Bank and Accounting Services

FINANS TILSYNET Postboks 1187 Sentrum 0107 Oslo Circular Bank and Accounting Services CIRCULAR: 4/2021 DATE: 15.06.2021 THE CIRCULAR APPLIES TO: Banks Credit institutions Financing companies Insurance companies Pension companies Holding companies in financial groups E-money institutions Payment institutions Accountants Accounting firms

Bank and Accounting Services 2 | Finanstilsynet 1 Introduction The accounting industry is changing, and several actors see economy and accounting services as an interesting market. Among other things, several banks have started accounting operations where the service is part of the service offering. Integration of banking systems and accounting systems is part of ongoing digitalization processes. When a financial company or financial group offers several different services, there will be a commercial advantage if a customer who buys one service or product also chooses to buy more of the services or products from the financial company or financial group. Where the commercial interest does not always coincide with the customer's interest, it is legislation and regulations that are to ensure that the customers' interests are safeguarded. In addition to general competition, privacy, and other consumer regulation, the Financial Undertakings Act and the Accounting Act contain provisions that are to safeguard customer interests. The circular discusses the handling of possible conflicts of interest that arise when banks offer accounting services. Normally, banks offer such services through their own subsidiaries. The circular applies to all financial companies that own accounting companies, but currently only banks do so. Finanstilsynet assumes that the same will apply if other financial companies than banks offer accounting services.

2 Current regulation of conflicts of interest etc. The Financial Undertakings Act1 § 13-5 fourth paragraph states that "financial undertakings shall carry out their business in accordance with honesty and good business practice." Furthermore, it follows from § 16-1 fourth paragraph that: "Financial undertakings shall organize their business in such a way that there is little risk of conflicts of interest between the undertaking and its customers or between the undertaking's customers, or for customer treatment contrary to the requirements of good business practice. Financial undertakings shall have satisfactory arrangements and routines to identify and, if necessary, counteract such risk factors within the various areas of business." The Financial Undertakings Regulation § 16-1, cf. the Financial Undertakings Act § 16-7 on product packages, contains a prohibition on financial undertakings themselves or another financial undertaking in the same group offering a service on the condition that the customer simultaneously obtains another service, or giving a customer particularly favorable terms on the condition that this is done. Exceptions apply where there is an association between several services or that a total offer of several services gives cost savings. 1 Act of 10 April 2015 No. 17 on financial undertakings and financial groups

Bank and Accounting Services Finanstilsynet | 3 For accounting companies, the relevant regulation is the Accounting Act2 § 2 second paragraph, which has the following wording: "Authorized accountants shall carry out their assignments in accordance with the provisions in and pursuant to the law and in accordance with good accounting practice." "Good accounting practice" is a legal standard that is supplemented by the industry-established standard on good accounting practice3 (GRFS). The purpose of the standard is to ensure that accounting services are carried out in a way that ensures that the duties of the clients are safeguarded in a defensible manner within the scope of the assignment agreement, but also that it is within good accounting practice "also elsewhere to contribute to safeguarding the client's interests", cf. GRFS point 5.1. In addition to GRFS, Regnskap Norge has adopted an ethical code of conduct for accountants. Regnskap Norge cannot set rules for anyone other than its own members. Finanstilsynet nevertheless assumes that the ethical rules that authorized accountants "shall act with integrity, objectivity, professionalism, due care, confidentiality and loyalty", reflect the Accounting Act § 2 second paragraph on good accounting practice. 3 More on the meaning of the rules Confidentiality The possibility of cross-selling for the bank and the accounting company presupposes knowledge that there is a customer relationship, and about the nature of the customer relationship and circumstances at the customer that make it interesting to offer products from the parent bank or the accounting company. Both banks and accountants have statutory confidentiality obligations, cf. the Financial Undertakings Act § 16-2 and the Accounting Act § 10. Regardless of questions about conflict of interest or other special circumstances, the bank and the accounting company must ensure that the confidentiality obligation is observed. Guidance on confidentiality for financial undertakings and sharing of information in financial groups is given in Finanstilsynet's circular 3/2019. Cross-selling It is not illegal for the bank to market services offered by the accounting company, and vice versa. However, it will be contrary to the customers' interests if the bank offers a product or service on the condition that the customer uses the owned accounting company, or if the accounting company requires a customer to use the owner bank as its banking affiliation. This principle is expressed in the rules in the Financial Undertakings Act on product packages, cf. discussion in point 2. The rules in the Financial Undertakings Act on product packages cover services offered by financial undertakings, and do not apply directly to accounting services. The product package regulations nevertheless express certain general balancing of conflicts of interest and will, in Finanstilsynet's assessment, have transfer value in the assessment of the requirement for good business practice and what is to be considered a conflict of interest. This principle is also expressed in other legislation, cf. among others in the Competition Act4 § 11. It may also be to set aside the customer's interests if a bank offers more favorable terms if the customer uses the accounting company owned by the bank and vice versa. Finanstilsynet assumes that this does not apply to favorable terms where it can be demonstrated that a total offer of several services gives cost savings. 4 Identification and handling of conflicts of interest A prerequisite for a business to be operated responsibly is that the various risks associated with the business are identified, and that measures are implemented that give control and oversight of the risks. Establishment of guidelines and routines is a necessary risk-reducing measure both in banking business and in accounting business. For banks, the requirement for guidelines and routines to handle conflicts of interest etc. is mentioned specifically in the Financial Undertakings Act § 16-1 fourth paragraph, third sentence, cf. point 2 in this circular. For accounting companies, this follows from the Risk Management Regulation5 § 6 with further specification of the responsibility of the board and managing director in §§ 4 and 5. This means that both banks and accounting companies must have written guidelines and routines that ensure that the interests of the customers are safeguarded, also in the process related to the offer of and sale of products from the bank and the accounting company. 5 Follow-up Control of the relevant banks and accounting companies' routines and compliance will take place in connection with supervision of the relevant undertaking. This may, for example, be that Finanstilsynet requests to receive the relevant routines because signals are received that the customers' interests are not sufficiently safeguarded in processes related to the offer of and sale of products from the bank or the accounting company. 4 Act of 5 May 2004 No. 12 on competition between undertakings and control of undertakings 5 Regulation of 22 September 2008 No. 1080 on risk management and internal control

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