The Norwegian Financial Supervisory Authority published an inspection report on Nidaros Sparebank following a January 2025 review of governance and credit risk, including IFRS 9 expected credit loss (ECL) assessments, as well as liquidity and funding risk. Although some lending approval criteria have been updated since the 2020 inspection, the supervisor concludes that the bank’s credit framework still lacks sufficiently concrete, steering criteria and that routines for loss provisioning need further improvement. For corporate lending, the report highlights limited minimum requirements and an overly general framework that can increase reliance on individual judgement, alongside expectations that the board clarifies criteria (including for equity and loan-to-value), sets clearer escalation and deviation-handling rules, and becomes more involved in credit decisions beyond committee work. It also calls for clearer documentation of risk assessments where borrowing entities are part of group structures and the borrower is not the ultimate user of funds. In retail lending, weaknesses were identified in the information basis used to assess borrowers’ debt-servicing capacity, with a need to tighten requirements for income data to support compliance with the lending regulation. On credit risk monitoring, the bank’s follow-up has improved since 2020, but documentation of watchlist triggers should be strengthened; commercial real estate collateral valuation practices should include clearer yield assumptions, including triggers for broader revaluations. On IFRS 9, the report notes a high share of corporate exposures migrating to Stage 2, with Stage 2 corporate loans rising by 38 percent through the third quarter of 2024, and points to validation results indicating that the corporate probability of default model underestimates observed defaults, contributing to quarterly management overlays that the supervisor expects to reduce over time as model-based and individual provisions are improved. The report also flags repeated breaches of liquidity-related limits and volatility in the liquidity coverage ratio, and questions whether funding risk limits are too wide given a relatively shorter market funding maturity and a higher share of market funding maturing within one year compared with medians for comparable Norwegian standardised approach banks. Finanstilsynet requests a copy of the board minutes from the meeting where the inspection report is considered and asks the bank to send the report to its auditor.
Norwegian Finanstilsynet 2025-08-29
Norwegian Financial Supervisory Authority finds continued shortcomings in Nidaros Sparebank’s credit framework, IFRS 9 provisioning and liquidity governance
The Norwegian Financial Supervisory Authority's report on Nidaros Sparebank identifies deficiencies in its credit framework, loss provisioning routines, and corporate lending criteria. It highlights weaknesses in retail lending assessments, credit risk monitoring, and IFRS 9 expected credit loss models, alongside breaches of liquidity-related limits. Finanstilsynet requests board minutes from the meeting discussing the report and asks the bank to forward the report to its auditor.