History

In 1986 the Banking Inspectorate – into which the Securities Commission had been absorbed in 1983 – was merged with the Insurance Council, thereby creating the first integrated supervisory authority for the financial market in the western world.

A growing number of countries have subsequently adopted this model. Also looking to the future, Norway’s financial industry has opted for a joint organisational structure with a common industry association for commercial banks and insurance companies.

A joint supervisory body for the entire financial market provides a better basis for responding to the dynamic development of products and services in the market and for overseeing financial groups across the traditional sectoral divides.

Through its additional responsibility for real estate agency, debt collection and insurance mediation, its oversight of auditors and accountants and its responsibility for ensuring listed companies’ compliance with the Accounting Act and international financial reporting standards, Kredittilsynet provides security for users and promotes well functioning markets.

Kredittilsynet’s first decade was marked by a crisis in the Norwegian banking system. The government was compelled to take over commercial banks accounting for three quarters of this bank category’s total assets. Savings banks representing half of this category’s total assets were in need of substantial capital injections from the government or the guarantee fund.

The following decade heralded a favourable economic climate for the financial industry. Kredittilsynet has stressed that financial institutions should maintain a sound equity capital position and good internal control in order to prevent new crises and to fulfil their social role by being able to assume new risk in their lending operations. The prospects for Norwegian financial institutions appear excellent in the short term. However, international experience shows that it is precisely in periods of vigorous growth that a basis can be laid for future problems. Recent years’ steep growth in house prices and household debt entails a real risk of a sudden contraction, possibly accompanied by falling house prices and potential problems for a number of late market entrants with a high loan-to-value ratio. It is still demanding for insurers to honour the returns they have guaranteed. At the same time pension obligations for an increasingly longer lived population are creating new challenges.