Introductory statement at Ecofin

Dear Colleagues,

On behalf of the EFTA states, I thank you for this opportunity to exchanges view on the present economic and financial situation in Europe and the way forward. First, I will present the EFTA states' common views. At the end of my intervention, I will also give a few more specific Norwegian comments.

The times are challenging for Europe. We strongly sympathize with those hardest hit by the ongoing crisis. The high and rising unemployment in many countries is worrisome, in particular the high levels of youth unemployment. To break this destructive trend, there is a need for economic growth – job-rich growth. The interdependence between the real economy and the financial system is strong. A well functioning financial sector is crucial for generating growth and jobs. We also believe that market integration improves the functioning of our financial markets, given that financial stability is maintained. Sufficiently homogenous regulatory standards that can be accepted on a global scale are essential to achieve sufficient stability and contribute to a level playing field. EU and EFTA economies are highly integrated. Iceland, Liechtenstein and Norway take part in the internal market through the EEA agreement. Switzerland has strong ties through bilateral agreements. Thus, European economic and financial stability and the development of the common European market concern us all. Important steps have been taken to tackle the problems in the euro area. However, financial markets are still fragile and growth prospects are weak.

Photo:The Council of the European Union

The EEA members among the EFTA states seek to include relevant new EU legislation in the EEA Agreement, and to implement such new EEA legislation in the national legal system in a timely manner. Switzerland is also committed to assess the need and options for adoption of an equivalent regulation with regard to EU-regulatory reforms. This in its efforts to timely and adequately implement international standards and to prevent regulatory arbitrage.

The level of economic and financial integration varies between countries participating in the internal market. While the need for macro prudential instruments and other measures to mitigate risks may be similar, the use of such measures will often differ, in order to fit the circumstances in each individual country.

The EFTA countries wish to build their national regulation upon the Basel III framework, but they also wish to maintain the possibility to set higher capital requirements than the minimum requirements recommended in the Basel III framework. We therefore follow closely the discussion on how the EU plans to transpose the Basel III recommendations.

When banks operate in more than one jurisdiction through branches, the interface between home and host supervision may become complex. It may be challenging for the host authorities that most of the supervision takes place from the home country supervisor, especially when even systemically important banks may be organized as branches and not subsidiaries.

The three EEA EFTA states emphasize that the participation of their competent authorities in the three European Supervisory Authorities and in the European Systemic Risk Board is an important element for ensuring homogeneity and the well-functioning of the EEA financial market.

Norway and Iceland will, however, due to constitutional requirements, not be able to subject their entities to binding decisions taken by these authorities. The EEA EFTA states will therefore take this opportunity to underline the need for a continued dialog to find a mutually acceptable solution allowing for the incorporation of the relevant legal acts into the EEA Agreement. A solution which satisfies the constitutional requirements should be found as soon as possible.

The EFTA states have noted the EU initiatives to establish a banking union, mandatory for the euro Member States and optional for the non-euro Member States. This will be an important step towards a higher degree of financial market integration, which may benefit both the participating Member States and their close neighbours.

Both the established new European system of financial supervision and the proposed banking union will affect EFTA countries as well as banks operating in EFTA countries in numerous ways.

There is a need to explore the effects of a banking union also for EFTA countries, and it is essential to have an open dialogue on aspects of further integration of the financial sector.