Norway's Sovereign Wealth Fund Calls for EU Regulatory Overhaul

Norway's central bank, which manages the world's largest sovereign wealth fund, has called for a unified regulatory framework for the European Union's markets. The bank highlighted the need for a single supervisory body to address fragmentation in commercial, tax, debt issuance, and securities laws across the EU.

The bank, in a letter to the European Commission, stated that the European market has lagged behind in commercial vitality and in providing new investment opportunities for institutional investors. This letter is part of ongoing consultations by the EU to establish a "Savings and Investment Union" framework, aimed at streamlining its financial system.

The fund, which manages Norway's vast oil and gas revenues, holds securities worth 2.85 trillion euros from EU member states and European companies as of the end of 2024. The fund's total value is approximately 1.9 trillion dollars, with 71% of its assets in equities and 26.6% in fixed-income products.

The bank suggested that capital market regulation should be unified at the European level. It noted that the lack of a single securities market regulator or rulebook covering all transactions in the EU leads to legal uncertainty, operational complexity, lengthy processes, and inconsistent interpretations.

The bank also emphasized the need to address regional fragmentation in securities law, corporate law, insolvency regimes, and tax systems. It called for the standardization of pan-European debt issuance processes to enhance market efficiency and support future economic growth.

By increasing productive investment opportunities and boosting demand for high-yield investments through policy measures, the European capital market can become more dynamic, efficient, and better positioned to support future economic growth, according to the bank.

Over the past six months, global investors' sentiment towards the European market has shifted significantly, driven by political instability in the United States and expectations of regulatory reforms and increased fiscal spending in the EU. This shift has made Europe more attractive to investors, with factors drawing funds into Europe outweighing those pushing funds out of the United States.