Note 26 - 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 IFRS 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 2019		31 Dec 2018
(NOK million)	Level ¹⁾	Book value	Fair Value	Book value	Fair Value
Assets
Loans to and claims on credit institutions	2	9,181	9,181	11,178	11,178
Loans to and claims on customers at amortised cost	3	41,105	41,173	46,897	46,972
Earned income not yet received	2	107	107	67	67
Accounts receivable, securities	2	13	13	7	7
Total financial assets at amortised cost		50,406	50,474	58,149	58,224

Liabilities
Debt to credit institutions	2	7,585	7,585	8,546	8,546
Deposits from and debt to customers	2	86,870	86,870	81,448	81,448
Securities debt at amortised cost	2	9,440	9,425	10,256	10,237
Securities debt, hedging	2	33,573	33,374	34,013	32,284
Subordinated debt at amortised cost	2	1,831	1,826	1,854	1,850
Subordinated debt, hedging	2	216	212	370	363
Lease liabilities	2	347	347	-	-
Debt from securities	2	9	9	699	699
Total financial liabilities at amortised cost		139,872	139,649	137,185	135,426

Group
		31 Dec 2019		31 Dec 2018
(NOK million)	Level ¹⁾	Book value	Fair Value	Book value	Fair Value
Assets
Loans to and claims on credit institutions	2	2,110	2,110	5,074	5,074
Loans to and claims on customers at amortised cost	3	49,351	49,431	53,967	54,052
Earned income not yet received	2	132	132	86	86
Accounts receivable, securities	2	292	292	277	277
Total financial assets at amortised cost		51,886	51,966	59,403	59,488

Liabilities
Debt to credit institutions	2	8,853	8,853	9,214	9,214
Deposits from and debt to customers	2	85,917	85,917	80,615	80,615
Securities debt at amortised cost	2	9,440	9,425	10,256	10,237
Securities debt, hedging		33,573	33,374	34,013	32,284
Subordinated debt at amortised cost	2	1,874	1,869	1,898	1,893
Subordinated debt, hedging	2	216	212	370	363
Lease liabilities	2	505	505	-	-
Debt from securities	2	197	197	809	809
Total financial liabilities at amortised cost		140,576	140,352	137,175	135,415

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

Note 26 - Fair value of financial instruments at amortised cost

Financial results

Annual report and notes

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