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Sovereign Wealth Funds

Proposal would keep Norway’s sovereign fund under eye of central bank

Norges Bank, the in-house money manager for the Government Pension Fund Global, Oslo, and Norway's central bank, will get a new governance structure under proposals by the country's government.

The world's largest sovereign wealth fund, with 8.2 trillion Norwegian kroner ($1 trillion) in assets, should also remain under the auspices of the central bank, the proposal states.

In a white paper submitted to the Norwegian Parliament, the government recommended the establishment of a committee for monetary policy and financial stability within Norges Bank.

"The government proposes a new and modernized governance structure for Norges Bank," said Siv Jensen, minister of finance for Norway, in a news release on the government's website. "Moving forward, this new structure lays the foundations for the sound management of the central bank and of the GPFG."

The white paper outlines a new Central Bank Act for the country, with the intention of a legislative proposal next spring.

"The government believes it is essential that there is broad agreement on how Norges Bank and the management of our common savings in the GPFG are organized and governed," added Ms. Jensen.

The white paper follows a report by the Commission on the Act related to Norges Bank and the Monetary System, published last year, that recommended the GPFG be managed by an entity separated from the central bank.

"After a comprehensive assessment, the government recommends that Norges Bank continue to be the asset manager of the GPFG going forward," added Ms. Jensen. "Keeping the management of the fund in Norges Bank implies that the bank will continue to have broad and complex responsibilities. We must ensure that the governance structures are well adapted to these responsibilities."

Under the proposals, the central bank's new policy committee will make decisions on the country's key policy rate and advise on, among other things, the counter-cyclical capital buffer. Moving these tasks to a separate committee means the bank can focus on and devote more time to other tasks, in particular the management of the sovereign wealth fund, said the release. The central bank governor would chair both the new policy committee and the board of the central bank. Two deputy governors would also be appointed – one focusing on the GPFG and the other on central banking activities.

Under current law, the central bank's board is responsible for setting interest rates and advising the Ministry of Finance on the counter-cyclical capital buffer.