Proposed amendments to the Norwegian ownership assessment rules for financial institutions
The Norwegian Financial Supervisory Authority has proposed amendments to the Norwegian ownership assessment rules, which would entail that the Norwegian rules would be more closely aligned with the EU/EEA directives.
The review follows the EFTA Court’s judgment in Case E-24/24, where the Court found that Norwegian administrative practice relating to ownership in banks and insurance companies in connection with acquisitions was in breach of EEA law. See our previous newsletter regarding the judgment here.
The EFTA Surveillance Authority also has an ongoing infringement case against Norway concerning the rules and administrative practice applicable at the authorisation stage. The case concerns the “issue rule” in Section 3-3 second paragraph of the Financial Institutions Act, which requires 75% of the share capital in a bank or insurance company to be subscribed through a capital increase without preferential rights. It also concerns the administrative practice whereby no single shareholder is, as a main rule, allowed to own more than 20% to 25% of the shares at the initial authorisation stage.
The Norwegian authorities have argued that the issue rule and administrative practice together ensure dispersed ownership from the time of authorisation, where the purpose is to, inter alia, reduce the risk of misuse of influence by large shareholders. The Norwegian authorities’ view has been that the rules on subsequent acquisitions cannot be used to circumvent authorisation requirements, but this view was not accepted by the EFTA Court.
Following the EFTA Court’s judgment, the Norwegian authorities have informed the EFTA Surveillance Authority that applications for acquisitions of qualifying holdings will be assessed solely on the basis of the criteria set out in CRD and Solvency II. Applications for ownership above 20% to 25% will therefore not be refused on the basis of a general presumption against large shareholders.
The EFTA Court did not assess the Norwegian authorisation regime as such. There has therefore been uncertainty as to how the Norwegian Financial Supervisory Authority (the “NFSA”) would assess the authorisation-stage rules in light of the judgment.
The NFSA does not assess the administrative practice relating to the granting of authorisations as such, but states that the issue rule no longer fulfils its stated purpose, as the distribution of shares may be changed through subsequent acquisitions shortly after authorisation is granted, in accordance with the thresholds and assessment criteria set out in the directives. The NFSA also refers to the EFTA Court’s statement that authorisation conditions may not be imposed so as to restrict subsequent acquisitions.
The NFSA therefore proposes that the issue rule be repealed. The NFSA notes that this will also address the EFTA Surveillance Authority’s concerns regarding the provision. It is further proposed to include a reference to the ownership assessment for subsequent acquisitions, so that the same assessment applies at the authorisation stage. The NFSA also proposes amendments to the provision concerning refusal of authorisation, so that it aligns more closely with the directives.
Furthermore, the NFSA proposes amendments to the rules on sanctions against owners of qualifying holdings that no longer meet the fit and proper requirements. Under the proposal, sanctions such as prohibiting the exercise of voting rights, requiring divestment of shares or ordering a forced sale would be discretionary rather than mandatory, which entails a change from current law.
The consultation paper is available here (Norwegian only) and is likely to be circulated for consultation by the Ministry of Finance shortly. The NFSA will submit a separate assessment of whether there is a need to regulate business relationships between institutions and significant shareholders, such as credit rules, at a later stage.
Published:
