Financial corporations, balance sheet, December 2008

At the end of 2008 Norwegian banks’ stock of treasury bills was NOK 26 billion. This is an increase of NOK 22 billion compared to the end of 2007. The largest part of this increase came in the last months of 2008. From November to December Norwegian banks’ stock of treasury bills increased by close to NOK 20 billion, or a total of 300 per cent.

The increase is caused by the “swap agreement”

The large increase is a direct effect of the arrangement where Norwegian banks can “swap” covered bonds with treasury bills. 24^{t h} of October 2008 the Norwegian Parliament gave the Ministry of Finance authority to put into effect an arrangement where Norwegian banks could “swap” covered bonds with treasury bills. This “swap agreement” is an effort to reduce the negative effects of the financial crisis.

At the end of July 2008 only 6 mortgage companies were licensed to issue covered bonds, but following the arrangement of 24^{t h} of October where Norwegian banks could “swap” covered bonds with treasury bills, a number of new mortgage companies were established. By the end of 2008 12 mortgage companies were licensed to issue covered bonds, but not all were permitted to make use of their license pending on lacking approval of their statutes by the Financial Supervisory Authority of Norway.

At the end of 2008 Norwegian mortgage companies had issued covered bonds amounting to a value of NOK 191 billion. Norwegian banks’ stock of covered bonds amounted to NOK 44 billion in the same period.

Covered bonds

Covered bonds are bonds conferring a preferential claim over a cover pool consisting of public sector loans and loans secured on residential property or other real property.