The bond market in Norway currently functions only for large and solid enterprises and best for those with ties to the Government. Other corporations are dependant on the bank- and credit markets in order to obtain financing. This was the message given by Eksportfinans’ CEO Gisele Marchand at the annual conference held by the Norwegian Financial Services Association on March 31, 2009. Her speech was titled “The role of the bond market and the connection with the export industry”.
In her speech, Gisele Marchand emphasized that the bond market has been an increasingly important funding source for the Norwegian industry since 2004; both directly and indirectly as banks and financial institutions such as Eksportfinans to a large extent collect its funding in the bond market and on-lend to the industry sector.
She showed that it is still possible for Norwegian corporations and banks to fund in the bond market, but the pricing is much higher than before. For the clients, this increased funding cost offsets the positive effect of decreasing interest rates.
Gisele Marchand also showed an overview of the different government guarantee schemes given to all EU countries except Luxembourg since October 2008. As a consequence, only government guaranteed banks are now able to obtain long term funding in the international bond markets. In Norway, the Government has not provided guarantees for the banks.
Government guarantees have had different effects on the pricing of bank bonds in different countries, depending on which opinion the market has on the country’s own financial situation. While pricing of government guaranteed bank bonds in the UK are priced far more favorably than the non-guaranteed issues, this is not the case in Ireland. – This is due to the lack of confidence in Ireland’s ability to carry its guarantee responsibility, says Gisele Marchand. An other example is the Swedish Exportkredit (SEK), that is priced almost similar to Eksportfinans, although they have much closer ties to the Swedish Government than Eksportfinans does to the Norwegian. Probably this was due to weaker confidence in the Swedish economy than in the Norwegian.
In the autumn of 2008 Eksportfinans experienced record high demand for export credits. Concurrently the access to long term funding from the international bond markets decreased, and Eksportfinans had to put restrictions on its lending. The export industry put tremendous pressure on the Norwegian government in order to find solutions so that they could finance their projects. – This resulted in an agreement between Eksportfinans and the Norwegian Government whereby Eksportfinans is able to fund new export credits directly from the Central Bank of Norway, concluded Gisele Marchand.