Speech at Euronext Annual Conference

It is a pleasure to join you at the Euronext annual conference here in Paris.

Allow me to start by saying a few words about the Norwegian economy in general, our macroeconomic framework and our position in the European architecture. I will then turn to financial markets issues and some challenges I see there.

My country’s economy is in many ways formed by its geography. The most striking feature of the Norwegian map is its long coastline.

Our coastline taught us to build ships, which made long distance trade possible more than 1000 years ago. It also gave us access to a large stock of fish, and later oil and gas.

This still shapes us: Today we trade extensively with the world, we have a modern ship building industry and a big merchant fleet, and fish export still makes up 10 percent of our total export. And of course the petroleum industry plays a vital role in the Norwegian economy.

The oil and gas sector is Norway's largest sector – whether you measure it as a share of GDP, government revenues, investments or export.

Access to valuable natural resources is surely a privilege, but it also gives rise to some policy challenges.

Petroleum revenues are highly volatile and temporary in nature.

It is therefore important to decouple government spending from current revenues.

In Norway the solution has been a sovereign wealth fund, our Government Pension Fund Global.

From the moderate first deposit of 2 billion Norwegian kroner in 1996, the fund's market value has now grown to 10 000 billion Norwegian kroner, or around a trillion euros. This is approximately the Norwegian annual GDP three times over.

The petroleum revenues belong to all Norwegians, those who live in Norway today, and those yet to be born.

As the fund started growing in size, it became clear that we needed a rule to ensure that all generations will benefit from the revenues.

Our fiscal rule was introduced in 2001, five years after the first deposit. It is a very simple rule: Over time only the expected real return on the fund is spent, currently estimated at 3 per cent annually. In a given year, the use of fund money is adapted to the economic situation.

The fund and the fiscal rule shield the budget from short-term fluctuations in oil revenues or the market value of the fund, and give us fiscal space to counteract economic downturns.

The fiscal framework has served us very well so far. We may have had some luck along the way, but if we look at earlier downturns, it becomes clear that policies matter. And that we are better equipped to handle economic shocks today than a few decades ago.

The consequences of the oil price fall in 1986 and in 2014, illustrates this point very clearly. In size, the price fall was similar. The economic developments that followed, however, differed substantially.

The oil price fall in 1986 set off a long period of economic turbulence. It took five years before economic activity had returned to previous levels. During those years, employment fell continuously and unemployment tripled.

In 2014, GDP did not fall and the increase in unemployment was far more subdued. And, importantly, employment continued to increase.

A floating currency, a well-functioning labour market, strong public finances, and a very well capitalised financial sector helped us during the oil price fall in 2014. The government used fiscal policy actively to counter the downturn, but resisted supporting certain industries. Instead, we emphasized restructuring and mobility.

Today, the economy has fully recovered. The recovery has been broadly based, across both sectors and regions.

I believe it is fair to say that the Norwegian economy performs well. Nevertheless, we have challenges ahead.

We expect oil and gas production to be lower in the future. Not least because the necessary and on-going transition to a low-carbon world economy will evidently also affect the demand for oil and gas.

How to make this transition happen fast enough and in a fair and cost-efficient manner is a challenge we all share.

Like in many other countries, we have an aging population that will put pressure on public finances going forward. The key to success lays in keeping up labour force participation and employment, as well as making sure we have an efficient – and not too big – public sector.

Our success will continue to depend on a well-functioning world economy. For a small, open economy, this is crucial.

Our natural resources have value only if we have access to the international markets, and we invest our sovereign wealth fund in stocks, bonds and real estate all across the world.

In fact, few countries have made such a large bet on open global markets and the capitalist system as Norway has, by investing our common savings in financial instruments around the world.

Clearly, being a small open economy means that what happens abroad has great effect. For Norway, this is particularly true if it happens in the EU.

The EU is Norway’s most important trading partner, and EU policy has an impact on many sectors of Norwegian society.

Norway exports far more to the European market than to Asia, the US, Canada, Latin America and Oceania together. In fact, 80 per cent of our goods exports go to the EU, and 60 per cent of our imports come from EU member states. We are the second largest gas supplier to Europe, after Russia.

Our services markets are also highly integrated with the European markets around us. When it comes to financial services, the Nordic Baltic region is probably one of the deepest integrated cross-border markets in the word. Norway’s relation to the EU is regulated through a number of agreements. The cornerstone is the Agreement on the European Economic Area – the EEA Agreement.

This agreement entered into force in 1994, and brings together the EU Member States and the three EEA EFTA States — Iceland, Liechtenstein and Norway — in one single market governed by the same rules.

The EEA Agreement guarantees that the EU Single Market's four freedoms apply throughout the EEA area, as well as non-discrimination and equal rules of competition.

Norwegian citizens and businesses hold the same rights and obligations as their EU peers in trade, investments, banking and insurance.

The EEA Agreement provides predictability and a level playing field, and makes it possible to trade with a minimum of barriers within the EEA.

The EEA Agreement also covers cooperation in other important areas such as research and development, education, social policy, climate and environment and consumer protection.

A key feature of the EEA Agreement is that it is dynamic. New, relevant EU legislation is continuously incorporated into the Agreement.

As a non-EU country, Norway gives input during the preparatory phases of the legislation process, and there is also some room for adaptations when the legislation is taken into the EEA Agreement.

Our cooperation with the EU extends beyond the EEA Agreement. We take part in the Schengen agreement and cooperate closely with the EU on foreign policy and security issues.

In short, we are deeply integrated with the EU.

Let me now go more into financial market issues. Without doubt, we have an innovative and dynamic financial sector in Norway.

The financial industry is vital both to economic stability and to growth. Well-functioning capital markets provide businesses with access to funding.

The Oslo Stock Exchange – Oslo Børs – has been a central part of the financial development in Norway.

Oslo Børs opened more than 200 years ago, in 1819. At the time, economic activity in Norway was centred around fishing, farming and forestry. Over the last 200 years, we have witnessed tremendous economic developments, in Oslo, in Norway and in the world.

Oslo Børs has been part of this transition. By supplying capital to the industry, at first textile firms and later mechanical engineering companies, shipping and shipyards, the stock exchange made new levels of growth possible.

Today, Oslo Børs reflects the economic activity and business sector in Norway.

It has for long held a strong position within the oil and gas, maritime and seafood sector, and the Norwegian capital market is among the largest in the world in these areas.

We have built up a strong expertise within these sectors. This makes us competitive on the global stage.

To play at our strengths is a smart strategy, but at the same time, we must facilitate change and innovation to adapt to changing conditions.

Digitalisation has led to more accessible financial services and large efficiency gains. Norwegian payment systems are among the worlds most digitalised and efficient.

The first European bank to introduce online banking in 1996 was actually the small Norwegian savings bank, Sparebanken Hedmark. Today, 99 percent of Norwegian consumers use online banking.

However, the digitalisation in the finance sector is also a source of risk. The rapid development has made us more vulnerable for digital fraud and cyber-attacks.

I pay a particular keen eye on cyber security, and I know the same is true for the financial service providers.

The Norwegian initiative FinansCert, where the finance industry cooperates to prevent and guard against cyber threats, was established in 2012. It has since expanded into a Nordic cooperation.

We need innovation, in all sectors.

History has shown that not all innovation in the financial sector is beneficial. The challenge for regulators is to ensure financial stability and protect consumers, while at the same time making sure that our regulatory framework is conducive to innovation that benefits consumers and the financial system.

So-called regulatory sandboxes can be a tool to strike the balance between facilitating innovation and reducing the risk associated with new technologies. The Norwegian Financial Supervisory Authority recently launched a fintech sandbox. In the sandbox, selected companies can test new technical solutions or business models with guidance from the FSA.

The goal is to increase companies’ knowledge of regulations and simultaneously strengthen the regulators’ understanding of new technological solutions. I am excited to see what results the sandbox might bring.

Well-functioning financial markets are, as we have seen for centuries, crucial for transforming the economy and allocating resources to their best use.

In the coming years, we need the financial market to play its role in dealing with the risks and challenges associated with climate change. If the transition to a low emission economy is to be successful, we need financial markets that can identify and correctly price climate-related risks and opportunities.

Making it easier for the financial sector to direct capital towards investments that are consistent with the low-carbon transition is high on the agenda internationally, particularly in the EU. Last year, my Government endorsed the goals set out in the Commission's action plan for financing sustainable growth.

My impression is that the Norwegian financial industry has ambitious plans for becoming greener and making green investments mainstream. One example is Oslo Børs, which in 2015 became the first stock exchange in the world with a separate list for green bonds.

Today, we see a surge in demand for green investments internationally, which is likely to further increase in the coming years.

As the owners of Oslo Børs, Euronext will be a central part of this future. I look forward to the see Euronext, with your ambitious goals, take Oslo Børs into the future.

You have exiting times ahead of you.

I hope I have managed to give you a brief picture of the small open economy where Euronext now is running a stock exchange, including some main challenges and policies.

Trough trade and cooperation with the rest of the world, Norwegians have made use of the advantages we have been dealt. The EEA Agreement and our close relationship with the EU is an essential part of our policy.

We believe well-managed financial markets and an innovative and adaptable financial sector is key to enhance prosperity and growth. There is where we trust you to play an important role.

Thank you very much for your attention