The Financial Supervisory Authority of Norway published a supervisory report from a March 2025 on-site inspection of Sparebank 1 Helgeland covering internal governance and credit risk, including IFRS 9 expected credit loss assessments. The report concludes that the bank’s corporate lending portfolio carries high risk and that the board must increase its focus on risk monitoring, compliance with internal governance frameworks and the robustness of credit processes and loss estimates. The bank has a high share of corporate loans and several large exposures that contribute to concentration risk; the share of corporate loans classified as high risk increased in 2024, non-performing loans are relatively high, and a significant portion of corporate exposures has been granted amortisation-free periods, with much of the risk linked to property-project lending. Case reviews identified shortcomings in credit assessments, including the scope of sensitivity analyses and the assessment and documentation of collateral values, as well as weaknesses in IFRS 9 practices, including documentation and assumptions for stage 3 individual provisions and the governance of model overrides. Finanstilsynet expects concrete action plans and close follow-up to reduce credit risk, and asks the board to ensure forward-looking loss estimates, avoid overly low collateral reduction factors that could understate loss given default, strengthen timely forbearance and unlikely-to-pay tagging, systematise commercial real estate guidelines and clarify collateral update requirements (including independence), and establish routine sample checks in the first and second lines with reporting to the board. For follow-up, Finanstilsynet requests a copy of the minutes from the board meeting at which the supervisory report is handled and asks the bank to send the preliminary supervisory report to its auditor.
Norwegian Finanstilsynet 2025-08-08
Financial Supervisory Authority of Norway identifies elevated corporate credit risk and IFRS 9 provisioning weaknesses at Sparebank 1 Helgeland
The Financial Supervisory Authority of Norway's report on Sparebank 1 Helgeland highlights high risk in the bank's corporate lending portfolio, emphasizing the need for enhanced risk monitoring and compliance with governance frameworks. It identifies concentration risk, increased high-risk corporate loans, and shortcomings in credit assessments and IFRS 9 practices. Finanstilsynet expects action plans to reduce credit risk and improve governance, with follow-up including board meeting minutes and auditor review of the preliminary report.