According to plan, Norwegian, Danish and Swedish kroner will be included in the international foreign exchange settlement system CLS in June 2003. In an effort to make it easier for banks to manage liquidity, Norges Bank, Danmarks Nationalbank and Sveriges riksbank have made it possible for banks to use deposits in one central bank as collateral for loans in one of the other central banks. This arrangement is called Scandinavian Cash Pool.

Banks that wish to borrow funds from Norges Bank in connection with this arrangement must have:

• An account maintenance and settlement agreement
• A frame agreement concerning terms and conditions and routines relating to collateral for loans in Norges Bank
• A frame agreement concerning deposits as collateral for loans

Banks that wish to use deposits in Norges Bank as collateral for loans in another central bank must in addition to the account maintenance and settlement agreement have:

• An agreement for the establishment and use of a collateral account

Banks that wish to use cash deposits in another central bank as collateral for loans in Norges Bank must have:

• A collateral agreement with Norges Bank

Participating banks must also have the necessary agreements with Danmarks Nationalbank and Sveriges riksbank. The borrowing terms and conditions within this arrangement are the prevailing rules for loan against collateral in Norges Bank, including a 5 per cent haircut for foreign exchange risk. The same will apply in Danmarks Nationalbank and Sveriges riksbank.

This arrangement may only be used for intraday liquidity. According to this arrangement, collateral may be provided and loans may be drawn from the time Norges Bank's Settlement System (NBO) opens in the morning until 3 pm. Banks are committed to redeem loans and ensure that the deposits in the collateral account in Norges Bank are redeemed by 3 pm the same day. In the case of non-compliance, a fee corresponding to the fee for E-loans will be charged. The current fee is NOK 5,000 plus 0.05 per cent of the collateral or borrowed amount. The fee is charged against the bank's sight deposit account on the last banking day of the month in which the violation occurred. Norges Bank will take possession of the collateral in the event of non-payment. Norges Bank's indicative exchange rates, which are set at 2:15 pm the same day as the exchange rates, will be used in connection with the settlement of collateral. Danmarks Nationalbank and Sveriges riksbank establish their own rules concerning the time of reversals and fees in the event of a violation of these rules.

Banks participating in this arrangement will be billed a one-time fee comparable to the central banks' total development costs spread over the number of participants. New participants who join the system after start-up must participate in the financing by paying a share of total costs that is equal to the share paid by the other participants and in accordance with a specified plan of depreciation. The original participants will be compensated accordingly.

Scandinavian Cash Pool was initiated on 31 March 2003. For more information, please contact Svein Grøder, +47 22 31 60 47.