Page 1 of 15. Terms and conditions for account management, collateralisation and participation in Norges Bank s settlement system (NBO)

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1 Page 1 of 15 Terms and conditions for account management, collateralisation and participation in Norges Bank s settlement system (NBO)

2 Page 2 of 15 1 Introductory provisions Scope Changes in the terms and conditions etc Definitions Account management, user administration and testing Opening of account Collateral accounts at Norges Bank Scandinavian Cash Pool Access to settlement account Contingency account User management for NBO Online Testing of system changes and new versions Execution of payment orders in NBO Deadlines Time of payment order entry and settlement finality Direct participation in settlement of clearings Direct participation in settlement of payment orders from NICS Direct participation in settlement of payment orders from VPS Direct participation in settlement of payment orders from a central counterparty Settlement of payment orders Right to debit and credit an account Incorrect crediting or debiting of an account Duty to provide information and duty of confidentiality Contingency solution and contingency exercises Enhanced contingency solution for NBO Contingency exercises Prices and fees Prices and fees for participation in NBO etc Annual setting of prices and fees Coverage of Norges Bank s costs related to central securities depositories Fees for violating the terms and conditions Collateral for loans from Norges Bank General provisions... 12

3 Page 3 of Bank s right of disposal Norges Bank s right of disposal Instalment and redemption Right of disposal over interest on pledged securities Default and public administration etc Utilisation of bank s funds to cover claims Invalidation of collateral Realisation of collateral etc Tax liability and tax reporting etc Other provisions Liability for losses Limitation of Norges Bank s liability Notification to EFTA Termination and suspension Choice of law and dispute resolution Introductory provisions Banks access to borrowing and deposit facilities at Norges Bank is regulated by Section 19 and 20 of the Norges Bank Act, the Regulation on banks access to borrowing and deposit facilities from Norges Bank etc., more detailed guidelines laid down pursuant to the Regulation and by the provisions in these terms and conditions. This is a translation of the terms and conditions for account management, collateralisation and participation in Norges Bank`s settlement system (NBO) into English, cf. Section Scope The terms and conditions apply to the establishment of accounts and use of the bank s accounts at Norges Bank and the bank s participation in NBO. Furthermore, the terms and conditions apply to the collateral pledged by the bank for its loans from Norges Bank and to Norges Bank s right to perform close-out netting and realise the collateral. The bank commits itself to comply with these terms and conditions by completing, signing and sending the following documents to Norges Bank: Request to open, change or close an account at Norges Bank Declaration of collateral collateral for loans from Norges Bank

4 Page 4 of 15 Norges Bank determines the following supplementary provision to these terms and conditions: The operating schedule for Norges Bank s settlement system (NBO) Prices and fees in Norges Bank s settlement system (NBO) 1.2 Changes in the terms and conditions etc. Norges Bank may change the terms and conditions and the supplementary provisions referred to in Section 1.1. Changes will normally become effective with at least one (1) month s notice, except prices and fees, for which notice will be given two (2) months before they become effective. Norges Bank will publish changes by circular. Substantial changes in the terms and conditions and in the supplementary provisions will be circulated for consultation. 1.3 Definitions Bank means a commercial or savings bank resident in Norway, a branch in Norway of a non-resident bank or a non-resident credit institution, or a non-resident bank or a nonresident credit institution authorised to market and provide services in Norway (crossborder activities). Clearing means the calculation of net payment positions on the basis of individual payments. Clearing system means a system for the calculation of net payment positions. Collateral account means deposits in a non-interest bearing account at Norges Bank that a bank has pledged as collateral for its own or another bank s borrowing at Sveriges Riksbank and/or Danmarks Nationalbank pursuant to the Scandinavian Cash Pool (SCP) agreement between Danmarks Nationalbank, Sveriges Riksbank and Norges Bank. Collateral means assets banks have pledged as collateral for loans from Norges Bank in accordance with the Regulation on banks access to borrowing and deposit facilities from Norges Bank etc. Contingency account means a passive account that does not provide access to borrowing and deposit facilities at Norges Bank until it has been activated. Enhanced contingency solution means the Market Infrastructure Resiliency Service (MIRS) run by SWIFT that may replace the main functions of NBO in the event of operational failure. Gross payment orders means payment orders between two banks or between a bank and Norges Bank. Gross settlement means settlement of payment orders between two banks or between a bank and Norges Bank.

5 Page 5 of 15 Loan account means the bank s account at Norges Bank in which the bank s overnight loan (D-loan) is registered. LOM account (Liquidity Optimization Mechanism) means a subaccount to the main account used for the execution of payment orders. Main account means the bank s account in Norges Bank in which the bank s deposits are held overnight. NBO Online means Norges Bank s internet-based information and transaction system for the banks access to NBO. NBO operating schedule means the opening and closing times and deadlines for the settlement of payments. NBO (Norges Bank s settlement system) means Norges Bank s system for account management and execution of payment orders. NICS (Norwegian Interbank Clearing System) means the banks system for clearing of payment orders. Operator means the institution responsible for operating a clearing or settlement system. Payment order means an order to execute payment. Payment settlement means settlement of payment order. Realisation means selling collateralised securities and taking possession of deposits in a collateral account. Scandinavian Cash Pool (SCP) means the arrangement whereby Danmarks Nationalbank, Sveriges Riksbank or Norges Bank extend loans to a bank against collateral in the bank s deposit on a collateral account at one of the other two central banks. Securities settlement means the settlement of the cash leg of positions in clearings from Verdipapirsentralen ASA (the Norwegian central securities depository). Settlement account means a main account and one or more subaccounts (LOM accounts) in NBO that are used to settle payment orders and over which the bank has rights of disposal. Settlement day means a day from the date and time NBO opens for settlement to the time NBO closes on the same settlement day. Settlement days are weekdays from Monday to Friday, except public holidays and Christmas Eve. The settlement days for each year are published on Norges Bank s website. Settlement means the final transfer of funds between banks and between banks and other participants in NBO. Sufficient funds means that there is enough liquidity to execute a payment order by debiting the account specified in the order. In a main account, sufficient funds may be in the form of deposits and borrowing access, while sufficient funds in a LOM account may only be in the form of deposits.

6 Page 6 of 15 SWIFT bank means a bank that participates in SWIFT and can send and receive SWIFT messages. 2 Account management, user administration and testing 2.1 Opening of account A bank may request Norges Bank to open a settlement account or a contingency account by sending in a Request to open, change or close an account at Norges Bank. A bank that has or requests a settlement account may also request to open one or more collateral accounts for participation in the Scandinavian Cash Pool (SCP). 2.2 Collateral accounts at Norges Bank Scandinavian Cash Pool Deposits held in collateral accounts at Norges Bank pledged as collateral for loans from Danmarks Nationalbank and/or Sveriges Riksbank must be returned by the deadline specified in the NBO operating schedule. Only the pledgee has rights of disposal over these accounts. Any funds deposited overnight in collateral accounts at Norges Bank do not bear interest and are subject to a fee. 2.3 Access to settlement account A bank with a settlement account at Norges Bank shall use NBO Online to monitor the execution of all payment settlements in NBO in which the bank participates. The bank disposes its accounts in Norges Bank via NBO Online or by sending SWIFT messages. In the event of an operational failure and by special agreement with Norges Bank, the bank may dispose the funds in its accounts by means of a letter with authorised signatures, telefax with a test key or with a test key. The bank is responsible for ensuring that its employees using NBO Online on behalf of the bank are familiar with the rules and procedures for participation in NBO. The bank shall inform Norges Bank of contact persons for its operational liquidity management, with telephone numbers and addresses. 2.4 Contingency account A bank that does not have a settlement account may request to open a contingency account at Norges Bank. The contingency account is inactive until it is activated by Norges Bank. An inactive contingency account cannot be used to make deposits, raise loans or take part in settlement of payment orders. For the contingency account to be activated by Norges Bank, the bank must submit a Request to open, change or close an account at Norges Bank. Norges Bank will activate the contingency account as soon as this request has been received and approved.

7 Page 7 of 15 A refusal by Norges Bank to approve the bank s request for activation of a contingency account must have a reasonable ground. An activated contingency account gives the bank access to borrowing and deposit facilities. The bank has rights of disposal over its contingency account from the time the account is activated and until a settlement account may be established. Payment orders are executed on the basis of orders the bank sends to Norges Bank by letter with authorised signatures, telefax with a test key or with a test key. At the latest fourteen (14) calendar days after the contingency account has been activated, the bank shall notify Norges Bank whether it wishes to deactivate the contingency account, open a settlement account or close its accounts. This is done by submitting a Request to open, change or close an account at Norges Bank. 2.5 User management for NBO Online The bank shall notify Norges Bank of the security officer authorised to manage the bank s users of NBO Online. The bank shall notify Norges Bank of new users and of any changes or deletions. The bank shall allocate user rights for each user. The number of NBO Online users shall be limited to those actively using the solution or will use the solution in a contingency situation. Norges Bank will deactivate the user s access to NBO Online if a user has not been logged on for the previous six (6) months. The bank shall notify Norges Bank of users who are on leave of absence. 2.6 Testing of system changes and new versions The bank shall on request by Norges Bank participate in testing of system changes and new versions of system solutions for NBO. Norges Bank shall notify the bank of the time the test is planned and provide other practical information well in advance. 3 Execution of payment orders in NBO 3.1 Deadlines Payment orders for same-day settlement must be received in NBO by the closing time for the relevant account in accordance with the operating schedule for NBO. The bank shall specify the settlement day for payment orders and may specify the settlement time on the settlement day. 3.2 Time of payment order entry and settlement finality A payment order is regarded as entered in NBO and settled with finality when it has been debited or credited one of the bank s accounts in Norges Bank. Norges Bank, the bank or a third party may not recall the payment order after this time.

8 Page 8 of Direct participation in settlement of clearings A bank that is a direct participant in settlement of clearings (NICS, VPO, CCP) in Norges Bank must be a SWIFT bank. Norges Bank may in special cases grant exemption from this requirement upon application by the bank. Norges Bank may determine more detailed terms and conditions for such exemption. 3.4 Direct participation in settlement of payment orders from NICS The bank accepts that payment orders from NICS may be debited and credited the bank s account in Norges Bank. The bank shall be staffed and monitor the execution of payment settlements from 7 a.m. until NBO is closed. The bank shall notify Norges Bank of any change in its participation in NICS that will affect the bank s participation in payment settlements in NBO by sending a Request to open, change or close an account at Norges Bank to Norges Bank. The request shall be received at the latest one (1) week before the change becomes effective. The requirement of one week s notice to Norges Bank of changes in participation in NICS does not apply in situations where the bank must rapidly switch settlement bank. In such situations, the bank may use Norges Bank as its settlement bank from the time Norges Bank has implemented the change. 3.5 Direct participation in settlement of payment orders from VPS The bank accepts that payment orders from VPS can be debited and credited the bank s VPO LOM account at Norges Bank. Before settlement of each clearing, the bank shall transfer funds to its VPO LOM account by the deadlines determined in the NBO operating schedule. The bank does not have rights of disposal over the funds set aside in the VPO LOM account in the periods stated in the NBO operating schedule. The execution of the securities settlement requires that each bank has sufficient funds in the form of deposits in its VPO LOM account. 3.6 Direct participation in settlement of payment orders from a central counterparty The bank accepts that payment orders from a central counterparty may be debited and credited the bank s accounts at Norges Bank. 3.7 Settlement of payment orders If the bank has not specified a time of settlement, Norges Bank will settle payment orders in the bank s accounts in the sequence they are received. In the event of insufficient funds in a NBO LOM account, the following priorities apply to the settlement of payment orders: 1. Interest on fixed-term loans (F-loans) and settlement of foreign exchange trades with Norges Bank.

9 Page 9 of Clearings from NICS and central counterparties. 3. Gross payment orders from the bank and payment orders from Norges Bank except settlement of foreign exchange transactions with Norges Bank. The bank may give priority to one gross payment order over another gross payment order in a queue, but may not give priority to a gross payment order over a clearing in a queue. The bank shall have sufficient funds for its payment orders and other obligations within the time limits determined in the NBO operating schedule. Payment orders to be debited the main account will be rejected immediately if there are insufficient funds in the account. Norges Bank may reject a clearing if there are insufficient funds or if requested to do so by the operator of the clearing system. This applies even if the deadlines in the NBO operating schedule have not been exceeded. Norges Bank may settle a clearing that replaces the rejected clearing. Norges Bank will reject a clearing or a gross payment order if there are insufficient funds in the LOM account at closing time for the relevant account. In the event of a severe operational disruption with reduced availability or capacity of NBO, Norges Bank may deviate from the provision in the first and second paragraph. Clearings, payments to CLS Bank and other gross payment orders that are important for the execution of payment orders will be given priority. 3.8 Right to debit and credit an account Norges Bank is entitled to debit the bank s accounts on the basis of payment orders received in accordance with the terms and conditions. This also applies to claims Norges Bank has against the bank as a result of the bank s loans from Norges Bank and its participation in NBO. 3.9 Incorrect crediting or debiting of an account If Norges Bank has credited an account or an amount incorrectly, Norges Bank may rectify the error and notify the bank if the correction is carried out by the end of the third settlement day after the error occurred. After this deadline, Norges Bank shall obtain prior consent from the bank. If Norges Bank has debited the bank s accounts incorrectly, Norges Bank shall rectify the error without undue delay Duty to provide information and duty of confidentiality Norges Bank shall notify the bank through NBO Online of payment orders settled on the bank s accounts. Account statements are made available for each account through NBO Online. Norges Bank may also send notification of settlements and account statements via SWIFT. Employees at the bank and at Norges Bank have a duty of confidentiality with regard to information concerning the business or personal affairs of others that they acquire via the

10 Page 10 of 15 account management at Norges Bank, unless otherwise required by legislation. This also applies to others who provide services for the bank or Norges Bank. The bank and Norges Bank are obliged to inform everyone involved about the duty of confidentiality. The duty of confidentiality in accordance with these terms and conditions or in accordance with the statutory duty of confidentiality does not prevent the parties from providing information considered necessary for Norges Bank to be able to perform its tasks as the bank s settlement bank. Nor does the duty of confidentiality prevent Norges Bank from informing operators sending payment orders to Norges Bank on behalf of several banks, such as clearing houses or central counterparties, about changes in the bank s participation in NBO. The same applies to information to VPS concerning the balance in the bank s VPO LOM account. If one or more banks have insufficient funds for their clearing position to be settled in NBO, Norges Bank may inform the operator of the clearing system of which banks that has insufficient funds. Norges Bank may also inform an operator of a clearing system about termination, suspension and restrictions on banks borrowing access as well as closure of accounts at Norges Bank. 4 Contingency solution and contingency exercises 4.1 Enhanced contingency solution for NBO If Norges Bank decides to activate the enhanced contingency solution for NBO (MIRS), Norges Bank shall notify the bank before this contingency solution is invoked. When the contingency solution is active, all payment settlements will be executed in one account for each bank. The contingency solution does not provide the option to reserve funds for specific payment settlements. Changes in the bank s borrowing access will be made manually by Norges Bank and normally only at maturity of collateral assets and registration of new collateral. A SWIFT bank shall send payment orders via SWIFT as usual and will receive account statements as SWIFT messages. A SWIFT bank will be able to monitor the execution of its payment orders in a user interface via SWIFTNet Browse. A bank which is not a SWIFT bank must send its payment orders to Norges Bank by telefax with a test key or with a test key. These banks will not be able to monitor the execution of their payment orders in the contingency solution. When the use of the contingency solution has been terminated, Norges Bank shall send an account statement to the bank for the period the contingency solution was active. When the contingency solution is active, interest on loans and deposits in the settlement account will only be debited or credited the bank s account in connection with month-end and when the use of the contingency solution has been terminated. Interest on fixed term loans (F-loans) and fixed term deposits (F-deposits) will be debited and credited as normal.

11 Page 11 of 15 When the contingency solution is active, banks participating directly in one or more clearings (NICS, VPO, CCP) must be staffed and must monitor the execution of payment settlements from 7 a.m. until NBO is closed. 4.2 Contingency exercises The bank shall take part in NBO contingency exercises. If a contingency exercise has been announced, Norges Bank shall inform the bank of the time the exercise will be held and provide other practical information well in advance. 5 Prices and fees 5.1 Prices and fees for participation in NBO etc. The bank shall pay for account management, loan collateralisation and participation in NBO. If the bank violates these terms and conditions, a fee may be charged. 5.2 Annual setting of prices and fees Prices and fees are determined by Norges Bank for one year at a time and published in a circular at least two (2) months before the beginning of the year to which the prices and fees apply. 5.3 Coverage of Norges Bank s costs related to central securities depositories Costs related to the bank s collateral registered in central securities depositories shall be borne by the bank. If such costs are charged to Norges Bank, Norges Bank may invoice the bank for these costs. 5.4 Fees for violating the terms and conditions Norges Bank may impose a fee if the bank: does not repay a loan extended under the Scandinavian Cash Pool (SCP) arrangement by the deadline determined in the NBO operating schedule, has pledged securities as collateral for loans which does not give loan value at Norges Bank, cf. Section 6.1, pledges a security that has not been approved in accordance with Norges Bank s guidelines, holds loans in excess of the borrowing access at the end of the day, cf. Section 6.1, sends payment orders erroneously to Norges Bank, has exceeded its quota for the number of users of NBO Online, requests activation of a NBO Online user that has been deactivated by Norges Bank.

12 Page 12 of 15 6 Collateral for loans from Norges Bank 6.1 General provisions To access borrowing facilities at Norges Bank, the bank must submit a Declaration of collateral collateral for loans from Norges Bank. If the size of the bank s loan and accrued interest exceed the loan value of the collateral, Norges Bank may require the bank to pledge additional collateral. In such cases, Norges Bank may also utilise the bank s ordinary deposits in Norges Bank as collateral. If the bank s loans exceed its borrowing access at end of the day, Norges Bank will charge the bank the current overnight lending rate (D-loan rate) with the addition of 10 percentage points per year. Loan access based on collateralised deposits held with Sveriges Riksbank and/or Danmarks Nationalbank under the SCP arrangement must be repaid by the deadline stated in the NBO operating schedule. Violation of this provision will incur a fee, cf. Section Bank s right of disposal Assets pledged as collateral for loans from Norges Bank may not be utilised as collateral for loans from a third party. Securities pledged as collateral may only be released by Norges Bank. 6.3 Norges Bank s right of disposal Norges Bank may only utilise the collateral to cover the claims specified in the Declaration of collateral collateral for loans from Norges Bank. The collateral shall be realised in accordance with the provisions in Sections Instalment and redemption Disbursements in connection with maturity, instalment or redemption of securities pledged as collateral for loans from Norges Bank are included in Norges Bank s right to collateral and shall be credited an account determined by Norges Bank. 6.5 Right of disposal over interest on pledged securities The bank has right of disposal over disbursed interest on securities pledged as collateral in favour of Norges Bank. 6.6 Default and public administration etc. Within the scope of these terms and conditions and the provisions in the Declaration of collateral collateral for loans from Norges Bank, Norges Bank has the right to recover its claims against the bank by close-out netting and to take possession of and realise the collateral in full or in part if: the bank defaults on its obligations to Norges Bank on repayment of loans or payment of interest on loans,

13 Page 13 of 15 the bank defaults on its obligations to Norges Bank to raise additional collateral if the sum of loans and accrued interest exceeds the loan value of the collateral, the bank has been placed under public administration or bankruptcy proceedings have been initiated with the bank, or Norges Bank has decided to suspend or limit the bank s access to loans under the provisions of the Regulation on the access of banks to borrowing and deposit facilities from Norges Bank etc. 6.7 Utilisation of bank s funds to cover claims If at least one of the conditions in Section 6.6 exists, Norges Bank may cover its claims by utilising the bank s deposits held with Norges Bank, including ordinary reserves and fixed term deposits (F-deposits). Norges Bank is not entitled to cover its claims by netting against the bank s deposits in its collateral account at Norges Bank that are pledged as collateral for borrowing from Danmarks Nationalbank and/or Sveriges Riksbank. 6.8 Invalidation of collateral Funds deposited in the bank s accounts and collateral pledged by the bank in favour of Norges Bank may not be invalidated pursuant to Section 5-7 of the Norwegian Creditors Recovery Act, cf. Section 4-4 of the Payment Systems Act etc. and Section 5 of the Financial Collateral Act. 6.9 Realisation of collateral etc. If at least one of the conditions in Section 6.6 exists, Norges Bank may without delay and without further consent from the bank or from the administrator/estate realise the collateral registered in a central securities depository in Norway or abroad. The same applies to deposits pledged as collateral at Danmarks Nationalbank and/or Sveriges Riksbank. The collateral must only be utilised to cover the claims specified in the Declaration of collateral collateral for loans from Norges Bank. Norges Bank shall notify the bank or the administrator/estate before the collateral is realised. Valuation, realisation and, if applicable, close-out settlement between the bank and Norges Bank shall be conducted on commercially reasonable terms. For deposits pledged as collateral in the aforementioned central banks, the close-out settlement shall be based on the foreign exchange rate obtained from an independent broker at the time of realisation of the collateral. By signing the Declaration of collateral collateral for loans from Norges Bank, the bank grants Norges Bank the irrevocable authority to give registrars for securities, central securities depositories and brokers the instructions necessary to realise the collateral.

14 Page 14 of Tax liability and tax reporting etc. The bank shall, upon request from Norges Bank, complete documents that Norges Bank receives from foreign securities depositories concerning tax liability to other countries, and submit these to Norges Bank. Norges Bank shall send the completed documents to the relevant recipients. Any financial losses incurred by Norges Bank or the bank due to the erroneous or insufficient completion of these documents must be borne by the bank. 7 Other provisions 7.1 Liability for losses Norges Bank is liable for direct losses, for example loss of interest, if Norges Bank executes an erroneous or delayed credit or debit on a bank s account. Norges Bank s liability for direct losses other than loss of interest, however, does not apply if Norges Bank establishes that the error or delay is due to an obstacle beyond the control of Norges Bank that Norges Bank could not reasonably have been expected to take into account at the time the account became active or avoid or overcome the consequences of at a later time. Exemption from liability applies as long as the obstacles exist. In the event of error due to gross negligence or intent on the part of Norges Bank, Norges Bank is also liable for indirect losses. 7.2 Limitation of Norges Bank s liability If the bank has contributed to the error or delay, Norges Bank s liability pursuant to Section 7.1 of the terms and conditions may be limited or cease to apply. 7.3 Notification to EFTA Norges Bank may provide EFTA s Surveillance Authority with such information about the bank as is necessary to meet the notification requirements pursuant to Section 4-5 of the Act relating to Payment Systems etc. 8 Termination and suspension The bank may terminate its account with Norges Bank with one (1) month s written notice. Termination by Norges Bank must have a justifiable basis. The bank must notify Norges Bank of changes in its legal company structure, mergers or demergers at the latest one (1) month before the change enters into force. Norges Bank may terminate the account effective from the time the change enters into force. The bank must notify Norges Bank of any changes as mentioned above by submitting a Request to open, change or close an account at Norges Bank. In the event of a material breach of the Terms and conditions for account management, collateralisation and participation in Norges Bank s settlement system (NBO), either of the

15 Page 15 of 15 parties may suspend the account for a specified period or terminate the account with immediate effect. The account is terminated with immediate effect if the bank is placed under public administration or enters into insolvency proceedings. This does, however, not apply to provisions in Section 6 concerning collateral for loans at Norges Bank. 9 Choice of law and dispute resolution The parties rights and obligations according to these terms and conditions are regulated by Norwegian law. In case of discrepancy between the text in the Terms and conditions for account management, collateralisation and participation in Norges Bank s settlement system (NBO) in Norwegian and in English, the text in Norwegian applies. The parties shall seek to resolve disputes concerning the terms and conditions by negotiation. If a dispute is not settled within three (3) months, the dispute shall be resolved by ordinary court of law proceedings. The bank and Norges Bank agree to use Oslo as the legal venue.