New Norwegian legislation on covered bonds

It has today been decided by the King in Council that the new statutory provisions on "obligasjoner med fortrinnsrett" (covered bonds) shall enter into force 1 June 2007.

The Ministry of Finance has today adopted a regulation on covered bonds, which also enters into force 1. June 2007.

- The purpose of the legislation is to enable credit institutions to borrow long term at favorable terms, in order to lend in the form of e.g. residential mortgages. Low cost borrowing depends on low risk for the creditors. Separate and good regulation of this type of borrowing is important for the price and the volume of this product, says state secretary Bjørn Arild Gram (SP).

The new statutory provisions on covered bonds replace earlier provisions on "obligasjonslån med pantesikkerhet i utlånsportefølje". The security for bond-holders in the form of a security interest in certain assets is replaced by a preferential right to the outcome of the sale of certain assets owned by the issuer in the case of liquidation.

The new statutory provisions were proposed by the Ministry of Finance 1. december 2006 (Ot.prp nr. 11 (2006-2007)), and adopted by the Storting 8 February 2007.

The legislation builds on proposals from the finance industry.