Note 11 - 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 2015-2021.
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 2021 | Collateral class |
Lower limit | Upper limit | |
| A | 0.00 % | 0.10 % | Aaa-A3 | 0.01 % | 0.00 % | 1 | 120 | ||
| B | 0.10 % | 0.25 % | Baa1-Baa2 | 0.04 % | 0.02 % | 2 | 100 | 120 | |
| C | 0.25 % | 0.50 % | Baa3 | 0.08 % | 0.09 % | 3 | 80 | 100 | |
| D | 0.50 % | 0.75 % | Ba1 | 0.31 % | 0.15 % | 4 | 60 | 80 | |
| E | 0.75 % | 1.25 % | Ba2 | 0.52 % | 0.40 % | 5 | 40 | 60 | |
| F | 1.25 % | 2.50 % | 1.08 % | 0.87 % | 6 | 20 | 40 | ||
| G | 2.50 % | 5.00 % | Ba2-B1 | 2.14 % | 2.06 % | 7 | 0 | 20 | |
| H | 5.00 % | 10.00 % | B1-B2 | 4.54 % | 3.44 % | ||||
| I | 10.00 % | 99.99 % | B3-Caa3 | 13.49 % | 13.06 % | ||||
| J | Default | ||||||||
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 credit impaired |
| Averaged | Averaged | |||
| unhedged | Total | unhedged | Total | |
| Parent Bank | exposure | exposure | exposure | exposure |
| (NOK million) | 31 Dec 2021 | 31 Dec 2021 | 31 Dec 2020 | 31 Dec 2020 |
| Lowest risk | 3.5 % | 113,794 | 3.5 % | 96,809 |
| Low risk | 7.4 % | 26,482 | 4.6 % | 25,258 |
| Medium risk | 6.4 % | 15,016 | 13.9 % | 15,970 |
| High risk | 9.7 % | 2,854 | 10.4 % | 2,761 |
| Highest risk | 5.4 % | 1,503 | 12.5 % | 1,777 |
| Default and/or problem loans | 26.6 % | 3,211 | 25.2 % | 2,195 |
| Total | 162,860 | 144,770 |
| Averaged | Averaged | |||
| unhedged | Total | unhedged | Total | |
| Group (NOK million) | exposure | exposure | exposure | exposure |
| (NOK million) | 31 Dec 2021 | 31 Dec 2021 | 31 Dec 2020 | 31 Dec 2020 |
| Lowest risk | 3.5 % | 114,237 | 3.6 % | 96,370 |
| Low risk | 7.3 % | 28,449 | 5.1 % | 27,189 |
| Medium risk | 6.8 % | 21,756 | 12.1 % | 22,059 |
| High risk | 9.3 % | 3,536 | 11.1 % | 3,575 |
| Highest risk | 6.8 % | 2,035 | 13.0 % | 2,331 |
| Default and/or problem loans | 26.3 % | 3,402 | 25.9 % | 2,368 |
| Total | 173,415 | 153,892 |
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
