Norges Bank

Principles for financial management in Norges Bank

Adopted by the Executive Board 21 November 2012, last amended 20 December 2022.

1     Authorisation and background

The principles for financial management at Norges Bank have been prepared based on Section 4-3 of the Central Bank Act and Section 1.2 of the budget rules for Norges Bank issued by the Supervisory Council on 11 June 2020. General guidelines for the Executive Board’s budget proposals, allocations and reporting are adopted by the Supervisory Council in the budget rules for Norges Bank.

Norges Bank’s annual financial statements shall be presented in accordance with the Accounting Act and the Regulation relating to annual financial reporting for Norges Bank[1]. In accordance with the Government Pension Fund Global’s (GPFG) management mandate, a separate annual report shall be published for the GPFG (investment portfolio). This reporting shall include excerpts from the Bank’s financial statements that pertain to the investment portfolio, prepared in accordance with accounting regulations for the Bank that are in force at the time in question.

2     Purpose

The purpose of these principles is to promote sound financial management, efficient use of resources, achievement of established objectives, strategy implementation and financial reporting in compliance with current legislation and rules.

3     Roles and responsibilities

The Governor and the CEO of NBIM are responsible for ensuring that established objectives are achieved and that approved strategies are implemented.

The Governor and the CEO of NBIM shall submit budget proposals for each of their operational areas to the Executive Board. The Governor shall submit to the Executive Board an overall budget proposal for Norges Bank from the Executive Board to the Supervisory Council.

The Governor and the CEO of NBIM shall also submit action plans for their areas of responsibility to the Executive Board for information.

The general managers of the operational areas are responsible for the financial statements for their respective areas of responsibility.

The Governor is responsible for and signs Norges Bank’s annual report and financial statements (cf Section 3-5 of the Accounting Act and the Regulation relating to annual financial reporting for Norges Bank). Interim financial reporting for the investment portfolio shall be signed by the members of the Executive Board and the CEO of NBIM, as the general manager of the GPFG.

4     Financial management

Norges Bank has been given particular budgetary independence and its use of resources shall be cost-efficient, prudent and commensurate with its tasks. The cost level shall be reasonable relative to comparable organisations. Within their respective operational areas, the Governor of Norges Bank and the CEO of NBIM shall ensure well-run operations and sound financial management.

4.1   Strategy and action plan

The Executive Board shall adopt strategies and plans for the activities at Norges Bank, and a separate strategic plan for performing the task of managing the GPFG[2].

The strategy shall clarify ambitions and guide the organisation. Objectives and strategies shall be operationalised through action plans. Action plans show the relationship between strategy, objectives and actions. Action plans shall include measurable performance requirements, and where appropriate, specify operational and financial objective indicators for the operational area.

4.2   Budget proposals

Budget proposals shall be anchored in applicable strategies and shall identify the relationships between strategies, activities and resource use, and provide sufficient information to take account of the Executive Board’s management and control of the Bank’s use of resources. Information shall be provided on key cost drivers and risk patterns. Cost developments shall be commented upon in light of established strategies and objectives and available external cost benchmarks. The Governor and the CEO of NBIM shall regularly assess whether the external cost benchmarks used are relevant for the Executive Board’s cost management.

At an overarching level, the criteria and assumptions for budgeting shall be consistent across Norges Bank[3].

Budget proposals shall include a long-term forecast for operating expenses over the next three years (the budget year and the following two years) at a general level. Correspondingly, projections for planned investments shall also be specified. Long-term forecasts shall be based on the budget year, adjusted for known significant matters in line with established strategies. Cost/benefit assessments and analyses shall be part of the budgeting process to shed light on the consequences of key strategic prioritisations.

Matters of principle or significant importance across the operational areas, which also impact Norges Bank’s budget, shall be discussed by the Governor and the CEO of NBIM prior to consideration by the Executive Board.

4.3   Budget allocation

The Executive Board has primary authority to allocate the budget within the Supervisory Council’s budget resolution. The general managers of the operational areas deploy the budgets of their respective areas of responsibility.

To safeguard health, safety and major assets in extraordinary situations, the Governor and the CEO of NBIM may decide to cover costs without any special allocation of funds. The Executive Board shall be informed in writing of the decision as soon as possible (cf Section 5-2 General powers in the Rules of Procedure for Norges Bank’s Executive Board).

4.4   Cost allocation and pricing of external services

The Bank’s overall costs are allocated to primary tasks based on the full cost principle. This lays the foundation for the pricing of external services, including management of the GPFG and settlement services for the banks. Norges Bank’s expenses related to the management of the GPFG are remunerated by the Ministry of Finance. The Ministry sets a limit for GPFG management expenses.

The Governor shall issue guidelines for the distribution of costs to be charged to external or other operational areas.

Allocation keys, background and scope are reviewed by the Governor and the CEO of NBIM at least once per year. The distribution of costs shall be submitted to the general managers of the operational areas for approval before being presented to the Executive Board. Moreover, throughout the year, reports are submitted in the event of substantial discrepancies or when otherwise needed.

4.5   Reporting

The Executive Board shall, as a minimum, report specified information for the operational areas to the Supervisory Council on Norges Bank’s overall operations, on 30 June and the end of the budget year. At least twice a year, and as an integral part of business management reporting, the Governor[4] and the CEO of NBIM shall report on the status of performance measured against the approved strategy, action plan and budget. For semi-annual reporting, annual forecasts shall also be presented. Moreover, throughout the year, reports are submitted in the event of substantial discrepancies or when otherwise needed.

Forecasts shall represent best estimates and be updated when necessary. Prior to the Supervisory Council’s budget approval process for the year ahead, the current year’s accounting forecast shall be assessed.

5     Financial reporting

Norges Bank’s financial reporting shall be reliable, accurate, relevant, provide sufficient financial information and ensure consistent adherence to the Bank’s accounting policies.

Norges Bank’s accounting policies are approved by the Governor and their application shall be documented in an accounting manual. Updates and changes to the accounting manual shall be in accordance with approved processes.

Within their areas of responsibility, the Governor and the CEO of NBIM are responsible for the established internal control of financial reporting, which ensures reliable financial reporting, efficient closing date processes and compliance of the financial statements with the accounting manual. The Governor shall ensure internal control of financial reporting is established, ensuring reliable financial reporting and efficient financial statement close processes for Norges Bank’s overall financial statements.

To ensure reliable and complete financial reporting, the CEO of NBIM shall inform the Governor of matters of particular concern to Norges Bank’s financial statements.

The Governor and the CEO of NBIM are responsible for preparing an accounting memo for their areas of responsibility that describes significant changes in accounting policies, internal control, financial statement close process and information on balance sheet items that entail material risk or a high degree of discretionary accounting judgement.

At a minimum, the Governor shall present an overall accounting memo when financial reports are submitted to the Executive Board. The memo shall include relevant information from the two operational areas, with a separate appended memo for the GPFG. The Governor and the CEO of NBIM shall present the accounting memos of the operational areas.

6     Entry into force

Changes approved on 20 December 2022 enter into force immediately.

[1] Norges Bank has a statutory obligation to keep accounts in accordance with the Accounting Act and the Bookkeeping Act (cf Section 4-3 of the Central Bank Act). Provisions relating to financial reporting for Norges Bank under Section 2-4 specifies certain requirements regarding information on the GPFG’s krone account in Norges Bank’s annual financial statements.

[2] Cf Section 1.2 of the Executive Board’s rules of procedure.

[3] Cf overall guidelines in Section 2 of the Budget Rules.

[4] Also includes the preparation of reports on Norges Bank’s overall operations to the Executive Board.

Published 31 March 2023 14:10