The Norwegian government has forked up NOK 100 billion (about USD 14 billion) to boost the liquidity of local banks and stimulate crisis-hit credit markets. Finance Minister Kristin Halvorsen, however, has made it clear that the fresh funds have some strings attached.
“It’s entirely reasonable to make some demands regarding executive salaries and dividend payments,” Halvorsen said when announcing the aid package in February. “When we come up with the money, it shouldn’t run out at the other end in dividends. And we don’t want any big executive pay raises either.”
Banks applying for and accepting the fresh state funding will have to abide by strict rules monitoring its use. Most banking industry officials seemed to go along with the state’s demands. They mean, for example, that all executives earning more than NOK 1.5 million a year will have to accept a salary and bonus freeze in 2009 and 2010.
“I think I also would have made some demands if I was the one lending out the money,” the head of Sparebanken Møre, Olav Arne Fiskarstrand, told newspaper Dagens Næringsliv.
The crisis package consists of NOK 50 billion allocated to a new state fund that will be managed by the state pension fund, plus NOK 50 billion allocated to a new financing fund. Banks can borrow from the finance fund, to boost their ability to in turn lend to customers. Companies will be able to borrow directly from the other state fund (called Statens obligasjonsfondm or more easily from their own banks.
The goal is to increase lending capacity and spur business activity, which has taken a dive since the global finance crisis erupted last fall.