Note 29 - Hedge Accounting for Debt created by issue of securities

The bank has established hedge accounting in order to achieve accounting treatment that reflects how interest rate risk and foreign exchange risk are managed in the case of large long-term borrowings. The hedged objects consist exclusively of debt created by the issuance of financial instruments and are implemented in conformity with IFRS 9 by fair value hedging. For those debt instruments that are included in the hedging portfolio, separate interest rate and exchange rate swaps are entered into with corresponding principle and maturity structure. Inefficiency may nonetheless arise as a result of random market variations in the evaluation of object and instrument.


The hedging instruments (interest rate and exchange rate swaps) are recognised at fair value, whereas the hedged objects are recognised at fair value in respect of the risks that are hedged (interest rate risk and exchange rate risk). Hedge inefficiency, defined as the difference between the value adjustment of the hedging instruments and the value adjustment of the hedged risks in the objects is recognised through profit/loss on an ongoing basis. 

  Nominal amount 31 Dec 2020     Nominal amount 31 Dec 2019  
Group (NOK million) Hedging instrument Hedging object  Ineffectivity   Hedging instrument Hedging object  Ineffectivity
Accounting line in Balance Sheet Derivatives Debt created
by issuance
of securities
    Derivatives Debt created
by issuance
of securities
Debt at fixed interest Interest swap       Interest swap    
Nominal NOK 7,943 7,550 - 393   7,789 7,650 - 140
Debt in currency at fixed interest Interest and
currency swap
      Interest and
currency swap
Nominal EUR 22,658 22,644 - 13   23,429 23,429.0 -
Nominal SEK 626 600 - 26   846 846 -
Nominal CHF 1,696 1,696 -   1,586 1,586 -
  Book value 31 Dec 2020 Ineffectivity
in PL
  Book value 31 Dec 2019 Ineffectivity
in PL
  Hedging instrument Hedging object   Hedging instrument Hedging object
Recorded amount Assets 921       387    
Recorded amount Liabilities 48 33,481     216 33,790  
Accumulated value changes ending balance 634 570     167 160  
Accumulated value changes opening balance 167 104     233 217  
change in fair value 467 465 1   -66 - 56 - 9
Accounting line in profit and loss     Net return
on financial
      Net return
on financial

IBOR reform

In recent years, reform of and alternatives to IBOR rates have become a priority area for governments across the world. However, there is uncertainty as to the timing and method for any changes. All SpareBank 1 SMN’s interest rate derivatives have IBOR rates as their benchmark, and thus could be affected by changes. The most significant positions are held in EURIBOR and NIBOR. The bank follows market developments closely, and participates in several projects in order to monitor and facilitate any changes. The table below shows exposure and nominal amount for derivatives in hedge relationships that may be affected by the IBOR reform, split on the IBOR rate in question.

  Nominal amount
Interest- and currency instrument (NOK million) Hedging object  Hedging instrument  Net Exposure
CHFLIB 3M   242 242
EURIBOR 3M   21,967 21,297
EURIBOR 6M   272 257
NIBOR 3M   9,036 9,036
STIBOR 3M 600 626 - 26
USD LIBOR 3M   1,279 1,279
Total 600 33,422 32,085

Annual report and notes

© SpareBank 1 SMN