The Norwegian Financial Supervisory Authority has published an on-site inspection report on Odal Sparebank, highlighting increasing credit risk, particularly in corporate lending, and identifying weaknesses in internal control, credit practices, and the management of collateral and risk limits. The report also notes that a large share of customers are classified in stage 2 and that high-risk exposures and defaults have increased. Reviewing a sample of credit cases, the supervisor found shortcomings in the bank’s assessments of borrowers’ debt-servicing capacity in both the corporate and retail portfolios, including missing forward-looking cash-flow analyses, weak or incomplete budgets, limited stress testing and scenario analysis, and insufficient supporting documentation such as lease contracts and property valuations. The credit handbook was assessed as containing too few concrete approval requirements, while credit decisions and deviations from internal criteria were often poorly documented, undermining decision quality and second-line controls. Finanstilsynet also pointed to weaknesses in how borrower equity is assessed in business projects, concerns that some collateral reduction factors are set too low, inconsistent practices for forbearance identification and documentation, and gaps in routines for monitoring larger exposures, including watchlist and early-warning criteria; it additionally drew attention to EBA guidelines published in 2025 on capital requirements for lending to real estate development projects. Finanstilsynet notes that the bank plans to revise its credit handbook in 2026 and has already updated it in response to supervisory comments on collateral reduction factors. The bank also plans to clarify expectations for key ratios and the use of covenants, ensure syndicated loans are reflected in regulatory reporting, and establish or strengthen routines for annual renewal of corporate exposures, follow-up of vulnerable exposures, and consistent forbearance treatment.
Norwegian Finanstilsynet 2026-04-08
Norwegian Financial Supervisory Authority finds rising credit risk and weaknesses in credit practices at Odal Sparebank
The Norwegian Financial Supervisory Authority has published an on-site inspection report on Odal Sparebank, highlighting rising credit risk, especially in corporate lending, and material weaknesses in internal control, credit assessment practices, collateral management and risk limit monitoring. The supervisor identified deficiencies in debt-servicing capacity assessments, documentation, stress testing, forbearance practices and monitoring of larger and high-risk exposures. Odal Sparebank has begun updating its credit handbook and plans further enhancements to credit approval criteria, covenant use, reporting of syndicated loans and follow-up of vulnerable and forborne exposures.