A recent analysis conducted by Norges Bank sheds light on the composition of the corporate lending market in Norway. While non-bank financial institutions (NBFIs) have gained significant traction in global markets such as the United States, the Norwegian financial landscape remains heavily reliant on traditional banking structures.
Policy makers and regulators possess extensive data regarding bank lending. However, information concerning loans provided by non-bank entities has historically been less transparent. A new study utilizes data from the Norwegian Tax Administration to map out exactly which institutions are funding Norwegian enterprises.
Overview of Corporate Credit
Regulators monitor the financial system to identify potential vulnerabilities. In many international markets, the rapid expansion of NBFIs, often referred to as shadow banking, has prompted increased scrutiny. These entities play a growing role in the global financial system, yet their footprint in Norway appears distinct from international trends.
Data from Statistics Norway indicates that domestic lending institutions provide approximately two-thirds of all credit extended to non-financial firms in Norway. The remaining credit volume consists of bond financing and foreign lending. Within the domestic sphere, banks and their affiliated mortgage companies dominate the market.
Current figures suggest that traditional banks account for more than 90 percent of total lending to Norwegian companies. The remaining share is distributed among various non-bank lenders. These include financing companies, insurance firms, pension funds, and state-owned lending institutions.
Understanding Non-Bank Lenders
To gain a clearer picture of the non-bank sector, researchers examined tax data from 2015 to 2023. This dataset includes reports from Norwegian firms detailing every loan received from domestic institutions. By cross-referencing this with lender data from financial reports, a comprehensive profile of the market emerges.
Financing Companies
Among non-bank institutions, financing companies represent the largest segment, accounting for roughly 40 percent of non-bank lending. These entities do not accept deposits but offer various financial services. Their primary activities include leasing and factoring, which make up the majority of their corporate debt exposure.
Direct lending from these companies often takes the form of smaller debts. This includes products such as credit cards and vehicle financing. It is worth noting that a significant portion of these financing companies are not entirely independent. Approximately one-third are affiliated with banks, and banking groups provide the vast majority of their funding.
When analyzing specific loan types, like car loans, products and credit card debt appear frequently in tax data for smaller firms. However, leasing and factoring services are often categorized differently in tax filings, appearing as operational costs rather than direct loans.
Insurance Companies and Pension Funds
Lending from insurance companies and pension funds constitutes a smaller niche within the Norwegian market. This sector accounts for roughly one percent of total credit to non-financial firms. The lending activity here is highly concentrated.
Data reveals that a single major life insurance company provides about 75 percent of the lending in this category. The remaining volume is largely attributed to a bank-affiliated life insurance company. Unlike banks that serve a broad spectrum of clients, these institutions focus on a limited number of borrowers.
The primary recipients of business loan funding from insurers are firms within the commercial real estate (CRE) and construction sectors. In 2023, fewer than 200 firms borrowed from insurance companies, compared to approximately 100,000 firms borrowing from banks.
State Lending Institutions
State-owned entities play a specific role in the credit market, often targeting particular industries or policy objectives. Key players include Husbanken, Innovasjon Norge, and Eksportfinansiering Norge (Eksfin).
Husbanken focuses almost exclusively on the commercial real estate sector. Their lending is often directed toward firms that provide housing for vulnerable individuals. In contrast, Innovasjon Norge directs a significant portion of its funding toward the fishing industry.
Eksfin provides funding and guarantees primarily for Norwegian exporters. The shipping industry receives just under half of Eksfin’s total lending. Discrepancies between tax data and official credit statistics for Eksfin suggest that this institution frequently partners with banks to deliver financing packages.
Borrower Characteristics
The profile of a company borrowing from a non-bank institution often differs from the typical bank client. By analyzing median values for total assets, employee counts, and firm age, distinct patterns appear.
Size and Maturity
Companies that secure loans in Norway from life insurance companies or Eksfin tend to be significantly larger and more established than the average bank borrower. These firms report higher total assets and have been in operation for longer periods. They also tend to secure much larger individual loan amounts.
Conversely, the median loan size from financing companies is relatively small. This reflects the nature of their products, such as credit card debt and vehicle loans. However, the firms utilizing these financing companies are often larger in terms of sales and employees compared to the median bank borrower.
Sectoral Differences
The allocation of credit varies heavily by industry. Banks maintain a diversified portfolio, though commercial real estate remains the largest single exposure, followed by construction and services.
Non-bank lenders show clearer sectoral preferences:
- Insurance/Pension Funds: Heavily weighted toward Commercial Real Estate.
- Husbanken: Focused on real estate and social housing.
- Innovasjon Norge: Strong presence in the fishing sector.
- Eksfin: Dominant in shipping and export-related industries.
Data Discrepancies and Methodology
The analysis highlights differences between official credit indicators (C2) and tax return data. The C2 statistics define loans broadly, including all debt instruments. In contrast, tax data strictly reports direct lending.
This distinction is particularly relevant for financing companies. Leasing and factoring services, which comprise nearly 80 percent of financing companies’ exposure, are largely absent from direct lending tax reports. When researchers adjust for these services using supplementary financial reports, the total lending volumes align closely with official statistics.
