Irrespective, perseverance and patience are required if we are to achieve results. We should not allow the management of the Fund to be ruled by the impulsive and changing priorities that beleaguer so many public programmes and sectors. When we invest the Pension Fund’s assets, we are guests in our neighbour’s house. The requirements for the exercise of ownership rights cannot therefore be based solely on Norway’s values and culture. We must acknowledge that the dividing lines between politics, ethics and management may be different in other countries. When we point a finger at a company, we are also pointing a finger at the laws, regulations and practices of countries where the company is based and operates – and we are pointing that finger as a representative of the Norwegian state. 8  BIS Review 18/2008  When other countries look at Norway, they may agree with another Norwegian poet whose 100th anniversary we are celebrating this year, Olav H. Hauge, when he wrote that “selfesteem grows with the size of your bank account”. 7 We have enjoyed great economic prosperity over the past 10-15 years. But perhaps a warning can be found in one of Hauge’s poems. Allow me to recite: “Too happy by half – the pot’s boiling over, the scale arm is pointing sky-high! I must do something contrary, throw cold water on the pot, hang a stone on the scales, fell the biggest pine I’ve got. 8 Thank you for your attention!
So far this year, the market capitalisation of the Oslo Stock Exchange has declined by more than 15 per cent, or more than NOK 300 billion. When the interbank market seized up, many central banks injected extra liquidity. In periods, Norges Bank has also provided additional loans to banks. This has reduced swings in interbank rates. Norwegian banks borrow dollars short in the European market for their interbank trading. Banks also borrow in foreign markets to finance lending in NOK. The banks raise foreign currency loans, which are exchanged into NOK. The premia on such loans are passed on to customers that borrow in NOK. This is why the increase in US and European premia has quickly fed through to Norwegian interest rates even though Norwegian banks are profitable, retain confidence and have limited loss exposures. In recent years, debt accumulation among Norwegian businesses and households has increased markedly. At the same time, Norwegian banks’ foreign short-term liabilities have tended upwards. The banks hedge against the exchange and interest rate risk associated with these loans. But the turbulence in the latter half of last year showed that banks cannot as readily hedge against liquidity risk. Norges Bank supplies NOK to the Norwegian banking system. In that respect, we can be generous when the markets are seized by fear and uncertainty. But when banks borrow in foreign currency, they are more on their own. Crises and turbulence are built into the workings of the market.