Norges Bank

Circular 6/2011

Quotas in the system for the management of bank reserves

[NOT IN FORCE]

On 15 December 2010, Norges Bank’s Executive Board adopted an amendment to the “Regulation on the access of banks to loans and deposits in Norges Bank etc.” in order to change the system for managing banks reserves. Under the new system, banks receive interest only on a specific portion of reserves – a quota – equivalent to the key policy rate. Deposits in excess of the quota bear lower interest – equivalent to the reserve rate.

The following applies once the new system goes live on 3 October 2011: 

  • Norges Bank will seek to maintain reserves in the banking system at an average NOK 35 billion with a symmetrical interval ±5 billion around this level.
  • The sum of banks’ quotas, the total quota, is set at NOK 45 billion.   
  • The reserve rate is set at 100 basis points below the sight deposit rate.

Banks are divided into three groups where all banks in the same group are assigned the same quota, with the exception of settlement banks which are assigned higher quotas. As from June 2011, banks will be divided into groups as follows (Table 1):

Table 1. Division of banks into groups (as from June 2011) 

Group 1:

Group 2:

Group 3: All B banks in NBO* (111 banks)

DnB NOR Bank** 

Sparebank 1 SR Bank

 

Nordea Bank Norge

Sparebanken Vest

 

Fokus Bank

Sparebank 1 SMN **

 

Handelsbanken

Sparebank 1 Nord

 

SEB

Sparebanken Hedmark

 

Swedbank Norge

Sparebanken Møre

 

 

Storebrand Bank

 

 

Sparebanken Sør

 

 

Sparebanken Pluss

 

 

BNP Paribas NUF

 

 

BNBank ASA

 

 

Skandiabanken

 

 

Bank1 Oslo AS

 

 

Sparebanken Øst

 

 

Citibank NUF

 

*Norges Bank’s settlement system, **Settlement bank

When the new system goes live on 3 October 2011, the quotas will be set on the basis of banks’ total assets as at 31 March 2011.  The quotas are distributed as follows (Table 2):

Table 2. Banks’ quotas to be applied from 3 October 2011. In thousands of NOK

 

Sum TA

Share TA

Sum quota
per group

Number banks

Quota per bank

Group 1

2 376 490 171

66.3 %

29 818 313

6

5 000 000

Group 2

731 428 153

20.4 %

9 177 380

15

610 000

Group 3

478 537 362

13.3 %

6 004 307

111

54 000

Total

3 586 455 686

100 %

45 000 000

132

 

TA: Total assets

Settlement banks are assigned quotas as follows (Table 3):

Table 3. Quotas for settlement banks, DnB NOR and SpareBank 1SMN*. In thousands of NOK

 

Initial quota

Supplement to quota

Sum quota

DnB NOR

5 000 000

1 500 000

6 500 000

SpareBank 1 SMN

610 000

700 000

1 310 000

*Settlement banks are assigned a supplementary quota determined by the size of the settlement bank in relation to the size of the second-tier banks for which it executes settlements (as measured by total assets). If the estimated quota for the settlement bank is initially NOK K billion, its total assets NOK X billion and the sum of total assets of the second-tier banks is NOK Y billion, the settlement bank will be assigned a supplementary quota equal to K x (Y/X), but with an upper limit equal to the sum of the quotas for the second-tier banks for which it executes settlements. The settlement bank’s total quota will normally be equal to K+K x (Y/X).

Norges Bank will normally assess the total quota and its distribution among banks twice annually:  

  • On March 1, Norges Bank will announce the quotas to be applied from 1 April (or the first business day thereafter). End-Q4 figures for total assets will be applied.
  • On 1 September, Norges Bank will announce the quotas to be applied from 1 October (or the first business day thereafter). End-Q2 figures for total assets will be applied.
  • Norges Bank may change the quotas at other times where deemed necessary.
  • In the initial phase and periods of financial turbulence, the frequency of these assessments may be increased.
  • In light of experience, the method for calculating the quotas may be changed.

For a further description of the new system for the management of bank reserves, see “Management of bank reserves: The system in Norway”.

For a further discussion of the background for the new system, see Background for the system for the management of bank reserves in Norway 

Published 30 June 2011 14:30
Edited 1 March 2012 10:07