Minutes

Minutes of the Executive Board meeting of 5 February 2020

Present:

Executive Board:
Øystein Olsen, Jon Nicolaisen, Egil Matsen, Karen Helene Ulltveit-Moe, Kristine Ryssdal, Arne Hyttnes and Hans Aasnæs (items 28-53)

Apologies:
Nina Udnes Tronstad

Employee representatives:
Mona H. Sørensen (items 28-31 and 42-54) and Kjersti-Gro Lindquist (items 28-31 and 42-54)

Office of the Supervisory Council:
Jan Frode Jakobsen (items 29-30, 32, 34 and 44-53)

Deloitte:
Henrik Woxholt (items 29-30 and 32) and Roger Furholm (items 29-30 and 32)

Management:
Ørjan Agdesteen (items 29-30 and 32), Age Bakker (48 and 50), Julie Belck-Olsen (29-30 and 32), Olav Bø (49 and 51), Magnus Eriksen (29-30), Hege Gjerde (29-30 and 32), Trond Grande (29-39, 42-44, 46-48 and 50), Bjarne Gulbrandsen (28-31, 33-43 and 46-54), Pål Haugerud (42-43), Renate Haugen (50), Jane Haugland (45-47 and 52-54), Stephen Hirsch (42-44, 46-48 and 50), Dag Huse (32, 38, 43 and 50), Torbjørn Hægeland (40), Per Gunnar Karlsen (49 and 51), Mads Kristensen (50), Øystein Kruge (49), Sunniva Kvitvang (52), Runar Malkenes (28-31, 34-38 and 41-42), Kyrre Nilsen (28-38 and 40-54), Merethe Riddervold (31-38, 42-44, 46-48 and 50), Knut Sandal (40), Ola Stavem (33), Yngve Slyngstad (31-39 and 42-44), Kirsten Steinberg (45-47 and 49), Ingunn Valvatne (29-30, 32-34 and 42-51), John Tore Vatnar (35-38) Birger Vikøren (28-34 and 40-45), Line Vogt (29-30), Kjetil Watne (40), Morten Øfsti (45)

There were no comments on the meeting notice and agenda.

Item 28/2020 Approval of the minutes of the Executive Board meeting of 29 January 2020

Discussion document:

Draft minutes

The Executive Board approved the minutes of its meeting of 29 January 2020.

Item 29/2020 Budget update for Norges Bank 2019

Discussion document:

Memo from Norges Bank Administration (NBA) of 30 January 2020

Under the Supervisory Council’s budget rules for Norges Bank, the Executive Board is to report on the status of overall expenditure for the whole of Norges Bank as at 30 June and 31 December each year as a minimum. This reporting is to include a status report on performance against the approved budget for the Bank’s total operating revenue, operating expenses and investments, and any significant reallocations and variations.

Ørjan Agdesteen presented the matter for discussion.

The Executive Board took note of the 2019 budget update for Norges Bank. The report is to be submitted to the Supervisory Council.

Item 30/2020 Norges Bank’s annual report and financial statements for 2019

Discussion documents:

Memo from NBA of 31 January 2020
Memo from the Audit Committee of 4 February 2020

Runar Malkenes and Ørjan Agdesteen presented the main elements of the annual report and financial statements.

Henrik Woxholt and Roger Furholm summed up Deloitte’s audit of Norges Bank for 2019. They confirmed that Deloitte will be issuing an unqualified auditor’s report and that, in Deloitte’s opinion, the annual financial statements have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of Norges Bank as at 31 December 2019 and of its financial performance and its cash flows for the year then ended in accordance with the regulation on Norges Bank’s annual accounts.

Karen Helene Ulltveit-Moe reported on the Audit Committee’s discussions and the issues of particular concern to the Committee. The Audit Committee concluded that its review and discussions provided answers to important questions related to the handling of Norges Bank’s financial statements for 2019, and noted that:

There is agreement between management and auditor on valuations.
There are no uncorrected errors in the financial statements.
The internal control related to financial reporting has been tested and is assessed as satisfactory.
The audit has been conducted according to plan
Significant issues have not been identified by an external auditor.

On the basis of this and the auditor’s report on the audit of the annual financial statements, the Audit Committee recommended that the Executive Board follow management’s guidance.

The Executive Board adopted the annual report for 2019.

The Executive Board approved Norges Bank’s annual financial statements for 2019 and will submit them to the Supervisory Council for adoption. The Governor was authorised to make editorial changes up until submission to the Supervisory Council.

The annual report will be published on 27 February 2020.

Item 31/2020 NBIM – Accrual and payment of performance-based pay for 2019

Discussion documents:

Memo from NBIM of 31 January 2020
Memo from the Remuneration Committee of 4 February 2020

Trond Grande presented the matter for discussion.

Arne Hyttnes reported on the Remuneration Committee’s discussions. The Committee recommended that the Executive Board follow management’s guidance.

The Executive Board discussed the matter and took note of the report on the accrual and payment of performance-based pay in 2019.

The Executive Board approved the Remuneration Committee’s review of the framework for performance-based pay in cooperation with management, with the goal of further harmonisation with the principles for bonus arrangements in Norges Bank Central Banking Operations (NBCBO). Any recommended changes are to be presented for approval by the Executive Board in the first half of the year.

Item 32/2020 Annual report on the management of the Government Pension Fund Global (GPFG) in 2019

a) Executive Board’s assessment of the GPFG’s performance for 2019

Discussion document:

Memo from the General Secretariat of 31 January 2020

Pål Haugerud presented the matter for discussion.

The Executive Board discussed the matter and approved the statement “The Executive Board’s assessment of the results”. The Governor was authorised to finalise the statement based on the remarks at the meeting. The assessment is to be included in the annual report on the management of the Government Pension Fund Global in 2019.

Annual report on the management of the GPFG in 2019

Discussion documents:

Memo from NBIM of 30 January 2020
Memo from the Audit Committee of 4 February 2020

Yngve Slyngstad presented the main elements of the annual report.

Karen Helene Ulltveit-Moe reported on the Audit Committee’s discussions and the issues of particular concern to the Committee. The committee recommended that the Executive Board follow management’s guidance.

The Executive Board discussed the matter and approved the annual report on the management of the GPFG for 2019. The Governor was authorised to finalise the report based on the draft presented and the Executive Board’s remarks. The report is to be submitted to the Ministry of Finance for information and published on 27 February 2020.

Item 33/2020 Government Pension Fund Global – Investments in renewable energy infrastructure

Discussion document:

Memo from NBIM of 30 January 2020

In its meeting of 20 November 2019, the Executive Board decided on limits for the GPFG’s unlisted investments in renewable energy infrastructure. The Executive Board also requested that management provide more detail on the need for direct investment in projects in the development phase, an overview of different types of funds that can be used for investment in renewable energy and proposals for supplementary limits for such investments.

Yngve Slyngstad and Ola Stavem presented the matter for discussion.

The Executive Board discussed the matter and approved the proposed limits for direct investments in projects in the development phase and for investment through fund structures. The limits are to be presented to the Ministry of Finance in accordance with Section 2-5, paragraph ten of the Ministry’s mandate for management of the GPFG. The Executive Board plans to formally set the limits at its meeting on 24 March.

Item 34/2020 Government Pension Fund Global – Revised management mandate for the management of the fund

Discussion document:

Memo from NBIM of 30 January 2020

Yngve Slyngstad presented the matter for discussion.

The Executive Board discussed the matter. The Executive Board took note of the presentation on the revised mandate and approved the timetable for the implementation of necessary measures owing to changes in provisions in the Ministry of Finance’s management mandate for the GPFG.

Item 35/2020 Recommendation from the Council on Ethics (1)

Discussion document:

Memo from the Ownership Committee of 30 January 2020

Norges Bank has received a recommendation of 7 November 2019 from the Council on Ethics on exclusion of the company [censored text]. The recommendation is based on the unacceptable risk that the company contributes to greenhouse gas emissions (cf. the conduct-based criterion in section 3(1) (d) of the Guidelines for Observation and Exclusion from the Government Pension Fund Global).

Egil Matsen reported on the Ownership Committee’s discussions and position.

The Executive Board endorsed the Committee’s position:

[Censored text] should be excluded from the Government Pension Fund Global’s portfolio.
The Ministry of Finance is to be informed of the decision.
The exclusion enters into force on 1 May 2020. The Governor is authorised to grant exemptions from the deadline in situations with challenging liquidity or other special situations. The Governor was authorised to set a date for publishing the decision.

Item 36/2020 Recommendation of the Council on Ethics (2)

Discussion document:

Memo from the Ownership Committee of 30 January 2020

Norges Bank has received a recommendation of 7 November 2019 from the Council on Ethics on exclusion of the company [censored text].The recommendation is based on the unacceptable risk that the company contributes to greenhouse gas emissions (cf. the conduct-based criterion in section 3(1)(d) of the Guidelines for Observation and Exclusion from the Government Pension Fund Global.

Egil Matsen reported on the Ownership Committee’s discussions and position.

The Executive Board endorsed the Ownership Committee’s position:

[Censored text] should be excluded from the Government Pension Fund Global’s portfolio.
The Ministry of Finance is to be informed of the decision.
The exclusion enters into force on 1 May 2020. The Governor is authorised to grant exemptions from the deadline in situations with challenging liquidity or other special situations. The Governor was authorised to set a date for publishing the decision.

Item 37/2020 Recommendation from the Council on Ethics (3)

Discussion document:

Memo from the Ownership Committee of 30 January 2020

Egil Matsen reported on the Ownership Committee’s discussions and position.

The Executive Board endorsed the Ownership Committee’s position:

[Censored text] should be excluded from the Government Pension Fund Global’s portfolio.
The Ministry of Finance is to be informed of the decision.
The exclusion enters into force on 1 May 2020. The Governor is authorised to grant exemptions from the deadline in situations with challenging liquidity or other special situations. The Governor was authorised to set a date for publishing the decision.

Item 38/2020 Recommendation from the Council on Ethics (4)

Discussion document:

Memo from the Ownership Committee of 30 January 2020

Egil Matsen reported on the Ownership Committee’s discussions and position.

The Executive Board endorsed the Ownership Committee’s position:

[Censored text] should be excluded from the Government Pension Fund Global’s portfolio.
The Ministry of Finance is to be informed of the decision.
The exclusion enters into force on 1 May 2020. The Governor is authorised to grant exemptions from the deadline in situations with challenging liquidity or other special situations. The Governor was authorised to set a date for publishing the decision.

Item 39/2020 Briefing on relevant matters for NBIM

Yngve Slyngstad gave a briefing on relevant matters for NBIM.

Item 40/2020 Status of real-time payments in Norway – Preliminary project for the assessment of infrastructure in Norges Bank

Discussion document:

Memo from Financial Stability of 29 January 2020

Torbjørn Hægeland presented the matter for discussion.

The Executive Board discussed and took note of the matter.

Item 41/2020 Briefing on relevant matters for Central Banking Operations (NBCBO)

The Governor gave a briefing on relevant matters for NBCBO.

Item 42/2020 Supervisory review – Norges Bank’s periodic published reports

Discussion document:

Memo from the General Secretariat of 31 January 2020

Birger Vikøren presented the matter for discussion.

The Executive Board discussed the matter and approved the submission of the attached letter to the Supervisory Council. The Governor was authorised to finalise the letter based on the Executive Board’s remarks.

Item 43/2020 Assurance engagement for Norges Bank’s Supervisory Council on the framework for risk management and control related to the approval of markets

Discussion document:

Memo from the General Secretariat of 30 January 2020

Pål Haugerud presented the matter for discussion.

Item 44/2020 Annual assessment of internal control at NBIM for 2019

Discussion documents:

Memo from NBIM of 30 January 2020
Memo from the Audit Committee of 4 February 2020

Stephen Hirsch presented the main elements of the annual report on operational risk management and internal control in NBIM.

Karen Helene Ulltveit-Moe reported on the Audit Committee’s discussions and the issues of particular concern to the Committee, including security risk and threat level trend and IT security ambition level. The Committee recommended that the Executive Board follows management’s guidance.

The Executive Board discussed the matter and took note of the report on operational risk management and internal control in NBIM for 2019. The report is to be submitted to the Supervisory Council as an attachment to the general assessment of the risk situation and internal control at Norges Bank for 2019 (cf item 47/2020).

Item 45/2020 Operational risk and internal control in Norges Bank Central Banking Operations (NBCBO) for 2019

Discussion documents:

Memo from Governance, Risk and Compliance of 30 January 2020
Memo from the Audit Committee of 4 February 2020

Kirsten Steinberg presented the main elements of the annual report on operational risk management and internal control in NBCBO.

Karen Helene Ulltveit-Moe reported on the Audit Committee’s discussions and the issues of particular concern to the Committee, including the maturity and level of ambition of IT security. The committee recommended that the Executive Board follow management’s guidance.

The Executive Board discussed the matter and took note of the report on operational risk and internal control in NBCBO for 2019. The report is to be sent to the Supervisory Council for information as an attachment to the general assessment of the risk situation and internal control at Norges Bank for 2019 (cf item 47/2020).

Item 46/2020 Internal Audit’s annual report to the Executive Board for 2019

Discussion documents:

Memo from Internal Audit of 30 January 2020
Memo from the Audit Committee of 3 February 2020

Ingunn Valvatne presented the main elements of the annual report.

Karen Helene Ulltveit-Moe reported on the Audit Committee’s discussions and the issues of particular concern to the Committee. The Committee recommended that the Executive Board follow Internal Audit’s guidance.

The Executive Board discussed the matter and took note of Internal Audit’s annual report for 2019. The report is to be sent to the Supervisory Council for information as an attachment to the general assessment of the risk situation and internal control at Norges Bank for 2019 (cf item 47/2020).

Item 47/2020 Assessment of the risk situation and internal control at Norges Bank for 2019

Discussion document:

Memo from the General Secretariat of 30 January 2020
Memo from the Audit Committee of 4 February 2020

The regulation on risk management and internal control at Norges Bank requires the Executive Board to ensure that risk management and internal control are carried out and monitored, partly by considering reports from the operational areas and Internal Audit. The Executive Board is to send a risk assessment report for Norges Bank’s operations to the Supervisory Council at least once a year.

Kirsten Steinberg presented the matter for discussion. Karen Helene Ulltveit-Moe reported on the Audit Committee’s discussions and the issues of particular concern to the Committee. The committee recommended that the Executive Board follows management’s guidance.

The Executive Board discussed risk management and the quality of internal control in NBCBO and in NBIM.

The Executive Board’s assessment is that:

Internal control at Norges Bank is conducted satisfactorily.
The level of operational risk exposure in NBIM was within the Executive Board’s defined risk tolerance throughout the year.
Operational risk exposure in NBCBO has been acceptable throughout the year.

The Executive Board’s assessment is to be sent to the Supervisory Council. Internal control reports for 2019 for NBIM and NBCBO, along with Internal Audit’s annual report to the Executive Board, are to be submitted to the Supervisory Council as attachments to the Executive Board’s assessment.

Item 48/2020 Summary of Bank-wide audit report

Discussion documents:

Memo from Internal Audit of 30 January 2020
Memo from the Audit Committee of 27 January 2020

Ingunn Valvatne presented the main elements of the audit report 1902 NBCBO Ethical framework – anticorruption.

The Executive Board took note of Internal Audit’s summary of the audit report.

Item 49/2020 Summary of audit reports NBCBO

Discussion documents:

Memo from Internal Audit of 30 January 2020
Memo from the Audit Committee of 27 January 2020

Ingunn Valvatne presented the main elements of two audit reports:

1913 SBV Settlement Services
1915 NBCBO Management and Control of ICT

The Executive Board took note of Internal Audit’s summary of the audit reports.

Item 50/2020 Summary of audit reports NBIM

Discussion documents:

Memo from Internal Audit of 30 January 2020
Memo from the Audit Committee of 27 January 2020

Ingunn Valvatne presented the main elements of three audit reports:

1905 NBIM Allocation Process
1908 NBIM IT Governance
1910 NBIM Management and Control of Unlisted Real Estate Portfolio

The Executive Board took note of Internal Audit’s summary of the audit reports.

Item 51/2020 Update of the Executive Board’s principles for bonus arrangements in NBCBO and the Governor’s supplementary guidelines.

Discussion documents:

Memo from Markets and ICT of 22 January 2020
Memo from the Remuneration Committee of 4 February 2020

Arne Hyttnes reported on the Remuneration Committee’s discussions and the issues of particular concern to the Committee. The committee recommended that the Executive Board follow management’s guidance.

The Executive Board approved the proposed updated principles for bonus arrangements in NBCBO.

The Executive Board approved plans for the Remuneration Committee, in cooperation with Management, to review the bonus arrangement framework, with a view towards further harmonisation with the principles for performance-based pay at NBIM. Any proposed adjustments are to be presented to the Executive Board in the first half of the year.

Item 52/2020 Norges Bank’s Working Environment Committee – Annual Report for 2019

Discussion document:

Memo from NBA of 30 January 2020

The Governor introduced the Annual Report.

The Executive Board discussed the matter and took note of the Norges Bank’s Working Environment Committee’s 2019 annual report.

Item 53/2020 Norges Bank’s pension fund – Appointment of new board members

Discussion document:

Memo from NBA of 30 January 2020

The Executive board approved the appointment of the following board members:

Jan Thomsen for the period from 1 April 2020 to 31 March 2023
Mariann S. Bendriss for the period from 1 April 2020 to 31 March 2023
Lise Lindbäck (alternate) for the period from 1 April 2020 to 31 March 2023.

Item 54/2020 Any other business

On behalf of the selection committee, Egil Matsen gave a briefing on the status of the selection process for the appointment of a new CEO of NBIM. The committee recommended a two-week extension of the application deadline.

The Executive Board endorsed the extension of the application deadline to 21 February 2020.

The following were distributed for information together with the discussion documents:

Minutes of the Ownership Committee meeting of 18 November 2019
Minutes of the Risk and Investment meeting of 9 December 2019