Norges Bank

Minutes

Minutes of the Executive Board meeting of 13 December 2017

Present:

Executive Board:

Øystein Olsen, Jon Nicolaisen, Egil Matsen, Hilde Myrberg, Kjetil Storesletten, Karen Helene Ulltveit-Moe, Kathryn M. Baker and Steinar Juel

Alternates:

Arne Hyttnes and Kristine Landmark

Employee representatives:

Mona H. Sørensen (items 245-248)

Apologies:

Nina L. Midthjell

Management:

Torbjørn Hægeland (233-237), Sindre Weme (233), Henrik Borchgrevink (233-235), Katrine Godding Boye (233-235), Ida Wolden Bache (233-235), Per Espen Lilleås (233-235), Ingrid Solberg (233-235), Olav Bø (233-235), Arne Kloster (233-235), Andreas Andersen (233-235), Marius Ryel (236-237, 245-246), Yngve Slyngstad (239-244), Trond Grande (239-246), Dag Huse (239-243), Karsten Kallevig (239), Ole Christian Bech-Moen (239-243), Lise Lindbäck (239-243), Merethe Riddervold (239-243, 245-246), Pål Haugerud (239-243), Runar Malkenes (239-243), Alexander Behringer (246), Tamar Ester Azulay (246), Torkel Fagerli (246), Jane Haugland (247), Ingunn Valvatne (233-248), Bjarne Gulbrandsen (233-248), Sigrid Igland (233-243, 245-247)

There were no comments on the meeting notice and agenda.

Item 233/2017 Recommendation to the Ministry of Finance on the countercyclical capital buffer 2017 Q4

Discussion document:

  • STRICTLY CONFIDENTIAL memo from Financial Stability of 12 December 2017

Jon Nicolaisen provided an update on the basis for the recommendation to the Ministry of Finance on the countercyclical capital buffer. The basis for the recommendation is to be presented in Monetary Policy Report 4/17(cf item 234/2017).

In its discussions, the Executive Board emphasised that financial imbalances have built up, owing to a persistent rise in household debt ratios and high property price inflation over a long period. Household credit growth remains high, but the decline in house prices in 2017 has reduced the extent of a potential fall in the housing market. Low house price inflation will curb debt accumulation, but it will take time for household vulnerabilities to recede. Bank losses are low and banks have built up capital buffers that can absorb losses in the event of a downturn in the Norwegian economy. Creditworthy enterprises appear to have ample access to credit.

The Executive Board decided to advise the Ministry of Finance to keep the buffer rate unchanged at 2 percent from the end of 2017. The decision was unanimous.

Item 234/2017 Monetary Policy Report 4/17 with financial stability assessment

Discussion document:

  • STRICTLY CONFIDENTIAL memo from Monetary Policy of 8 December 2017

Jon Nicolaisen presented a number of adjustments to the report following its consideration by the Executive Board on 6 December 2017.

The Executive Board discussed the economic outlook, the monetary policy stance and the need for a countercyclical buffer at the banks. The Executive Board approved the proposed "Executive Board's Assessment" (cf interest rate decision in item 235/2017).

Item 235/2017 The current monetary policy situation

Discussion documents:

  1. Norges Bank's policy rates – meeting of 13 December 2017, STRICTLY CONFIDENTIAL memo from Monetary Policy of 13 December 2017
  2. Report from the meeting between Norges Bank and the Ministry of Finance of 24 October 2017
  3. Background information – presentation distributed at meeting

Jon Nicolaisen outlined the main economic developments since the previous Executive Board meeting with particular emphasis on developments in the money, currency and capital markets.

The Executive Board judges that there is a continued need for an expansionary monetary policy. Interest rates abroad are low. There is still some spare capacity in the Norwegian economy. The outlook suggests that inflation will remain below 2.5% in the coming years.

In its discussion of monetary policy, the Executive Board emphasised the continued upturn in the Norwegian economy and that capacity utilisation appears to be somewhat higher than previously assumed. Inflation is low, but a weaker krone than expected in September may lead to a faster rise in inflation than forecast earlier. As spare capacity is gradually absorbed, wage growth is also likely to edge up.

On the whole, the changes in the outlook and the balance of risks imply a somewhat earlier increase in the key policy rate than projected in the September report. Uncertainty surrounding the effects of monetary policy suggests a cautious approach to interest rate setting, also when it becomes appropriate to increase the key policy rate.

On the basis of an overall assessment, the Executive Board decided to keep the key policy rate unchanged at 0.5%. The Executive Board's current assessment of the outlook and the balance of risks suggests that the key policy rate will remain at today's level in the period ahead. The decision was unanimous.

Item 236/2017 Damaged banknotes compensation application

Discussion document:

  • Memo from Financial Stability of 6 December 2017

Torbjørn Hægeland presented the matter for discussion.

The Executive Board decided to allow ex gratia payment in line with the discussion document unless, before the stated deadline, Økokrim (the National Authority for Investigation and Prosecution of Economic and Environmental Crime) issues an order to refrain from executing the transaction.

Item 237/2017 Compensation for lost, burned or damaged notes and coins - delegation of decision-making authority

Discussion document:

  • Memo from Financial Stability of 23 October 2017

Torbjørn Hægeland presented the matter for discussion.

The Executive Board decided to revoke its decision of 16 March 2011, which authorised the Governor to approve applications for ex gratia payments of up to NOK 250 000.

The Executive Board granted the Governor general authorisation to approve applications for compensation pursuant to the regulation concerning compensation for lost, burned or damaged notes and coins. Applications that raise issues of a principle or reputational nature shall be submitted to the Executive Board.

Item 238/2017 Briefing on relevant matters for Central Banking Operations

The Governor gave a briefing on relevant matters for Norges Bank Central Banking Operations.

Item 239/2017 Government Pension Fund Global – Appointment of members of the Real Estate Investment Board (REIB) and changes to the mandate

Discussion document:

  • Memo from NBIM of 8 December 2017

Prior to the consideration of this item, the Executive Board held a meeting with Christian Rignes and Petter Fredrik Neslein, who presented their professional background, experiences with REIB and cooperation with NBIM and NBREM.

Yngve Slyngstad presented the matter for discussion.

The Executive Board discussed the matter and decided on the following changes to the Executive Board's mandate for the Real Estate Investment Board:

  • The upper limit for investments that will be presented to the Real Estate Investment Board is to be reduced from USD 750m to USD 500m.
  • The terms of office for external members are to be extended to two years, with the possibility for reappointment.

In addition, certain changes in format requirements related to REIB meetings were approved.

The Executive Board reappointed Christian Rignes and Petter Fredrik Neslein as members of the Real Estate Investment Board until 1 January 2020.

Item 240/2017 Benchmark index for the Government Pension Fund Global

Discussion document:

  • Memo from NBIM of 7 December 2017

In its letter of 9 June 2017, the Ministry of Finance requested that Norges Bank propose amendments to the rules for rebalancing that may be necessary in connection with the decision made to increase the GPFG's equity allocation to 70%.

Yngve Slyngstad presented the draft letter to the Ministry of Finance.

The Executive Board discussed the matter and approved the request for a letter to be sent to the Ministry of Finance in line with the draft. The Governor was authorised to finalise the letter based on the comments at the meeting.

Item 241/2017 The Executive Board's investment mandate for the CEO of NBIM

Discussion document:

  • Memo from NBIM of 7 December 2017

Trond Grande presented proposed changes to the investment mandate for the CEO of NBIM.

The Executive Board discussed the matter and decided to update the investment mandate for the CEO of NBIM in line with the proposals.

The updated investment mandate is to be sent to the Ministry of Finance and published on its entry into force. An attachment with a list of approved countries of issuance is to be published as part of the annual reporting for the Government Pension Fund Global.

Item 242/2017 Government Pension Fund Global – Additional information on changes to the guidelines for bond investments

Discussion document:

  • Memo from NBIM of 11 December 2017

In a letter of 1 September 2017, Norges Bank advised the Ministry of Finance on changes to the guidelines for bond investments in the Government Pension Fund Global. In a letter of 26 October, the Ministry requested additional information.

Yngve Slyngstad presented the draft letter with additional information.

The Executive Board noted that the letter is to be finalised and submitted to the Ministry of Finance.

Item 243/2017 Government Pension Fund Global – Review of Norges Bank's management

Discussion document:

  • Memo from NBIM of 8 December 2017

Since 2009, the Ministry of Finance has conducted broad reviews of the management of the Government Pension Fund Global approximately every four years, most recently in 2014. In its report to the Storting earlier in 2017, the Ministry announced its intention to f present a new review in its report on the fund in spring 2018. In its letter of 14 June 2017, the Ministry requested that Norges Bank contribute analyses and assessments in a number of areas.

Yngve Slyngstad presented the draft response.

The Executive Board discussed the matter and approved the request for a letter to be sent to the Ministry of Finance based on the draft. The Governor was authorised to finalise the letter based on the Executive Board's feedback at the meeting.

Item 244/2017 Briefing on relevant matters for Norges Bank Investment Management

Yngve Slyngstad gave a briefing on relevant matters for Norges Bank Investment Management.

Item 245/2017 Minutes of the Executive Board meeting of 6 December 2017

Discussion document:

  • Draft minutes

The Executive Board approved the minutes of its meeting of 6 December 2017.

Item 246/2017 Personal trading rules for members of the Executive Board etc.

Discussion document:

  • Memo from the General Counsel/GRC of 7 December 2017

Marius Ryel presented the topic.

The Executive Board discussed the matter and took note of the provisional assessments of the scope of personal trading rules in the Securities Trading Act. Management will work further on the matter.

Item 247/2017 Norges Bank's pension fund – Appointment of new board members

Discussion document:

  • Memo from Corporate and Shared Services of 7 December 2017

Jane Haugland presented the topic.

The Executive board approved the appointment of the following board members:

  • Olav Andreas Bø for the period from 1 January 2018 to 31 March 2019,
  • Sindre Weme for the period from 1 January 2018 to 31 March 2021.

Item 248/2017 Any other business

The Executive Board set the date for an additional Board meeting, 5 January 2018.

The following were distributed for information together with discussion documents:

  • Agenda for the meeting between the Council on Ethics and Norges Bank's Executive Board of 13 December 2017, Memo from General Secretariat of 8 December 2017
  • Minutes of the Risk and Investment Committee meeting of 23 October 2017
  • Ministry of Finance – Remuneration for the management of the Government Pension Fund Global in 2018, Memo from NBIM of 11 December 2017
  • Consultation response – New Financial Contracts Act – Information for the Executive Board, Memo from Financial Stability of 12 December 2017

 

Annex to the minutes of the executive board meeting of 13 december 2017

Meeting of 13 December 2017 between the Council on Ethics for the Government Pension Fund Global and Norges Bank's Executive Board

Present:

From the Council on Ethics:

Johan H. Andresen, Hans Christian Bugge, Cecilie Hellestveit, Brit Rugland and Trude Myklebust

From the Executive board:

Øystein Olsen, Jon Nicolaisen, Egil Matsen, Hilde Myrberg, Kjetil Storesletten, Karen Helene Ulltveit-Moe, Kathryn M. Baker, Steinar Juel, Arne Hyttnes and Kristine Landmark

Others:

Eli Ane Lund and Erik Forberg (Secretariat to the Council on Ethics)
Trond Grande, Carine Smith Ihenacho, Ingunn Valvatne, Pål Haugerud and Bjarne Gulbrandsen (Norges Bank)

The Council on Ethics for the Government Pension Fund Global (GPFG) has been established by the Ministry of Finance to advise Norges Bank on the observation and exclusion of companies from the GPFG's portfolio.

The work of the Council on Ethics and Norges Bank on the observation and exclusion of companies is to be based on the Guidelines for observation and exclusion from the Government Pension Fund Global. Section 7 of the guidelines requires regular meetings between the Council and the Bank.

The agenda for the meeting was as follows:

  • Recommendations for exclusions based on the climate criterion
  • Experiences of working together to date

The Council on Ethics and the Executive Board exchanged views on these topics.

Published 6 November 2018 15:10