Funds from the Deposit Guarantee Fund may be used to prevent a member bank from being liquidated.
The Norwegian Banks’ Guarantee Fund may grant support to member banks when alternative measures are deemed less costly than liquidation proceedings and pay out of guaranteed deposits.
The Norwegian Banks’ Guarantee Fund may use the deposit guarantee fund to help member banks in the rare event of severe economic difficulties through alternative measures. Before receiving support, the member bank must have tried to solve its economic difficulties. Another prerequisite is that alternative measures are deemed less costly than liquidation proceedings. Liquidation proceedings requires a pay-out to the depositors.
To ensure that a member bank of the Norwegian Banks’ Guarantee Fund which faces severe economic difficulties can fulfil its obligations or continue its activities, or have its activities transferred to another institution, the Fund may grant support by:
- Provide guarantees
- Provide liquidity support
- Supply equity
In agreement with the Financial Supervisory Authority, The Norwegian Bank’s Guarantee Fund set strict covenants when providing alternative measures to member banks.
The deposit guarantee fund may also be used to finance alternative measures to preserve the access of depositors to covered deposits, including transfer of assets and liabilities and deposit book transfer, in the context of liquidation proceedings. An important requirement for such support is that costs borne by the Norwegian Bank’s Guarantee Fund us should not exceed the net amount of compensating covered depositors at the credit institution concerned.
The Norwegian Bank’s Guarantee Fund are also obliged to contribute with assets from the guarantee fund if the Norwegian FSA (as resolution authority) decides to use resolution measures that preserves the depositors access to the deposits, however limited to the alternative cost of pay out in a liquidation scenario.
Details on alternative measures are described in section 19-11 of the Financial Institutions Act (in Norwegian).