Economic and Political Environment

The Norwegian economy is a prosperous bastion of welfare capitalism, featuring a combination of free market activity and government intervention. The government controls key areas, such as the vital petroleum sector, through large-scale state-majority-owned enterprises. 

The country is richly endowed with natural resources - petroleum, hydropower, fish, forests, and minerals - and is highly dependent on the petroleum sector, which accounts for nearly half of exports and over 30% of state revenue. Norway is the world's second-largest gas exporter; its position as an oil exporter has slipped to ninth-largest as production has begun to decline. 

Norway opted to stay out of the EU during a referendum in November 1994; nonetheless, as a member of the European Economic Area, it contributes sizably to the EU budget. 

In anticipation of eventual declines in oil and gas production, Norway saves state revenue from the petroleum sector in the world's second largest sovereign wealth fund, valued at over $500 billion in 2010. After solid GDP growth in 2004-07, the economy slowed in 2008, and contracted in 2009, before returning to positive growth in 2010.

Key economic indicators: 

• GDP (purchasing power parity): $276.4 billion (2010 est.)
• Per capita GDP: $59,100 (2010 est.)
• Real GDP growth: 1.5% (2010 est.)
• Unemployment: 3.6% (2010 est.)
• Public debt: 47.7% of GDP (2010 est.)

Currency: 

Norwegian krone

The Banking Environment

Economic and political environment

Norway is a parliamentary monarchy and has about 4.5 million inhabitants.

Norway is not a member of the European Union, however is a member of the EEA.

70-75% of export trade are with EU countries and 65-70% of import trade are from EU countries.

Norway has an independent attitude in foreign affairs. Within Norway the collaborative prevails. In the banking system there is an obvious willingness to act on a cooperative level. The evidenced you would be able to see by the existence of common standards for eInvoicing and the way retail payments are cleared.

Norway is large geographically: The distance from Oslo to the North Cape is as far as from Oslo to Naples. Remote communities are heavily dependent on telecommunications, and this can be via satellite as much as via mobile phone because of the mountainous terrain.

Norway has few multinationals. Shipping, oil&gas, forestry are the main industries.

Banking in general

Norway was affected of a general banking crisis in the early 1990s, after which there was much consolidation. The market is dominated by a small number of large banks. The banking industry is kind of liberal. The infrastructure of day-to-day operations is either publicly-owned or under strong public supervision.

Norges Bank (NB) is the central bank in Norway and financial supervision is vested in “Kredittilsynet”.

About 95% of cashless payments are done via giro transfer, of which there are several subtypes.

There are no lifting fees for cross-border payments. Norway has adopted the EU regulation on cross-border payments in EUR even though the country not is a member of the EU nor of EMU.

Current accounts in NOK and foreign currencies are offered. Interest is applied for credit balances depending on the currency and the balance held.

Corporates are obliged to hold a special tax account (“Skattetrekk”) in which to accumulate their tax payable.

Overdraft facilities are granted. Terms and conditions are mostly negotiated case by case.

NIBOR (Norwegian Interbank Offered rate) is the benchmark interest rate in NOK.

Cash Management Features

A few nationwide banks exist and it is possible to be monobanked in Norway.

DnB NOR is the largest bank with approx. 35 % market share, followed by Nordea with approx. 15 %, Fokus Bank (Danske Bank) 5 % and Handelsbanken with approx. 4 % market share. None of the large global banks have any market share in Norway (e.g. HSBC, Deutsche Bank and CitiGroup).

The financial market is liberal and there are no lifting fees or exchange controls, although Central Bank reporting exists.

Activity is highly automated and it is possible to achieve 100% automatic reconciliation of payables and receivables if “reference giros” are used. About 95% of payments are giro credit transfers and a number of utilities have been built around the instrument and around direct debit to facilitate:

• A high degree of automatic reconciliation
• Submission by file either to the bank or direct to a utility that links to the clearing
• Introduction of EBPP
• All Liquidity Management techniques are possible in Norway how ever, there is a legal issue as to how Norwegian subsidiaries become party to a regional scheme

All Liquidity Management techniques are possible in Norway however, there is a legal issue as to how Norwegian subsidiaries become party to a regional scheme.

Tax Considerations

All fiscally resident companies are subject to a 28 % corporation tax on their profits. Dividends payable to private shareholders are subjected to 28 % profit tax.

The general VAT rate is 25 %. There is a reduced rate at 14% for food and 8% on some services.

Norwegian tax law dictates that inter-company transactions must be carried out using arm’s-length pricing in accordance with OECD guidelines.

There are no specific thin capitalisation rules but the arm’s-length principle is applied, and excessive interest paid to a non-resident will be disallowed.

The employers’ social security contribution vary by region between 0 – 14,1 % of the employees salary. .Income tax is deducted from the employees’ salaries based on individual income. The average income is high compared to other European countries, which is a result of the tax politics and high costs of living.

Central Bank Reporting

The following have to be reported:

• All resident to non-resident payments above NOK 100,000
• All payments by residents that are not in NOK
• The opening of a bank account by a resident outside Norway or the entering into settlement arrangements with non-resident banks
• Monthly average transactions or balances of NOK 100 million or above over accounts held outside Norway

Transaction reporting usually has to be done by the end of the month in which the transaction occurred.


Reporting of accounts/settlement arrangements includes details of location of the account/arrangement, when it was opened, who by, who with and what for.

Foreign Exchange Controls

None.

Payments and Collections

Payment Instruments

96% of payments are giro transfers, but only 66% of these by volume are initiated electronically.

In terms of volume, credit transfers and payment cards are the most used, whilst in terms of value it is credit transfers.

Cheques

Cheques are scarcely used and their usage is also falling, accelerated by the withdrawal of the Eurocheque guarantee scheme in 2001. The average cheque value is NOK25,000 and so they are clearly used for significantly-sized business transactions.

Cheques are cleared through the NICS system.

Electronic Payments

There are three clearing systems in Norway.

Norges Bank Settlement System or NBO

This is Norway’s RTGS system for NOK, based on SWIFT Y-Copy. Its opening hours are 06:3 – 16:30 CET.

The major institutions participate directly in it; others are sponsored by the main ones. Transactions over NOK100,000 are usually sent through NBO.

Norwegian Interbank Clearing System (NICS SWIFT)

This is a net settlement system for NOK based on SWIFT.

The participants send payment orders to the BBS processing centre. BBS stands for Bankenes BetalingsSentral AS or banks’ Payment Centre: it is owned by the banks and operates NICS).

There are 7 settlement cycles run at about 2 hour intervals in the day, and the results of each cycle are settled in NICS multilaterally where credits and debits match, and then the excesses have to be paid in from NBO if a bank is short, else released to NBO if a bank is long. Payments above NOK100,000 are routed to the component of NICS that arranges Real-Time Gross Settlement and such payments then settle individually with transfers to/from NBO.

There are 23 direct participants in NICS/SWIFT.

ACH – NICS Retail

This system handles the following:

• Credit transfers
• Direct debits
• Card payments (including ATM and EFTPOS)

NICS Retail is also operated by BBS.

Transactions are introduced in three ways:

• By bank processing systems
• Direct submission of BrevGiros by consumers
• By the collaborative Data processing Centre (“EDB Fellesdata”)

EDB Fellesdata acts as a gateway to NICS Retail for the following:

• Companies (using Direkte Remittering, for example)
• Paper giros coming through banks
• The ATM network
• Bank-owned channels like call centres taking TeleGiros, giros initiated through internet banking or mobile device

EDB Fellesdata is used in particular by second-tier banks as a utility. Just over 30 banks are direct participants.

NICS Retail confirms the calculations of what each participant has submitted either for the 06:00 cycle or the one at 15:00. The bulk of operations are included in the 06:00 clearing.

Settlement amounts are posted to participants’ accounts in NBO, so twice a day.

Most ACH transactions are made through NICS Retail, though there are three groupings that have their own systems:

• Den norske Bank, Norway’s largest bank, whose system handles a lot of savings bank traffic
• Fellesbanken (Union Bank) whose system acts on behalf of cooperative and agricultural banks
• The mutual savings bank groups

ACH Credits

There are several types of giro service offered to the customer. As stated above, 33% are still initiated on paper.

• Most paper ones are a BrevGiro (“Letter Giro”), which is pre-printed by the creditor and sent with the invoice. These are returned directly to the BBS who introduce them to the banks being debited and credited
• TeleGiro, where the user phones a call centre and asks for a transfer

Most banks allow retail customers to initiate giros on electronic banking or via mobile devices.

The electronic services are targeted at big users:

• eGiro which is an Edifact-based layout in which giros and direct debits can be sent in
• Direkte Remittering which is a mass payments application whereby the corporate sends traffic direct to BBS and not through a bank

The usage of a BrevGiro and the two services described above would both enable a debtor identification code (“KID”) to be captured and held in the reference details with the payment. BrevGiro is machine-readable at the BBS, hence this service being known as OCRGiro service. The recipient of the funds can pick up the KID in either electronic reporting or paper statements and make an easy reconciliation.

ACH Debits

There are two types of direct debit.

The “AvtaleGiro” (or Agreement Giro) is for consumers and requires that the creditor is authorised by its bank to submit them at all, and an agreement with each debtor. The creditor has to preadvise the debtor that an amount will be taken, but its payment is not subject to specific debtor authorisation. The debtor has a right of reclaim.

An extension of this is the eInvoice service whereby companies can send invoices via the EDB centre attached to AvtaleGiros. The debtor is then asked to look at the invoice and be advised of the direct debit claim at the sane time. The EDB is also able to take in invoices that have no AvtaleGiro attached.

The “AutoGiro” is used for business-to-business transactions and requires that creditor and debtor both sign agreements with their banks, but that the debtor also authorise each individual claim.

Cards

There is one card in circulation for every member of the population.

There are effectively three types of card in circulation:

• Debit cards linked to bank accounts
• Charge cards, not linked to a bank account where the issuer sends a monthly invoice that must be settled. Oil companies’ cards are the largest group of these cards
• Credit cards

Diners Club, Europay, VISA and DnB Kort all issue cards with both debit and credit functions.

There are only 2,000 ATMs in Norway; on the other hand there are 70,000 EFTPOS. Physical proximity to a bank branch or ATM is not regarded as essential or feasible. There is full interoperability for different card types at ATMs and EFTPOS. Charge cards are usable at the retailer that has issued them.

Debit and credit cards and Luottokunta can be used at any of the 60,000+ EFTPOS.

There is an e-money card scheme and a service – SmartPay – that enables purchases to be made over a mobile phone. Both ventures are collaborative between banks, television and mobile telecoms companies.

There are a number of e-markets in operation and it is normal to pay using one of these card or mobile options.

Liquidity Management

Balance Netting & Cash Pooling are the preferred techniques within Norway. But some banks do also provide Zero Balancing, Notional and Client Account Pools. Nordea Norway also provides a Balance Netting solution with multi currency functionality and common credit facility. All necessary sweeping service are available for Cash Concentration solution.

Some Norwegian issues;

All accounts can be held at one bank since there are nationwide banks, eliminating the need to move funds across banks

There is no withholding tax on interest between residents so this complication on inter-company loans does not exist

It should be noted, though, that there are a some Norwegian legal limitations regarding loans by a Norwegian company to a foreign sister or parent company outside the EEA.

In addition, it is a condition of the Norwegian company participating in a scheme where funds are routed to a non-resident, that the restrictions on cash pooling in the country of the non-resident are at least as restrictive as they are in Norway – even if it is in the EEA.

Electronic Banking

Electronic banking is almost universally used.

The Bank Standardisation Office (“Bankenes Standardiseringskontor”) has driven the agreement of domestic standards that are used end-to-end in client systems, electronic banking and the banks themselves, and they are totally aligned with clearing formats.

There are Edifact options running in parallel with the basic options. The Edifact options are known as eGiro, PAYMUL and CREMUL, and cover both credits and debits, enabling the usage of the important facilities and instruments (KID, OCRGiro, AutoGiro and AvtaleGiro).

So corporates can enjoy near-100% automatic reconciliation.

Norwegian banks have cooperated with one another and with banks from other Nordic countries to establish versions of Edifact corresponding to payments types in their countries, and in future to establish versions in XML (the Scandifact initiative).

The trend is clear for banks only to offer E.B.Systems with functionality in them to retail and small business customers, and the functionality sits on the bank side and access is browser-based. For corporates it is assumed that they adopt systems that have the national standards built in, and submit to the bank or to EDB.

Legal Entity that exist in the corresponding country

Norway Legal Entity Types - Mainstream

Legal entity types	Comments
Aktieselskap (AS) is the underlying type for both a public limited liability company and a private one. Only public ones can be quoted.	Name must contain the words “aksjeselskap” or the abbrevaition “ASA” if it is a public company Min NOK1000000 of capital for a public company NOK100000 for private Part-paid is not possible Registration is with the Registration of Business Enterprises The board has the powers of management and board members do not act individually but as a board They usually delegate day-to-day matters to the general manager(s) and to other designated individuals In private companies with less than NOK3million capital, there is a minimum of one director and one deputy director In all public companies and also private ones with over NOK3million capital there must be three directors and a general manager (who can also be a director but not the chairman) There can be several general managers
Ordinary partnership (Ansvarlig selskap or ANS)	Not available for financial and insurance business Partners have unlimited joint and several liability Must be registered with the Registration of Business Enterprises Any partner can bind the partnership
Limited partnership where the limited partners’ liability is the amount they pay in as capital (Kommanditselskap or KS)	Not available for financial and insurance business Partners have limited liability Must be registered with the Registration of Business Enterprises Only the general partner can bind the KS; the general partner has unlimited liability

 Norway Legal Entity Types - Non-mainstream  

Legal entity type	Purpose	Comments
Internal partnership	Used to pool assets and liabilities of other partnerships	May not act on its own vis a vis third parties; no separate legal personality
Shipping partnership	a partnership with unlimited liability for the debts, either jointly or in proportion to their contribution percentage to the vessel’s cost	Used where owners of the vessels are also its users,and to support of pool of a particular type of vessel