Press release from the Law Commission:

Proposal on a new central bank act

The Commission on the Act relating to Norges Bank and the Monetary System proposes a new central bank act that lays down a clearly defined purpose for Norges Bank. Under the proposal, responsibility should also be conferred on Norges Bank for setting the countercyclical capital buffer for banks and the possibility of providing Norges Bank with the authority to issue regulations for new residential mortgage loans should be considered.

The Commission today submitted its recommendation to the Minister of Finance, Siv Jensen.

“The Commission emphasises that the Bank should have democratic legitimacy, which should be combined with transparency, predictability and a long-term approach in its use of instruments and the performance of its tasks,” said the chair of the Commission, Svein Gjedrem.

The Commission proposes the following purposes and functions for Norges Bank:

  • Norges Bank’s purpose should be to maintain monetary stability. Norges Bank should be the executive and advisory authority for monetary policy.
  • Norges Bank’s purpose should also include promoting the stability of the financial system and an efficient and secure payment system. Norges Bank has executive and advisory authority in the work to promote financial stability.
  • The central bank should otherwise contribute to high and stable output and employment.

The Commission also points out that the Government should, as necessary, further specify Norges Bank’s objectives under the act, for example through a mandate for monetary policy. The objectives will also serve as a reference when the Government and the Storting evaluate the Bank’s use of instruments. The objectives should be assessed at regular intervals, for example every five years.

The Commission proposes that Norges Bank should not be subject to instruction as to its activities except in extraordinary circumstances. Under the proposal, Norges Bank’s duty to submit matters of particular importance to the Ministry of Finance before a decision is made would no longer apply, but the Bank should inform the Ministry about matters of importance. 

New instruments for the Bank’s work on financial stability 
Under the proposal, the government should confer on Norges Bank decision-making authority in the use of instruments in its work on financial stability.

“The Commission also proposes that the Government should confer responsibility on Norges Bank for setting the countercyclical capital buffer for banks and should also consider providing Norges Bank with the authority to issue regulations for new residential mortgage loans,” said Mr Gjedrem.