euro banking association ( eba ) clearing system and the traditional network of correspondent banks. in addition, some large domestic clearing systems like euro access frankfurt ( eaf ) allow banks from all eu countries to participate. the participants naturally take such factors as price, risk and time into account when considering whether to make use of target or any of the other options. the norwegian banking industry has expressed an interest in having norges bank provide settlement services for a multilateral netting system for domestic transactions in euros. as an eea member, norway participates fully in the single market ( with the exception of agricultural products ) and norwegian banks are subject to the same requirements and obligations as those applying in the eu. access to the common payment system on virtually equal terms is therefore regarded as desirable and natural. norwegian banks attach importance to being able to offer competitive euro services, and a norwegian euro settlement system could make a contribution in this respect. norges bank is pursuing this matter with the ecb. we have taken note of the solutions found with respect to the non - euro eu members, including the uk. developments in the norwegian banking industry the industry that will probably be most affected by the euro is the banking industry. the banking industry in norway and other countries has undergone, and will continue to experience, substantial changes as a result of technological advances, internationalisation, deregulation and changes in customer behaviour. this has intensified competition and reduced margins, thereby prompting a need for restructuring and reducing overcapacity. in addition to increased competition between banks, new participants – both financial and non - financial – have contributed to increasing the pressure on margins. securities markets have also become more important in terms of their role in saving, financing and risk management, adding to the pressure on financial intermediaries such as banks. like banks in other countries, norwegian banks have had problems compensating for the decline in net interest income by increasing other income or reducing costs. intensified competition both between banks and from other financial market participants suggests that banks will in general be facing major challenges in the years to come. on top of this comes emu, which will probably amplify some of these trends. the euro will have varying effects on different market segments. the most immediate consequence of the transition to the euro is the elimination of foreign exchange and hedging transactions in the – 5 – currencies concerned. as exchange between euro - country currencies accounts for a very limited share of total currency exchange in norwegian banks, this

at the time were probably in doubt as to whether any savings would ever be accumulated in the fund. and initially the fund structure was only an exercise in accounting. government petroleum revenues were deposited in the fund, but the entire amount was transferred back to the central government budget to cover some of the non - oil deficit. but the norwegian economy rebounded. see chart “ first deposit in the fund ” at the end of the speech. it took a generation from the discovery of the first oil field in the north sea until it became possible for the government to set aside a portion of the economic rent. the first net transfer to the fund of close to nok 2 billion was made in 1996. every year since then, as a savings plan, the government has let a substantial share of current income from oil and gas remain as deposits in the fund. at the end of the first quarter of this year, the fund ’ s market value stood at nok 2 763 billion. see chart “ the fund ’ s market value ” at the end of the speech. as the fund increased, the need for a plan for the phasing in of oil revenues became evident. in 2001, the government and the storting adopted the fiscal rule, which is based on the deposit of government petroleum revenues in the oil fund. an amount equivalent to the expected real return on the fund, or 4 per cent, as an annual average over time, is transferred back to the central government budget to cover current expenditure. the transfers increase as the fund rises in value. along the way, the name of the fund has been changed from the government petroleum fund to the government pension fund global. there are prospects that new annual transfers to the fund may be made over the next 10 years or so. this implies further growth in the fund, perhaps up to twice the size of today ’ s see nou ( official norwegian report ) 1983 : 27 “ petroleumsvirksomhetens framtid ” [ the future of petroleum activity ]. fund, which corresponds to one and half to two times annual gdp for norway. public expenditure accounts for about half of gdp. withdrawals from the fund at 4 per cent can therefore finance 15 per cent of public spending in 10 years ’ time. this can continue on a permanent basis without reducing the capital in the fund. the fund will therefore lead to smaller cuts in government welfare spending than would have been the case without the fund as the costs related to the ageing of the