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 2010-2018.
Collateral cover represents the expected realisation value (RE value) of underlying collaterals. The values are determined using fixed models, and actual realisation values are validated to test the models’ reliability. 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 credit quality steps, 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 2018 | 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 % | 0.04 % | 2 | 100 | 120 | |
| C | 0.25 % | 0.50 % | Baa3 | 0.07 % | 0.06 % | 3 | 80 | 100 | |
| D | 0.50 % | 0.75 % | Ba1 | 0.27 % | 0.47 % | 4 | 60 | 80 | |
| E | 0.75 % | 1.25 % | Ba2 | 0.37 % | 0.52 % | 5 | 40 | 60 | |
| F | 1.25 % | 2.50 % | 0.92 % | 0.93 % | 6 | 20 | 40 | ||
| G | 2.50 % | 5.00 % | Ba2-B1 | 2.18 % | 2.02 % | 7 | 0 | 20 | |
| H | 5.00 % | 10.00 % | B1-B2 | 4.41 % | 3.99 % | ||||
| I | 10.00 % | 99.99 % | B3-Caa3 | 11.28 % | 13.78 % | ||||
| J | Default | ||||||||
| K | Problem loans | ||||||||
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) | 31 Dec 2018 | 31 Dec 2018 | 31 Dec 2017 | 31 Dec 2017 | |||
| Lowest risk | 10.2 % | 87,677 | 9.5 % | 80,379 | |||
| Low risk | 8.5 % | 21,176 | 9.9 % | 20,548 | |||
| Medium risk | 11.4 % | 18,783 | 12.2 % | 15,970 | |||
| High risk | 11.8 % | 3,743 | 8.6 % | 2,926 | |||
| Highest risk | 3.0 % | 2,387 | 4.2 % | 3,185 | |||
| Default and/or problem loans | 11.3 % | 2,326 | 32.0 % | 1,698 | |||
| Total | 136,092 | 124,706 | |||||
| Averaged | Averaged | ||||||
| unhedged | Total | unhedged | Total | ||||
| Group | exposure | exposure | exposure | exposure | |||
| (NOK million) | 31 Dec 2018 | 31 Dec 2018 | 31 Dec 2017 | 31 Dec 2017 | |||
| Lowest risk | 10.3 % | 87,334 | 9.5 % | 80,283 | |||
| Low risk | 8.4 % | 22,546 | 9.2 % | 22,057 | |||
| Medium risk | 10.9 % | 23,836 | 10.2 % | 19,109 | |||
| High risk | 11.4 % | 4,362 | 6.3 % | 3,991 | |||
| Highest risk | 4.5 % | 2,803 | 3.4 % | 3,978 | |||
| Default and/or problem loans | 13.2 % | 2,466 | 30.5 % | 1,779 | |||
| Total | 143,348 | 131,197 | |||||
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
