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 2010-2015.

Collateral cover represents the expected realisation value (RE value) of underlying collaterals. The value are determined using fixed models, and actual realisation value are validated to test their reliability of the model. In accordance with the capital requirements regulations the estimates are downturn estimates. Based on the collateral cover  (RE value / EAD) the exposure is classified to one of seven classes, the best of which has a collateral cover above 120 per cent, and the lowest has a collateral cover below 20 per cent.

 Probability of default       Collateral cover
Credit quality step From To Moody's Historical default Default 2015   Collateral class Lower limit Upper limit
                   
A 0.00 % 0.10 % Aaa-A3 0.01 % 0.01 %   1 120  
B 0.10 % 0.25 % Baa1-Baa2 0.04 % 0.03 %   2 100 120
C 0.25 % 0.50 % Baa3 0.07 % 0.07 %   3 80 100
D 0.50 % 0.75 % Ba1 0.24 % 0.17 %   4 60 80
E 0.75 % 1.25 % Ba2 0.36 % 0.52 %   5 40 60
F 1.25 % 2.50 %   0.89 % 0.68 %   6 20 40
G 2.50 % 5.00 % Ba2-B1 2.33 % 2.25 %   7 0 20
H 5.00 % 10.00 % B1-B2 4.52 % 4.07 %        
I 10.00 % 99.99 % B3-Caa3 11.01 % 12.25 %        
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

 

Parent Bank Averaged unhedged exposure Total exposure Averaged unhedged exposure Total exposure
(NOK million) 31 Dec 15 31 Dec 15 31 Dec 14 31 Dec 14
Lowest risk 9.0 % 60,945 9.9 % 52,644
Low risk 12.8 % 21,757 13.1 % 25,097
Medium risk 14.7 % 19,305 21.1 % 18,122
High risk 21.1 % 3,708 15.0 % 3,998
Highest risk 11.6 % 1,680 10.8 % 1,502
Default and written down 31.1 % 558 29.0 % 432
Total   107,953   101,796
         
         
         
         
Group Averaged unhedged exposure Total exposure Averaged unhedged exposure Total exposure
(NOK million) 31 Dec 15 31 Dec 15 31 Dec 14 31 Dec 14
Lowest risk 9.0 % 61,202 5.9 % 52,975
Low risk 12.4 % 22,821 8.9 % 25,938
Medium risk 14.0 % 20,925 15.2 % 19,798
High risk 19.8 % 4,222 10.3 % 4,443
Highest risk 15.1 % 2,285 10.5 % 1,922
Default and written down 30.7 % 604 23.6 % 486
Total   112,060   105,563

The realisation value of furnished collateral is determined such that they, on a conservative assessment, reflect the presumed realisation value in an economic downturn. 

Financial results

Annual report and notes

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