Minutes of the Executive Board meeting of 25 October 2017
Present:
The 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:
Nina Larsson and Mona H. Sørensen (items 193-196 and 205-213)
Office of the Supervisory Council:
Jan Frode Jakobsen (items 193-196, 199-203 and 205-212)
From Deloitte AS:
Henrik Woxholt (items 201-203)
Management:
Trond Grande (193-195, 201-212), Dag Huse (199, 201-203), Merethe Riddervold (201, 203, 205-206, 209-212), Hege Gjerde (203, 205), Stephen Hirsch (206, 209-211), Karsten Kallevig (195, 202-203, 207-208, 210-211), Lars Dahl (202), Mie Holstad (207), Jan Thomsen (208-211), Nina Hammerstad (210), Marius Ryel (193-194), Alexander Behringer (193-194), Ingrid Katrine Rogne (193-194), Olav Bø (196-200), Helge Mothes (196), Ida Wolden Bache (197), Per Espen Lilleås (197), Ingrid Solberg (197), Torbjørn Hægeland (197-198), Henrik Borchgrevink (197-198), Katrine Godding Boye (198), Henrik Andersen (198), Monique Erard (198), Bjørn Helge Vatne (198), Roger Rake (199-200), Arne Osnes (200), Ørjan Agdesteen (196, 199-200), Mads Kristensen (196, 199-203, 205-212), Renate Haugen (209-212), Birger Vikøren (193-195, 199-204), Pål Haugerud (199-200), Runar Malkenes (193-198), Bjarne Gulbrandsen (193-213), Sigrid Igland (193-203, 205-213)
There were no comments on the meeting notice and agenda.
Item 193/2017 Minutes of the Executive Board meeting of 9 October 2017
The Executive Board approved the minutes of its meeting of 9 October 2017.
Item 194/2017 Consultation response – The Central Bank Law Commission (Official Norwegian Report 2017:13)
Discussion document:
- Memo from the General Secretariat of 19 October 2017
The Governor and Birger Vikøren presented Norges Bank's draft consultation response.
The Executive Board exchanged views and approved the submission of the consultation response to the Ministry of Finance. The Governor was authorised to finalise the response based on the Executive Board's feedback at the meeting.
Item 195/2017 Briefing on current issues
Central bank management gave briefings on current issues, including a security breach at external auditor, Deloitte, and management's follow-up.
Alternate Arne Hyttnes recused himself from the presentation of the item.
Item 196/2017 Follow-up of IT security and updating Central Banking Operations' IT portfolio
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Follow-up of the strategy for IT security 2017-2019
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Updating the IT portfolio of Norges Bank (Central Banking Operations)
Discussion documents:
- Memo from Markets and ICT of 17 October 2017
- Memo from Markets and ICT of 16 October 2017
Olav Bø and Helge Mothes presented the follow-up of the strategy for IT security and the project of updating Central Banking Operations' IT portfolio, "Differentiated IT portfolio" (DiffIT).
The Executive Board exchanged views and took note of the presentation on IT security work and the project "Differentiated IT portfolio". The Executive Board will consider the matter again in connection with the budget for 2018.
Item 197/2017 The current monetary situation – Interest rate decision
Discussion documents:
- Recommendation for Norges Bank's key policy rate – the Executive Board's meeting of 25 October 2017, HIGHLY CONFIDENTIAL memo from Monetary Policy of 24 October 2017
- The Executive Board's assessment and memo on new information – Monetary Policy Meeting of 25 October 2017, HIGHLY CONFIDENTIAL memo from Monetary Policy of 19 October 2017
- Report from the meeting between Norges Bank and the Ministry of Finance of 19 September 2017
- Presentation from Monetary Policy, HIGHLY CONFIDENTIAL presentation distributed at meeting
Ida Wolden Bache outlined the main economic developments since the previous Monetary Policy Report and the assessment of developments in relation to defined monetary policy strategy. The Governor outlined management's recommendation.
Against this background, the Executive Board had an exchange of views. In the Executive Board's opinion, developments have been approximately in line with the picture presented in the September 2017 Monetary Policy Report. New information does not provide a basis for changing the assessment of growth in the Norwegian economy. Labour market improvement appears to be continuing. Inflation has been slightly lower than expected, while the krone exchange rate is somewhat weaker than assumed.
Overall, the outlook and the balance of risks do not appear to have changed substantially since the September Report. The Executive Board decided to keep the key policy rate unchanged at 0.5%. The decision was unanimous.
Item 198/2017 Financial Stability Report for 2017
Discussion document:
- Memo from Financial Stability of 19 October 2017
Torbjørn Hægeland and Katrine Godding Boye presented the main elements of the report.
Against this background, the Executive Board had an exchange of views. The Executive Board approved the proposed "Executive Board's Assessment" with the remarks made during the meeting and took note of the descriptive part of the 2017 Financial Stability Report. The report is to be published on 2 November 2017.
Item 199/2017 Financial risk and management of the foreign exchange reserves Q3 2017
Discussion documents:
- Memo from Markets and ICT of 19 October 2017
- Memo from the Audit Committee of 23 October 2017
- Memo from the Risk and Investment Committee of 24 October 2017
Olav Bø presented the main elements of the report.
Karen Helene Ulltveit-Moe and Egil Matsen presented the discussions on the Audit Committee and the Risk and Investment Committee, respectively, and the topics that particularly drew their attention. The committees recommended that the Executive Board follows management's guidance.
The Executive Board took note of the report on financial risk and management of the foreign exchange reserves for the third quarter of 2017. A public version of the report is to be published on Norges Bank's website on 3 November.
Item 200/2017 Strategy and framework for the foreign exchange reserves
Discussion documents:
- Memo from Markets and ICT of 26 September 2017
- Memo from the Risk and Investment Committee of 24 October 2017
The Executive Board's principles for the management of Norges Bank's foreign exchange reserves state that the Executive Board shall receive an overall assessment of the strategy and framework for the foreign exchange reserves on an annual basis.
Olav Bø presented the investment strategy and proposed changes to the governance structure.
Egil Matsen presented the discussions on the Risk and Investment Committee and the Committee's position, including the proposal of an addition to the Executive Board's principles concerning guidelines for rebalancing.
The Executive Board exchanged views and approved the proposal for revised principles for the management of Norges Bank's foreign exchange reserves, with provisions on strategic equity shares, rebalancing, benchmark indexes, investment universe and risk limits. The Executive Board approved the proposal from the Risk and Investment Committee.
The revised principles do not entail any changes to the composition of the foreign exchange reserves. Management will return with further analyses of investment strategies at a later point in time.
The Governor was authorised to deviate from the provisions in the Executive Board's principles if warranted by security considerations.
Item 201/2017 NBIM return and risk Q3 2017
Discussion documents:
- Memo from NBIM of 19 October 2017
- Memo from the Risk and Investment Committee of 24 October 2017
Trond Grande and Dag Huse presented the main elements of the report.
Egil Matsen presented the discussions on the Risk and Investment Committee and the topics that particularly drew its attention, including developments in Q3 and prospects ahead. The Committee noted that management has shown very strong returns for a long period.
The Executive Board took note of the report on return and risk for the third quarter of 2017.
Item 202/2017 NBREM return and risk Q3 2017
Discussion documents:
- Memo from NBREM of 13 October 2017
- Memo from the Risk and Investment Committee of 24 October 2017
Karsten Kallevig and Lars Dahl presented the main elements of the report.
Egil Matsen presented the discussions on the Risk and Investment Committee and the topics that particularly drew its attention, including developments in certain cities and prospects ahead.
The Executive Board took note of the report on return and risk for unlisted real estate management for the third quarter of 2017.
Item 203/2017 Government Pension Fund Global (GPFG) – Public report for 2017 Q3
Discussion documents:
- Memo from NBIM of 19 October 2017
- Memo from the Audit Committee of 23 October 2017
- Memo from the Risk and Investment Committee of 24 October 2017
Trond Grande presented the main elements of the report.
Karen Helene Ulltveit-Moe and Egil Matsen presented the discussions on the Audit Committee and the Risk and Investment Committee, respectively, and the topics that particularly drew its attention, including the application of the principles that underlie the valuation of properties. The committees recommended that the Executive Board follows management's guidance.
Henrik Woxholt from Deloitte confirmed that nothing had come to its attention during its review causing it to believe that the interim financial information had not in all material respects been prepared in accordance with relevant accounting standards.
The Executive Board approved the public report on the management of the GPFG, including the interim financial reporting for the investment portfolio, for the third quarter of 2017.
Item 204/2017 Briefing on current issues in investment management
Trond Grande gave a briefing on current issues in investment management.
Item 205/2017 NBIM – Management report for the third quarter of 2017
Discussion document:
- Memo from NBIM of 19 October 2017
Trond Grande presented the main elements of the report.
The Executive Board exchanged views and took note of the operations report for NBIM for the third quarter of 2017.
Item 206/2017 NBIM compliance and control Q3 2017
Discussion documents:
- Memo from NBIM of 19 October 2017
- Memo from the Audit Committee of 23 October 2017
Stephen Hirsch presented the main elements of the report.
Karen Helene Ulltveit-Moe presented the discussions in the Audit Committee and the topics that particularly drew its attention, including events in the quarter and assessment and measurement of risk. The Audit Committee recommended that the Executive Board follows management's guidance.
The Executive Board took note of the report on compliance and control at NBIM for the third quarter of 2017.
Item 207/2017 NBREM operations report Q3 2017
Discussion document:
- Memo from NBREM of 13 October 2017
Karsten Kallevig and Mie Holstad presented the main elements of the report.
The Executive Board exchanged views and took note of the operations report for NBREM for the third quarter of 2017.
Item 208/2017 NBREM compliance and control Q3 2017
Discussion documents:
- Memo from NBREM of 13 October 2017
- Memo from the Audit Committee of 23 October 2017
Jan Thomsen presented the main elements of the report.
Karen Helene Ulltveit-Moe presented the discussions in the Audit Committee and the topics that particularly drew its attention, including events in the quarter and recruitment status. The Audit Committee recommended that the Executive Board follows management's guidance.
The Executive Board exchanged views and took note of the report on compliance and control at NBREM for the third quarter of 2017.
Item 209/2017 Summary of audit reports – NBIM
Discussion documents:
- Memo from Internal Audit of 28 September 2017
- Memo from the Audit Committee of 28 September 2017
Mads Kristensen presented the main elements of three audit reports:
- 1704 NBIM External mandates
- 1705 NBIM Cash management
- 1707 NBIM IT Governance of IT-solutions developed and maintained in the business lines
Karen Helene Ulltveit-Moe presented the discussions on the Audit Committee and the topics that particularly drew its attention.
The Executive Board took note of Internal Audit's summary of the audit reports.
Item 210/2017 Summary of audit report – NBREM
Discussion documents:
- Memo from Internal Audit of 28 September 2017
- Memo from the Audit Committee of 28 September 2017
Mads Kristensen presented the main elements of the audit report "1709 NBREM IT General controls in a cloud based IT environment".
Karen Helene Ulltveit-Moe presented the discussions on the Audit Committee and the topics that particularly drew its attention, including differences between traditional IT operations and cloud-based services and follow-up of service providers under the current setup.
The Executive Board took note of Internal Audit's summary of the audit report.
Item 211/2017 Summary of audit report – Norges Bank
Discussion documents:
- Memo from Internal Audit of 28 September 2017
- Memo from the Audit Committee of 28 September 2017
Mads Kristensen presented the main elements of the audit report "1702 NB ICT Security – Survey of security culture".
Karen Helene Ulltveit-Moe presented the discussion on the Audit Committee and the topics that particularly drew its attention, including results and their interpretation from the different operational areas and management's follow-up of the surveys.
The Executive Board took note of Internal Audit's summary of the audit report.
Item 212/2017 Proposed instructions update for Internal Audit
Discussion documents:
- Memo from Internal Audit of 2 October 2017
- Memo from the Audit Committee of 28 September 2017
Mads Kristensen presented the proposed instructions update for Internal Audit.
Karen Helene Ulltveit-Moe presented the discussions on the Audit Committee and the Committee's feedback on formulation with regards to reporting by management. The Audit Committee approved the proposed instructions update for Internal Audit.
The Executive Board exchanged views and laid down the instructions for Internal Audit at Norges Bank in line with the recommendation from the Audit Committee.
Item 213/2017 Any other business
The Governor informed that the Executive Board seminar of 21 November is to be extended by one hour, and is to start at 16:00.
Documents distributed for information together with the discussion documents:
- National report from the regional network – Phone survey 2017/2, Memo from Monetary Policy of 19 October 2017
- GPFG performance and risk, September 2017, Report from NBIM of 18 October 2017
- Real estate management – Report from meetings of the Real Estate Investment Board, Memo from NBREM of 20 October 2017