Norway may need to separate its sovereign wealth fund from the central bank as its ballooning size makes proper oversight more difficult, the annual Norges Bank Watch report said.
With a fund of 5 trillion kroner ($830 billion) that’s “invested in a complex set of assets, we are concerned that the board’s capacity may be strained,” Knut Anton Mork, chief economist at Svenska Handelsbanken AB, Xavier Freixas, a professor at Universitat Pompeu Fabra, and Kyrre Aamdal, senior economist at DNB ASA, wrote in the report.
While there have been no signs of “specific problems so far, we are seriously concerned about the board’s ability to act effectively during an international crisis, which would require substantial special attention to fund management and monetary policy at the same time, including the bank’s role as lender of last resort,” they wrote in the report, released in Oslo today.
The authors said a solution would be to move the fund out of the central bank, though that wasn’t within their mandate to recommend. An answer would be to form a monetary-policy committee to deal exclusively with rate setting and a separate board to oversee the whole central bank as well as the fund.
“We have a competent board and we manage well,” Norges Bank Deputy Governor Jan Qvigstad said in an interview in Oslo today. “I don’t think that our tasks are more than boards in big companies.”
Built from Norway’s oil and gas revenue, the fund got its first capital infusion in 1996. It has been taking on more risk as it expands, adding stocks in 1998, emerging markets in 2000 and real estate investments in 2011 to boost returns, helping safeguard the wealth of western Europe’s largest oil exporter.
The government estimated in its latest budget in November that the fund will grow to 7.28 trillion kroner by 2020.
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