The Financial Supervisory Authority of Norway has published an inspection report on Sparebanken Vest and its wholly owned subsidiary Sparebanken Vest Boligkreditt AS, focusing on governance, controls, and exposures related to liquidity and funding risk. While the supervisor found the group’s liquidity position satisfactory, it highlighted a high reliance on market funding and called for measures to strengthen funding resilience, stress testing, and the overall control environment. Key expectations include clearer board-level articulation of risk tolerance for liquidity and funding and its translation into limits and targets, stronger independence between first- and second-line functions, and strengthened resources in the second-line control function. The report notes breaches of the regulatory minimum liquidity coverage ratio (LCR) and internal limits, prolonged breaches of an internal deposit coverage limit, and gaps in board reporting, including the need to report the mortgage credit company’s 180-day liquidity buffer requirement for its covered bond collateral pool. The supervisor also pressed for more frequent and broader ILAAP stress testing and board reporting at least quarterly, including scenarios covering increased defaults affecting overcollateralisation in the mortgage credit entity and exchange rate shocks of more than five percent between Norwegian kroner and euro. The authority noted that the board’s response of 3 March 2025 described follow-up actions already taken and further changes planned, including quarterly stress test reporting and enhanced backtesting of liquidity and funding forecasts from 2025, and inclusion of the 180-day metric in group board reporting from first quarter 2025. With Sparebanken Vest and Sparebanken Vest Boligkreditt AS in a merger process with the Sparebanken Sør group, the authority expects the new banking group, Sparebanken Norge, to address the reported remarks and asked that the letter be shared with the external auditor.
Norwegian Finanstilsynet 2025-04-03
Financial Supervisory Authority of Norway publishes inspection report on Sparebanken Vest urging tighter market funding limits and quarterly liquidity stress testing
Norway's Financial Supervisory Authority published an inspection report on Sparebanken Vest and its subsidiary, noting satisfactory liquidity but high market funding reliance. It calls for clearer risk tolerance, stronger independence between first- and second-line functions, and improved stress testing and board reporting. The authority expects the new banking group, Sparebanken Norge, to address these issues during its merger with Sparebanken Sør.