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PR(01)19: Restrictions in Norwegian law on ownership of financial institutions incompatible with EEA law

18.9.2002

On 30 October 2001, the EFTA Surveillance Authority sent a Reasoned Opinion to Norway for failure to comply with EEA rules concerning the free movement of capital (Article 40 of the EEA Agreement and the Capital Movements Directive 88/361/EEC) and for failure to implement Article 16 of Directive 2000/12/EC concerning credit institutions (replacing the Second Banking Directive 89/646/EEC).

Section 2-2, paragraph 1, of the Norwegian Law on Financial Activity and Financial Institutions of 10 June 1988 No. 40 provides, in principle, that no one can own more than 10% of the share capital of a Norwegian financial institution (so-called 10% rule). As a consequence, Norway argues that there is no need for an explicit implementation of Article 16 of Directive 2000/12/EC into Norwegian law.

Article 16 of Directive 2000/12/EC provides, inter alia, that EEA States shall require any person who proposes to acquire a qualifying holding (i.e. 10%) or above in a credit institution to inform national authorities of the size of the intended holding. Where the influence of such persons is likely to operate to the detriment of the prudent and sound management of the institution, the authorities shall put an end to that situation.

In the Authority’s view, expressed in a letter of formal notice sent on 20 December 2000, a general prohibition against more than 10% ownership of a financial institution is contrary to the free movement of capital. Norway cannot therefore justify the lack of an explicit implementation of Article 16 of the Directive 2000/12/EC by referring to the 10% rule. Norway should consequently be obliged to transpose Article 16 of that Directive.

In a reply to the letter of formal notice, Norway disputed that its legislation infringed the EEA rules on free movement of capital. In any case, Norway argued that the 10% rule would be justified mainly for competition and prudential supervision concerns.

In its Reasoned Opinion the Authority maintains its position that the Norwegian legislation is incompatible with the free movement of capital. Norway has not demonstrated that its legislation is proportionate to the aims the country intends to pursue. Consequently, Norway infringes Article 40 EEA and the Capital Movements Directive 88/361/EEC and should also implement Article 16 of Directive 2000/12/EC.

The purpose of a Reasoned Opinion is to give the State in question a last chance to take corrective measures before the Authority decides whether to bring the matter before the EFTA Court. Norway has three months to take the necessary measures to comply with this Reasoned Opinion.

For further information please contact Mr. Jónas Fr. Jónsson (Director of Persons, Services and Capital Movements Directorate), telephone (32)-2-286-1860.

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