4 Regulatory amendments in 2015
4.1 Regulatory developments
This chapter provides an overview of the most important financial market regulatory amendments in 2015. It also details key licences granted during the year, with a brief discussion of each case.
The overarching objective of regulatory amendments within the financial markets area in 2015 was to promote financial stability and well-functioning markets.
4.1.1 Financial undertakings and financial groups
The Act relating to financial undertakings and financial groups (Financial Undertakings Act) was adopted by the Storting on 10 April 2015, and entered into force on 1 January 2016. The Savings Banks Act, the Commercial Banks Act, the Guarantee Schemes Act and the Financial Institutions Act were repealed as of the same date. Existing regulations under these acts will continue to apply until further notice. The Financial Undertakings Act contains rules on licensing, organisational rules, general operational rules and rules on guarantees schemes and solvency failure, as well as provisions on penalties for banks, insurance companies and other financial undertakings. The Act made considerable changes to the Insurance Activity Act. The Act of 4 December 2015 No. 96 relating to changes to finance legislation, etc. remedied a number of oversights in the Act and authorised the Ministry to require banks to provide links to the Finansportalen financial services portal.
On 17 November 2015, the Storting adopted amendments to section 9 of the Act of 7 December 1956 No. 1 relating to supervision of financial undertakings, etc. (the Financial Supervision Act) on the allocation of Finanstilsynet’s expenses. The Act retains the general principle that Finanstilsynet’s expenses must be distributed among the institutions which are subject to its supervision according to the amount of supervisory work. The amendments have simplified the system for allocating such expenses and reduced the amount of discretion which can be exercised. The arrangement that Finanstilsynet’s allocation proposal requires the Ministry’s approval has been dropped. The statutory rules authorise the Ministry to issue supplementary provisions in allocation regulations. The Ministry has issued regulations setting out rules for the distribution of expenses between institutions. Both the new statutory provisions and the regulations entered into force on 1 January 2016.
On 18 December 2015, the Ministry of Finance issued new regulations relating to consolidation, etc. in cross-sector financial groups. The Ministry has also adopted new consolidation rules for bank- and insurance-dominated financial groups by amending the CRR/CRD IV Regulations and Solvency II Regulations, respectively. A financial group is formed when a financial undertaking, investment firm, securities fund management company or holding entity in a financial group has a capital interest in or is subject to joint management with another undertaking. Financial groups must meet solvency requirements on a consolidated basis, as though the entire group’s operations were located in a single undertaking, although capital requirements apply to each individual financial institution in the group. Previously, the Norwegian consolidation rules were identical for all types of financial groups. The regulations adopted on 18 December 2015 adjusted the consolidation rules to ensure consistency with the Solvency II Regulations and CRR/CRD IV Regulations, and introduced dedicated rules for bank-dominated financial groups, insurance-dominated financial groups and cross-sector financial groups, respectively. The new regulatory provisions entered into force on 31 January 2016.
Also on 18 December 2015, the Ministry of Finance adopted regulations relating to the allocation of supervisory expenses pursuant to section 9 of the Act relating to supervision of financial institutions (the Financial Supervision Act). The regulations govern the distribution of Finanstilsynet’s expenses among the different groups which are subject to its supervision, and state that supervision expenses must be distributed among the institutions which are under supervision at the end of the fiscal year and that a minimum amount must be set for undertakings which become subject to supervision during the course of the fiscal year. The regulations permit Finanstilsynet to set annual minimum and maximum amounts for allocation to the individual entities subject to supervision. Further, a licence application processing fee has been introduced for payment institutions and electronic money institutions. The regulations entered into force on 1 January 2016.
On 18 December 2015, the Ministry of Finance adopted regulations relating to holding entities in insurance groups. The regulations provide that holding entities in insurance groups are deemed to be insurance companies for the purposes of the Financial Undertakings Act and must meet a minimum capital requirement equal to 45 percent of the solvency capital requirement under Solvency II. The regulations entered into force on 31 January 2016.
On 21 December 2015, the Ministry of Finance issued regulations containing transitional rules to supplement the Financial Undertakings Act. The transitional rules are based on a discussion document from Finanstilsynet, and represent an interim solution until the issue of comprehensive, updated regulations.
4.1.2 Banking
On 15 June 2015, the Ministry of Finance adopted regulations setting out requirements for new residential mortgages. The regulations are based on guidelines previously issued by Finanstilsynet. The purpose of the regulations is to promote more balanced development of the housing and credit markets. Among other things, banks are required to calculate a customer’s ability to service a mortgage based on income and all relevant expenses, and to include a potential interest rate rise of 5 percentage points in the calculation. Amortising loans secured by residential mortgage may not exceed 85 percent of a property’s value, while home equity credit lines may not exceed 70 percent of the property value. These requirements may be satisfied by providing additional security in the form of a mortgage over other real estate or a personal guarantee. Residential mortgages exceeding 70 percent of property value must be amortising. To ensure that banks retain sufficient flexibility to make loans to creditworthy customers who do not meet all the regulatory requirements, the regulations permit up to 10 percent of loans granted each quarter to be loans which do not meet the regulatory requirements relating to servicing capacity, leverage ratio or amortisation. The regulations entered into force on 1 July 2015, and are due to be evaluated in light of developments in the housing market, household borrowing and any effects on inter-bank competition. The regulations will remain in effect until the end of 2016 unless the evaluation reveals a need for continued application.
Through the Act of 19 June 2015 No. 45 relating to amendment of the Norges Bank Act (the organisation of Norges Bank), the Storting made the following changes to the Act of 24 May 1985 No. 28 relating to Norges Bank and the Monetary System, etc. (the Norges Bank Act): the number of deputy governors was increased from one to two. Both deputy governors are members of the Executive Board. The total number of members of the Executive Board was increased from seven to eight to maintain the existing number of external members. The system of personal substitutes for members of the Supervisory Council was replaced by an arrangement under which the Storting appoints two permanent substitute members. The Executive Board was also granted power to establish subsidiaries as part of the management of the Government Pension Fund Global. The changes took effect on 1 January 2016.
The Regulations relating to relationships between members of Norges Bank’s Executive Board and other credit institutions and enterprises were amended with effect from 1 January 2016 to take account of the inclusion of two deputy governors in Norges Bank’s Executive Board as of that date. A further change was the replacement of “private undertakings“ with “undertakings engaged in commercial activities“ in section 1 of the regulations.
On 25 November 2015, the Ministry of Finance adopted regulations relating to amendment of the CRD IV Regulations containing provisions on a liquidity coverage requirement (LCR). These entered into force on 31 December 2015. Finanstilsynet adopted supplementary rules on 22 December 2015.
4.1.3 Insurance and pensions
By Act of 22 May 2015 No. 31, the Storting made amendments to the Occupational Pension Schemes Act concerning detailed limits and rules for disability pensions under private occupational pension schemes which are afforded preferential tax treatment. The changes adapt the regulatory framework governing private-sector disability pension schemes to the new disability insurance rules under the national insurance scheme. The new rules took effect on 1 January 2016. On 15 December 2015, the Ministry of Finance adopted regulations setting out transitional rules and a number of specific provisions on the calculation of disability pensions and transfers to undertakings’ premium funds; see the Regulations of 15 December 2015 No. 1640.
On 25 August 2015, the Ministry of Finance issued regulations to implement detailed rules corresponding to the new EU solvency regulations for insurance companies (Solvency II). The main rules under the new Solvency II regime have been incorporated into the Financial Undertakings Act. The Solvency II Directive is supplemented by implementation provisions, technical standards and recommendations. The regulations contain more detailed rules and transitional provisions (applicable for up to 16 years) relating to the new requirements. The Act and the regulations both entered into force on 1 January 2016, the date Solvency II became effective in the EU.
On 18 December 2015, the Ministry of Finance adopted regulations relating to the annual accounts of non-life insurance companies, and regulations relating to the annual accounts of life insurance companies. These regulations replace the Regulations of 16 December 1998 No. 1241 relating to annual accounts, etc. of insurance companies. The regulations entered into force on 1 January 2016, with effect for financial years beginning 1 January 2016 or later.
On 21 December 2015, Finanstilsynet issued regulations containing rules supplementing the Solvency II Regulations. The new regulations include provisions corresponding to Commission Delegated Regulation (EU) 2015/35 which adjust the capital requirement in connection with exposures to Norwegian municipalities and county authorities. The regulations are framed as an interim solution since the Commission regulation has not yet been incorporated into the EEA Agreement.
4.1.4 Securities trading, securities funds and alternative investment funds
Through the Act of 4 December 2015 No. 96 relating to changes to finance legislation, etc., the Storting made changes to instruments including the Act of 25 November 2011 No. 44 relating to securities funds (the Securities Funds Act). First, a new provision was adopted on the ability of securities funds to combine different investments vis-à-vis a single issuer. This change took effect on 1 January 2016. Second, the provision in the Securities Funds Act on the power of securities fund management companies to lend financial instruments on behalf of the securities fund was repealed and replaced by a regulatory power permitting rules to be issued by regulation on the use of portfolio management techniques. Lending of financial instruments is considered one of several such techniques. A change was also made to the Securities Funds Act which permits securities fund management companies to provide fund assets on behalf of the fund as security for contracts concluded to achieve efficient portfolio management. These changes will take effect on 1 July 2016.
On 17 April 2015, the Ministry of Finance adopted amendments to the Regulations of 29 June 2007 No. 876 under the Securities Trading Act (the Securities Trading Regulations). The amendments allow undertakings listed in a regulated Norwegian market to apply standard Chinese, Canadian or South Korean accounting principles in their financial reporting, since these are deemed consistent with International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No. 1606/2002. The amendments implement EEA rules corresponding to Commission Implementing Decision 2012/194/EU.
On 1 September 2015, the Ministry of Finance made changes to the Regulations of 29 June 2007 No. 876 under the Securities Trading Act, the Regulations of 21 December 2011 No. 1467 under the Securities Funds Act and the Regulations of 26 June 2014 No. 877 under the Act relating to the management of alternative investment funds. The changes require investment firms and securities fund management companies to submit reports on their operations to Finanstilsynet every six months instead of every quarter. Managers of alternative investment funds are now also required to report on their operations to Finanstilsynet every six months. The changes came into force on 1 October 2015.
Through the Regulations of 3 September 2015 No. 1022, the Ministry of Finance introduced amendments to the Regulations of 21 December 2011 No. 1467 under the Securities Funds Act. The changes related to manager registration of securities fund ownership interests in a fund’s register of ownership interests. The amendments permit managers – instead of maintaining a running overview of the beneficial owners of security fund ownership interests – to ensure by means of agreement that sub-managers meet the duty to register beneficial owners and provide information to the securities fund management company on request. The regulatory amendments make no changes to other manager duties, such as the duty to provide information on beneficial owners to the tax assessment authorities. The reason for the regulatory amendments was that the duty of managers to register beneficial owners on an ongoing basis created difficulties for both foreign managers and the export-focused segment of the Norwegian industry which wished to market its funds via European fund platforms. The changes took effect on 1 January 2016.
The Act relating to the setting of benchmark rates was adopted on 4 December 2015. In the Regulations of 4 December 2015 No. 1410, the Ministry of Finance introduced rules on a transitional scheme and entry into force. The Act became effective on 1 January 2016 and will apply, among other things, to the setting of the Norwegian money market rate Nibor (Norwegian Interbank Offered Rate). The regulations provide that administrators of benchmark rates must satisfy statutory and any regulatory requirements by 1 July 2016 and submit authorisation applications by the same date.
4.1.5 Estate agency
Through the Regulations of 9 June 2015 No. 618, the Ministry of Finance made amendments to the Regulations of 23 November 2007 No. 1318 repealing the provision setting out detailed requirements applicable to the qualifying examination for estate agents. Following the amendments, estate agency students are subject to university colleges’ own programme and examination regulations, like other students. The changes entered into force on 1 July 2015.
By means of the Regulations of 11 December 2015 No. 1466, the Ministry of Finance made a number of changes to the Regulations of 23 November 2007 No. 1318 relating to estate agency. The changes concerned practical experience requirements for personal estate agency authorisation. The changes took effect on 1 January 2016.
4.1.6 Accounting, auditing and bookkeeping
On 30 June 2015, Finanstilsynet approved an amendment to the Regulations relating to the authorisation of accountants, etc. The amendment concerned the content of the aptitude test requirement in the case of applicants with professional qualifications from other EEA member states (Directive 2005/36/EC). The amendment harmonises the professional content of the aptitude test with the concentration requirement in the educational requirement for authorised accountants (recommended plan for the bachelor’s degree in economic and business administration with concentration in external accounting).
On 21 August 2015, the Ministry of Finance adopted changes to the Regulations of 17 December 2004 No. 1852 relating to implementation of EEA rules on adopted international financial reporting standards. The purpose of the regulatory amendments was to incorporate into Norwegian law EEA rules corresponding to three European Commission regulations concerning changes to international financial reporting standards (respectively 2014/1361, 2015/28 and 2015/29).
Changes to the Accounting Act relating to social responsibility reporting entered into force on 1 June 2013. The Ministry of Finance introduced transitional rules pending regulatory provisions on such reporting in accordance with international standards. On 9 December 2015, the Ministry adopted amending regulations which extended the transitional rules to the financial years 2016 and 2017. The transitional rules permit reporting under the Global Compact and the Global Reporting Initiative (GRI) to replace the social responsibility statement required by section 3-3c, first paragraph, of the Accounting Act.
4.1.7 Miscellaneous
In June and December of each year, the Ministry of Finance sets a late payment interest rate for the next six-month period; see section 3 of Act of 17 December 1976 No. 100 relating to Late Payment Interest, etc. (the Late Payment Interest Act). The rate equals the Norges Bank key policy rate, with a surcharge of no less than eight percentage points. On 22 June 2015, the late payment interest rate for the second half of 2015 was fixed at 9.00 percent p.a.; see the Regulations of 22 June 2015 No. 729 relating to late payment interest. At the same time, the Ministry of Finance stipulated a standard debt collection cost compensation amount of NOK 330; see section 3a of the Late Payment Interest Act. The late payment interest rate for the first half of 2016 was set at 8.75 percent p.a.; see the Regulations of 17 December 2015 No. 1694. The same regulations set the standard debt collection cost compensation amount for the first half of 2016 at NOK 370.
On 16 June 2015, the Ministry of Finance adopted regulations permitting all central counterparties to be deemed “qualified” pursuant to the provisions of the Capital Requirements Regulations until 15 December 2015. This transitional arrangement corresponds to the rules adopted by the European Commission in Regulation (EU) 2015/880. The transitional arrangement was extended until 15 June 2016 by regulatory amendment of 14 December 2015. This corresponds to the rules adopted by the European Commission on 11 December 2015 in Regulation (EU) 2015/2326.
4.2 Enacted regulations
In total, the Ministry of Finance and Finanstilsynet enacted 40 sets of financial market regulations in 2015:
Regulations of 17 April 2015 No. 384 relating to amendment of regulations under the Securities Trading Act (the Securities Trading Regulations)
Regulations of 9 June 2015 No. 618 relating to amendment of the Regulations relating to estate agency
Regulations of 15 June 2015 No. 634 relating to requirements applicable to new residential mortgages
Regulations of 16 June 2015 No. 661 relating to amendment of the Regulations of 14 December 2006 No. 56 relating to capital requirements for commercial banks, savings banks, financial undertakings, financial group holding companies, investment firms and securities fund management companies, etc.
Regulations of 18 June 2015 No. 691 relating to amendment of the Regulations relating to the level of counter-cyclical capital buffers
Regulations of 19 June 2015 No. 712 relating to amendment of the Regulations relating to mortgage companies which issue covered bonds secured on public loans, residential mortgages or other real estate
Regulations of 22 June 2015 No. 729 relating to interest in connection with late payment and compensation for collection costs (second half of 2015)
Regulations of 30 June 2015 No. 822 relating to amendment of the Regulations relating to the authorisation of accountants, etc.
Regulations of 21 August 2015 No. 975 relating to amendment of the Regulations of 17 December 2004 No. 1852 relating to implementation of the EEA provisions on adopted international financial reporting standards
Regulations of 25 August 2015 No. 999 under the Financial Undertakings Act relating to implementation of the Solvency II Directive (the Solvency II Regulations)
Regulations of 1 September 2015 No. 1016 relating to amendment of regulations under the Act relating to the management of alternative investment funds
Regulations of 1 September 2015 No. 1017 relating to amendment of regulations under the Securities Trading Act
Regulations of 1 September 2015 No. 1018 relating to amendment of regulations under the Securities Funds Act
Regulations of 3 September 2015 No. 1022 relating to amendment of regulations under the Securities Funds Act
Regulations of 30 September 2015 No. 1137 relating to amendment of the Regulations relating to the disclosure duty of insurance companies in respect of agreements concerning insurance other than life insurance
Regulations of 2 October 2015 No. 1144 relating to amendment of the Regulations relating to relationships between members of Norges Bank’s Executive Board and other credit institutions and enterprises (Regulations of 7 August 2000 No. 809)
Regulations of 9 October 2015 No. 1175 relating to amendment of regulations under the Act of 24 November 2000 No. 81 relating to defined-contribution pension schemes in employment relationships (the Defined-Contribution Pensions Act)
Regulations of 9 October 2015 No. 1177 relating to amendment of regulations under the Occupational Pension Act
Regulations of 30 October 2015 No. 1247 relating to amendment of regulations relating to the jurisdiction of the Norwegian Labour and Welfare Administration (NAV) to determine pensionable income and social security contributions
Regulations of 25 November 2015 No. 1357 relating to amendment of the Regulations relating to capital requirements and national adaptation of CRR/CRD IV (the CRR/CRD IV Regulations)
Regulations of 25 November 2015 No. 1358 relating to amendment of the Regulations relating to appropriate liquidity management
Regulations of 1 December 2015 No. 1375 relating to approval of amendments to the articles of financial undertakings and financial foundations
Regulations of 1 December 2015 No. 1376 relating to approval of amendments to the articles of financial undertakings and financial foundations
Regulations of 4 December 2015 No. 1410 under the Act on the setting of benchmark rates (the Benchmark Rate Regulations)
Regulations of 9 December 2015 No. 1432 relating to amendment of the Regulations of 3 June 2013 No. 568 relating to transitional provisions supplementing the Act of 19 April 2013 No. 15 relating to amendments to the Accounting Act and certain other statutes
Regulations of 11 December 2015 No. 1464 relating to amendment of the Regulations relating to capital requirements and national adaptation of CRR/CRD IV (the CRR/CRD IV Regulations)
Regulations of 11 December 2015 No. 1466 relating to amendment of the Regulations relating to estate agency
Regulations of 15 December 2015 No. 1640 relating to amendment of regulations under the Occupational Pension Schemes Act
Regulations of 17 December 2015 No. 1694 relating to interest in connection with late payment and compensation for collection costs (first half of 2016)
Regulations of 18 December 2015 No. 1760 relating to amendment of the Regulations of 14 December 2006 No. 56 relating to capital requirements for commercial banks, savings banks, financial undertakings, financial group holding companies, investment firms and securities fund management companies, etc.
Regulations of 18 December 2015 No. 1762 relating to amendment of the Regulations relating to capital requirements and national adaptation of CRR/CRD IV (the CRR/CRD IV Regulations)
Regulations of 18 December 2015 No. 1763 relating to amendment of the Regulations relating to implementation of the Solvency II Directive (the Solvency II Regulations)
Regulations of 18 December 2015 No. 1764 relating to consolidation, etc. in cross-sector groups
Regulations of 18 December 2015 No. 1765 relating to capital requirements for holding companies in financial groups primarily comprising insurance companies
Regulations of 18 December 2015 No. 1775 relating to the annual accounts of non-life insurance companies
Regulations of 18.desember 2015 No. 1776 relating to the settlement of supervision costs
Regulations of 18 December 2015 No. 1780 relating to repeal of the Regulations relation to application of robustness provisions on a consolidated basis, etc.
Regulations of 21 December 2015 No. 1807 relating to provisions supplementing the Solvency II Regulations. Adopted by Finanstilsynet pursuant to the Regulations of 25 August 2015 No. 999 under the Financial Undertakings Act relating to implementation of the Solvency II Directive (the Solvency II Regulations)
Regulations of 18 December 2015 No. 1824 relating to the annual accounts of life insurance companies
Regulations of 21 December 2015 No. 1794 relating to transitional provisions, etc. supplementing the Act of 10 April 2015 No. 17 relating to financial undertakings and financial groups (the Financial Undertakings Act)
Delegation of 21 December 2015 No. 1803 of the Ministry’s powers under the Financial Undertakings Act to Finanstilsynet