The Bank of Norway was founded as a commercial bank in 1816; in 1949, all its share capital was acquired by the state. It is the central bank and the sole note-issuing authority. The bank discounts treasury bills and some commercial paper; trades in bonds, foreign exchange, and gold and silver; and administers foreign exchange regulations. The bank also receives money for deposit on current account but generally pays no interest on deposits. The head office is in Oslo, and there are 20 branches.
In 1938 there were 105 commercial banks, but mergers brought the total down to only 31 in 1974 and 21 in 1984. As of 1993, the total was down to 20. The three largest-the Norske Creditbank, Bergen Bank, and Christiania Bank og Kreditkasse-account for more than half of the total resources of the commercial banks. In 1988, a number of small savings banks and one medium-sized commercial bank, Sunnmorsbanken, became illiquid or insolvent. Most were rescued by merging with larger banks. After a slight improvement in 1989, however, banks' positions deteriorated again in 1990 following heavy losses sustained in the securities markets. As commercial property prices continued to fall, the position of the country's second and third largest commercial banks, Christiania and Fokus, became increasingly precarious. To prevent a loss of confidence in the banking system, the government established a Government Bank Insurance Fund in March 1991. Within months this was called upon to provide capital to support the country's three largest banks, two of which—Christiania and Fokus—were by then insolvent.
By the late 1990s, increasing pressure fell upon Norway to shed its nationalistic protection of its banking industry and allow for foreign investment, particularly from its Nordic neighbors. Throughout the fall of 1998 and into 1999, attention centered on the fate of Christiania as two attempted merger attempts fell through. As of mid-October 1999, Christiania was seeking to merge with MeritaNordbanken in order to avert a hostile takeover by either Swedish Svenska Handelbanken or Danish Den Norske Bank. A merger with MeritaNordbanken would make create the largest bank in the Nordic and Baltic.
Ten state banks and other financial institutions serve particular industries or undertakings, including agriculture, fisheries, manufacturing, student loans, mortgages, and others. Although savings banks also have been merging in recent years, there were still 133 private savings banks and many credit associations in 1993.
A law of 1961 contains measures to implement the principle that banking policies are to be based on social as well as economic and financial considerations. The government appoints 25% of the representatives on the board of every commercial bank with funds of over Kr100 million. Guidelines for these banks are worked out cooperatively with public authorities.
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $73.4 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $87.6 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 8.5%.
The stock exchanges of Norway are at Oslo (the oldest, founded 1818), Trondheim, Bergen, Kristiansund, Drammen, Stavanger, Ålesund, Haugesund, and Fredrikstad. Amid the increasing consolidation among European stock exchanges in the late 1990s, calls increased for the Norwegian markets to merge.