The Financial Supervisory Authority of Norway has published an inspection report on DNB Bank ASA’s Corporate Banking division BM Norge, assessing credit exposure governance and control with a particular focus on IFRS 9 expected credit loss (ECL) modelling, assessments and provisions. The supervisor finds that DNB’s modelled loss provisions are low compared with comparable Nordic banks and expects the bank to further develop its ECL framework and improve the quality of forbearance flagging. BM Norge accounts for around 25 percent of DNB’s total lending portfolio, and while the risk level has increased somewhat, the supervisor does not see a systematic or significant risk increase across the portfolio or sub-segments. Key expectations include establishing a trigger for increases in yield that would prompt a general reassessment of collateral values for the commercial real estate portfolio, strengthening modelling and governance around IFRS 9 parameters and forward-looking sensitivity, and addressing identified weaknesses in forbearance handling and timely annual reviews that can affect identification of anticipated default. The report also calls for more quantitative indicators for operational risk, highlights a significant backlog in periodic ongoing customer follow-up relevant to anti-money laundering obligations, and notes that while DNB has put in place climate risk goals and a transition plan, more customer engagement is needed to evidence delivery through documented actions and targets. DNB’s board has initiated a project to conduct a full review of parameters in the ECL calculation, with implementation of changes expected during 2025. The supervisor requests notification of the adopted changes and their effects on calculated expected loss once the project is completed, and asks that the bank send a copy of the letter to its auditor.
Norwegian Finanstilsynet 2025-02-12
Financial Supervisory Authority of Norway flags low modelled loss provisions at DNB and calls for upgrades to IFRS 9 models and controls
Norway's Financial Supervisory Authority released an inspection report on DNB Bank ASA’s Corporate Banking, highlighting deficiencies in IFRS 9 expected credit loss (ECL) modelling and provisions. The report urges DNB to enhance its ECL framework, improve forbearance flagging, and address operational risk indicators and anti-money laundering follow-up. DNB’s board is reviewing ECL parameters, with changes anticipated in 2025, and the supervisor requests notification of these changes and their impact.