Norges Bank’s inflation projection is our judgement of the most probable outcome for the rise in the CPI two years ahead. The macroeconomic model RIMINI is a tool that is used in making these 3 projections. Judgement and assessments of current statistics and results from other models are also 3  A further discussion of the use of RIMINI in the work on the inflation projections is provided in: Kjetil Olsen and Fredrik Wulfsberg: “The role of assessments and judgement in the macroeconomic model RIMINI”, Economic Bulletin 2/2001, Norges Bank. BIS Review 7/2002  3  important. In setting the interest rate, however, we also place emphasis on the probability distribution – or the balance of risk – surrounding the projection. Therefore, we also publish our assessment of the risk associated with our own projections. The chart shows our assessment of risk as it was presented in the last Inflation Report, published on 31 October 2001. The black line represents what we consider the most probable development in the CPI. The bulk of the distribution was below the line. This is reflected in the formulation “the probability that inflation two years ahead will be lower than 2½ per cent is greater than the probability that it will be higher.” In order to reduce the possibility of substantial deviations from the inflation target, Norges Bank takes the balance of risks into account when assessing the interest rate. The assessment of the balance of risks largely expresses the Bank’s own judgement.
It is also important to understand financial reporting formats and the auditing standards specified by the external auditors and ensure that there are no conflicting instructions issued by the regulator or the external auditor. This task can also be facilitated through continuous dialogue between the relevant parties and in forums like this, where such issues can be raised and resolved. BIS Review 64/2007  1  Neither the regulator nor the external auditor can ensure that the companies are acting in a transparent and an accountable manner. The boards of directors and the senior management should be accountable to relevant stakeholders. This is why it is necessary to adopt corporate governance practices both at the board level and throughout the operations of the institution. There is an increasing trend of making some of the corporate governance practices mandatory either through rules and regulations issued by the regulator or by separate mandatory codes. From 2009 onwards, all finance and leasing companies will have to observe mandatory governance principles. Therefore, contribution by the boards of directors and the senior management of finance and leasing companies is extremely important as it will facilitate the roles of both regulator and auditor. The role of an auditor under the new Companies Act Given the fiduciary responsibility of finance and leasing companies, it is important to differentiate normal company audits from financial institution audits.