Kredittilsynet recommends to the Ministry of Finance to authorise the merger between (the holding companies) DnB Holding and Gjensidige NOR and the merger between the banks Den norske Bank and Gjensidige NOR Sparebank. Kredittilsynet suggests that authorisation be granted on certain conditions. Kredittilsynet finds that neither solvency concerns, nor competition concerns, nor provisions in the financial legislation present obstacles to a merger.
Solvency situation
According to information provided in the merger application, a merged DnB NOR ASA would exceed the minimum capital adequacy requirement of 8 per cent with a good margin. Therefore, a merger would not be prevented for reasons pertaining to solvency or capital adequacy.
Shares in joint ventures (BBS, the Banks’ Central Clearing House, and Eksportfinans, the Norwegian Export Credit Agency)
Kredittilsynet has assessed the ownership of the DnB NOR Group in joint ventures, with particular attention to the Banks’ Central Clearing House BBS and Eksportfinans (the Norwegian Export Credit Agency).
According to Kredittilsynet, ownership in a joint payment system motivates the banks to contribute to the maintenance and development of such a system. Kredittilsynet therefore recommends that DnB NOR be authorised to own a maximum of 40 per cent of BBS, whereas the current aggregate ownership would amount to 43 per cent.
With regard to Eksportfinans, Kredittilsynet also recommends that DnB NOR be allowed to own a maximum of 40 per cent.
Competition issues
It is important to contribute to establishing a competent and competitive Norwegian financial conglomerate which is able to compete in the Nordic market, particularly to the benefit of Norwegian industry. Maintaining and developing financial competence in Norway will have a positive effect on smaller financial institutions and other parts of the economy.
A merger between DnB and Gjensidige NOR will create the largest financial conglomerate in the Norwegian financial market. A merger of the two largest financial institutions will lead to increased concentration and fewer institutions in the market. DnB NOR will achieve a particularly high market share within banking and life insurance.
In the banking market a merger between Den norske Bank ASA and Gjensidige NOR Sparebank ASA will in itself lead to fewer independent banks. The merger will lead to an increased market share in all regions, with a particularly high market share in Eastern and Northern Norway. Kredittilsynet assumes that the dynamics in the market and activities of other banks and financial institutions will lead to a decrease in the market share, bringing it, within a few years, closer to 40 per cent rather than 50 per cent for private customers and SME’s in Eastern Norway. In today's market, changing bank is easy, and several alternatives are available. Therefore Kredittilsynet does not find sufficient reasons to propose particular conditions with regard to market share in the banking sector. In the opinion of Kredittilsynet, competition can still be maintained due to the number of service providers and the adequate access to banking services. Kredittilsynet emphasises in its recommendation that DnB NOR will represent a strong Norwegian financial institution in competition with other Nordic and foreign banks, and contribute to enhancing the competition in the market for large corporate clients.
With regard to the life insurance market, DnB NOR will achieve a high market share within individual annuity insurance. Kredittilsynet has reached the conclusion that it would be most practical to let the companies themselves assess how they can gradually lower their market share in individual annuity insurance to a maximum of 45 per cent. The parties to the merger should be required to present a plan for the market share reduction.
Contact persons:
Director General Bjørn Skogstad Aamo, tel. +47 22 93 99 29
Adviser Lene Elisabeth Andersen, tel. +47 22 93 99 16 (regarding the conditions)
Special Adviser Anne Stine Aakvaag, tel. +47 22 93 98 74 (regarding financial data)
Link to the recommendation to the Ministry of Finance (pdf)
