Credit policy for the cover pool

SpareBank 1 Naeringskreditt's credit policy ensures that the the development of the Company takes place within the approved framework for credit risk. Both legal criteria from Norway's cover bond legislation and self-selected criteria are imported for the overall rules summarized here and approved annually by the Company's Board of Directors.

SpareBank 1 Naeringskreditt (the Company) has as its objective to provide covered bond funding to its parent banks, utilizing the commercial property mortgage loans granted to customers in these banks.  Only mortgages already approved and underwitten by the SpareBank 1 banks can be considered for the Company's cover pool. Once a mortgage loan has been sold to the Company and included in the cover pool, SpareBank 1 Naeringskreditt approves all subsequent material amendments pertaining to the loan contract.

A.  Quantification of credit risk limits

A1. Default and loss

  • Maximum probability of default for the loan portfolio of 2.0%
  • Expected loss for the portfolio less than 0.2% of overall lending volume

A2. Concentration Risk

  • Largest single exposure less or equal to 5% of the whole lending portfolio
  • A single credit exposure shall not be above 23% of the Company's equity capital unless there is a guarantee in place from the Originator/selling bank
  • The lower credit volume limit for mortgages sold to Naeringskreditt is 10 million kroner
  • The top 20 largest credit exposures shall not be more than 50% of the whole lending portfolio

B. Requirements for mortgage loans sold to SpareBank 1 Naeringskreditt's cover pool

B1. Criteria pertaining to the customer's ability and willingness to service the mortgage

  • SpareBank 1 risk classificaton between A and F (meaning a probability of default of less than or equal to 2.5%)
  • No customer payment reminder due to a late payment has occured in the last 12 months (both in Naeringskreditt or in any of the Alliance banks)

B2. Criteria pertaining to collateral

  • The mortgage loan must be within 60% of the property's value (maximum 60% LTV)
  • First priority lien for SpareBank 1 Naeringskreditt
  • The building must be classified as one or more of these categories of commercial real estate: (1) office building, (2) hotel, (3) retail/service, (4) shopping mall, (5) logistical facility/warehouse, (6) multi-family residential buidling

B3. Product criteria

  • Floating rate mortgages based on NIBOR with a reset every 3 or 6 months (serial or annuity mortgages)
  • Foreign currency loans or syndicated loans are never approved for the cover pool

C. Collateral Valuation

  • The valuation is determining the expected market value for the collateral
  • The valuation assessment must be done by a competent and independent person in accordance with recognized valuation principles
  • The valuation assessment must be documented, and it shall be recorded who has completed it, when it was completed and which assumptions it is based upon
  • SpareBank 1 Naerigskreditt approves the selection of valuers / appraisers for loans that are to qyualify for the cover pool
  • Valuations are updated at least annually and quarterly when market price volatility for commercial property is observabely high

D. Credit risk committee

SpareBank 1 Naeringskreditt maintains a credit risk committee in order to evaluate and approve mortgage loans which are of a larger size, in the lower end of the acceptable internal rating spectrum or for specific types of commercial property. The committee meets regularly to assess the cases which indivdiual Alliance banks are seeking to qualify for the cover pool. All cases to be considered by the committee first have to meet the general criteria summarized above.  The committee, which is constituted by the commercial rest estate chief risk officers in several of the Company's parent banks advise the Company on the following cases:

  • For mortgages in the risk categories A and B (PD of 0 to 0.25%) and that have a total amount above 200 million kroner
  • For mortgages in the risk categories C to E (PD of 0.25% to 1.25%) and that have a total amount above 100 million kroner
  • For mortgages in the risk category F (PD of 1.25% to 2.25%) and that have a total amount above 50 million kroner


  • For any mortgages with a total LTV at or above 90% when taking into account both the first lien amount sought to qualify for the mortgage pool (up to 60% LTV) and any amounts left on the parent bank balance sheet
  • All hotels
  • All shopping malls
  • Any mortgages for customers with a negative book equity