Norges Bank Watchdog May Open Probe After Deputy Governor Quits

The watchdog overseeing Norway’s central bank may investigate its handling of security clearances, after a deputy governor was suddenly forced to resign this month when his clearance was withdrawn.

Jon Nicolaisen, deputy to Norges Bank Governor Oystein Olsen and the official at the bank overseeing Norway’s $1.2 trillion wealth fund, resigned on Dec. 4 after failing to get the necessary security clearance. Nicolaisen, who had been deputy governor since 2014 and was supervising the fund since April this year, said he was told the decision was tied to his Chinese wife, who resides in China and receives financial support from him.

The announcement stunned onlookers and raised questions around Nicolaisen’s role overseeing the world’s biggest sovereign wealth fund, which holds about 1.5% of global stocks. Norges Bank provided little in the way of explanation, while Olsen limited his comments to praise of his 61-year-old former colleague’s achievements during his tenure.

Julie Brodtkorb, the head of Norges Bank’s watchdog, the Supervisory Council, says there may be grounds to probe the bank’s handling of security clearances. She said by phone that the watchdog will decide whether to launch an official investigation when the council holds its first meeting of 2021.

If the Supervisory Council moves ahead with a probe, it would be the second time in as many years that Norges Bank is investigated by its watchdog. Earlier this year, the bank was criticized by the council for its handling of the recruitment of Nicolai Tangen, the chief executive of Norway’s wealth fund. Norges Bank had to redraft Tangen’s contract to address potential conflicts of interest raised by the watchdog.

10 Months

This time, the case is shrouded in considerably more mystery. The Civil Clearance Authority took about 10 months to process Nicolaisen’s security status, compared with the month it says similar cases usually require. Norges Bank says the outgoing deputy’s existing clearance expired in March, and he hasn’t had access to classified material since then.

Norges Bank declined to say whether it was aware Nicolaisen’s wife had relocated to China, or when, and wouldn’t comment on whether it continually kept the Civil Clearance Authority apprised of such changes in the deputy governor’s status. The bank said it passed on all relevant information in connection with his latest security check, which he failed.

Until 2015, security clearance in Norway was handled by about 30 separate government entities. These were consolidated in 2015 and the Civil Clearance Authority was created in 2018. When Nicolaisen became deputy governor, it was Norway’s Finance Ministry that granted him security clearance.

The Civil Clearance Authority says each case it looks at is determined based on the specific circumstances of the individual involved, and that affiliation with a foreign power not deemed an ally doesn’t automatically result in a person’s clearance being denied. Still, history suggests there’s a link.

“The pattern you sense is that having a Chinese, Russian or Iranian as a close relative, and getting security clearance at the same time, is getting harder and harder,” said Anders Romarheim, an associate professor with the Defense Research Institute in Oslo.

Under the clearance authority’s rules, everyone who has been cleared is obliged to report significant and relevant developments to their employer, who is in turn obliged to notify the clearance authority.

Part of the confusion stems from the apparent uncertainty around who Nicolaisen’s employer was, Norges Bank or the Finance Ministry. Norges Bank has so far declined to weigh in on the question. Gudmund Gjolstad, the director of the Clearance Authority, says Norges Bank was in charge of keeping it informed of Nicolaisen’s circumstances.

Norway’s Finance Ministry declined to say whether it was informed of Nicolaisen’s wife’s return to China. The authority said it can’t comment on individual cases.

©2020 Bloomberg L.P.

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