Jon Nicolaisen: Challenges for the payment system Speech by Mr Jon Nicolaisen, Deputy Governor of Norges Bank (Central Bank of Norway), at the Finance Norway’s payments conference, Oslo, 12 November 2014. *  *  *  Introduction The modern history of payments in Norway began 200 years ago. A clause was included in the Constitution stipulating that the Storting (Norwegian parliament) should “supervise the monetary affairs of the realm”. Two years later, in 1816, Norges Bank was founded. The Storting delegated “supervisory authority” over monetary affairs to the Bank. Today, private banks perform payment services for the general public. Norges Bank has become the bankers’ bank. According to the Norges Bank Act, Norges Bank shall promote an efficient payment system. The Bank issues cash and ensures efficient settlement between banks’ accounts with Norges Bank. In addition, the Bank has responsibility for overseeing and supervising those parts of the payment system located outside of Norges Bank. Finanstilsynet (Financial Supervisory Authority of Norway) has responsibility for supervising the retail payment systems. 1 Payment services play a unique role in the economy. The payment system can be compared to the plumbing system in a house. As long as it functions, we do not give it a second thought. But if it fails, the consequences are immediate and serious. The Norwegian payment system is efficient and up-to-date. Fast, cheap and reliable payments save time and provide security to households and the business sector. It gives the nation a competitive advantage over many other countries.
In particular, there have been substantial declines in industrial goods prices over the past year, while services prices, traditionally prone to very high rates of increase, have eased substantially and have even been growing at a lower rate than in the euro area in recent months. Admittedly, this negative inflation differential is very closely linked to the weakness of demand in Spain. But it is a promising sign of the competitiveness on which the pick-up in activity should be based, so it is important that this price moderation should be preserved in the near future. As I said earlier, there are two adverse consequences of the way in which these imbalances are being corrected: the excessive toll imposed on employment by the crisis, owing to the poor functioning endemic in our labour market, and the deterioration of public finances. Job destruction began with great virulence in construction and subsequently spread to manufacturing industry and market services. It was centred above all on temporary contracts, given the prevailing duality in the labour market. In recent months employment has continued to fall, although the State Fund for Local Investment has slackened the effect. The unemployment rate skyrocketed from 8% in 2007 to almost 18% in the third quarter this year, when it stabilised due partly to the strong slowdown in the growth rate of the labour force. This slower labour force growth was the consequence of part of the population being discouraged by poor employment prospects and of the return of some immigrants to their countries of origin.