Cash Management in the Nordic and Baltic Regions 2015

Norway update

Published: Aug 2015

With a coastline spanning over 25,000 kilometres, Norway draws much of its economic strength from the sea. In addition to exporting natural resources such as oil and gas, the country is responsible for the largest catches of fish in Western Europe today.

Economic overview

Despite not being a member of the EU, the Norwegian government demonstrates independent prudent economic management designed to ensure that the country manages the revenue generated from natural resources efficiently in order to secure its future.

Norway’s economy is based on a highly developed welfare system that contains a prosperous free market and a large degree of state ownership in key sectors. The country boasts an extremely low unemployment rate of 2.6% and the hourly productivity and wages are among the highest in the world.

The oil and gas industry is one of the main drivers of the economy and the petroleum sector comes under government control. It was during the 1970s that Norway’s oil and gas resources were first tapped and, according to the CIA World Factbook, Norway is the world’s ninth-largest crude oil exporter and third-largest gas exporter. Petroleum accounts for over half of the country’s exports and over 30% of state revenue.

However, the Norwegian government is acutely aware that its oil and gas reserves are finite and, therefore, diverts the generated state revenue from the petroleum sector into the world’s second largest sovereign wealth fund, the ‘Government Pension Fund Global’ (GPFG). Forecasts estimate that at the end of 2014 the fund was worth around $800bn and is expected to reach $1trn by 2020. The fund currently holds 1% of the entire world’s stocks and is large enough to make every citizen a millionaire in the country’s own currency. The purpose of the fund is to smooth out the effect of declining oil output and fluctuating prices.

Having experienced solid GDP growth in 2004-07, the Norwegian economy slowed in 2008 on the back of the crisis, and contracted in 2009. Nevertheless, the country was not as badly hit as many of its European counterparts and unemployment remained relatively low. Since the crisis, Norway has returned to growth and is one of only a handful of countries in the world to be awarded an AAA rating by all credit agencies.

The banking sector

Norway’s banking sector is overseen by the Norges Bank, the central bank of Norway. Due to celebrate its 200 year anniversary in 2016, the primary role of the central bank is to promote economic stability through advising on monetary policy, promoting robust and efficient payment systems and markets, whilst also managing the nation’s foreign exchange reserves and government pension fund.

There were 125 banks with operations in Norway in 2014, including 19 commercial banks and 106 savings banks. There are also 41 branches of foreign banks. The country’s numerous savings banks have a significant share of the market in both lending and deposit taking. Prominent commercial and cash management banks include DnB NOR, Nordea, Fokus Bank, part of the Danske Bank Group and Swedbank.

Payments and clearing

System Clearing type Transaction type Value dates Times
NBO RTGS High value payments Same day, immediate finality Processes payments between Monday – Friday from 05:30 to 16:35 CET
NICS Gross RTGS High-value or urgent payments over NOK 25m Same day, immediate finality 05:45 to 16:00 CET
NICS Net Multilateral net settlement Medium-value payments below NOK 25m Four daily settlements 05:45 to 16:00 CET
  • Apart from cash, credit transfers (both electronic and paper-based) are the most frequently used payment instrument for domestic payments in Norway. According to the latest figures available on the central bank’s website, in 2012, credit transfers accounted for 96% of the total payment volume and 99.4% of the value. Norway is part of the SEPA initiative for EUR-denominated payments.
  • Payment cards are increasingly popular. In 2013, the number of card transactions came to 1.75bn. The number of transactions in the Norwegian debit card system BankAxept increased by 5.2% between 2012 and 2013. For the same period, the number of transactions using international payment cards increased by as much as 17.8%.
  • The usage of cheques continues to fall, primarily due to high pricing associated with cheques and the growing use of electronic instruments. Cheques are used mainly for one-off, large-value retail and corporate transactions.
  • Direct debits are now frequently used in Norway. The country has two different schemes, which are AvtaleGiro for B2C and B2B and AutoGiro for B2B transactions, both schemes are run by Nets Holding. As of 31st October 2016, cross-border EUR direct debits will need to be SEPA compliant.
  • E-invoicing. Electronic billing and payment solutions are offered through Nets and are becoming increasingly popular. Since 2011, over 2.7m electronic invoices have been issued by more than 10,000 public and private sector entities.

Investment options

  • Norwegian current accounts are not usually interest bearing, but interest can be paid on demand deposits.
  • Time deposits. Maturities usually range from one day to 24 months, however the most common maturities fall between one week and three months. Time deposits can be made in domestic or foreign currency and there is generally no minimum or maximum amount.
  • Certificates of deposit. These are offered by most commercial banks but a minimum investment amount of NOK 1m is likely to apply. These are popular with larger companies.
  • Treasury bills. T-bills have maturities of three, six, nine and 12 months and are denominated in units of NOK 1,000. Again, the minimum investment amount is NOK 1m.
  • Commercial paper. The minimum amount for a CP tranche is NOK 1m. These are popular with a range of investors.
  • Money market funds are only offered by some commercial banks, not all.
  • Repurchase agreements. The repo market in Norway is relatively active.
  • There are no foreign exchange controls in place in Norway.
  • Corporation tax is levied at 27% (2015).
  • Payments made to resident companies are not subject to withholding tax. However, dividends paid by resident companies to non-residents are subject to a 25% rate (subject to treaties). If a dividend payment is paid to an EEA resident corporate shareholder by a Norwegian company there is no withholding tax.

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