There is not an active securitisation market in Norway for the time being.

Due to specific Norwegian banking regulation, financial institutions in Norway are not able to effectively securitise their assets absent permissive legislation. In Norway, both lending and the purchase of existing loans are regulated activities subject to license, supervision and capital requirements. These requirements would extend to the special-purpose entity (SPV) acquiring the underlying financial assets in a traditional securitisation. In addition, Norwegian consumer loans may not be sold to SPVs without an active and informed consent from the consumer. The requirement for an informed consent means that a pre-consent to a future transfer embedded into the terms and conditions of the loan when initially granted will not be effective. Absent legislation explicitly removing these restrictions in the context of a securitisation, Norwegian financial institutions are effectively prevented from securitisation.

Prior to 2016, such permissive securitisation legislation existed in Norway, but was considered inflexible and complex, resulting in a very few securitisation transactions being completed by Norwegian credit institutions. However, in 2019 an expert group commissioned by the Norwegian Ministry of Finance (the MoF) published a report on the potential implementation of the Securitisation Regulation (2017/2402) in Norway, and on 4 December 2020 the MoF published a legislative proposal for such implementation based on the report. We expect that the Norwegian Parliament will vote on the proposal during the spring of 2021 which means that the legislation may become effective either later in 2021 or in 2022. If the legislative proposal is passed, Norwegian financial institutions are allowed to securitise financial assets under the same legal framework as other European financial institutions.

In our responses below, we have assumed that the MoF’s legislative proposal will be passed by the Norwegian parliament without any amendments.

The MoF’s legislative proposal does not contain provisions that prevent certain assets from being securitised. However, the underlying asset itself may include restrictions regarding assignment, thus prohibiting the asset from being securitised (eg contractual limitations on assignment in a loan agreement).

If passed, the MoF’s legislative proposal will amend the Norwegian Financial Undertakings Act of 10 April 2015 to permit securitisation by financial undertakings including banks and other credit institutions. The legislative proposal will incorporate the Securitisation Regulation by reference and with only a few amendments to the current Norwegian legislation.

We expect that the MoF may issue more detailed regulations if a Norwegian securitisation market develops.

There is no active securitisation market in Norway for the time being. Further, the Norwegian securitisation market has traditionally been very limited. Thus, there are no typical legal structures used for securitisations.

The MoF’s legislative proposal does not contain specific provisions for different types of legal structures, and the proposal provides for both traditional ‘true sale’ securitisation and synthetic securitisation.

The Norwegian Financial Supervisory Authority (FSAN) is the competent authority under the Securitisation Regulation and will be responsible for the supervision of the Norwegian securitisation legislation.

There are no specific limitations in the MoF’s legislative proposal with regards to the nature of entities that may participate in a securitisation transaction.

In Norway, lending and other forms of financing by extension of credit are regulated and licensed activities. The purchase of existing loans is also a licensable activity. Pursuant to the MoF’s legislative proposal, securitising SPVs are exempted from capital and licensing requirements. Other entities involved in a securitisation are subject to the general regulatory requirements in the Norwegian legislation.

When the originator in a securitisation is a financial institution, the servicer of a securitised loan portfolio must be a bank, a non-banking credit institution or a finance company. It is worth noting that under existing Norwegian financial regulations, an originator of a loan will always be a financial institution.

The proposed Norwegian securitisation framework includes the concept of ‘simple, transparent and standardised‘ securitisation by virtue of implementation of the Securitisation Regulation. The MoF’s legislative proposal does not contain any additional local law requirements. The MoF may issue regulations with more detailed requirements at a later point in time.

Neither the Securitisation Regulation, nor the MoF’s legislative proposal defines or distinguishes between private securitisations and public securitisations.

With regards to prospectus requirements, we note that Regulation (EU) 2017/1129 (the Prospectus Regulation) has been implemented in Norway. The application of the Prospectus Regulation to a securitisation in Norway depends, among other things, on whether the securitisation constitutes a public offering or a private placement in Norway, the latter being an offer which is exempted from the Prospectus Regulation.

Except for the requirements set out in the Securitisation Regulation, and if applicable the Prospectus Regulation, there are no specific local law registration, authorisation or other filing requirements in Norway in relation to securitisations.

Under the MoF’s legislative proposal the debtors under securitised loans shall receive information on the identity of the SPV and the servicer, as well their respective rights and obligations as against the debtor. The information must be provided at least three weeks before the loans are sold and transferred from the originator to the SPV. However, the proposal does not afford the debtors any right to object or opt out of the securitisation.

Pursuant to the Norwegian Act on Debt Information, Norwegian financial institutions are required to report certain information to an authorised debt registry institution. In the MoF’s legislative proposal this reporting requirement is placed on the servicer of the securitised portfolio (which typically will be the originator), because SPVs are not financial institutions and thus not subject to the reporting requirement.

There are certain disclosure requirements in the Securitisation Regulation (particularly Article 7) and Regulation (EU) 575/2013 (CRR). A public securitisation is subject to the Prospectus Regulation (see question 8).

Regulation (EU) 1286/2014 (PRIIPS) has not yet been implemented in Norway.

The Securitisation Regulation requires that the originator, sponsor or original lender must comply with certain risk retention requirements. The MoF’s legislative proposal does not contain specific regulation regarding credit risk retention above and beyond what is set out in the Securitisation Regulation.

In general, the Securitisation Regulation requires that a minimum of 5% of the net economic credit risk must be retained.

The Securitisation Regulation sets out an exhaustive list of five acceptable risk retention techniques. We expect that securitising entities in Norway will prefer the less complex risk retention methods, ie:

• vertical slice (the securitising entities retain not less than 5% of the nominal value of each tranche sold or transferred to investors); and
• first loss exposure (the securitising entities retain a first loss exposure of not less than 5% of every securitised exposure in the securitisation).

However, we note that the Securitisation Regulation also contains exemptions from the risk retention requirements, eg, in cases where the securitised exposures are fully, irrevocably and unconditionally guaranteed by central banks or governments.

Article 5 of the Securitisation Regulation requires institutional investors to conduct a minimum standard of due-diligence measures before investing. This includes comprehensive and thorough knowledge of the securitisation position and its underlying exposures, including the exposure type, proportion of overdue loans, default rates and collateral type. The investor must also monitor the information on the exposures underlying the positions on an ongoing basis, and have written policies and procedures in place for the risk management of its positions.

Upon request by the FSAN, institutional investors must be able to demonstrate comprehensive and thorough understanding of the securitisation position and its underlying exposures. The MoF’s legislative proposal does not impose further regulatory obligations to conduct due diligence before investing above and beyond what is set out in the Securitisation Regulation.

The standard penalties in the Norwegian Financial Undertakings Act will be applicable to breaches of the securitisation legislation. Primarily, breaches are sanctioned with fines, but in particularly aggravating circumstances breaches may also be sanctioned by imprisonment. The sanctions may be directed at both the involved legal entities and the responsible individuals.

Norwegian corporate law is not particularly well suited to facilitate the use of Norwegian SPVs in securitisation transactions. Based on input received in the legislative hearing, the MoF anticipates that Norwegian financial institutions will prefer to use SPVs registered outside of Norway in securitisation transactions, eg SPVs registered in Luxembourg or Ireland.

The Securitisation Regulation lays down a general framework for securitisation and sets certain requirements for SPVs used in securitisation transactions, which among other things requires that:

• The SPV must be a corporation, trust or other entity, other than an originator or sponsor, established for the purpose of carrying out one or more securitisations;
• The activities of the SPV should be limited to those appropriate to accomplishing the securitisation for which it has been established and its structure should allow isolating the obligations of the SPV from those of the originator.

An SPV should not be established in a third country listed as a high-risk and non-cooperative jurisdiction by the Financial Action Task Force or in a third country that has not signed an agreement with an EU member state to ensure that that third country fully complies with tax good-governance standards.

Norwegian insolvency law does not have particular designs applicable to securitisation transactions. Since there is no active securitisation market in Norway for the time being, there are no common structures or measures utilised by securitising entities.

Norwegian insolvency law provides that an insolvency estate, as a starting point, may only seize assets that belong to the insolvent debtor (ie assets in the ownership of the insolvent debtor). However, this starting point is modified by legal perfection requirements which may entitle the insolvency estate to seize assets which have been sold by the debtor if the acquirer has failed to obtain legal perfection for its acquisition of the assets. In this context, the assets of the acquirer would be ‘bankrupcty remote’ if it has taken all necessary steps to ensure that its rights to the assets are protected (i.e. legally perfected) in case of the seller’s bankruptcy.

A fundamental prerequisite for ensuring that the SPV is bankruptcy remote, is that the assets are transferred to the SPV by way of a valid and binding transfer agreement. The insolvency estate will not be bound by a pro forma transfer agreement, and a transfer which is not on arm’s length terms and which unreasonably favours the SPV at the expense of other creditors of the seller may on certain conditions be overturned in bankruptcy.

To ensure that the assets of the securitisation SPV are bankruptcy remote, the originator must transfer underlying financial assets to the SPV following a ‘true sale’ transaction. For a transfer of monetary claims to be deemed a ‘true sale’ transaction, the originator must transfer the substantial risks associated with the underlying claims to the SPV and the transaction must be undertaken on an arm’s length, solvent basis. Following a ‘true sale’ transaction the SPV becomes the owner of the underlying assets and, subject to legal perfection (see question 17), acquires the full legal title to the assets.

There is no active securitisation market in Norway for the time being.

There are no specific requirements to ensure that a transfer of financial assets is valid between the parties to such transfer. However, certain actions are required to achieve legal perfection. The type of action needed depends on the asset in question.

Legal perfection for assignment of non-negotiable monetary claims (such as consumer loans) under Norwegian law is achieved by notifying the debtor of the assignment. If the monetary claim is secured, the assignment of the relevant security from the originator to the SPV may be subject to a separate perfection requirement.

Pursuant to the MoF’s legislative proposal, each individual obligor under the securitised loans must be informed three weeks ahead of the transfer of the securitised loans to the SPV. The debtor is not afforded any right to object or opt out of the securitisation, and this notification requirement is not a part of the legal perfection act for sale of non-negotiable monetary claims.

In the event of the originator’s insolvency, the administrator of the insolvency estate may invoke certain general overriding claw-back provisions in Norwegian insolvency law. In general, these are only applicable if the transaction is deemed to be objectively unfair to the other creditors of the insolvent party.

In case of insolvency, the transfer of assets may also be challenged by arguing that the sale was not duly perfected (see question 17) or by arguing that the transfer of the underlying financial assets should be re-characterised as a secured loan transaction (see question 15 on the requirements for a transfer to be deemed a ‘true sale’ transaction).

Financial institutions are subject to a strict confidentiality duty toward their clients. In general, financial institutions as originators are not allowed to disclose information on the underlying claims to third parties without prior consent from the debtors of such claims. There are no exemptions from confidentiality measures in the MoF’s legislative proposal.

Data protection in Norway is governed by Regulation (EU) 2016/679 (GDPR) and by the Norwegian Personal Data Act, which both apply to the gathering and processing of personal data. These rules are also applicable to securitisation transactions.

The activities of rating agencies in Norway are regulated by Regulation (EU) 1060/2009 (CRA Regulation), Regulation (EU) 513/2011 (CRA 2) and Regulation (EU) 462/2013 (CRA 3), which are incorporated by reference in Norwegian legislation. The FSAN is the competent authority under the CRA Regulation.

The MoF’s legislative proposal does not include provisions on taxation and taxation is not addressed in the preparatory works. Further, as there is no active securitisation market in Norway today and the market historically was very limited, there is limited precedence. Some general considerations are set out below:

In Norway, financial services, including the sale of receivables, are generally exempt from value added tax. Thus, the transfer of underlying financial assets from the originator to the SPV should be exempt from value added tax. Further, in case of foreign SPVs, the income that a SPV located outside of Norway derives from the acquired underlying financial assets should as a starting point not be subject to Norwegian income tax.

For the time being there is not a withholding tax applicable to securitisation transactions in Norway. During the course of 2021, however, a 15 % withholding tax on interest payments to related parties in low tax jurisdictions will be introduced. Payments to entities that are genuinely established and conduct real economic activity in an EU/EEA member state will be exempt.

There is no active securitisation market for the time being. In general, there are no restrictions on global or cross-border transactions. The exemption from lending and banking licensing requirements for SPVs applies equally to SPVs located outside of Norway.

There is no active securitisation market in Norway for the time being.

The MoF’s legislative proposal has been well received by representatives from the Norwegian financial industry. In particular, when compared to the previous securitisation framework in Norway, the proposed framework has been drafted with a view to ensuring that securitisation should be feasible in practice. It remains to be seen whether the new framework is sufficient to develop a securitisation market in Norway.

The MoF’s legislative proposal implements the Securitisation Regulation by reference, but with few amendments to existing Norwegian legislation. In its legislative proposal, however, the MoF makes several references to the possibility of issuing detailing regulations at a later time. For securitising entities or financial institutions considering to securitise their asset portfolios in the future, this may appear as somewhat unpredictable: Particularly due to the limited amount of precedent in the Norwegian market, it is important to ensure sufficient predictability for securitising entities if a market is to develop. The securitisation framework should be comprehensive and not leave several elements to be detailed at a later stage. However, any future national regulation will need to observe the requirements of the Securitisation Regulation and any delegated or implementing acts thereunder, if and to the extent incorporated into the EEA agreement.

There is no active securitisation market in Norway for the time being. As far as we can observe, COVID-19 has not affected the MoF’s legislative proposal or the discussion on securitisation in general in the Norwegian market.