Management principles
Organisation and management of Norges Bank - some principles
1. Mandate
The Norges Bank Act of 1985 regulates the Bank’s activities. The Act stipulates that the Bank shall be an executive and advisory body for monetary, credit and foreign exchange policy. The Bank shall issue banknotes and coin, promote an efficient payment system domestically as well as vis-à-vis other countries, and monitor developments in the money, credit and foreign exchange markets. The Act authorises the Bank to implement any measures customarily or ordinarily taken by a central bank.
The Government has defined an inflation target for monetary policy in a regulation pursuant to the Norges Bank Act. The Bank’s responsibility of managing the government Pension Fund – Global is governed in a regulation pursuant to the Act relating to the Government Pension Fund. In addition, a separate management agreement was concluded between the Ministry of Finance and Norges Bank.
The Board is responsible for the Bank’s executive and advisory activities. The Governor and Deputy Governor of Norges Bank are chairman and deputy chairman, respectively, of the Executive Board. The Supervisory Council adopts the budget and approves the Bank’s accounts (see point 4 for further information concerning the Executive Board and the Supervisory Council).
2. Core responsibilities
Clearly defined core responsibilities form the basis for the organisation of Norges Bank.
Norges Bank shall through monetary policy promote price stability. Norges Bank shall promote financial stability and contribute to robust and efficient financial infrastructures and payment systems. Norges Bank shall manage the portfolios of the Government Pension Fund – Global, the Bank’s own foreign exchange reserves and the Government Petroleum Insurance Fund.
Particular focus on core activities has shaped the Bank’s development in recent years. Through the establishment of limited companies, outsourcing and downsizing, the number of employees has been reduced from 1 150 in 1998 to 542 at end-2006. In the same period, overall net costs have been reduced by 30 % in real terms.
See the overview of organisational changes since 1998 and developments in costs and staffing.
3. The wings as basic units
The Bank is organized in wings corresponding to the three core areas of responsibility: Norges Bank Monetary Policy (NBMP), Norges Bank Financial Stability (NBFS) and Norges Bank Investment Management (NBIM). In addition, a separate department provides staff and support services (see chart).
Chart: Organisation
(The broken line indicates delivery of services, while the solid line indicates reporting.)
4. Delegation of tasks
The Supervisory Council adopts the budget and approves the Bank’s accounts and ensures compliance with the rules governing the Bank’s activities. The Council comprises fifteen members appointed by the Storting (Norwegian parliament). The Bank’s auditing department, Central Bank Audit, reports to the Supervisory Council. The Supervisory Council normally meets five times a year.
The Board is responsible for the Bank’s executive and advisory activities and comprises seven members, all appointed by the King in Council. The Governor and Deputy Governor of Norges Bank are chairman and deputy chairman, respectively, of the board. Two employee representatives supplement the Board in administrative matters. The Board meets every three weeks.
The Board has delegated responsibility for current business to the Governor, who has further delegated responsibility for various tasks to the Bank’s Executive Directors.
Subject to annual budgetary limits, the wings have considerable leeway with respect to administration and budgetary allocations. For most activities, the Board has established three-yearly guidelines limiting the number of person-years that can be employed.
The compensation and benefit system has been revised towards greater emphasis on performance and results at the professional and management level.
Performance-linked pay is used extensively in NBIM.
5. Management and follow-up
The main management principle in Norges Bank is line management. The result is a straightforward organisation with clear lines of responsibility. The wings prepare annual action plans for activities with associated performance goals which are approved by the Governor. In the course of the year, the Governor follows up the performance of the individual wings by means of an appraisal dialogue in the spring and a follow-up dialogue in the autumn. During the year, there are follow-up talks between the Governor/Deputy Governor and the Executive Directors every three weeks.
- Norges Bank Investment Management (NBIM) was expanded from 41 employees in 1998 to 130 in 2006
- The Royal Norwegian Mint was established as a separate company in 2001 and then sold in 2003
- Cash handling was spun off into a separate company (NOKAS) in 2001. Norges Bank owned 33.5% of the shares in NOKAS until 2006, when the shares were sold
- Norges Bank’s Printing Works phased out stamp production in 2000 and passport production in 2003. Banknote production will be discontinued and the Printing Works closed in 2007
- Concentration on core activities in the Banking Department (2004)
- Operation of Norges Bank’s settlement system was outsourced in 2003
- Production of the capital account statistic in the balance of payments was transferred to Statistics Norway (SN) in 2005. The rest of the activities of Norges Bank’s Statistics Departement was transferred to SN in 2007
Person-years and real costs 1998-2006
1) Price index for public expenditures