Note 12 - Credit risk exposure for each internal risk rating
The Bank uses a special classification system for monitoring credit risk in the portfolio. Risk classification is based on each individual exposure's probability of default. In the table below this classification is collated with corresponding rating classes at Moody’s.
Historical default data are Parent Bank figures showing the default ratio (DR) per credit quality step. The figures are an unweighted average of customers with normal scores in the period 2006-2014.
| Probability of default | Collateral cover | |||||||
| Credit quality step |
From | To | Moody's | Historical default |
Collateral class |
Lower limit | Upper limit | |
| A | 0.00 % | 0.10 % | Aaa-A3 | 0.03 % | 1 | 120 | ||
| B | 0.10 % | 0.25 % | Baa1-Baa2 | 0.08 % | 2 | 100 | 120 | |
| C | 0.25 % | 0.50 % | Baa3 | 0.18 % | 3 | 80 | 100 | |
| D | 0.50 % | 0.75 % | Ba1 | 0.45 % | 4 | 60 | 80 | |
| E | 0.75 % | 1.25 % | Ba2 | 0.59 % | 5 | 40 | 60 | |
| F | 1.25 % | 2.50 % | 1.42 % | 6 | 20 | 40 | ||
| G | 2.50 % | 5.00 % | Ba2-B1 | 3.33 % | 7 | 0 | 20 | |
| H | 5.00 % | 10.00 % | B1-B2 | 6.35 % | ||||
| I | 10.00 % | 99.99 % | B3-Caa3 | 16.87 % | ||||
| J | Default | |||||||
| K | Written down | |||||||
The Bank's exposures are classified into risk groups based on credit quality step.
| Credit quality step | Risk groups |
| A - C | Lowest risk |
| D - E | Low risk |
| F - G | Medium risk |
| H | High risk |
| I | Highest risk |
| J - K | Default and written down |
| Averaged | Averaged | ||||||
| unhedged | Total | unhedged | Total | ||||
| Parent Bank | exposure | exposure | exposure | exposure | |||
| (NOK million) | 2014 | 2014 | 2013 | 2013 | |||
| Lowest risk | 6.0 % | 52,394 | 5.8 % | 46,680 | |||
| Low risk | 9.0 % | 24,969 | 6.1 % | 22,631 | |||
| Medium risk | 17.2 % | 18,846 | 8.8 % | 16,275 | |||
| High risk | 9.8 % | 3,972 | 12.2 % | 3,644 | |||
| Highest risk | 7.1 % | 1,484 | 3.8 % | 1,988 | |||
| Default and written down | 32.1 % | 432 | 20.5 % | 457 | |||
| Total | 102,098 | 91,676 | |||||
| Averaged | Averaged | ||||||
| unhedged | Total | unhedged | Total | ||||
| Group | exposure | exposure | exposure | exposure | |||
| (NOK million) | 2014 | 2014 | 2013 | 2013 | |||
| Lowest risk | 6.0 % | 52,724 | 6.2 % | 46,927 | |||
| Low risk | 8.7 % | 25,809 | 8.6 % | 23,418 | |||
| Medium risk | 14.4 % | 20,520 | 18.8 % | 17,816 | |||
| High risk | 8.8 % | 4,416 | 16.3 % | 4,008 | |||
| Highest risk | 5.7 % | 1,868 | 11.4 % | 2,321 | |||
| Default and written down | 19.3 % | 520 | 34.5 % | 543 | |||
| Total | 105,858 | 95,033 | |||||
The realisation value of furnished collateral is determined such that they, on a conservative assessment, reflect the presumed realisation value in an economic downturn. For example, collateral furnished in the form of negative pledge and unquoted equities in accordance with the Group’s internal guidelines will not be assigned any realisation value and will thus appear unsecured. The conservative assessment entails that the realisation value that is actually attained may prove higher than the estimated realisation value.
Financial results
Annual report and notes
