The banks in the SpareBank 1 Alliance are Norwegian savings banks. The legal basis for these banks is established in a separate piece of legislation from 1961 (the Savings Banks Act) (Norwegian: Sparebankloven), which was last amended in 2010.
While the savings banks’ business model is typically dominated by taking deposits and making retail mortgage loans, the essence of what makes a savings bank unique is that it is a self owned entity. Traditionally, going back to the 1800s the savings banks were the only kind of financial institution in Norway and their equity capital had been created from their own retained earnings over time. With the introduction of the Savings Bank Act the various layers of capital were specified and certain rules established and these have since evolved some.
Simplified we can say that today a savings bank has two layers of capital: its own and that of the external equity holders. The savings bank’s own funds are further divided into components which represents the mission of a savings bank, which includes being a supporting component of local communities. In the following high level illustration of a typical savings bank’s balance sheet (organized in descending order of priority in the case of insolvency), the equity consists of the bottom three lines in the table below.
Retail deposits up to NOK 2 mill (insured)
Senior debt / Deposits above NOK 2 mill
Equity Capital Certificates (ECC)
ECC´s / Bank´s paid-in capital reserves
Equalization Fund / Savingsbank´s Reserve Fund / Gift Fund
The Equity Capital Certificates (ECCs) represent the external capital, which must not necessarily be present in a savings bank. If it is present, it is usually listed on the Oslo Stock Exchange. The ECC holders can by law hold a maximum of 40% of the votes. It consists of certificates with a nominal value and additional paid in capital.
The savings bank’s own funds are represented by the last line in the table below and must always represent 35% of the total votes of the bank, voted by the depositors and/or publicly elected officials from the community in which the bank is located and operates. The remaining 25% of the votes belongs to the employees. The Reserve Fund is the core of the self owned capital, while the Gift Fund represents money set aside to support community projects (a gift is typically distributed annually) in the region where the bank is located. Finally the Equalization Fund belongs economically to the ECC holders in that it may be used for future dividends or converted to ECCs in the future, but this capital is voted by the bank itself until it is converted.
An important point is that a savings bank can never be acquired against its will due to the limitation on votes of the external capital.
SpareBank 1 SR-Bank, which is the largest bank in the SpareBank 1 Alliance has as of January 1, 2012 changed its own legal basis to a bank where the entire equity capital is in the form of publicly traded, regular shares which is typical of banks elsewhere in the world. Recent amendments to the savings banks Act allows for this. The previous self owned capital of SpareBank 1 SR-Bank has been converted into an external fund or trust (Norwegian: stiftelse) which is now the largest individual owner of the share capital in SpareBank 1 SR-Bank. The SpareBank 1 SR-Bank Trust statutes represent the savings bank principles which were previously enshrined within the bank itself, i.e. the Gift Fund activities and the preservation of its own ownership of SpareBank 1 SR-Bank over time. Because of this trust ownership, SpareBank 1 SR-Bank may still call itself a savings bank under Norwegian law. Since SR-Bank introduced this change, several other savings banks have followed suit, both inside and outside of the SpareBank 1 Alliance.