Norwegian Bank Research Articles

The Relationship of Narcissism with Workaholism, Work Engagement, and Professional Position

We examined scores on the Narcissistic Personality Inventory (NPI; Raskin & Terry, 1988) in relation to drive to work, enjoyment of and engagement in work, and professional position. A sample of 235 Norwegian bank employees completed a cross-sectional survey. We found that managers scored higher than subordinates on all measures. NPI scores correlated significantly and positively with drive, enjoyment of and engagement in work. Multiple regression analyses controlling for demographic and work variables showed that narcissism was significantly related to enjoyment of work and work engagement but unrelated to drive. Although the associations were rather weak, our findings support previous clinical observations of narcissistic traits in workaholics as well as findings in empirical research on narcissistic traits in managers.

The Daily Liquidity Effect in a Floor System – Empirical Evidence from the Norwegian Market

This paper analyses the liquidity effect in Norway by examining the relationship between a range of liquidity variables and five different measures of the short-term interbank premium. The models are estimated on data from January 2007 and up to the end of September 2011, a period in which Norges Bank implemented its liquidity policy within a so-called floor system, and prior to the new liquidity system introduced on 3 October 2011. In a floor system the key policy rate is equal to banks' deposit rate in the central bank, and as such, this analysis provides new information on the liquidity effect in a floor system. Both excess liquidity (total central bank reserves in the banking system) and structural liquidity (central bank reserves in the system before Norges Banks' market operations) have, as expected, a negative an significant effect on almost all dependent variables. Structural liquidity is the important factor driving the interbank premiums during periods characterized by low volatility, while excess liquidity gained importance during the financial crisis. This result is in line with what should be expected in a floor system. Furthermore, in periods of financial turmoil European and Norwegian banks may face higher USD rates in the interbank market either because of a general USD liquidity premium or an institution specific credit premium. My analysis provides additional insight in the division between the liquidity premium and the credit premium in a way, to my knowledge, not done in earlier literature. In line with the existing literature, the results indicate that during the financial turmoil and crisis (2007-2009), a USD liquidity premium dominated as credit conditions in USD deteriorated (USD shortage).

How Do Banks’ Funding Costs Affect Interest Margins?

We use a dynamic factor model and a detailed panel data set with quarterly accounts data on all Norwegian banks to study the effects of banks’ funding costs on their retail rates. Banks’ funds are categorized into two groups: customer deposits and long-term wholesale funding (market funding from private and institutional investors including other banks). The cost of market funding is represented in the model by the three-month Norwegian Inter Bank Offered Rate (NIBOR) and the spread of unsecured senior bonds issued by Norwegian banks. Our estimates show clear evidence of incomplete pass-through: a unit increase in NIBOR leads to an approximately 0.8 increase in bank rates. On the other hand, the difference between banks’ loan and deposit rates is independent of NIBOR. Our findings are consistent with the view that banks face a downward-sloping demand curve for loans and an upward-sloping supply curve for customer deposits.

Bank advisors working with contradiction: meeting the demands of control through reflective learning

This study of a Norwegian bank’s strategic learning initiatives is based on theory about reflective learning and external constraints on learning. Its main aim is to investigate how the practice of reflective learning among advisors who provide customer service is influenced by new institutional demands, strategic learning initiatives and senior management in an organisation using the Balanced Scorecard. The empirical data were derived from 40 qualitative interviews, eight two-day focus groups and observation of 35 learning activities. Grounded theory was used to analyse the consistency or contradictions between organisational strategy and the understanding of employees about learning activities at work. In addition 2284 registered learning activities recorded by Bank employees on a Balanced Scorecard were analysed. Empirical findings indicate that the management’s new top-down strategy for learning in the organisation – ‘Best Customer Practice’ (recording information about and accounting for learning) when combined with a new institutional demand for authorization and training – has a controlling function that contradicts the organisation’s own rhetoric about promoting reflective learning among the employees. Employees value reflective learning arising from customer relations as it improves motivation and customer service in general. The broader may promote top-management control that constrains the contribution by employees of new ideas, based on reflection about their work, for improving the quality of the services that they provide.

Dividend policy in Norwegian banking before 1914

This article discusses the dividend strategy adopted by Norwegian commercial banks before 1914. Based on a unique data set covering all banks in the period 1882– 1913 as well as six other institutions for the pre-1882 period, I identify the existence of a strong bias towards the payment of high and stable dividends to shareholders. The origins of such bias lie in the specific institutional set-up of commercial banking, the expectations of shareholders and the absence of developed securities markets. Combined with a strong preference for high gearing, this feature contributed to increase the fragility of the Norwegian banking system.

Risk Reporting to the Board of Directors – Field Study Among Norwegian Banks and Power Companies

Risk Reporting to the Board of Directors – Field Study Among Norwegian Banks and Power Companies

The management of variable pay in European banking

Banking is a major employer in most large European countries, facing common pressures in terms of competition and technological change. Traditional pay systems have been revised in response to changing business objectives and new forms of work organisation. This paper examines variable pay schemes (VPS) in banking in four countries with very different institutional contexts: Austria, Norway, Spain, and the UK. It finds extensive use of VPS in each case and shared managerial objectives in terms of performance management and cost control. Forms of VPS vary, with Norwegian banks in particular favouring collective forms of bonus, but overall there is a common drive towards individual (merit) pay and multiple bonus arrangements providing increased scope for management discretion. In broad terms, what the case of pay-setting in banking suggests is a course of fading path dependency at national level.

The International Expansion of the Norwegian Banks

We discuss the expansion of Norwegian banks abroad in the post-World War II era. The Norwegian case gives us an opportunity to examine the determinants of the strategies that banks from a small county have followed in their international expansion. At least two issues emerge as important. The first issue is the role of regulation as goad and handicap to internationalization. Regulations influenced when, where, how and why the Norwegian banks expanded abroad. The second issue is the role of the competition and cooperation (including joint ventures) between banks.

Commentary: On form, comparability, and levels in the income and health relationship

Based on information from the tax register. Total income is the sum of several different types of income. The following method of calculation is used: net income (according to the central government taxation rules) or basis for surtax on gross income (the highest amount for every individual in the household is selected). Included in total income are: student loans and grants from the state educational loan fund; housing allowance from the Norwegian national housing bank; family allowance; miscellaneous tax-free social security benefits (including basic benefit, supplementary benefit, maternity benefit, education grants, etc.); parents’ tax deduction; other transfers.

Endogenous product differentiation in credit markets: What do borrowers pay for?

This paper studies strategies pursued by banks in order to differentiate their services and soften competition. More specifically we analyze whether bank's ability to avoid losses, its capital ratio, or bank size can be used as strategic variables to make banks different and increase the interest rates banks can charge their borrowers in equilibrium. Using a panel of data covering Norwegian banks between 1993 and 1998 we find empirical support that the ability to avoid losses, measured by the ratio of loss provisions, may act as such a strategic variable. A likely interpretation is that borrowers use high-quality low-loss banks to signal their creditworthiness to other stakeholders. This supports the hypothesis that high-quality banks serve as certifiers for their borrowers. Furthermore, this suggests that not only lenders and supervisors but also borrowers may discipline banks to avoid losses.

Endogenous product differentiation in credit markets: What do borrowers pay for?

This paper studies strategies pursued by banks in order to differentiate their services and soften competition. More specifically we analyze whether bank's ability to avoid losses, its capital ratio, or bank size can be used as strategic variables to make banks different and increase the interest rates banks can charge their borrowers in equilibrium. Using a panel of data covering Norwegian banks between 1993 and 1998 we find empirical support that the ability to avoid losses, measured by the ratio of loss provisions, may act as such a strategic variable. A likely interpretation is that borrowers use high-quality low-loss banks to signal their creditworthiness to other stakeholders. This supports the hypothesis that high-quality banks serve as certifiers for their borrowers. Furthermore, this suggests that not only lenders and supervisors but also borrowers may discipline banks to avoid losses.

Banks’ buffer capital: how important is risk

Most banks hold a capital to asset ratio well above the required minimum defined by the present capital adequacy regulation (Basel I). Using bank-level panel data from Norway, important hypotheses concerning the determination of this buffer capital are analyzed. Focus is on the importance of: (i) risk, (ii) the buffer as an insurance, (iii) the competition effect, (iv) supervisory discipline, and (v) economic growth. A negative or non-significant risk effect is found, which suggests that introducing a more risk-sensitive capital regulation (Basel II) is likely to affect Norwegian banks. Support is found for the hypothesis that buffer capital serves as an insurance against failure to meet the capital requirements.

Scale economies, bank mergers, and electronic payments: A spline function approach

This paper demonstrates the importance of using a flexible cost function specification when analyzing economies of scale and estimating the cost effect of banking mergers. The inflexibility of the translog cost function is illustrated and results are compared to more flexible spline and Fourier cost functions. Using these different approaches we predict the ex ante effect on average cost from mergers over 1987–1998 using a balanced panel of 130 Norwegian banks. On average mergers are predicted to lower costs. Predictions using the Fourier or spline approach are in overall agreement with computed actual average merger-cost changes ex post. Cost effects of electronic payments are also estimated and exceed cost reductions associated with mergers.

Financial Fragility, Growth Strategies and Banking Failures: The Major Norwegian Banks and the Banking Crisis, 1987-92

Norwegian financial institutions experienced a severe banking crisis in the late 1980s and early 1990s. This article examines the development of the two largest Norwegian banks before and during the crisis within a financial fragility approach. Deregulation of the markets for credits and lax monetary policy triggered a rapid growth of lending from Norwegian banks in the mid-1980s. Systemic risk was dramatically increased by changes in mentality and strategies in the largest banks. During the banks' expansion, a fragile debt burden was built up and systems of steering and control were given a lower priority. The mechanisms in the process of growths and failure of the two major Norwegian banks indicate that sudden institutional change triggered by the liberalisation of financial markets as well as organisational factors should be emphasised when explaining the crisis.

Endogenous Product Differentiation in Credit Markets: What do Borrowers Pay for?

This paper studies strategies pursued by banks in order to differentiate their services from those of their rivals. In that way competition among banks is softened. More specifically we analyze if the bank size, the bank's ability to avoid losses, and its capital ratio can be used as strategic variables to make banks different and increase the interest rates banks can charge their borrowers in equilibrium. Using a panel of data covering Norwegian banks between 1993 and 1998 we find empirical support that the ability to avoid losses, measured by the ratio of loss provisions, may act as such a strategic variable. Our main finding is that borrowers in the market for credit line loans may discipline banks to avoid losses. We also find evidence that banks pass on parts of increases in their operating costs to credit line borrowers. However, we do not find evidence for the use of high capital ratio as a strategic variable that borrowers are willing to pay for.

Comparing Genotypes of Different Body Sizes for Growth-related Traits in Chickens. Live Weight and Growth Performance under Intensive and Feed-restricted Extensive Systems

Three chicken breeds, including one commercial broiler (CB) and others from the Norwegian gene bank (Barred Plymouth Rock and Jaerhøn) differing in body size were raised under intensive ( ad libitum feeding) and extensive (restricted feeding) systems from 7 to 20 weeks. Body weight (every fortnight), carcass, breast, thigh and abdominal fat weights were recorded. CB chickens had heavier live weights, grew more rapidly and had heavier carcass components at slaughter under intensive conditions, but lost more weight under extensive conditions than the other two breeds. Intensive birds showed a higher degree of maturity than extensively reared birds. Males expressed their growth capacity much less than females under extensive conditions. Size scaling narrowed the gap between the performance of CB chickens and other genotypes but the specific genetic effect still remained. Therefore, both genetic and underlying size differences should be considered in breed comparisons, particularly when chickens are subjected to different feeding regimens.

Calculating the probability of failure of the Norwegian banking sector

We calculate the probability of failure of the Norwegian banking sector both before and after the Norwegian banking crisis. Thus unlike previous studies of this kind we choose a sample period and banking sector where there were significant numbers of bank failures. This approach therefore gives us a better indication of the quality of the calculated risk measure. Our results indicate evidence of a steep increase in the risk inherent in this sector beginning in 1984 following the deregulation of Norwegian banks in the mid 1980s. We also find that risk levels in the sector fall after 1992 and continue to fall to pre-1982 levels by the end of our sample in December 1995.

The International Expansion of the Norwegian Banks

(2001). The International Expansion of the Norwegian Banks. Business History: Vol. 43, No. 3, pp. 79-104.

Comparing Genotypes of Different Body Sizes for Growth-related Traits in Chickens. II. Feed Consumption Performance under Choice Feeding Using Commercial Starter Ration and Whole-grain Wheat

Three genotypes of chickens including one commercial broiler (CB) and two others from the Norwegian gene bank [Barred Plymouth Rock (BPR) and Jærhøn (JH)] were raised from 1 day to 20 weeks of age with a free choice of a commercial starter ration and whole-grain wheat. Body weights and pen-feed intakes were recorded every 2 weeks. The weight–age data were fitted to a Gompertz growth equation where, among other parameters, adult body weights were estimated and used for size scaling. The heavier CB chickens consumed more food (starter and wheat) than the other two genotypes. The maximum proportions of whole-grain wheat in the diet were 0.56, 0.68 and 0.75 for BPR, CB and JH birds, respectively. Although the proportions of whole-grain wheat were similar between the genotypes as age progressed, their maintenance requirement and feed intakes relative to body weight suggested a major genetic role and a possible interplay of both genetic potential and body size.

The Norwegian banks in the Nordic consortia: a case of international strategic alliances in banking

Despite the scholarly interest in joint ventures and strategic alliances, the consortium bank movement represents and under-researched phase in postwar banking history. From 1964 to the early 1980s, many of the largest banks in the world, including the Nordic banks, entered into international strategic alliances. Almost all of these alliances are now defunct and thus we are looking at the growth and demise of an organizational form. We follow the Norwegian banks in the Nordic consortia and find that domestic rivals do not cooperate but international rivals do. Legal prohibitions in the Nordic countries on entry by foreign banks underpinned the cooperation. The cooperation broke down when, as a result of deregulation, the Nordic banks could establish operations in each other's domestic markets and when domestic mergers disrupted existing international alliances. Copyright 1999 by Oxford University Press.