Norway's financial and banking industries are following the general consolidation trend characterizing the global and the Nordic financial sector in the 1990s, yet with greater reluctance than elsewhere, largely due to its independent, somewhat insular, mindset that has kept Norway outside the EU for so long. In the late 1990s, for example, the centrist coalition government did all it could
|Exchange rates: Norway|
|Norwegian kroner per US$1|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
to prevent the sale of the second-largest Norwegian commercial bank, Christiania Kreditkassen, to the Scandinavian (Finnish-Swedish) conglomerate MeritaNordbanken. The government preferred a domestic Norwegian solution to the problem, potentially involving the country's largest bank, Den Norske Bank, the majority of which is state-owned.
Norway's financial system is still afflicted by a banking crisis of the early 1990s. The origin of that crisis dated back to 1984, when the dropping of lending limitations combined with very low interest rates led to a vast expansion of debt among Norwegian households and businesses. Households were not able to meet their repayments, and bankruptcies among companies increased when macroeconomic policies were tightened in response to rising inflation . In 1990 Christiania Kreditkassen and the third-largest commercial bank, Fokus Bank, were almost brought to insolvency. In 1991, to prevent a confidence crisis, the government created a bank insurance fund that provided resources for the country's largest commercial banks. As a result, the state became a major shareholder in these banks.
The Oslo Stock Exchange (OSE) is still very small by international standards, with 215 listed companies and an annual turnover of US$57.1 billion (1999), but it performs well mostly due to the interest in information technology and high-tech stocks in recent years. Yet the largest companies in terms of market capitalization still originate from the "old economy": Norsk Hydro (oil), Orkla (consumer products), and Den Norske Bank and Christiania Kreditkassen (banking). Foreign investors held 31 percent of the equity listed on the OSE in 1999, and their share has been relatively constant since 1994. Equity (stock) ownership has become popular in Norwegian society, although to a lesser degree than it is in the United States, with 7 percent of the population holding shares. The OSE is a partner in the Norex alliance, consisting of stock exchanges from Denmark and Sweden, and these 3 indexes—plus Iceland's—plan to begin trading on a new electronic system in 2001.
Government finances and external trade balance are both in surplus, and Norwegian interest rates are higher than the euro area rates. The Norwegian krone's appreciation against the euro throughout 1999 and 2000 was largely due to these factors.