Norway may need to separate its sovereign wealth fund from the central bank as its ballooning size makes proper oversight more difficult, the annual Norges Bank Watch report recommended.
With a fund of 5trillion kroner (£500billion) that is “invested in a complex set of assets, we are concerned that the board’s capacity may be strained,” Knut Anton Mork, chief economist at Svenska Handelsbanken AB, Xavier Freixas, a professor at Universitat Pompeu Fabra, and Kyrre Aamdal, senior economist at DNB ASA, wrote in the report.
While there have been no signs of “specific problems so far, we are seriously concerned about the board’s ability to act effectively during an international crisis, which would require substantial special attention to fund management and monetary policy at the same time, including the bank’s role as lender of last resort,” they said.
The authors said a solution would be to move the fund out of the central bank, though that was not within their mandate to recommend.
A solution would be to form a monetary policy committee that will deal exclusively with rate setting and a separate board that would oversee the whole central bank as well as the fund.
Built from Norway’s oil and gas revenue, the fund got its first capital infusion in 1996.
It has been taking on more risk as it expands, adding stocks in 1998, emerging markets in 2000 and real estate in 2011 to help returns needed to safeguard the wealth of western Europe’s largest oil exporter.
The government estimated in its latest budget that the fund will grow to 7.28 trillion kroner (£720billion) by 2020.
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