Norway parliament passes $50 bln bank rescue plan

OSLO (Reuters) - Norway's parliament, Stortinget, on Friday unanimously passed the government's 350 billion crown ($49.86 billion) financial sector rescue package aimed at restoring confidence and rejuvenating a stalled money market.

The plan, announced 12 days ago, aims to improve bank sector liquidity and long-term funding hit by the credit crunch by issuing new government securities in exchange for covered debt including mortgage-backed bonds.

The central bank said it would announce later on Friday rules for banks to swap their covered bonds for the new government debt, which will be up to three years in maturity.

Norwegian interbank lending rates -- which peaked above 9 percent this month -- fell on Friday in anticipation of the plan's passage. High funding costs have threatened Norway's otherwise apparently sound banking system and have forced the central bank to provide billions in liquidity each week.

With less than a year to go before a general election, politicians from across the political spectrum voted for the measure, drafted with the help of the independent central bank.

But Prime Minister Jens Stoltenberg and Finance Minister Kristin Halvorsen told parliament not to expect too much more additional state spending in the 2009 budget.

"We should be very cautious in imagining multi-billion crown crisis measures on top of the budget already presented for 2009, as that would limit the room for interest rate reductions," Halvorsen told parliament before the vote.

Norway's interest rates are among the highest in the western world at 5.25 percent -- even after a 50 basis point cut earlier this month. The central bank is widely tipped by analysts to cut rates again by 25 or 50 basis points at its meeting next week.

Norway's interbank tomorrow/next rates were fixed at 5.19 percent -- the lowest daily level in 11 months. Three-month deposits fell to 6.61 from 7.13 percent.

Parliament also asked the finance ministry to amend the scheme to help banks that have not issued mortgage-backed bonds but are in need of a cash injection.

Smaller banks have complained that the package was made to fit Norway's biggest banking group, DnB NOR, in which the government holds a 34 percent stake, and other leading lenders -- which have seen short-term financing costs soar.

(Additional reporting by Aasa Christine Stoltz; Editing by Ron Askew)