Amendments to the National Security Act aim to strengthen national security and increase resilience against threats. As in many other countries Norway has made a review of its current FDI regime. New legislation is being introduced and existing ones are being amended due to the evolving landscape of geopolitics and security.
- The EU adopted its twelfth package of economic and individual restrictive measures in response to the ongoing Russian war of aggression against Ukraine.
- Ongoing discussions surrounding Norway’s energy industry and data protection issues are making their way into the courtroom.
- New legislation has been passed to strengthen employment protection, including new obligations for employers in group companies during redundancies and rules on new, extensive requirements to employment contracts.
- The real estate transaction market is cautiously picking up with new transactions, some of which are off-market, and some go through brokers.
- The Norwegian minority coalition cabinet released its proposal for the 2024 National Budget, which includes measures such as expanding the scope of the exit tax rules and reviewing the possibility to increase the tax rate on dividend distributions.
- From the financial regulatory point of view, the Norwegian Parliament has asked the Government to propose a ban on the marketing of credit and consumer loans. The Ministry of Finance has set the interest on overdue payments for the first half of 2024 to 12.5 percent.
On December 7, 2023, Wiersholm organized and hosted Nordic Buy Out Forum for the 13th time, a conference Wiersholm founded 13 years ago, and which has become the largest and most important conference for M&A practitioners in the Nordics. Please see highlights from the event here:
M&A and Corporate Law
Key contacts: Harald Hellebust, Jarle Kvam, Gunhild Dugstad and Svein-Helge Hanken
The year 2023 was characterised by macroeconomic volatility, primarily due to escalating interest rates and inflation, coupled with heightened global geopolitical tension resulting in increased protectionism. These macroeconomic trends have impacted the Norwegian M&A markets, which continued in the trend from 2022, with lower levels of M&A activity after the record activity levels in the pandemic years of 2020 and 2021.
Transaction volumes in the Norwegian M&A markets have seen a slight decrease from 2022, while deal values have experienced a marginal increase. Nonetheless, the projected interest rates and inflation for 2024 and 2025 present a positive outlook. This forecast provides both encouraging signs of and reasons for cautious optimism regarding a potential resurgence in market activity in 2024.
Record date
- A mandatory record date for attending shareholders meeting came into force on 1 July 2023. Only those who are shareholders 5 business days before the general meeting are entitled to attend and vote at the general meeting.
- The provision applies to public and private limited liability companies with shares registered in the Norwegian Central Securities Depository (VPS).
Shares held through nominee accounts
- Beneficial owners of shares held through nominee accounts who want to attend and vote at general meetings, must notify the company of this no later than 2 business days prior to the general meeting date. From 1 July 2023 there is no longer a requirement that the shares must be moved out of the nominee account and into a temporary account in the name of the beneficial owner for the shareholder to attend and vote.
- The provision applies to public and private limited liability companies with shares registered in VPS.
Brief overview of the new requirements for gender composition of boards of directors in limited liability companies
- New rules on the gender composition of boards of directors in limited liability companies came into force on 1 January 2024. Until that date, such rules only applied to public limited liability companies.
- The new rules apply to boards of directors of limited liability companies that either have an operating income and a financial income that together exceeds NOK 50 million or more than 30 employees and a board of directors with 3 or more board members. The new rules are implemented in 5 steps during the period from 31 December 2024 until 1 July 2028, starting with companies with total operating and financial income that exceeds NOK 100 million. These companies are required to comply with the new rules at the latest 1 month following the ordinary general meeting in 2024. The new rules also apply to employee elected board members.
Capital Markets
The number of IPOs completed on Oslo Børs in 2023 remained consistent with 2022 levels, with two IPOs completed. Additionally, one IPO was completed on Euronext Expand in 2023. However, the total number of listings on Oslo Børs’ marketplaces saw a significant decline in 2023. Oslo Børs recorded only four listings in 2023, a substantial drop from 16 listings in 2022. Similarly, Euronext Growth Oslo, aimed at small and medium-sized companies, also saw a decrease in listings, with only four listings in 2023 compared to 15 listings in 2022.
The market shift away from “growth” companies to companies with sustainable profits and free cash flows, which began in 2022, continued into 2023. The focus in 2023 remained on traditional industries, such as oil & gas, energy and industrials.
Despite the challenging market conditions, the Oslo Børs main index managed to increase by approximately 10% in 2023, largely driven by the strong performance of the oil and gas and shipping sectors.
ESG
Key contact: Georg Abusdal Engebretsen
The ESG regulatory landscape has developed significantly lately, mainly due to the high activity among the EU’s legislative bodies. Companies are continually faced with new regulations they must comply with, and the regulatory landscape has become very complex with several layers of national as well as international rules. Hence, it is more important than ever that companies keep track of regulatory developments and adjust accordingly, as there are significant reputational and legal risks related to non-compliance. Below is a brief summary of some of the key developments within ESG.
Provisional deal reached on the Corporate Sustainability Due Diligence Directive (CSDDD)
On December 14, 2023, the Council and the European Parliament reached a provisional deal on the CSDDD, which aims to enhance the protection of the environment and human rights in the EU and globally. The directive obligates large companies (in the EU and in some cases also non-EU companies) to have a transition plan that is compatible with the EUs climate goals, while also establishing obligations regarding actual and potential adverse impacts on the environment and human rights. Both upstream business partners of the company and to some extent also downstream activities, such as distribution or recycling, are included. In addition, there is a substantial liability in instances of non-compliance, with sanctions potentially reaching up to 5 per cent of net global turnover.
Changes to the EU Emission Trading System will lead to new and enhanced climate requirements in Norway
The EU has adopted several major changes in key parts of the so-called “Fit for 55”-package, including the EU Emission Trading System (ETS). The latest changes include the integration of maritime transport into the ETS, and industry actors must adhere to the regulations for buying, selling, using, and surrendering emission allowances from January 1, 2024. Simultaneously, a separate and parallel carbon credit system for buildings, road transport and other sectors (ETS 2) is being established, along with reduced limits for total greenhouse gas emissions, revised rules for the free allocation of quotas, and new rules for the utilization of ETS revenues.
The enhanced carbon credit system will impose stronger requirements on climate work and efforts in several new sectors of the Norwegian industry and commerce. There is also reason to believe that the reduction of available carbon credits in the future will result in an advance in prices of these credits. Thus, the changes in the ETS rules, coupled with a progressively stricter enforcement of environmental legal requirements, will lead to increased economic and legal risk, making it even more important for Norwegian companies to actively work with climate and environment.
Green Claims Directive
In order to protect consumers from greenwashing, the EU is currently in the legislation process of the so-called Green Claims Directive. No specific date has been set for the adoption yet, but when the directive enters into force, companies are required to provide clear and accurate information about the environmental impact of their products or services, as well as adhere to the prohibition of unsubstantiated or vague environmental claims. Furthermore, substantiation and communication of environmental claims and labels will have to be third party verified and certified to comply with the requirements of the directive before the claim may be used in commercial communication, and labels based on so-called self-certification (i.e. not based on a certification scheme, or not established by public authorities), will be prohibited.
New environmental requirements in public procurements
New regulations that tighten environmental requirements in public procurement come into effect already from January 1, 2024. Under these new rules, the principal guideline is that climate and environmental considerations should be weighted with a minimum of 30 per cent. The purpose is thus to reduce the total climate footprint and environmental impact of public procurement processes.
New initiatives to combat social dumping and work-related crime
From January 1, 2024, more stringent provisions will be implemented in the cleaning sector and the construction industry to combat social dumping and work-related crime. Among others, new requirements are introduced within the procurement- and supply regulations, regulations concerning wage and working conditions in public contracts. In addition, the Norwegian Agency for Public and Financial Management (DFØ) has developed and published a guide on best practice for contract management, which is expected to have a significant impact on principals in the future.
COMPLIANCE
Key contact: Georg Abusdal Engebretsen, Jan Fougner
The landscape of geopolitics and security is continually evolving, particularly due to increased tensions in conflict areas both within and outside Europe. Additionally, the rise of technology and AI has introduced new threats in the digital realm. Collectively, this results in significant regulatory activity, where both new legislation is introduced and existing ones amended.
Implemented and forthcoming changes to the National Security Act
Recent amendments to the National Security Act aim to strengthen national security and increase resilience against a diverse array of threats. These include, among other things, modifications that lower the threshold for subjecting companies to the NSA as well as lowered thresholds for ownership control, a duty for companies to identify sensitive properties, as well as an expansion of the definitions of critical and protectable values. Some of these changes came into effect on July 1, 2023, while others are set to be implemented later, likely in early 2024.
Enhanced focus and possible new regulations on foreign investments in Norwegian companies
On December 4, 2023, an Official Norwegian Report (NOU) was presented on how Norway better can assess, and possibly intervene, in investments due to national security concerns. The external committee proposes that a new act on foreign investment control should be established, with the aim of controlling foreign investments in companies that are not subject to the Norwegian Security Act and to align the Norwegian regulations more closely with the EU. If the legislator follows up along the lines presented in the report, it could lead to significant implications for cross-border M&A-transactions in Norway.
New legislation on cybersecurity
The Norwegian Parliament enacted a new Digital Security Act on December 12, 2023, aimed at ensuring basic requirements for digital security in companies of particular importance to society. The exact date of when the act enters into force is not yet determined. However, it will apply to both public and private entities that offer vital services within the sectors of energy, transport, health, water supply, banking, financial market infrastructure and digital infrastructure, as well as providers of digital services, including online marketplaces, search engines or cloud services. As the law is structured, companies within these sectors must assess themselves whether they are within the scope of the law, and it has been announced that the government will clarify the law’s scope (for instance, regarding threshold values) in a separate regulation. For the companies covered by the law, there are specific requirements for ongoing mapping and risk assessment of important information systems, implementing and monitoring of security policies and management systems for information security, as well as a duty to report significant security incidents that impact a service.
SANCTIONS
Key contact: Georg Abusdal Engebretsen
On 18 December, the EU adopted its twelfth package of economic and individual restrictive measures in response to the ongoing Russian war of aggression against Ukraine. The sanction package includes, among other measures, further restrictions on the import of goods that generate significant revenues for Russia, such as pig iron, copper, and aluminium wires, foil tubes, and pipes. Additional examples encompass tighter export restrictions on dual-use goods and technologies, as well as measures aimed at strengthening bilateral and multilateral cooperation with third countries to impede the circumvention of sanctions. Furthermore, the EU has decided to list a significant number of additional individuals and entities, subjecting them to asset freezes and travel ban restrictions.
It is expected that Norway will follow up and implement the twelfth package into Norwegian law within a short time.
Dispute resolution
Key contacts: Thomas G. Naalsund, Stephan L. Jervell, Olav Fr. Perland and Christian Hauge
The ongoing discussions surrounding Norway’s energy industry and data protection issues are making their way into the courtroom.
A recent judgment from the Norwegian Supreme Court has become a focal point as it represents the latest development in the much-debated ACER Case. In 2018, the Norwegian Parliament (“Stortinget”) consented to the implementation of the EU’s third energy market package into the EEA-Agreement, which involved a transfer of authority from the state to the EFTA Surveillance Authority (“ESA”). This decision, made by a simple majority in line with section 26 subsection 2 of the Constitution, was challenged by the organization Nei til EU (“No to the EU”). They argued that the significant nature of the authority transfer required a three-fourths majority. However, the Supreme Court upheld the Storting’s decision, ruling it constitutional.
Concurrently, another lawsuit has been filed against the state by Greenpeace and Natur og Ungdom (“Young Friends of the Earth Norway”), seeking to delay further oil extraction on the Norwegian continental shelf. They demand a temporary preliminary against the development plan for three oil fields in the Barents Sea, arguing that the state has not adequately assessed the plan’s impact on climate change. This lawsuit continues the intense debate over the future of Norway’s energy industry, with the district court expected to deliver its verdict by the end of January 2024.
In July 2023, the Norwegian Data Protection Authority (“Datatilsynet”) ruled that Meta, the parent company of Instagram and Facebook, had engaged in illegal behavior-based marketing. As a result, a temporary ban was imposed on Meta’s marketing practices in Norway. Despite initially challenging the authority’s decision, Meta withdrew the case after a failed attempt to secure a preliminary injunction.
This dispute highlights a shift towards stricter data protection practices in the EU, as the European Data Protection Board (“EDPB”) has now prohibited behavior-based marketing on Instagram and Facebook across the EU and the EEA. Similarly, Grinder inc., owner of the popular dating app Grindr, has filed a lawsuit against Datatilsynet following a record-breaking fine of 65 million NOK for data protection violations.
Employment law
Key contacts: Christel Søreide, Eli Aasheim and Jan Fougner
New legislation to strengthen employment protection
The current Norwegian government is committed to strengthening employment protection, a commitment that has significantly influenced labour market politics in 2023. Among other measures, the government has passed several new rules that enhance employee rights, set to come into effect during 2024. Below, we summarize the most critical new legislation.
New obligations for employers in group companies during redundancies – effective from 1 January 2024
Under Norwegian employment law, the primary rule is that employees only have entitlements towards their specific employing legal entity. However, from 1 January 2024, employees will gain certain rights to new employment in other Norwegian group companies during redundancy processes. These new rules will necessitate increased cooperation and information exchange across different group companies.
- The obligation to offer other suitable work during redundancy processes will extend to include vacant positions for which the employee is qualified within all Norwegian companies in the same group as the employer company. However, the new rules allow for limiting the circle of group companies encompassed by the obligation, provided there are justifiable grounds.
- The employee’s preferential right to new employment after redundancy will also extend to include vacant positions for which the employee is qualified within all Norwegian group companies. This preferential right will apply for 12 months from the expiration of the notice period.
- Groups with companies that regularly employ at least 50 employees are obliged to establish a forum for information and consultation between the companies and the employees in the group. This forum will discuss matters affecting employees in more than one group company.
Rules on new, extensive requirements for employment contracts
The Norwegian government has passed new legislation to implement EUs Directive 2019/1152, which includes more extensive requirements with regard to content in employment agreements. These rules will come into effect in Norway by 1 July 2024, meaning that Norwegian employers must update their current employment contract templates by this date. The new requirements for employment contracts will primarily apply to contracts concluded after 1 July 2024 and not to employees with older contracts, unless the employee requests a new contract.
The requirement to include more extensive information in employment contracts is not intended to limit the employer’s management prerogative or right to make changes in terms and conditions, etc. Moreover, it will be possible to provide large parts of the required information through addendums to the employment contract.
Employers should begin the process of (i) updating their employment contract templates and (ii) mapping the terms and conditions that apply to the different positions in the company to ensure compliance with the information requirements before 1 July 2024
New Supreme Court Judgment clarifies low threshold for whistleblowing under Norwegian law
In Norway, the threshold for whether an employee’s note of concern is considered whistleblowing is lower compared to many other countries. This has led to an increasing number of work environment and personnel-related matters being handled as whistleblowing cases, often subject to more extensive processing than required by law or deemed appropriate.
In a judgment from 21 December 2023, the Norwegian Supreme Court confirmed that the threshold for a note of concern being considered as whistleblowing is low. The Supreme Court assessed whether an email sent by an employee representative criticizing how an HR representative acted towards another employee in a meeting constituted whistleblowing. The Supreme Court concluded that this did constitute whistleblowing. The Supreme Court also concluded that a notification does not need to have public interest to be covered by the whistleblowing rules.
However, the Norwegian Employment Act allows employers considerable flexibility in deciding how a whistleblowing case should be handled. This means that extensive investigations are rarely needed for whistleblowing cases related to personnel cases. In many instances, it may not even be necessary to conduct investigations at all, as the employer already has a sufficient overview of the situation. Employers are in any case obliged to ensure that any notes of concern and complaints from employees are handled appropriately, regardless of whether they constitute whistleblowing or not.
Real estate
Key contacts: Tom Rune Lian, Ståle O. Meleng and Stig L. Bech
In the transaction market we are currently observing the market cautiously picking up in terms of new transactions; some of these are off-market, some go through brokers. The activity includes consolidations, where several parties are using the opportunity to strengthen their portfolio and expertise through new ownership structures, but also pure sales of commercial buildings and development plots. The brokers’ guidance on levels seems reasonable – with prime yield at around 4.75. It is not unusual for the pre-holiday season to contain a large proportion of the annual transaction volume, but this year it will be particularly skewed – possibly with over a third in November/December.
The transaction volume as of December 2023 is approx. NOK 45 billion, and international buyers represent 14,80% (figures from Akershus Eiendom).
The rental market is still pretty good. Some selected figures: Prime office rent is NOK 6,200 per sqm., vacant areas in central Oslo are just under 5%. 5-year swap is 3.55 and the Consumer Price Index (CPI) is 4.80%.
In terms of development, we observe a similar tendency, where equity-strong players are using the opportunity to strengthen the land bank – many in Joint Ventures with previous owners. New owners not only bring capital, but often also new angles on established projects. By no means do we experience that things are being sold cheaply, quite the opposite. Professional players on both sides negotiate from long-term positions and are only rarely influenced by specific moments in time involving significant challenges.
As such, the market for residential rentals, and combinations of renting and owning, is a topic worth mentioning. Not least co-ownership and rent-to-own, where new standard contracts are soon to come (Norsk Eiendom and others). These contracts are a synthesis of renting and owning, combining a dozen sets of rules. It is a complex starting point, but when put together in an orderly manner it becomes precise and consumer-friendly. OBOS has reported that 40% of sales in Oslo during the past two years took place under housing purchase models, mostly co-ownerships. Fredensborg has sold about 150 units under the rent-to-own model. The fact that organisations, leading industry players and advisors create good templates together is a typical feature of the Norwegian market.
Tax – Final Norwegian National Budget 2024
Key contacts: Nicolay Vold, Andreas Bullen and Bettina Banoun
The Norwegian minority coalition cabinet released its proposal for the 2024 National Budget (full text in Norwegian only here) on 6 October 2023, discussed in our Norway International Update – Q3 2023. The coalition parties later reached an agreement with the Socialist Left Party (SV) on a final amended budget, and it was approved by parliament 4 December 2023. The agreement involved certain amendments to the original budget, and we will present the most important changes here.
Exit tax
The parties have agreed to expand the scope of the exit tax rules, by making every transfer of shares from an individual to any person (also legal entities) not tax residents in Norway covered by the exit tax rules. Previously, only transfers to spouse and close relatives of the individual transferor were covered by the exit tax rules. The change will have effect from 3 December 2023.
It is noted that it has in news articles been stated that the Government is working on a Bill to amend the exit tax rules to implement a more “direct” exit tax, which may involve a duty to pay tax at the time of exit, compared to the current rules which in reality implies an indefinite tax deferral if security is posted.
Dividend taxation under the participation exemption
Further, the parties agreed to review the possibility to increase the tax rate on dividend distributions between entities covered by the Norwegian participation exemption. Today 3 per cent of dividends received by a shareholder covered by the participation exemption but not in a “tax group” (i.e. more than 90 per cent ownership/voting rights) are subject to tax at a rate of 22 per cent (i.e. an effective tax of 0.66 per cent). The parties will now assess whether to increase the percentage of taxable amount from 3 per cent to 5 per cent (i.e. a possible increase the effective tax rate to 1.1 per cent). It is uncertain if and when such a change may enter into force.
Tax-free allowance for individual shareholders
The parties agreed to further assess whether to increase the tax-free allowance on dividends and capital gains for individual shareholders. Currently, the tax-free allowance is calculated on a share-by-share basis, and the allowance for each share is equal to the cost price of the share multiplied by a determined risk-free interest rate based on the effective rate after tax of interest on treasury bills (Norwegian: statskasseveksler) with three months maturity plus 0.5 percentage points, after tax. It is uncertain if and when such a change may enter into force.
Resource rent tax on onshore wind power
In the final approved budget the proposal to introduce resource rent tax on onshore wind power was amended. The resource rent tax will be in addition to the ordinary corporate income tax and the new rules shall take effect from 1 January 2024. The key elements are as follows:
- The effective tax rate is 25 per cent (i.e. 10 percentage points lower than the original proposal)
- New onshore wind power farms that are not in a tax position will be reimbursed for the tax value of the negative resource rent.
- Existing onshore wind power farms’ input value will be increased by 40 per cent (limited to 85 per cent of the historic costs of the investment). The input value will be depreciated linearly over five years.
Taxation on private consumption in companies
The Government is still working on the previous proposal to introduce new tax rules applicable to private consumption in companies (often referred to as “monster tax” or “luxury tax”). It is expected that the Government will put forward a Bill to the Norwegian parliament during the spring of 2024. This tax will seek to put a heavy tax burden on legal entities owning homes, boats and other objects which typically may be used by individual shareholders.
OECD Pillar 2
On 24 November 2023 the Government put forward a Bill to the Norwegian parliament to implement the internationally agreed rules on global minimum tax (Pilar 2) of 15 per cent. The rules will apply in Norway from 1 January 2024. The Bill is in consistent with the proposal resulting from the extended OECD collaboration with over 140 jurisdictions involved.
See press release from the Government for further information.
Taxation of synthetic shares and the taxation of low-interest loans from an employer
On 15 November 2023 the Tax Directorate published an advance tax ruling regarding the tax treatment of synthetic shares.
The first issue was whether such shares were covered by the Norwegian participation exemption when such shares were acquired by a company. The Tax Directorate concluded that such shares were covered, as they should be regarded as a derivative of shares.
The second issue was whether capital gains from synthetic shares would be subject to the rules re. tax-free allowance (which applies to ordinary shares realised by an individual), and secondly whether the calculated gain subject to tax is to be grossed up with a factor of 1.44, giving an effective tax of 37.84 per cent (which applies to ordinary shares realised by an individual). The conclusion on both answers were no, as the wording in the relevant sections of the tax act did not cover synthetic shares. This confirms what has been the common understanding, that capital gains on synthetic shares held by individuals are subject to a tax of 22 per cent, compared to 37.84 per cent for ordinary shares held by individuals.
The third issue was whether the rules on taxation of low-cost loans from an employer to an employee were applicable where the debtor is a private holding company of an employee. Under the said rules, the benefit of a low-interest loan within an employment relationship is taxed using a normal interest rate which is set by the Directorate of Taxes, six times a year. The Tax Directorate concluded that the rules were applicable also for loans to the employee’s holding company, an issue which until now has been unclear.
A ruling from Tax Board of Appeals regarding the allocation of interest costs when calculating credit for banking businesses
On 16 October 2023 the Tax Board of Appeals ruled in favour of a banking business regarding the allocation of interest costs when calculating credit related to profits attributable to a branch that is taxable in another jurisdiction.
According to the regulation of the Tax Act, interest costs are to be allocated based in same proportion as the amount of net income. Yet, the Tax Board of Appeals found that it would be more in line with the applicable tax treaty if the allocation would be based on a direct allocation for banking businesses. This was found on the basis that that special considerations apply for banking businesses, cf. OECD’s Report on Attribution of Profits to Permanent Establishments (2008). (“Traditional banking, which is the subject of this part of the Report, involves borrowing money from depositors for on-lending to third parties. Interest costs are consequently an intrinsic part of a bank’s business, and its trading profits can only properly be determined by deducting such costs. It follows that lending and borrowing by a PE to and from the rest of the enterprise of which it is a part should generally be recognised where it meets the requirements for recognition as a dealing.“) On this basis, the Tax Board of Appeals concluded that when calculating the maximum credit for banking businesses interest costs may be deducted based on a direct allocation.
Financial regulatory
Key contact: Kjersti T. Trøbråten
- The Norwegian Parliament has asked the Government to propose a ban on the marketing of credit (unsecured loans) and consumer loans.
- The Norwegian Ministry of Finance (“MoF“) has presented measures relating to the capital requirements framework for small and medium-sized banks. Among other things, The MoF has tasked the Norwegian Financial Supervisory Authority (“NFSA“) with reviewing changes in the regulatory framework resulting from CRR3 and CRD6.
- The NFSA will examine the implementation of MiCA and TFR II into Norwegian law.
- The Ministry of Finance has set the interest on overdue payments for the first half of 2024 to 12.5 percent.
- The NFSA has decided that Norwegian banks should not be required to adhere to the macroprudential policy measures implemented by Sweden aimed at commercial real estate and residential property.
On 7 December 2023, the Norwegian Parliament (Nw. Stortinget) asked the Norwegian Government (Nw. Regjeringen) to propose a ban on the marketing of credit (unsecured loans) and consumer loans.
The MoF has presented a number of measures relating to the framework for capital requirements for small and medium-sized banks.
- The NFSA has been asked to examine changes in banks’ capital requirements resulting from CRR3 and CRD6, which includes the introduction of a new and more risk-sensitive standard method for calculating capital requirements for credit risk. The NFSA’s examination is a result of the EU countries’ agreement from June regarding the implementation of the final parts of the Basel III recommendations. The MoF’s aim is to implement the new method in Norway and the additional changes that result from CRR3 from 1 January 2025, coinciding with its application in the EU.
- The MoF will introduce new requirements for the composition of capital for pillar 2 requirements in a way that results in lower requirements for Common Equity Tier 1 Capital (“CET1“), especially for smaller banks. This will be implemented as early as 31 December 2023.
- The MoF has asked the NFSA to prepare the necessary numerical basis to assess a reduction of the risk weighting of agricultural property loans. The NFSA has been given a deadline of 29 February 2024.
The NFSA has been tasked with examining regulation (EU) 2023/1114 on markets in Crypto-assets (“MiCA“) and regulation (EU) 2023/1113 on information accompanying transfers of funds and certain Crypto-assets (“TFR II“), with a deadline of 1 March 2024. MiCA introduces a common framework for Crypto-assets and Crypto-asset service providers, while TFR II aims to prevent the financial system from being used for money laundering or terrorist financing by requiring service providers to gather and disclose specific information about the parties involved in transactions. The MoF has stated that it is working towards Norwegian implementation without significant delays compared to the EU.
Every six months, the MoF amends the interest on overdue payments. For the first half of 2024, i.e. from 1 January until 1 July, the rate shall be 12.5 percent. By comparison, the rate that applied until 31 December was 11.75 percent. The standard compensation for recovery costs is also set every six months. As of 1 January 2023, the rate is NOK 470.
CRR permits national authorities to impose additional requirements if changes in macroprudential or systemic risk warrant it. Other countries may choose to recognize this measure and require national institutions to consider it for exposures in the relevant country (voluntary reciprocity). Sweden has adopted measures which entails that IRB-banks should apply a floor of 35 percent for the exposure-weighted average of the risk weights applied to the portfolio of corporate exposures secured by commercial real estate and a floor of 25 percent for the exposure-weighted average of the risk weights applied to the portfolio of corporate exposures secured by residential property. The NFSA has decided to opt out of voluntary reciprocity, as Norwegian banks do not have significant exposure to these risks in Sweden.
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