Norges Bank's settlement system (NBO)
All banks in Norway may have accounts in Norges Bank. The largest banks in Norway settle their claims and liabilities vis-à-vis other banks through entries in their accounts with Norges Bank. Settlement may be made for each payment transaction (gross settlement) or by netting a number of individual transactions between two or more banks (net settlement). Norges Bank's settlement system (NBO) is described in Norges Bank's Annual Report.
Banks' participation in NBO is regulated by an account maintenance and settlement agreement between the individual bank and Norges Bank. NBO's operating schedule is outlined in a separate circular (at present only in Norwegian). A bank's account in Norges Bank will be closed if the bank is placed under public administration. Norges Bank's pattern of action in such a situation is described in a separate circular.
The total value of entries in NBO normally amounts to NOK 150 - 200 billion each day. The turnover in the past few days is shown on the chart on the right.
Central bank settlement entails no credit risk for banks, since Norges Bank has the exclusive right to issue Norwegian kroner, and therefore cannot go bankrupt. A smoothly functioning settlement system is important for promoting financial stability. Banks' sight deposits with Norges Bank also provide the central bank with an effective channel for conveying interest rate signals in monetary policy.
To promote the efficiency of Norges Bank's settlement system, banks can raise loans in Norges Bank against collateral in the form of securities through the collateral for loans arrangement. Interest is not charged on these loans if they are repaid the same day, but banks that have overnight loans in Norges Bank are charged interest at the overnight lending rate (D-loan rate).