Note 28 - Fair value of financial instruments at amortised cost

Financial instruments measured at amortised cost
Financial instruments that are not measured at fair value are recognised at amortised cost or are in a hedging relationship. For further details, see note 2 Accounting principles. Amortised cost entails valuing balance sheet items after initially agreed cash flows, adjusted for impairment.

Amortised cost will not always be equal to the values that are in line with the market assessment of the same financial instruments. This is due to different perceptions of market conditions, risk and discount rates.

Methods underlying the determination of fair value of financial instruments that are measured at amortised cost are described below:

Loans to and claims on customers
Current-rate loans are exposed to competition in the market, indicating that possible excess value in the portfolio will not be maintained over a long period. Fair value of current-rate loans is therefore set to amortised cost. The effect of changes in credit quality in the portfolio is accounted for through collectively assessed impairment write-downs, therefore giving a good expression of fair value in that part of the portfolio where individual write-down assessments have not been made.

Individual write-downs are determined through an assessment of future cash flow, discounted by effective interest rate. Hence the discounted value gives a good expression of the fair value of these loans.

Bonds held to maturity
Change to fair value is calculated by reference to a theoretical valuation of market value based on interest rate and spread curves.

Loans to and claims on credit institutions, debt to credit institutions and debt to customers
For loans to and claims on credit institutions, as well as debt to credit institutions and deposits from customers, fair value is estimated equal to amortised cost.

Securities debt and subordinated debt
The calculation of fair value in level 2 is based on observable market values such as on interest rate and spread curves where available.

Parent Bank
		31 Dec 2017		31 Dec 2016
(NOK million)	Level ¹⁾	Book value	Fair Value	Book value	Fair Value
Assets
Loans to and claims on credit institutions	2	9,543	9,543	8,203	8,203
Loans to and claims on customers at amortised cost	3	101,490	101,490	92,673	92,673
Total financial assets at amortised cost		111,033	111,033	100,876	100,876

Liabilities
Debt to credit institutions	2	9,047	9,047	10,299	10,299
Deposits from and debt to customers	2	77,362	77,362	68,391	68,391
Securities debt at amortised cost	2	11,003	11,040	10,689	10,700
Securities debt, hedging	2	31,191	31,472	25,627	25,307
Subordinated debt at amortised cost	2	1,102	1,104	1,103	1,100
Subordinated debt, hedging	2	1,057	1,060	1,083	1,075
Total financial liabilities at amortised cost		130,762	131,085	117,192	116,872

Group
		31 Dec 2017		31 Dec 2016
(NOK million)		Book value	Fair Value	Book value	Fair Value
Assets
Loans to and claims on credit institutions	2	4,214	4,214	3,892	3,892
Loans to and claims on customers at amortised cost	3	107,680	107,680	97,528	97,528
Total financial assets at amortised cost		111,894	111,894	101,420	101,420

Liabilities
Debt to credit institutions	2	9,607	9,607	10,509	10,509
Deposits from and debt to customers	2	76,476	76,476	67,168	67,168
Securities debt at amortised cost	2	11,003	11,040	10,689	10,700
Securities debt, hedging		31,191	31,472	25,627	25,307
Subordinated debt at amortised cost	2	1,144	1,148	1,145	1,143
Subordinated debt, hedging	2	1,057	1,060	1,083	1,075
Total financial liabilities at amortised cost		130,478	130,802	116,221	115,902

¹⁾ Fair value is determined by using different methods in three levels. See note 27 for a definition of the levels.

Note 28 - Fair value of financial instruments at amortised cost

Financial results

Annual report and notes

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