Division of powers and responsibilities between the Financial Supervisory Authority of Norway (Finanstilsynet) and Norges Bank with regard to securities settlement systems and central counterparties
Published: 10 November 2017
Secure and efficient settlement systems and well-functioning central counterparties are important for smoothly functioning securities markets and financial stability. The Financial Supervisory Authority of Norway (Finanstilsynet) and Norges Bank have been assigned different powers in this area pursuant to Norwegian legislation and international principles.
Finanstilsynet is responsible for ensuring that the institutions it supervises operate in an appropriate and proper manner in accordance with law and provisions issued in pursuance of law and with the intentions underlying the establishment of the institution, its purpose and articles of association, cf. the Financial Supervision Act. Institutions supervised by Finanstilsynet include financial institutions, investment firms, central counterparties and central securities depositories. These institutions are participants in, or operators of, securities settlement systems.
Central securities depositories must have an authorisation from the Ministry of Finance pursuant to Section 3-1 of the Securities Register Act. According to Section 13-2 of the Securities Trading Act, Finanstilsynet is the competent authority under Regulation (EU) No. 648 / 2012 (EMIR) and is thereby responsible for authorising and supervising Norwegian central counterparties. Finanstilsynet participates in the supervisory college of other central counterparties as provided for in Article 18 of EMIR. Operators of securities settlement systems may apply to Finanstilsynet to have their system approved in accordance with Section 4-1 of the Payment Systems Act, in order to be covered by the rules on legal protection for settlement agreements and collateral under this Act. If the cash leg of the settlement is performed by a private settlement bank, the approval also covers the cash settlement.
Norges Bank is responsible for promoting financial stability, including efficient and secure payment and securities settlement systems (see the Norges Bank Act and the Payment Systems Act). Norges Bank therefore performs oversight of these systems and central counterparties.
Norges Bank’s settlement system (NBO) settles the cash leg of the securities settlement (VPO NOK) and provides cash settlement for some central counterparties. Norges Bank sets the terms and conditions for settlement participants’ cash accounts. Central counterparties are entitled to maintain intraday positions with Norges Bank but not overnight. A number of securities settled in VPO are used as collateral for credit in NBO. Fails or interruptions in VPO operations can therefore impair the efficiency of the NBO and the conduct of monetary policy.
The Payment Systems Act requires Norges Bank to notify the EFTA Surveillance Authority (ESA) about securities settlement systems approved by Finanstilsynet. The same applies if a participant becomes insolvent.
Norges Bank and Finanstilsynet maintain regular contact and exchange information on circumstances of material importance for the firms and securities settlement systems supervised by Finanstilsynet and that are assessed to be important to financial stability (cf. Appendix A). Norges Bank and Finanstilsynet consult each other before important decisions affecting securities settlement systems and central counterparties are made.
Finanstilsynet informs Norges Bank of approvals of securities settlement systems without undue delay. Whichever party first becomes aware of a participant’s insolvency must immediately notify the other party.
If there is reason to fear that a securities settlement system or a central counterparty included in Appendix A cannot continue to operate, Finanstilsynet or Norges Bank, whichever is the first to become aware of the risk, must notify the other without undue delay. The same applies if there is a risk of long-term operational disruption. Finanstilsynet ensures that the chair of the Contingency Committee for Financial Infrastructure is informed.
Appendix A: Firms and systems to which the cooperation between Finanstilsynet and Norges Bank applies
Central securities depositories must hold an authorisation from the Ministry of Finance under Section 3-1 of the Security Register Act and are supervised by Finanstilsynet. Finanstilsynet may also approve securities settlement systems under Section 4-1 of the Payment Systems Act. According to Section 13-2 of the Securities Trading Act, Finanstilsynet authorises and supervises central counterparties established in Norway. Norges Bank performs oversight of securities settlement systems, central securities depositories and central counterparties that are important for financial stability.
The cooperation between Finanstilsynet and Norges Bank thus applies to the following firms and securities settlement systems that are supervised by Finanstilsynet and that are assessed to be important for financial stability as at 25 September 2017:
Navn på foretak
|Verdipapirsentralen ASA (VPS)||Central securities depository|
|VPO NOK||Securities settlement system (operated by Verdipapirsentralen ASA) approved by Finanstilsynet under Section 4-1 of the Payment Systems Act.|