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www.financenorway.com

EU Capital Markets Union

– The Norwegian AngleNovember 22nd 2017

By Per Erik Stokstad, Finance Norway


Agenda

1. Finance Norway

Who we are

How we work on EU files

2. CMU – The Norwegian perspective

Regulatory consequences (EEA)

An international capital market

3. Our priorities

2


Our members:• Savings banks

• Commercial banks

• Life insurers

• Non-life insurers

• Savings bank foundations

• Mortgage companies

• Financial conglomerates

• Other financial companies

• The trade and employer

federation for all banks and

insurance companies operating

in Norway.

• More than 240 member

companies.

• Our employees work on

regulatory, social, industry

and employer issues.

3



Nordic

Organizations


Agenda

1. Finance Norway

Who we are





3. Our priorities

5


CMU – The Norwegian perspective

6

Outside the

EEA «sphere»Investment

Plan for Europe

Capital Markets Union

Energy Union

Digital Single Market

Jobs, growth and investment


CMU – The Norwegian perspective (cont.)

CMU

Covered Bonds

SecuritisationInfrastructure investments

[…] Crowdfunding

7

Regulatory initiatives

[…]EEA-relevant

Outside the EEA «sphere»




Non-

regulatory

initiatives

A better functioning

common EU/EEAcapital market Norwegian legislation

A plan to unlock funding for Europe’s growth


Dependence on the international capital market

8

-2000

0

2000

4000

6000

8000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Bn

. N

OK

Total net claims (foreign assets)

Norges Bank and central government

Life and non-life insurance

Investment funds

Other

Banks and credit institutions

Non-financial companies

Current account surplus (accumulated)

Source: Statistics Norway


Non-financial companies – debt

9

1/3 foreign debt

Foreign

Domestic

Figures as of 2017Q2. Source: Statistics Norway Figures as of 2017M07. Source: Statistics Norway

75% of domestic debt from banks and mortgage companies

Banks and mortgagecompanies

State lending institutions

Finance companies

Pension funds, life and non-life insurance companies

Bond and certificate debt

Loans from other sources


Bank funding - Covered bonds

• Covered bonds approx. 23% of

banks funding

• Approx. 57 % (631 bn. NOK)

issued in foreign currency –

primarily EUR

• Approx. 8% (43 bn. NOK*)

foreign ownership of covered

bonds denominated in NOK

10

Source: Norwegian CB issuers, Norges Bank*This figure is based on covered bonds registered with The Norwegian Central Securities Depository (VPS)

-

200

400

600

800

1 000

1 200

2007

2008

2009

2010

2011

201

2Q

1

201

2Q

2

201

2Q

3

201

2Q

4

201

3Q

1

201

3Q

2

201

3Q

3

201

3Q

4

201

4Q

1

201

4Q

2

201

4Q

3

201

4Q

4

201

5Q

1

201

5Q

2

201

5Q

3

201

5Q

4

201

6Q

1

201

6Q

2

201

6Q

3

201

6Q

4

201

7Q

1

201

7Q

2

Bn

. N

OK

Outstanding volume in different currencies(measured in NOK)

NOK EUR USD Other Government bonds


Oslo Stock Exchange – An international market

11

Nr. 1 GloballyNo. of companies and market cap

# 1 Europe No. of companies

# 2 GloballyNo. of companies

# 1 Europe Oil service – no. of companies

# 2 Europe Energy – no. ofcompaniesEN

ERG

YSH

IPP

ING

SEA

FOO

D

Source: Oslo Børs

Foreign; 38%

Domestic; 62%

Investors at Oslo Børs

International investors account for 1/3 of holdings in

Oslo Børs listed companies and

dominate activity, accounting for 2/3 of daily trading

Rest of the world48 %

EU - Rest41 %

EU - Nordics11 %

Foreign investors* at Oslo Børs

*Investors/Custodians


“EUropeans” strongly into the Norwegian banking market

Bank Type Origin

DNB Bank ASA

Nordea Bank AB Branch Sweden

Danske Bank Branch Denmark

Svenska Handelsbanken AB Branch Sweden

SpareBank 1 SR-Bank

Sparebanken Vest

Santander Consumer Bank AS Subsidiary Spain

SpareBank 1 SMN

SEB AB Branch Sweden

Sparebanken Sør

SpareBank 1 Østlandet

SpareBank 1 Nord-Norge

Sbanken ASA

Swedbank AB Branch Sweden

12

Largest banks. Ranked by total assets

Market shares foreign branches as of 31.12.2015

with Nordea is included as a branch

Gross lending Deposits

Retail market Corporate

market

Retail

market

Corporate

market

16% 36% 17% 30%

Deposit taking banks Number

Norwegian institutions 125

Foreign subsidiaries 1

Foreign branches 11

Total 137

Source: Norwegian FSA

Source: The Norwegian Central Bank

Source: Norwegian FSA


EU insurers in Norway

13

* Finance Norway’s members

** Majority NorwegianSource: Finance Norway

DNB Livsforsikring

15,7 %

KLP32,4 %

Nordea Liv (Subsidiary -

Sweden)12,0 %

Storebrand Livsforsikring

17,8 %

Other**22,1 %

life

Gjensidige25,9 %

If (Finland)21,5 %

Tryg (Denmark)14,1 %

SpareBank 19,6 %

Other**28,9 %

non-lifeMarket shares*

based on premiums


Money market based on the foreign exchange market

5 out of 6 Nibor (Norwegian Interbank Offered Rate)

panel banks are Swedish or Danish

14

-40 -30 -20 -10 0 10 20 30 40

ON

T/N

1W

1M

3M

6M

12M

Lending activity - April 2017

Unsecured Repo Currency Swaps

Lending

NOK Billions

Borrowing

Source: The Norwegian Central Bank’s Money Market Survey 2017


Agenda

1. Finance Norway

Who we are





3. Our priorities

15


Our CMU priorities• Covered Bonds

• Securitisation

• SME

• Green Finance

• Solvency II and infrastructureinvestments

• Crowdfunding

• Pan-European Personal PensionProduct

• EMIR

• Insolvency

• Prospectus

• Others

16

Extract from CMU Mid-Term Review


CMU Mid-term review: Shadow Ratings

• ESMA has strongly indicated that publishing «shadow ratings» are prohibited by

the Credit Rating Agency Regulation (CRAR)

• Finance Norway, March 2017:

Official ratings are too costly and require too much internal resources for small

and mid-sized issuers. Prohibiting «shadow ratings» would work against the

purposes of CMU. Proposal for amendment to CRAR Article 2

• Commission Expert Group on Corporate Bonds, November 2017:

“The Expert Group recommends that the Commission explores different

mechanisms that would enable smaller issuers that cannot afford expensive

ratings to receive an independent and objective credit assessment. This would

greatly enhance the ability of small and medium-sized issuers to reach a critical

investor base and make bond issuance meaningful.”

17


Covered Bonds

• CMU initiative to propose a European covered bond framework in Q1 2018

• A well-functioning market in Norway. Framework well aligned with EBA best

practice

• Our position:

Important that the forthcoming framework is principle-based and built on

the well-functioning national systems; “If it ain’t broke – don’t fix it!”

18


Securitisation

• European securitisation markets subdued after US subprime crisis

• New EU legislation on securitisation from January 1, 2019

• Goal: To facilitate the development of a securitisation market in Europe

• Securitisation removed from Norwegian legislation in 2016

• Our position:

Important to quickly reinstate securitisation in Norwegian legislation

following EU-implementation

19


SME

• Small and medium-sized enterprises (SMEs) represent 99% of all

businesses in the EU

• CMU goal: Broadening access to finance for SMEs. Ensure adequate flow of

credit.

• Widening of “SME Supporting Factor” introduced in CRR in 2014 to avoid

tightened lending following stricter general capital requirements on banks.

• SME Supporting Factor is to be introduced in Norwegian legislation

• Our position:

SME Supporting Factor important for bank’s capacity for lending

20


Green Finance

• High-Level Expert Group on Sustainable Finance launched in October 2016

• Goal: To help to develop an EU strategy on sustainable finance to integrate

sustainability into EU financial policy

• Interim report issued in July 2017

• Our position:

The financial industry has an essential role in the transition towards a

sustainable financial system. Important to avoid regulatory

disincentives. (Ensure continued risk based approach)

21


Solvency II and infrastructure investments

• Limited investments in infrastructure by insurers due to overly restrictive capital

requirements

• CMU: Lower Solvency II risk charges for investments in infrastructure

• Goal: To make infrastructure investments more attractive to insurers

• Our position:

Adequately calibrated risk charges makes infrastructure investments

more attractive for insurers. Actual investments will depend on the

availability of economically sound projects

22


Crowdfunding

• Emerging, rapidly growing alternative form of financing. Mainly web based.

• 30.10.2017 EU Commission: Inception impact assessment - Legislative

proposal for an EU framework on crowd and peer to peer finance

• Our position submitted 20.11.2017:

Finance Norway welcomes the initiative […] crowdfunding has developed better in

jurisdictions with a relevant and transparent regulation than in jurisdiction without […].

The objectives […] are important and relevant […] important that such a framework

secures a level playing field for more traditional banks and investment firms competing

with the platforms. […]

same risk – same activity – same regulation

23


Agenda

✓Finance Norway

Who we are


✓CMU – The Norwegian perspective



✓Our priorities

24


Questions?

25

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