The Financial Supervisory Authority of Norway has published a supervisory report on Sparebank 68 Grader Nord after reviewing the bank’s internal governance and operational risk, credit risk including IFRS 9 impairment assessments, and liquidity and funding risk. It found weaknesses in the bank’s risk management and internal control framework and judged its credit risk to be higher than at comparable banks, reflecting a large corporate lending book and a high level of problem loans. The board was told to strengthen oversight of credit and liquidity risk, improve documentation of risk and loss assessments, use more forward-looking risk analysis, and ensure expected credit loss estimates are adequately supported. The report points to vague minimum requirements in credit and liquidity policies, weaknesses in annual internal control reporting, incomplete procedures for assessing risks from new products and changes, and fragmented risk reporting to the board. Credit underwriting and monitoring also need improvement, including clearer debt service and cash flow analysis, better documentation of collateral values and covenant compliance, stronger handling of forbearance cases, and more consistent consideration of sustainability and property market risks. At the end of the second quarter of 2025, corporate loans accounted for 34.2 percent of on-balance-sheet lending, or 29.8 percent when loans transferred to a mortgage credit company are included, and stage 3 corporate loans were 5.4 percent after 7.2 percent in the first quarter, above the 5 percent level at which the authority recommends an action plan. Liquidity stress testing and ILAAP documentation were also found to be weak. On IFRS 9, the authority identified shortcomings in the bank’s impairment model and provisioning practice, including insufficiently documented stage 2 criteria, stage 3 scenario assumptions and model overrides. It said the board’s response identified satisfactory remedial measures, but stressed that implementation remains the board’s responsibility. The report also notes that banks in the Localbank cooperation plan to switch to a new loss model in the fourth quarter of 2026.
Norwegian Finanstilsynet 2026-04-28
Financial Supervisory Authority of Norway finds weaknesses in Sparebank 68 Grader Nord risk management and calls for stronger credit and liquidity oversight
The Financial Supervisory Authority of Norway has published a supervisory report on Sparebank 68 Grader Nord identifying material weaknesses in risk management, internal control, credit underwriting and monitoring, and liquidity and funding risk management, and assessing the bank’s credit risk as higher than peers due to a large corporate portfolio and elevated problem loans. The authority instructed the board to strengthen oversight of credit and liquidity risk, improve documentation and forward-looking risk analysis, and address deficiencies in IFRS 9 impairment modelling and provisioning, while noting that remedial measures remain the board’s responsibility to implement.