The submission places emphasis on the financial strength of the proposed group, risk in the payment system and the consequences for the authorities' handling of potential crises and for the guarantee fund system. The effect on competition has also been assessed, because competition is important for robust and efficient financial infrastructures and payment systems. The discussion of competition is limited to the markets for banking services.

Norges Bank points out that a merger between DnB and Gjensidige NOR will mean that a larger share of the overall risk associated with the provision of credit and other financial services to the Norwegian business and household sectors will be concentrated in one financial group. If DnB NOR were hit by a financial crisis, the consequences for the financial system would be more far-reaching than if one of the banks encountered a crisis today. However, increased size will give room for cost savings, diversification and improved risk management which can contribute to ensuring stable earnings and satisfactory financial strength. Whether the merger will improve the stability of the financial system will depend on the realisation of such improvements and in general on the new company's strategic decisions. A merger will necessitate close supervision of DnB NOR's operations, in particular their choice of risk profile and their risk management systems.

Large, complex financial institutions may generate expectations that they will be bailed out by the authorities in the event of financial problems. This may result in inadequate monitoring of the bank's operations and insufficient risk awareness on the part of both creditors and credit rating agencies. It is Norges Bank's view that there should be no grounds for such expectations. The fact that the government is a major owner may, however, be a complicating factor in handling a crisis in the merged bank.

Norges Bank points out that competition is currently strong in most markets for banking services and that there are competitors who can establish operations in areas where market power is exploited. Foreign competition is also substantial and increasing. Norges Bank expects that competition in most markets for banking services will continue to be satisfactory after the merger. In particular as regards small and medium-sized companies in regional Norway, it would be desirable for savings banks to increase their business vis-à-vis these types of companies.

It is Norges Bank's view that the merger should be accompanied by a broad review of the guarantee fund system.