The operating profit before tax was NOK 88.6 million and net lending decreased from NOK 19.1 to NOK 19.0 billion.
KLP Kommunekreditt AS is a mortgage company 100% owned by KLP Banken AS. The purpose of the Company is long-term financing of municipalities, county authorities and companies working for the public sector.
KLP Banken AS is a commercial bank 100% owned by Kommunal Landspensjonskasse gjensidig forsikringsselskap (KLP). KLP Banken AS also owns all of the shares in the subsidiary KLP Boligkreditt AS. The collective operations of KLP Banken AS and its subsidiaries are divided into two business areas: retail market and public-sector lending. The business is nationwide and the companies’ head office is in Trondheim.
KLP Kommunekreditt AS is the only financial institution in Norway to issue covered bonds by way of loans to municipalities, county authorities or enterprises with public guarantees. Its presence in the market for loans to public-sector enterprises encourages competition, which benefits the target group of municipal and county authorities and enterprises with public guarantees by providing access to favourable long-term financing.
Profit (NOK millions)
2023
2022
Change
Profit before tax
88.6
76.1
12.5
Net interest income
113.6
107.6
6.0
Operating expenses
-22.7
-20.7
-2.0
Profit/loss fin. instr.
-2.3
-10.8
8.4
Balance sheet (NOK billions)
2023
2022
Change
New loan payments
1.1
2.5
-1.4
Net lending
19.0
19.1
-0.1
Liquidity
2.1
3.3
-1.2
INCOME STATEMENT
The Company’s profit before tax gave a return on equity of 9.9 (9.8) per cent. The change in profit compared to last year is mainly due to higher interest rates resulting in an increased return on loans financed with equity. On average, lending margins have been somewhat lower in the financial year compared to last year.
Net interest income from the lending and investment portfolios increased by about 6 per cent compared to 2022.
The results are also affected by significantly lower losses on financial instruments in 2023 than the previous year. This can mainly be attributed to an increase in the market value of the Company's securities investments through the year. The overall profit/loss effect of increased value on the Company’s securities shows a gain of NOK 3.8 (-4.4) million.
The Company makes regular adjustments to reduce its liquidity risk and meet regulatory requirements with respect to liquidity indicators and capital adequacy. Refinancing of the borrowing side then results in a regular need to buy back the Company’s own issuance. In 2023 the effect on profits of borrowing buybacks was NOK -6.0 (-6.4) million. The overall accounting effect of changes in value on financial instruments is thus lower in 2023 compared to the previous year. See Note 6.
Operating costs show a 10 per cent increase compared to the previous year. This is due to cost growth on purchases of services from the parent company and on external services relating mainly to rating and lending assistance. The Company’s lending is managed by KLP Banken AS, and the operating expenses incurred are regulated in a management agreement with the parent company. Under this agreement, KLP Kommunekreditt AS is charged for its share of the parent company’s costs for the management of public-sector loans, based on volume. Costs are settled monthly. Operating expenses in excess of this are mainly direct costs incurred by the Company for purchases of external services.
LENDING
Lending activities in KLP Kommunekreditt AS are primarily based on the sale of new loans directly from the Company.
Total lending was reduced by 1 per cent in 2023. 91 (91) per cent of the lending volume is at floating interest rates. The rest is fixed interest loans.
In 2023, the Company paid out new loans worth NOK 1.1 (2.5) billion. The lending portfolio comprises direct loans to Norwegian municipal and county authorities, or to enterprises working for the public sector and receiving unconditional guarantees from municipalities or county authorities. The credit risk in the lending portfolio is considered very low.
The credit risk associated with lending to municipal and county authorities in Norway is limited to deferral of payment and does not provide for cessation of payment obligations. This is a consequence of the Norwegian Local Government Act, which indemnifies lenders against losses if a local authority is unable to meet its payment obligations. Where payment is deferred, the lender is also secured against losses of accrued interest, late-payment interest and debt collection costs. KLP Kommunekreditt AS has not incurred any credit loss on loans to Norwegian municipalities or county authorities.
The Company had no non-performing loans more than 90 days past due at the end of 2023. No individual losses were recorded in the financial year. Estimated loss provisions under IFRS 9 had an effect on profits of NOK 4 (-8) thousand in the financial year. For more information on losses and lending, please refer to Note 8.
LENDING ACTIVITIES AND THE ROLE OF THE BANK
KLP makes loans to the public sector from its own balance sheet and through KLP Kommunekreditt AS. Loans are managed by KLP Banken.
KLP Kommunekreditt AS, together with KLP, has a good position in the market for long-term financing of municipalities, county authorities and enterprises working in the public sector.
Total loans to public-sector borrowers amounted to NOK 90.3 (87.1) billion at the end of 2023, an increase of 3.1 (3.0) billion, or 3.6 (3.6) per cent, in the financial year. For the local government sector overall, the estimated debt growth is just over 7 per cent in 2023. Loan applications totalling NOK 95.0 (76.3) billion were received in 2023.
LIQUIDITY
The Company’s liquidity situation is satisfactory, as its financing more than covers the liquidity requirement from operations.
KLP Kommunekreditt AS is subject to strict rules with respect to the assets it may invest in. The portfolio of liquid investments comprises safe securities and deposits in other banks. The securities are certificates and bonds with excellent security, largely covered bonds with an Aaa rating.
Holdings of cash and cash equivalents have been used to pay out new loans or for redemptions and buybacks of borrowings.
As new borrowings occur when the terms for them are considered favourable, a need arises to invest surplus liquidity. This liquidity contributes to earnings and provides the flexibility needed to meet demand for new lending.
At the end of 2023 the Company had outstanding liquid investments in the form of interest-bearing securities amounting to NOK 1.5 (2.7) billion. Securities are recognised at market value. At the same time, bank deposits amounted to NOK 0.6 (0.5) billion.
BORROWING
KLP Kommunekreditt AS has established a programme for issuing covered bonds.
In the Norwegian market, covered bonds secured against loans to the local government sector amounted to NOK 19.4 (19.8) billion at the end of 2023. New issues in 2023 totalled NOK 6.0 (4.2) billion. Buybacks of previous issues amounted to NOK 6.4 (3.0) billion. No bonds were issued outside Norway. KLP Kommunekreditt AS has achieved the best rating for its borrowing programme.
The bonds are backed by the Company’s lending activity. Loans to enterprises have to be guaranteed by municipalities or county authorities under the provisions of the Local Government Act, by the Norwegian government or by a bank. They must be unconditional and cover both repayments and interest.
The Company’s debt to credit institutions at the end of the year comprised internal financing from KLP Banken AS in the amount of NOK 0.7 (1.7) billion.
BALANCE SHEET AND CAPITAL ADEQUACY
The Company had total assets of NOK 21.2 (22.5) billion at the end of 2023. Of this, loans to public-sector borrowers amount to NOK 19.0 (19.1) billion and NOK 2.1 (3.3) billion are liquidity investments.
The Company’s equity and subordinated loan capital, based on the Board of Directors’ proposal for the allocation of the year’s profit, totalled NOK 968 (897) million at the end of 2023. Core capital is identical to equity and subordinated loan capital. This gives a capital adequacy and core capital adequacy of 22.7 (20.3) per cent.
The current capital requirement, including capital buffers, is 14.0 per cent tier 1 capital adequacy and 17.5 per cent capital adequacy. The unweighted tier 1 capital ratio was 4.6 (4.0) per cent, compared with the requirement of 3.0 per cent.
The risk-weighted balance came to NOK 4.1 (4.3) billion. Capital adequacy is considered to be good.
ALLOCATION OF THE PROFIT FOR THE YEAR
The financial statements for KLP Kommunekreditt AS for 2023 show total comprehensive income of NOK 88.8 (62.4) million. The Board of Directors proposes that a group contribution of NOK 90.6 million be paid to KLP. NOK 70.7 million will be returned from KLP as a group contribution without any tax effect. Net profit and group contribution will be transferred to other equity. The group contribution only has an accounting effect from the date of the decision.
ABOUT THE FINANCIAL STATEMENTS
The Board of Directors believes that the financial statements provide a true and fair view of the Company’s assets and liabilities, financial position and profit. The conditions for continued operation are present, and this is assumed in the financial statements.
KLP Kommunekreditt AS prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as approved by the EU, with associated interpretations. See Note 2 for further details.
RATING
The rating agencies’ assessments of the Company have a bearing on its borrowing terms. The Company uses Moody’s for credit rating of bonds. All covered bond issues have an Aaa rating.
RISK MANAGEMENT
KLP Kommunekreditt AS is subject to KLP Banken’s risk management framework, the purpose of which is to ensure that risks are identified, analysed and managed by means of policies, limits, procedures and instructions.
Separate guidelines have been established for the most important individual risks (liquidity, credit, market, operational and compliance risks) and an overarching risk management policy that includes principles, organisation, frameworks etc. for the bank's overall risk. The guidelines are adopted by the Board and reviewed at least once per year. The policies are of an overarching nature and are complemented by procedures, rules, and instructions determined at the administrative level.
The Company aims to maintain a low level of operational risk, and to be characterised by a high level of professional competence, sound procedures and efficient operations.
The Company is included in the KLP Banken Group’s process for assessing and quantifying material risks and calculating its capital and liquidity needs (ICAAP/ILAAP). The assessment of capital needs is forward-looking, and in addition to calculating the need based on the current exposure (and limits), the need is assessed in light ofplanned growth, decided strategic changes, etc. The Board of Directors of the Company takes an active part in these assessments and, in addition to the capital requirement assessment, determines a desired level for total capital (the capital target).
The boards of KLP Banken AS, KLP Kommunekreditt AS and KLP Boligkreditt AS have appointed a joint risk committee. The risk committee deals with matters specifically related to risk and has an advisory function to the Board of KLP Kommunekreditt AS.
CORPORATE GOVERNANCE
The Company’s articles of association and applicable legislation provide guidelines for corporate governance, corporate management and define a clear division of roles between governing bodies and corporate management.
The Board of Directors sets the policies for the Company’s activities. The Board held six board meetings in 2023. The Board comprised two women and two men in 2023.
The Managing Director is in charge of the day-to-day management of the Company in accordance with instructions issued by the Board of Directors.
For Board members, board liability insurance has been taken out. This also covers the managing director.
The company’s financial reporting follows established common processes within the KLP group. There is a division of labor between the financial function within the company and the group’s shared functions. The administration regularly reports on the financial status and decisions regarding borrowing to the board. The board approves quarterly and annual financial statements.
The company adheres to KLP group’s guidelines for equality and diversity in the composition of the board. This ensures an appropriate mix of age, gender, and experience. There have been no deviations from these guidelines during the reporting period.
WORKING ENVIRONMENT AND ORGANISATION
The Company’s governance and management are handled by people employed by KLP Banken AS.
A management agreement has been entered into with KLP Banken AS, covering administration, IT support, finance and risk management, as well as borrowing and liquidity management.
CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY
In 2023, a new sustainability strategy was formed, which states that KLP will be the municipality- and health-Norway's partner for a sustainable transition.
As part of the KLP Group, KLP Kommunekreditt AS aims to contribute to sustainable investments and responsible business operations. Social responsibility is of strategic importance for KLP. This is manifested through actions linked to the Group’s business. KLP is a signatory to the UN Global Compact, and is thereby committed to working for human rights, workers’ rights and the environment, and against corruption. A more detailed descriptions of targets, measures and results can be found on the KLP website, www.klp.no/en.
KLP Banken AS signed up to the UN Principles for Sustainable Banking in the autumn of 2019 and has committed to implementing these principles in its operations, including those of its subsidiaries. The Principles for Sustainable Banking mean that banks are transparent about how their products and services create value for customers and investors, as well as for society as a whole. The Principles are intended to guide banks in their work on sustainability, and support society’s overall goals in line with the UN Sustainable Development Goals and the Paris Agreement.
KLP and KLP Kommunekreditt have for many years contributed to the sustainable development of society through loan financing of projects all over Norway, such as roads, schools, kindergartens, swimming pools, sports facilities, care homes, cultural centres and many other socially beneficial projects. Loans to Norwegian municipalities are used for purposes that contribute to reducing national greenhouse gas emissions and that benefit society as a whole.
KLP Banken is a driver and advisor to the municipalities to help them to make sustainable choices in public administration. The Bank offers green loans to municipalities, county authorities and companies connected to local government for projects that have a clear positive environmental and climate impact. The green loans granted in the Bank are added to the Life portfolio managed for KLP. There are currently no green loans in KLP Kommunekreditt.
As of today, we do not have sufficient data to map financed emissions for loans to the public sector. This is partly because we have limited access to investment-specific information, and that the municipalities report emissions related to investments to a limited extent today. In 2023, we have, together with several actors, carried out a preliminary project to look at how to map financed emissions in the public sector. This work will continue in 2024.
The Transparency Act, which came into force on 1. July 2022, means that businesses will be obliged to conduct due diligence and account for this in public reporting. For KLP Kommunekreditt, this report will be published on klp.no by 30 June 2024.
The premises of the parent company KLP Banken AS in both Oslo and Trondheim are certified as “eco-lighthouses” through the Eco-Lighthouse Foundation. Both locations were recertified in 2021.
For further information and details on corporate social responsibility and sustainability, please refer to KLP’s Sustainability Report at www.klp.no/en.
OUTLOOK
The presence of KLP Kommunekreditt AS together with KLP in the market for public loans contributes to competition and so provides the public sector with access to long-term financing on favourable terms. Overall growth in recent years shows that the market position is strong.
High credit quality in the lending portfolios helps KLP Kommunekreditt AS to obtain the most favourable borrowing terms. Government regulation of banks and financial institutions means that a number of regulatory requirements for capital and liquidity have to be met. This requires constant earnings to enable us to meet such requirements.
The market for loans to the local government sector is still growing, and a large portion of the borrowing is financed from the securities market rather than financial institutions. KLP Kommunekreditt AS is well capitalised and has an advantage as a stable and long-term lender in a market characterised by low risk. General developments in the financial markets will determine the extent to which KLP Kommunekreditt AS can finance its lending activities on terms that provide sufficient profitability for further growth.
Norwegian society is experiencing turbulent times with great macroeconomic uncertainty, and this will also affect the general conditions faced by the public sector. Norwegian municipalities have a good and extensive range of services to the public. Increased life expectancy, demographics, income growth and climate risk give grounds to expect a sustained high level of investment in the public sector over the next few years. In the short term, higher costs resulting from increased inflation and a higher interest rates could contribute to slightly weaker lending growth than has been normal in recent years. However, the municipalities in Norwegian Association of Local and Regional Authorities (KS) say in their annual budget survey that they expect to see high levels of investment and debt in 2024 too.
Demand for loans for projects that contribute to climate adaptation is likely to increase further in the years ahead.
The Board of Directors expects that there will still be a need for significant long-term and stable financing beyond what the securities market can offer to public-sector borrowers. KLP Banken’s expertise in local government financing, regardless of the size of its own balance sheet, can be used in its stewardship role for KLP. KLP Kommunekreditt AS and KLP as a whole aim to be a key player providing loans for public investments.
Declaration pursuant to the Norwegian securities trading act, section § 5-5KLP Kommunekreditt AS
We hereby declare that, to the best of our knowledge, the annual financial statements for the period from 1 January to 31 December 2023 have been prepared in accordance with applicable accounting standards, and that the information in the financial statements gives a true and fair view of the Company’s assets, liabilities, financial position and overall profit or loss.
We also declare that the Directors’ report provides a true and fair overview of the development, profit or loss and the financial position of the Company, together with a description of the most significant risk and uncertainty factors the Company faces
Income statement KLP Kommunekreditt AS
NOTES
NOK THOUSANDS
01.01.2023 -31.12.2023
01.01.2022 -31.12.2022
Interest income, effective interest method
891 875
463 028
Other interest income
209 113
98 981
5
Total interest income
1 100 988
562 009
Interest expenses, effective interest method
-879 623
-404 952
Other interest expenses
-107 746
-49 451
5
Total interest expense
-987 369
-454 403
5
Net interest income
113 619
107 606
6
Net gain/(loss) on financial instruments
-2 304
-10 751
Total net gain/(loss) on financial instruments
-2 304
-10 751
Other operating expenses
-22 717
-20 725
8
Net loan losses
4
-8
Total operating expenses
-22 713
-20 733
Operating profit/loss before tax
88 603
76 122
9
Tax on ordinary income
235
-13 771
Income for the year
88 838
62 351
Other comprehensive income
-
-
Other comprehensive income for the year after tax
-
-
COMPREHENSIVE INCOME FOR THE YEAR
88 838
62 351
ALLOCATION OF INCOME
Allocated to/from retained earnings
-88 838
-62 351
TOTAL ALLOCATION OF INCOME
-88 838
-62 351
Total profit in % of total assets
0.42%
0.28%
BalanceKLP Kommunekreditt AS
NOTES
NOK THOUSANDS
31.12.2023
31.12.2022
ASSETS
10,11,12
Loans to and receivables from credit institutions
568 248
547 868
11,12
Loans to and receivables from customers
19 001 225
19 117 097
12,13,14
Fixed-income securities
1 500 050
2 724 070
12,14,15,16
Financial derivatives
108 137
138 897
17
Other assets
10 618
20 092
TOTAL ASSETS
21 188 279
22 548 024
LIABILITIES AND OWNERS’ EQUITY
LIABILITIES
12,18
Liabilities to credit institutions
701 570
1 707 544
12,19
Liabilities created on issuance of securities
19 390 805
19 783 028
12,14,15,16
Financial derivatives
23 233
25 939
20
Other liabilities
81 817
109 527
9
Deferred tax
21 622
21 857
20
Provisions for accrued costs and liabilities
21
28
TOTAL LIABILITIES
20 219 067
21 647 922
OWNERS’ EQUITY
Share capital
391 500
391 500
Share premium
363 500
363 500
Other owners’ equity
214 212
145 102
22
TOTAL OWNERS’ EQUITY
969 212
900 102
TOTAL LIABILITIES AND OWNERS’ EQUITY
21 188 279
22 548 024
Statement of owners’ equityKLP Kommunekreditt AS
2023 NOK THOUSANDS
Share capital
Share premium
Other equity
Total owners’ equity
Owners’ equity 1 January 2023
391 500
363 500
145 102
900 102
Income for the year
-
-
88 838
88 838
Other comprehensive income
-
-
-
-
Comprehensive income for the year
-
-
88 838
88 838
Group contribution received during the period
-
-
69 944
69 944
Group contribution paid during the period
-
-
-89 671
-89 671
Total transactions with the owners
-
-
-19 728
-19 728
Owners’ equity 31 December 2023
391 500
363 500
214 212
969 212
2022 NOK THOUSANDS
Share capital
Share premium
Other equity
Total owners’ equity
Owners’ equity 1 January 2022
362 500
312 500
85 727
760 727
Income for the year
-
-
62 351
62 351
Other comprehensive income
-
-
-
-
Comprehensive income for the year
-
-
62 351
62 351
Group contribution received
-
-
10 551
10 551
Group contribution paid during the period
-
-
-13 527
-13 527
Owners' equity received during the period
29 000
51 000
-
80 000
Total transactions with the owners
29 000
51 000
-2 976
77 024
Owners’ equity 31 December 2022
391 500
363 500
145 102
900 102
NOK THOUSANDS
Number of shares
Par value
Share capital
Share premium
Other equity
Total
Equity at 1 January 2023
3 625 000
0.1
391 500
363 500
145 102
900 102
Changes between 01.01 - 31.12
-
-
-
-
69 110
69 110
Equity at 31 December 2023
3 625 000
0.1
391 500
363 500
214 212
969 212
There is one class of shares. All the shares are owned by KLP Banken AS.
Statement of cash flows
KLP Kommunekreditt AS
NOTES
NOK THOUSANDS
01.01.2023 -31.12.2023
01.01.2022 -31.12.2022
Operational activities
Payments received from customers – interest, commission & charges
794 436
381 107
Disbursements on loans customers & credit institutions
-1 069 415
-2 481 139
Receipts on loans customers & credit institutions
1 300 680
1 198 315
Disbursements on operations
-22 301
-22 801
Net receipts/disbursements from operating activities
-38 809
79 152
Interest from credit institutions
18 079
9 273
Net cash flow from operating activities
982 671
-836 092
Investment activities
Payments on purchase of securities
-442 481
-2 084 060
Receipts on sales of securities
1 666 175
1 030 010
Interest received from securities
77 787
36 175
Net cash flow from investment activities
1 301 482
-1 017 875
Financing activities
19
Receipts on loans from credit institutions
6 000 000
4 200 000
19
Repayments and redemption of securities debt
-5 000 000
-3 008 000
19
Change in securities debt, own funds
-1 407 062
-52 701
19
Net payment of interest on loans credit institions
-775 168
-325 316
18
Receipts in internal funding
2 205 000
3 005 000
18
Disbursements in internal funding
-3 210 000
-2 055 000
18
Net payment of interest on internal funding
-67 524
-14 887
Payment on group contribution
-19 728
-2 976
-
80 000
Net cash flow from financing activities
-2 274 481
1 826 120
Net cash flow during the period
9 672
-27 847
Cash and cash equivalents at start of period
525 685
553 531
Cash and cash equivalents at end of period
535 356
525 685
Net receipts/disbursements (-) during the period
9 672
-27 847
Notes to the accounts KLP Kommunekreditt AS
Note 1 General information
KLP Kommunekreditt AS was founded on 25 August 2009. The company is a credit enterprise whose object is to provide and acquire public sector loans that are guaranteed by the Norwegian state, Norwegian county administrations or Norwegian municipalities. Borrowers provide ordinary surety covering both repayments and interest.
The business is mainly financed by issuing covered bonds with collateral in government guaranteed loans. Some of these are listed on Oslo Børs (The Norwegian Stock Exchange).
KLP Kommunekreditt AS is registered and domiciled in Norway. KLP Kommunekreditt AS has its head office at Beddingen 8 in Trondheim and the company has a branch office in Dronning Eufemiasgate 10 in Oslo.
The company is a wholly owned subsidiary of KLP Banken AS, which is in turn wholly owned by Kommunal Landspensjonskasse (KLP). KLP is a mutual insurance company.
The company’s financial statement for 2023 were approved by the company’s board on 06.03.2024. The annual financial statement is available at www.klp.no.
Note 2 Material information on accounting principles
Below is a description of the most important accounting principles used in the preparation of the financial statements for KLP Kommunekreditt AS. These principles are applied in the same way in all periods presented unless otherwise indicated.
2.1 FUNDAMENTAL PRINCIPLES
The financial statements for KLP Kommunekreditt AS have been prepared in accordance with IFRS Accounting Standards®) as adopted by the EU. The Norwegian Accounting Act and the Regulations concerning annual accounts for banks, mortgage firms and finance companies (the Accounting Regulations) contain individual requirements for additional information which is not required under IFRS Accounting Standards. These supplementary information requirements have been incorporated into the notes to the financial statements.
The annual accounts have been prepared on the principle of historic cost, with the following exceptions:
Financial assets and liabilities (including financial derivatives) are valued at fair value through profit or loss
Financial assets and liabilities are valued in accordance with the rules on fair value hedging
To prepare the accounts in accordance with IFRS Accounting Standards, management must make accounting estimates and approximate valuations. This will affect the value of the company’s assets and liabilities, income and expenses recognised in the financial statements. Actual figures may deviate from estimates used. Areas in which discretionary valuations and estimates of material significance to the company have been used are described in Note 3.
All amounts are presented in NOK thousands without decimals unless stated otherwise.
The financial statements have been prepared in accordance with the going concern assumption.
2.1.1. Changes in accounting principles and information
New and changed standards adopted by the company in 2023:
There are no new and/or changed standards with material effect adopted by the company in 2023.
Standards, changes to and interpretations of existing standards that have not come into effect and where the company has not chosen early application:
There are other standards or interpretations not yet in force that are expected to have a significant impact on the company’s financial statements.
2.2 FOREIGN CURRENCY
2.2.1 Functional currency and presentation currency
The accounts are presented in NOK, which is the functional currency of the parent company and the presentation currency of the company.
2.3 FINANCIAL INSTRUMENTS
The most important accounting policies relating to financial instruments are described below.
2.3.1 Recognition and derecognition
Financial assets and liabilities are recognised on the balance sheet on the date when the KLP Kommunekreditt AS becomes party to the instrument’s contractual terms and conditions. Regular purchases and sales of investments are recognised on the date of the agreement. Financial assets are removed from the balance sheet when the rights to receive cash flows from the investment expire or when these rights have been transferred and the KLP Kommunekreditt AS has essentially transferred the risk and the potential benefit from ownership. Financial liabilities are derecognised when the rights to the contractual conditions have been fulfilled, cancelled or have expired.
2.3.2. Classification and subsequent measurement
2.3.2.1 Financial assets
Financial assets are classified on initial recognition in one of the following categories:
Amortized cost
Fair value through profit or loss
A financial asset is measured at amortized cost if both of the following criteria are met and the financial asset has not been reported at fair value through profit or loss (the “fair value option”):
The financial asset is held in a business model whose purpose is to keep financial assets in order to receive the contractual cash flows (the ‘business model criterion’), and
At certain times, the contractual terms of the financial asset lead to cash flows that only include repayments and interest on the outstanding principal amount (the “cash flow criterion”)
All other financial assets are measured at fair value with changes in value through profit/loss:
Assets with contractual cash flows that do not meet the cash flow criterion; and/or
Assets held in a different business model than “held to collect contractual cash flows”; or
Assets designated at fair value through profit or loss (the “fair value option”).
KLP Kommunekreditt AS may designate a debt instrument that meets the criteria to be measured at amortized cost to be reported at fair value through profit or loss if this eliminates or significantly reduces inconsistencies in measurement (“accounting mismatches”).
Impairment model
The impairment model for losses on loans and receivables is based on expected credit losses. The impairment model defines default as “a claim that is more than 90 days past due, or an account that is continuously overdrawn for a minimum of 90 days (by at least NOK 1.000)”. Also, a commitment is considered defaulted on if it has been forfeited for various reasons, such as in debt negotiations.
How the impairment loss is to be measured is determined for each individual stage and the model uses the effective interest rate method. Upon initial recognition, and in cases where the credit risk has not increased significantly after initial recognition, provision has to be made for credit losses that are expected to occur over the next 12 months (Stage 1). If the credit risk has increased significantly, the provisions should correspond to the expected credit losses over the expected useful life (Stage 2). If there is a loss event, impairments are raised equal to the expected loss on the commitment throughout its life (Stage 3).
For the products where the company has not developed its own PD (probability of defalult) and LGD (loss given default) models, the loss ratio method is used.
The company has only public loans, and here the loss ratio method is used, with the exception for low credit risk such as all loan are in Stage 1.
For more information on loan losses, please refer to Note 8.
Financial derivatives and hedging
Financial derivatives are capitalised at fair value at the time the derivative contract is struck. On subsequent measurement the derivatives are recognised at fair value and are presented as an asset if the value is positive and a liability if the value is negative. Recognition of associated gains and losses depends on whether the derivative has been identified as a hedging instrument and on the type of accounting hedge the derivative is included in.
For derivatives not included in hedging relationships, gains and losses are recognised as net value changes on derivatives and foreign exchange. In the financial statements, they are included in the line “Net gain/loss on financial instruments”. These fall into the category of financial assets at fair value reported through profit or loss.
For derivatives included in the accounting hedges, gains and losses are recognised as net changes in value of certificates, bonds and other securities, and are presented in the financial statements under ‘Net profit/(loss) on financial Instruments’.
The derivatives which are hedging instruments are used for hedging interest rate risk on fixed-interest borrowing and lending. In its hedging activity, the company safeguards itself against movements in market interest rates. Changes in the credit spread are not taken into account in the hedging effectiveness. The company uses the rules on fair value hedging, so that the book value of the hedged item (asset or liability) is adjusted for the value change in the hedged risk. The value change is recognised in the income statement. On entry into a hedging contract, the connection between the hedging instrument and the hedging object is documented, in addition to the purpose of the risk management and the strategy behind the different hedging transactions. The hedging effectiveness is measured regularly to ensure the hedge is effective.
If the hedge no longer fulfils the criteria for hedge accounting, the recognised effect of the hedge for hedging objects recognised at amortized cost is amortized over the period up to the due date of the hedging instrument.
2.3.2.2 Financial liabilities
The company has classified all financial liabilities measured at amortized cost, except for:
Financial liabilities at fair value through profit or loss: this classification applies to derivatives and financial liabilities designated as such upon initial recognition. The company has designated certain liabilities at fair value through the income statement, because this reduces or eliminates inconsistencies in measurement (‘accounting mismatches’)
Financial guarantees and loan commitments
Other financial liabilities recognised at amortized cost:
The category includes deposits from customers and credit institutions with no interest rate hedging and other financial liabilities not designated as liabilities measured at fair value through profit or loss.
2.3.2.3 Presentation, classification and measurement in the balance sheet and the income statement
Based on the descriptions above, the presentation, classification and measurement of financial instruments can be summarized in the following table:
Financial instruments
Classification
Loans to and receivables from credit institutions
Amortized cost
Loans to and receivables from customers
Amortized cost
Amortized cost (hedging)
Fixed-income securities
Fair value through profit or loss
Financial deriva€ves (assets)
Fair value through profit or loss
Liabüties created on issurance of securities
Amortized cost
Amortized cost (hedging)
Financial derivatives (liabilities)
Amortized cost (hedging)
Liabilities to credit institutions
Amortized cost
2.3.3 Netting
Financial assets and liabilities are presented net in the statement of financial position when there is an unconditional offsetting entitlement that can be legally enforced, and the intention is to settle net or realise the asset and liability simultaneously.
2.3.4 Modification
When the contractual cash flows from a financial asset are renegotiated or otherwise amended, and the renegotiation or change does not lead to derecognition of the financial asset, the gross book value of the financial asset is recalculated, and a gain or loss is recognised in the income statement. The gross book value of the financial asset is recalculated as the present value of the renegotiated or amended contractual cash flows, discounted at the original effective interest rate for the financial asset. Any costs or fees incurred adjust the book value of the modified financial asset and are written down over the remaining lifetime of the changed financial asset.
2.4 CASH AND BANK DEPOSIT
Cash and bank deposits are defined as receivables from credit institutions without any termination date. The amount does not include receivables from credit institutions that are linked to the purchase and sale of securities in the management of the securities portfolios. The statement of cash flows has been prepared in accordance with the direct method.
2.5 FINANCIAL LIABILITIES
The company’s financial liabilities comprise liabilities to credit institutions and covered bonds issued.
2.5.1 Liabilities to credit institutions
Liabilities to credit institutions are capitalized at market value on acquisition. As a rule, on subsequent measurement the liability is recognized at amortized cost. The interest costs are included in the amortization and are shown in the line “Interest expenses effective interest rate method” in the income statement.
2.5.2 Covered bonds issued
In the first instance covered bonds issued are recognized at fair value on take-up adjusted for purchase costs, i.e. nominal adjusted for any premium/discount on issue. On subsequent valuation the bonds are valued at amortized cost. The interest costs are shown in the line “Interest expenses, effective interest rate method” in the income statement. Bonds with fixed interest are recognized in accordance with the rules on fair value hedging since they are hedged against change in interest rate level. Upon repurchase of covered bond issued, any gain or loss is recognized in the line “net gain/loss on financial instruments”.
2.6 OWNERS’ EQUITY
The owners’ equity in the company comprises owners’ equity contributed and retained earnings.
2.6.1 Owners’ equity contributed
Owners’ equity contributed comprises share capital, the share premium fund and other owners’ equity contributed.
2.6.2 Retained earnings
Retained earnings comprise other owners’ equity. Ordinary company law rules apply to any allocation or use of the retained earnings.
2.7 PRESENTATION OF INCOME IN THE ACCOUNTS
2.7.1 Interest income/expenses
Interest income and interest expenses associated with all interest-bearing financial instruments valued at amortized cost are taken to income using the effective interest rate method (internal rate of return) and is presented in the line “Interest income/expenses, effective interest rate method”.
2.8 TAX
Tax costs in the income statement comprise tax payable and changes in deferred tax. Deferred tax and tax assets are calculated as differences between the accounting and taxation value of assets and liabilities. Deferred tax assets are capitalized to the extent it can be shown probable that the company will have sufficient taxable profit to exploit the tax asset.
The company is a part of a financial services group and a tax group. Except for the limitations pursuant to the Financial Institutions Act, any tax-related surplus may be passed in its entirety to the parent company and subsidiaries as a group contribution with tax effect.
The company pays no benefits to employees and is not covered by the rules on financial activity tax. The company’s nominal income tax rate in 2023 is 22 per cent.
Note 3 Important accounting estimates and valuations
The company prepares estimates and assumptions about future situations. These are constantly evaluated and are based on historical data and expectations concerning probable future events considered on the basis of data available at the time of presentation of the financial statements. The estimates may be expected to differ from the final outcome.
The company’s balance sheet principally comprises loans to local government and enterprises with local government guarantee, as well as covered bonds issued. These items are valued in the accounts at amortized cost, except for borrowing and lending with fixed interest rates which are valued at fair value in accordance with the rules on fair value hedging. This means that the accounting value of the hedging object (fixed interest borrowing and lending) is changed when the market interest rate changes. The credit spread is locked at the commencement date, so the market's pricing of credit is not reflected in book value. This is because the credit element is not hedged.
The portfolio of loans measured at amortized cost is written down for expected credit losses. The method for measuring impairment for expected loss depends on whether the credit risk has increased significantly since initial recognition. Upon initial recognition, and when the credit risk has not increased significantly after initial recognition, provisions are based on 12 months’ expected loss (step 1). If the credit risk has increased significantly since initial recognition, but there is no objective evidence of impairment, write-downs are based on expected loss over the lifetime (step 2). If the credit risk has increased significantly and there is objective evidence of impairment, a provision should be raised for the expected loss over its lifetime (step 3).
The company has not developed its own models for determining the probability of loss and calculating loss given default, but use a simplified loss ratio method. This is justified by the fact that the lending portfolio mainly hav a municipal guarantee with low credit risk. In the simplified method, a change in risk class of at least one grade from initial recognition to the reporting date is considered to be a significant increase in credit risk. For more information about the company's calculation of losses, please refer to Note 8.
Note 4 Segment information
KLP Kommunekreditt AS has no division of its income by products or services. The Company has only the public sector market segment and offers only loans to its customers. The Company has only Norwegian customers. The Company has no external customers representing more than 10 per cent of the Company's total operating income.
Note 5 Net interest income
NOK THOUSANDS
01.01.2023 -31.12.2023
01.01.2022 -31.12.2022
Interest income on loans to customer
873 796
453 754
Interest income on loans to credit institutions
18 079
9 273
Total interest income, effective interest method
891 875
463 028
Interest income on bonds and certificates
77 406
45 009
Other interest income
131 708
53 973
Total other interest income
209 113
98 981
Total interest income
1 100 988
562 009
Interest expenses on debt from KLP Banken AS
-66 549
-17 264
Interest expenses on issued securities
-813 073
-387 688
Total interest expense, effective interest method
-879 623
-404 952
Other interest expenses
-107 746
-49 451
Total other interest expense
-107 746
-49 451
Total interest expence
-987 369
-454 403
Net interest income
113 619
107 606
Note 6 Net gain/(loss) on financial instruments
NOK THOUSANDS
01.01.2023 -31.12.2023
01.01.2022 -31.12.2022
Net gain/(loss) on fixed-income securities
3 763
-4 379
Net gain/(loss) financial derivatives and realized amortization linked to lending
-46
5
Net gain/(loss) financial derivatives and realized repurchase of own debt
-6 021
-6 377
Total net gain/(loss) on financial instruments
-2 304
-10 751
Note 7 Auditor’s fee
NOK THOUSANDS
01.01.2023 -31.12.2023
01.01.2022 -31.12.2022
Ordinary audit
438
440
Certification services
162
158
Total auditor’s fee
600
598
The audit fee is expensed according to received invoice. The amounts above include VAT.
Note 8 Loan loss provision
KLP Kommunekreditt uses the IFRS 9 exception in the rules for very low credit risk in public-sector lending, and there will be no estimated future losses on the basis of substantially increased credit risk since initial recognition. All loans are classed in stage 1, which corresponds to immaterial change in credit risk since initial recognition. For KLP Kommunekreditt, a simplified loss rate method has been chosen to calculate the expected credit loss (ECL), where the bank uses a very low loss rate to calculate its losses, corresponding to 0.001 per cent of total lending.
A part of the assessment of future losses is the assessment of how the future will look with regard to the future in terms of macroeconomic conditions affecting the bank's credit losses. The expected credit loss (ECL) should be probability-weighted based on several scenarios defined by the bank, but since we use an exception for very low credit risk the bank only use the expected scenario as a basis for the calculation of expected credit loss.. KLP Banken’s risk forum reviews the changes in macroeconomic conditions or other factors that could affect the impairments in KLP Kommunekreditt.
Follow-up on non-performing commitments
Non-performing exposures are currently monitored by the public-sector loan administration department. There have been no recorded losses on public-sector lending in KLP Kommunekreditt or KLP at any time. Loans with payments over 30 days past due are followed up by way of dialogue with the public-sector customers, which is believed to be the reason why there have been no cases of default over 90 days in recent years.
EXPECTED CREDIT LOSS (ECL) - LOANS TO CUSTOMERS - PUBLIC LENDING
NOK THOUSANDS
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
2023
stage 1
stage 2
stage 3
Total stage 1-3
Opening balanse ECL 01.01.2023
184
-
-
184
Transfer to Stage 1
-
-
-
-
Transfer to Stage 2
-
-
-
-
Transfer to Stage 3
-
-
-
-
Net changes
-13
-
-
-13
New losses
27
-
-
27
Write-offs
-19
-
-
-19
Closing balance ECL 31.12.2023
180
-
-
180
Changes (01.01.2023 - 31.12.2023)
-4
-
-
-4
VALUE OF LENDING AND RECEIVABLES FOR CUSTOMERS RECOGNISED IN THE BALANCE SHEET - PUBLIC LENDING
NOK THOUSANDS
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
2023
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2023
19 215 331
-
-
19 215 331
Transfer to Stage 1
-
-
-
-
Transfer to Stage 2
-
-
-
-
Transfer to Stage 3
-
-
-
-
Net change
-1 109 055
-
-
-1 109 055
New lending
2 947 008
-
-
2 947 008
Write-offs
-1 965 325
-
-
-1 965 325
Lending 31.12.2023
19 087 958
-
-
19 087 958
EXPECTED CREDIT LOSS (ECL) - LOANS TO CUSTOMERS - PUBLIC LENDING
NOK THOUSANDS
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
2022
stage 1
stage 2
stage 3
Total stage 1-3
Opening balanse ECL 01.01.2022
176
-
-
176
Transfer to Stage 1
-
-
-
-
Transfer to Stage 2
-
-
-
-
Transfer to Stage 3
-
-
-
-
Net changes
-11
-
-
-11
New losses
36
-
-
36
Write-offs
-16
-
-
-16
Closing balance ECL 31.12.2022
184
-
-
184
Changes (01.01.2022 - 31.12.2022)
8
-
-
8
VALUE OF LENDING AND RECEIVABLES FOR CUSTOMERS RECOGNISED IN THE BALANCE SHEET - PUBLIC LENDING
NOK THOUSANDS
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
2022
stage 1
stage 2
stage 3
Total stage 1-3
Lending 01.01.2022
17 875 934
-
-
17 875 934
Transfer to Stage 1
-
-
-
-
Transfer to Stage 2
-
-
-
-
Transfer to Stage 3
-
-
-
-
Net change
-762 931
-
-
-762 931
New lending
3 724 592
-
-
3 724 592
Write-offs
-1 622 264
-
-
-1 622 264
Lending 31.12.2022
19 215 331
-
-
19 215 331
Note 9 Tax
NOK THOUSAND
01.01.2023 -31.12.2023
01.01.2022 -31.12.2022
Accounting income before taxes
88 603
76 122
Differences between accounting and tax income:
Reversal of value increase financial assets
25 246
-67 782
Change in differences affecting relationship between booked and taxable income
-23 271
81 331
Taxable income
90 578
89 671
DEFFERED TAX ASSETS LINKED TO
Hedging of borrowing
-
-2 202
Securites
-694
-1 451
Loan to customers
-19 042
-21 571
Total tax-reducing temporary differences
-19 736
-25 225
DEFERRED TAX LINKED TO
Securities
16 870
23 181
Hedging of borrowing
1 236
-
Premium/discount on borrowing
3 325
4 173
Tax effect of group distribution
19 927
19 728
Total tax-increasing temporary differences
41 357
47 081
Net deferred tax(+)/tax assets(-)
21 622
21 857
SUMMARY OF TAX EXPENSES OF THE YEAR
Change in deferred tax taken to income excl. effect of group distribution
-435
-2 981
Capitalized tax from Group contribution
19 927
19 728
Reallocated tax from paid out Group contribution
-19 728
-2 976
Total tax costs
-235
13 771
Effective tax rate
-0.3%
18.1%
RECONCILIATION OF TAX RATE
Accounting income before taxes
88 603
76 122
Income taxs expense, nominal tax rate
19 493
16 747
Income tax expense, effective tax rate
-235
13 771
Difference between effective and nominal tax rate
19 728
2 976
Effect of reallocated tax from paid out Group contribution
19 728
2 976
Total
19 728
2 976
Note 10 Cash, cash equivalents and other loans and receivables from credit institutions
NOK THOUSANDS
31.12.2023
31.12.2022
Bank deposits operations
535 356
525 685
Cash
-
-
Total cash and cash equivalents (liquidity)
535 356
525 685
Bank accounts to be used for the purchase and sale of securities
32 892
22 183
Loans and receivables from credit institutions
568 248
547 868
Note 11 Lending and receivables
NOK THOUSANDS
31.12.2023
31.12.2022
LOANS TO AND RECEIVABLES FROM CREDIT INSTITUTIONS
Bank deposits
568 248
547 868
Loans to and receivables from credit institutions
568 248
547 868
LOANS TO AND RECEIVABLES FROM CUSTOMERS
Principal on lending
18 895 059
19 101 791
Write-downs steps 1 and 2
-180
-184
Fair value hedging
-86 554
-98 049
Accrued interest
192 899
113 540
Loans to and receivables from customers
19 001 225
19 117 097
All lending comprises loans to, or loans guaranteed by, Norwegian municipalities and county administrations, including loans to local government enterprises and intermunicipal companies (public sector loans). Guarantees are of the ordinary guarantor type covering both repayments and interest.
Note 12 Categories of financial instruments
NOK THOUSANDS
31.12.2023
31.12.2022
Capitalized value
Fair value
Capitalized value
Fair value
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Fixed-income securities
1 500 050
1 500 050
2 724 070
2 724 070
Financial derivatives
108 137
108 137
138 897
138 897
Total financial assets at fair value through profit and loss
1 608 187
1 608 187
2 862 967
2 862 967
FINANCIAL ASSETS FAIR VALUE HEDGING
Lending to Norwegian municipalities
1 584 628
1 578 296
1 702 745
1 706 638
Total financial assets fair value hedging
1 584 628
1 578 296
1 702 745
1 706 638
FINANCIAL ASSETS AT AMORTIZED COST
Loans to and receivables from credit institutions
568 248
568 248
547 868
547 868
Lending to Norwegian municipalities
17 416 597
17 416 597
17 414 352
17 414 352
Total financial assets at amortized cost
17 984 845
17 984 845
17 962 220
17 962 220
Total financial assets
21 177 661
21 171 328
22 527 932
22 531 825
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Financial derivatives
23 233
23 233
25 939
25 939
Total financial liabilities at fair value through profit and loss
23 233
23 233
25 939
25 939
FINANCIAL LIABILITIES FAIR VALUE HEDGING
Covered bonds issued
1 713 024
1 722 804
1 728 703
1 745 090
Total financial liabilities fair value hedging
1 713 024
1 722 804
1 728 703
1 745 090
FINANCIAL LIABILITIES AT AMORTIZED COST
Liabilities to credit institutions
701 570
701 570
1 707 544
1 707 544
Covered bonds issued
17 677 781
17 707 656
18 054 324
18 048 197
Total financial liabilities at amortized cost
18 379 351
18 409 226
19 761 869
19 755 741
Total financial liabilities
20 115 608
20 155 262
21 516 511
21 526 770
GAIN/LOSS FAIR VALUE HEDGING
31.12.2023
31.12.2022
On the hedging object
-27 124
76 318
On the hedged item attributable to hedged risk
27 124
-76 318
Gain and loss in fair value hedging
-
-
Fair value should be a representative price based on what a corresponding asset or liability would have been traded for at normal market terms and conditions. A financial instrument is considered as listed in an active market if listed prices are simply and regularly available from a stock market, dealer, broker, industry group, price-setting service or regulatory authority, and these prices represent actual and regularly occurring transactions at arm’s length. If the market for the security is not active, or the security is not listed on a stock market or similar, the Group uses valuation techniques to set fair value. These are based for example on information on recently completed transactions carried out on business terms and conditions, reference to trading in similar instruments and pricing using externally collected yield curves and yield spread curves. As far as possible the estimates are based on externally observable market data and rarely on company-specific information.
The different financial instruments are thus priced in the following way:
Fixed-income securities - government
Nordic Bond Pricing is used as a source for pricing Norwegian government bonds.
Fixed-income securities - other than government
Norwegian fixed-income securities are generally priced based on rates from Nordic Bond Pricing. Securities not covered by Nordic Bond Pricing are priced theoretically. The theoretical price should be based on the discounted value of the security's future cash flows. Discounting is done using a swap curve adjusted for credit spread and liquidity spread. The credit spread should, to the extent possible, be based on a comparable bond from the same issuer. Liquidity spread is determined at the discretion of the evaluator.
Financial derivatives
These transactions are valued based on the applicable swap curve at the time of valuation. Derivative contracts are to be used only to hedge balance amounts and to enable payments obligations to be met. Derivative contracts may be struck only with counterparties with high credit quality.
Fair value of loans to Norwegian local administrations
Fair value of lending without fixed interest rates is considered virtually the same as book value since the contract terms are continuously changed in step with market interest rates. Fair value of fixedrate loans is calculated by discounting contracual cash flows by the marked rate including a relevant riskmargin on the reporting date. This is valued in Level 2 in the valuation hierarchy, cf. Note 14.
Fair value of loans to and receivables from credit institutions
All receivables from credit institutions (bank deposits) are at variable interest rates. Fair value of these is considered virtually the same as book value since the contract terms are continuously changed in step with marked interest rates. This is valued in Level 2 in the valuation hierarchy, cf. Note 14.
Fair value of liabilities to credit institutions
These transactions are valued using a valuation model, including relevant credit spread adjustments obtained from the market. This is valued in Level 2 in the valuation hierarchy, cf. Note 14.
Liabilities created on issuance of securities
Fair value in this category is determined on the basis of internal valuation models based on external observable data. This is valued in Level 2 in the valuation hierarchy, cf. Note 14.
Note 13 Fixed-income securities
NOK THOUSANDS
31.12.2023
Debtor categories
Acquisition cost
Unreal. gain/loss
Accr. int. not due
Market value
Government/social security administration
98 915
158
-
99 073
Credit enterprises
1 203 795
-3 027
3 769
1 204 537
Local government administration
195 315
-285
1 410
196 440
Total fixed-income securities
1 498 025
-3 154
5 178
1 500 050
Effective interest rate: 5.23%
NOK THOUSANDS
31.12.2022
Debtor categories
Acquisition cost
Unreal. gain/loss
Accr. int. not due
Market value
Government/social security administration
99 368
67
-
99 435
Credit enterprises
1 944 672
-5 580
4 798
1 943 890
Local government administration
677 182
-824
4 388
680 745
Total fixed-income securities
2 721 221
-6 337
9 185
2 724 070
Effective interest rate: 3.75%
Effective interest is calculated as a yield-to-maturity, i.e. it is the constant interest rate level at which one may discount all the future cash flows from the securities to obtain the securities’ total market value.
Note 14 Fair value hierarchy
31.12.2023 NOK THOUSANDS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities
99 073
1 400 977
-
1 500 050
Financial derivatives
-
108 137
-
108 137
Total assets at fair value
99 073
1 509 114
-
1 608 187
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)
-
23 233
-
23 233
Total financial liabilities at fair value
-
23 233
-
23 233
31.12.2022 NOK THOUSANDS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Fixed-income securities
99 435
2 624 635
-
2 724 070
Financial derivatives
-
138 897
-
138 897
Total assets at fair value
99 435
2 763 533
-
2 862 967
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives (liabilities)
-
25 939
-
25 939
Total financial liabilities at fair value
-
25 939
-
25 939
Fair value shall be a representative price based on what a corresponding asset or liability would have been traded for at normal market terms and conditions. Highest quality in regard to fair value is based on listed prices in an active market. A financial instrument is considered as listed in an active market if listed prices are simply and regularly available from a stock market, dealer, broker, industry group, price-setting service or regulatory authority, and these prices represent actual and regularly occurring transactions at arm's length.
Level 1: Instruments at this level obtain fair value from listed prices in an active market for identical assets or liabilities to which the entity has access at the reporting date. Examples of instruments in Level 1 are stock market listed securities.
Level 2: Instruments at this level obtain fair value from observable market data. This includes prices based on identical instruments, but where the instrument does not maintain a high enough trading frequency and is therefore not considered to be traded in an active market, as well as prices based on corresponding assets and price-leading indicators that can be confirmed from market information. Example instruments at Level 2 are fixed-income securities priced on the basis of interest rate paths.
Level 3: Instruments at Level 3 contain non-observable market data or are traded in markets considered to be inactive. The price is based generally on discrete calculations where the actual fair value may deviate if the instrument were to be traded.
Note 12 discloses the fair value of financial assets and financial liabilities that are recognized at amortized cost and according to the rules on hedge accounting. Financial assets measured at amortized cost and hedge accounting comprise lending to and due to credit institutions, Norwegian municipalities and retail customers. The stated fair value of these assets is determined on terms qualifying for Level 2. Financial liabilities recognized at amortized cost and hedge accounting consist of debt securities issued. The stated fair value of these liabilities is determined by methods qualifying for Level 2.
There have been no transfers between Level 1 and Level 2.
Note 15 Financial derivatives
NOK THOUSANDS 31.12.2023
Nominal amount
Fair value
< 1 year
1-5 years
5-10 years
> 10 years
Total
Derivatives related to borrowing
1 200 000
17 819
-
500 000
700 000
-
1 200 000
Derivatives related to lending
1 525 972
90 318
91 978
1 079 483
354 511
-
1 525 972
Total assets
2 725 972
108 137
91 978
1 579 483
1 054 511
-
2 725 972
Derivatives related to borrowing
500 000
-22 209
-
500 000
-
-
500 000
Derivatives related to lending
135 664
-1 024
-
83 197
52 467
-
135 664
Total liabilities
635 664
-23 233
-
583 197
52 467
-
635 664
NOK THOUSANDS 31.12.2022
Nominal amount
Fair value
< 1 year
1-5 years
5-10 years
> 10 years
Total
Derivatives related to borrowing
1 200 000
37 764
-
500 000
700 000
-
1 200 000
Derivatives related to lending
1 588 570
101 133
81 605
1 102 980
403 985
-
1 588 570
Total assets
2 788 570
138 897
-
1 602 980
1 103 985
-
2 788 570
Derivatives related to borrowing
500 000
-21 968
-
500 000
-
-
500 000
Derivatives related to lending
200 402
-3 971
47 661
138 678
-
14 063
200 402
Total liabilities
700 402
-25 939
47 661
638 678
-
14 063
700 402
The company uses interest-rate swaps to adjust for differences in interest rate exposure between lending and borrowing. All derivative agreements entered into are for hedging purposes. The hedging strategy involves swapping interest terms in future periods, not swapping principal amounts. Interest-rate swaps are generally agreed with the same principal as the underlying loan or borrowing (back-to-back). Changes in the value of the effective part of the hedging instruments are regularly compared with changes in the value of the hedged risk, and any differences in hedging effectiveness are corrected. See note 2.3.2.1 for a description of the accounting policies for classifying and measuring derivatives.
Note 16 Presentation of assets and liabilities subject to net settlement
31.12.2023 NOK THOUSANDS
Related sums that are not presented net
Gross financial assets/liabilites
Gross assets/ liabilities presented net
Book value
Financial instruments
Security in cash
Net recognised value
ASSETS
Financial derivatives
108 137
-
108 137
-23 233
-
84 905
Total
108 137
-
108 137
-23 233
-
84 905
LIABILITIES
Financial derivatives
23 233
-
23 233
-23 233
-
-
Total
23 233
-
23 233
-23 233
-
-
31.12.2022 NOK THOUSANDS
Related sums that are not presented net
Gross financial assets/liabilites
Gross assets/ liabilities presented net
Book value
Financial instruments
Security in cash
Net recognised value
ASSETS
Financial derivatives
138 897
-
138 897
-25 939
-
112 959
Total
138 897
-
138 897
-25 939
-
112 959
LIABILITIES
Financial derivatives
25 939
-
25 939
-25 939
-
-
Total
25 939
-
25 939
-25 939
-
-
The purpose of this note is to show the potential effect of netting agreements on KLP Kommunekreditt AS. The note shows the derivative positions in the financial position statement.
Note 17 Other assets
NOK THOUSANDS
31.12.2023
31.12.2022
Receivables between Group companies
10 618
20 092
Total other assets
10 618
20 092
Note 18 Liabilities to credit institutions
31.12.2023 NOK THOUSANDS
Currency
Interest
Due date
Nominal
Accrued interest
Book value
Debt from KLP Banken AS
NOK
Fixed
12.12.2025
700 000
1 570
701 570
Total liabilities to credit institutions
700 000
1 570
701 570
Interest rate on debt to credit institutions at the reporting date
4.75%
The interest rate is calculated as a weighted average of the act/360 basis.
NOK THOUSANDS
Book value 31.12.2022
Receipts internal funding
Disbursements internal funding
Changes accrued interest
Book value 31.12.2023
Interest paid in 2023
Debt from KLP Banken AS
1 707 544
2 205 000
-3 210 000
-974
701 570
-67 524
Debt from KLP Banken AS
1 707 544
2 205 000
-3 210 000
-974
701 570
-67 524
31.12.2022 NOK THOUSANDS
Currency
Interest
Due date
Nominal
Accrued interest
Book value
Debt from KLP Banken AS
NOK
Fixed
15.12.2024
1 705 000
2 544
1 707 544
Total liabilities to credit institutions
1 705 000
2 544
1 707 544
Interest rate on debt to credit institutions at the reporting date
3.16%
The interest rate is calculated as a weighted average of the act/360 basis.
Total liabilities created on issuance of securities
19 390 805
19 783 028
Interest rate on borrowings through the issuance of securities at the reporting date.
5.07%
3.60%
The interest rate is calculated as a weighted average of the act/360 basis. It includes interest rate hedges and amortization costs.
NOK THOUSANDS
Balance sheet 31.12.2022
Issued
Matured/ redemed
Other adjustments
Balance sheet 31.12.2023
Interest paid in 2023
Change in liabilities created on issuance of securities
Bonds, nominal value
19 668 000
6 000 000
-6 415 000
-
19 253 000
-
Revaluations
12 429
-
-
-21 155
-8 726
-
Accrued interest
102 599
-
-
43 933
146 531
-775 168
Total liabilities created on issuance of securities
19 783 028
6 000 000
-6 415 000
22 777
19 390 805
-775 168
NOK THOUSANDS
Balance sheet 31.12.2021
Issued
Matured/ redemed
Other adjustments
Balance sheet 31.12.2022
Interest paid in 2022
Change in liabilities created on issuance of securities
Bonds, nominal value
18 496 000
4 200 000
-3 028 000
-
19 668 000
-
Revaluations
37 436
-
-
-25 007
12 429
-
Accrued interest
29 679
-
-
72 919
102 599
-325 316
Total liabilities created on issuance of securities
18 563 116
4 200 000
-3 028 000
47 912
19 783 028
-325 316
Note 20 Other liabilities and provision for accrued costs and liabilities
NOK THOUSANDS
31.12.2023
31.12.2022
Receivables between companies in the same Group
1 704
1 402
Creditors
113
25
Short-term balances with credit institutions
80 000
108 100
Total other liabilities
81 817
109 527
Value-added tax
21
28
Total accrued costs and liabilities
21
28
Note 21 Transactions with related parties
NOK THOUSANDS
01.01.2023 -31.12.2023
01.01.2022 -31.12.2022
Income statement items
KLP Banken AS, interest on borrowing
-66 549
-17 264
KLP Banken AS, interest on deposits
8 646
4 177
KLP Banken AS, administrative services (at cost)
-13 966
-13 116
KLP Kapitalforvaltning AS, fees for services provided
-77
-74
Total
-71 946
-26 277
NOK THOUSANDS
31.12.2023
31.12.2022
Financial position statement items
KLP Banken AS, debt to credit institutions
-701 570
-1 707 544
KLP Banken AS, deposit
213 878
205 231
KLP Banken AS, loan settlement
10 618
20 092
Net outstanding accounts to:
KLP Banken AS
-1 627
-1 402
KLP Kapitalforvaltning AS
-77
-
There are no direct salary costs in KLP Kommunekreditt AS. Personnel costs (adminiistrative services) are allocated from KLP Banekn AS.
Transactions with related parties are carried out on general market terms, with the exception of the Company’s share of common functions, which is allocated at cost. Allocation is based on actual use. All internal receivables are settled as they arise.
Note 22 Capital adequacy
NOK THOUSANDS
31.12.2023
31.12.2022
Share capital and share premium fund
755 000
755 000
Other owners’ equity
214 212
145 102
Total owners’ equity
969 212
900 102
Adjustments due to requirements for proper valuation
-1 500
-2 724
Core capital/Tier 1 capital
967 712
897 378
Supplementary capital/Tier 2 capital
-
-
Supplementary capital/Tier 2 capital
-
-
Total own funds (eligible Tier 1 and Tier 2 capital)
967 712
897 378
Capital requirement
340 885
353 621
Surplus of own funds (eligible Tier 1 and Tier 2 capital)
626 827
543 756
ESTIMATE BASIS CREDIT RISK
Institutions
137 401
141 371
Local and regional authorities
3 846 618
3 963 118
Covered bonds
120 454
194 389
Calculation basis credit risk
4 104 472
4 298 878
Credit risk
328 358
343 910
Operational risk
12 335
9 432
Credit valuation adjustment
192
280
Total capital requirement assets
340 885
353 621
Core capital adequacy ratio
22.7%
20.3%
Supplementary capital ratio
0.0%
0.0%
Capital adequacy ratio
22.7%
20.3%
Leverage ratio
4.6%
4.0%
Capital requirement as of 31.12.2023
Core capital/ Tier 1 capital
Supplementary capital/ Tier 2 capital
Own funds
Minimum requirement without buffers
4.5%
3.5%
8.0%
Protective buffers
2.5%
0.0%
2.5%
System risk buffers
4.5%
0.0%
3.0%
Counter-cyclical buffers
2.5%
0.0%
2.0%
Applicable capital requirements including buffers
14.0%
3.5%
17.5%
Capital requirement leverage ratio
3.0%
0.0%
3.0%
Note 23 Financial risk management
Organisation of risk management
KLP Kommunekreditt AS is a wholly owned subsidiary of KLP Banken AS. The Board of Directors of the Bank has established a risk management framework aimed at ensuring that risks are identified, analyzed and managed based on policies, limits, procedures and instructions. The Board has adopted risk policies covering the key individual risks as well as an overarching risk policy that covers principles, organization, limits etc. for the Bank’s total risk. The risk policies are of an overarching nature and are complemented by procedures, guidelines and instructions laid down at the senior management level. The policies state which departments are responsible for handling the various risks and cover the establishment of a separate risk control function. One purpose of the risk control function is to check that the risk policies and other guidelines for risk management are being followed. This function is carried out by the head of the Risk Management and Compliance Department, which is responsible for preparing periodic risk reports to senior management and the Board as well as reporting on any breaches of policies or guidelines. The Department, which has an independent role in relation to other departments, also has other tasks associated with the Bank’s risk management. The responsibility for the operational direction of the Bank’s liquidity risk and interest rate risk lies with the Finance Department.
Note 24 Credit risk
Credit risk is defined as the risk of loss associated with loan customers, derivative counterparties, issuers of securities and other counterparties being unable or unwilling to settle at the agreed time and in accordance with written contracts, where the collateral established does not cover the outstanding claim. KLP Kommunekreditt AS provides loans to Norwegian municipalities and county administrations, local government enterprises, intermunicipal companies and loans to companies where the loan is guaranteed by a Norwegian municipality or county administration. Guarantees are payable on demand.
24.1 CONTROL AND LIMITATION OF CREDIT RISK
The Board has determined a credit policy that contains overarching guidelines, requirements and limits associated with credit risk. The policy lays down that the bank is to have a low credit risk profile and includes limits on types of lending and principles for organisation and operation of the Company’s lending activity. The policy also includes an overall mandate structure for lending and other counterparty exposure. The mandates are linked to Board-determined limits for a large number of the Company’s individual borrowers and these limits derive from a risk classification in which the individual borrowers are assigned a risk class based on a set of fixed criteria. Furthermore requirements are set for reporting to the Board on usage of the limits.
Credit risk associated with issuers of securities, derivative counterparties and other counterparties in the financial area is also limited by Board-determined limits on individual counterparties. These limits are based on the counterparty’s solvency and other assessments of the counterparties’ creditworthiness.
In processing all new loan applications checks are made on whether the customer’s credit limits are greater than the sum of the loan amounts applied for and current lending. In the credit risk policy described above, requirements are set for reporting to the Board on the use of the limits. Any breach of the limits must be reported to the Company’s Board in any event.
24.2 LOANS ACCORDING TO TYPE OF SECURITY/EXPOSURE (PRINCIPAL)
NOK THOUSANDS
31.12.2023
31.12.2022
LOANS ACCORDING TO TYPE OF SECURITY/EXPOSURE (PRINCIPAL)
Lending to municipalities and county administrations
18 086 373
18 282 090
Lending with municipal/county administration guarantee
808 686
819 701
Total
18 895 059
19 101 791
Sums falling due more than 12 months after the end of the reporting period
17 876 915
18 100 414
The Company also invests in securities issued by municipalities and county administrations and will in addition have credit risk exposure in the form of “additional collateral”. The additional collateral can amount up to 20 percent of the cover. In accordance with the Company’s internal guidelines the additional collateral may be in the form of deposits in banks satisfying minimum rating requirements as well as covered bonds issued by Norwegian credit enterprises.
CREDIT QUALITY OF SECURITIES, BANK DEPOSITS AND DERIVATIVES
Securities with external credit rating (Moody’s)
NOK THOUSANDS
31.12.2023
31.12.2022
AAA
1 296 000
2 156 639
Unrated
204 050
567 431
Total
1 500 050
2 724 070
Deposits in banks grouped by external credit assessment (Moody’s)
NOK THOUSANDS
31.12.2023
31.12.2022
Aa1-Aa3
334 316
336 166
A1-A3
233 932
211 701
Total
568 248
547 868
The Company may also be exposed to credit risk as a result of derivative agreements struck. The purpose of such agreements is to reduce risks arising as a result of the Company’s borrowing and lending activities. The Company’s internal guidelines specify creditworthiness requirements for derivative counterparties. All derivative agreements are entered into with counterparties with a minimum A1 rating (Moody’s).
24.3 MAXIMUM EXPOSURE TO CREDIT RISK
KLP Kommunekreditt AS measures maximum exposure as principal and accrued interest. Security in cash or securities is not exchanged, nor are other credit improvements carried out. The table below shows the maximum exposure for KLP Kommunekreditt AS.
Maximum exposure to credit risk
NOK THOUSANDS
31.12.2023
31.12.2022
Loans to and receivables from credit institutions
568 248
547 868
Loans to and receivables from customers
19 087 779
19 215 147
Fixed-income securities
1 500 050
2 724 070
Financial derivatives
108 137
42 051
Loss write-downs stage 1
180
184
Total
21 264 394
22 529 319
24.4 LOANS FALLEN DUE OR WRITTEN DOWN
The Company has not incurred losses on lending. The company considers all receivables to be satisfactorily secured.
Loans fallen due or written down
NOK THOUSANDS
31.12.2023
31.12.2022
Principal on loans with payments overdue by 7-30 days
72 778
25 375
Principal on loans with payments overdue by 31-90 days
-
13 008
Principal on non-performing loans
-
-
Total loans fallen due
72 778
38 383
Relevant security or guarantees
72 778
38 383
Lending that has been written down
-
-
24.5 CONCENTRATION OF CREDIT RISK
The Company’s lending is in its entirety linked to public-sector financing, so the portfolio has a high concentration towards a single sector. The underlying credit risk from this sector is however so low that it is hardly possible to reduce this concentration without increasing the total risk in the portfolio. The concentration towards the Norwegian public sector is thus considered not to be a risk issue.
KLP Kommunekreditt AS’s largest borrower as at 31 December 2023 was approximately 4.7 per cent of the Company’s total lending.
Note 25 Market risk
Market risk is here understood to mean the risk of a reduction in the fair value of the -Company’s owners’ equity as a result of fluctuations in market prices for the Company’s assets and liabilities. Changes in credit margins are excluded as they fall under credit risk.
KLP Kommunekreditt AS is exposed to market risk as a result of the Company's borrowing and lending activity and management of its liquidity. The exposure is however limited to interest rate risk. Interest rate risk arises from differences in timing of interest rate adjustments for the Company’s assets and liabilities. The risk associated with such imbalances is reduced by using derivative contracts. All of the Company’s borrowing is in NOK, and the whole of the lending portfolio comprises loans in NOK.
25.1 MEASUREMENT OF MARKET RISK
Interest rate risk is measured as the change in value on a one percentage point change in all interest rates.
25.2 INTEREST RATE RISK
The market risk policy comprises the Company’s overarching guidelines, requirements and limits associated with market risk. The policy dictates that the market risk should be minimised so the total market risk is low. It further states that the Company should not actively take positions that expose it to market risk. The policy also sets limits for interest rate risk, both for the total interest rate risk for the indefinite future and for rolling 12-month periods. The risk limits are set to ensure that low market risk profile that has been adopted is adhered to. The operational responsibility for managing the Company’s market risk lies with the Finance Department. The Risk managment and Compliance Department reports the Company’s actual exposure in relation to limits in accordance with guidelines set by the Board.
Interest rate risk arises because the fixed interest periods for the Company’s assets and liabilities are not the same. The gap in the table below shows the difference between assets and liabilities that can be interest-adjusted within the given time intervals. The repricing date shows the time to the next agreed interest adjustment date. Floating-rate loans and deposits, and cash and receivables from credit institutions, fall into the time interval up to one month, while fixed-interest loans, securities and liabilities created on issuance of securities fall into the time interval for which interest adjustment has been agreed.
INTEREST-RATE RISK KLP KOMMUNEKREDITT AS
Repricing dates for interest-bearing assets and liabilities as at 31 December 2023
NOK THOUSANDS
Total Principal
Up to 1 mth
From 1 mth to 3 mths
From 3 mths to 12 mths
From 1 year to 5 years
Over 5 years
Loans to and receivables from credit institutions
568 248
568 248
-
-
-
-
Loans to and receivables from customers
18 895 059
15 572 638
1 609 536
225 767
1 193 628
293 491
Fixed-income securities
1 498 025
129 608
1 368 417
-
-
-
Total
20 961 332
16 270 494
2 977 953
225 767
1 193 628
293 491
Liabilities to credit institutions
700 000
700 000
-
-
-
-
Liabilities created on issuance of securities
19 253 000
5 000 000
12 553 000
1 000 000
700 000
-
Total
19 953 000
5 700 000
12 553 000
1 000 000
700 000
-
Gap
1 008 332
10 570 494
-9 575 047
225 767
493 628
293 491
Financial derivatives
-
-930 637
740 224
60 072
-162 680
293 022
Net gap
1 008 332
9 639 856
-8 834 823
285 839
330 948
586 513
Repricing dates for interest-bearing assets and liabilities as at 31 December 2022
NOK THOUSANDS
Total Principal
Up to 1 mth
From 1 mth to 3 mths
From 3 mths to 12 mths
From 1 year to 5 years
Over 5 years
Loans to and receivables from credit institutions
548 122
548 122
-
-
-
-
Loans to and receivables from customers
19 101 791
15 495 497
1 797 952
233 690
1 274 628
300 024
Fixed-income securities
2 709 804
171 000
2 350 500
188 304
-
-
Total
22 359 717
16 214 619
4 148 452
421 994
1 274 628
300 024
Liabilities to credit institutions
1 705 000
1 705 000
-
-
-
-
Liabilities created on issuance of securities
21 373 000
6 705 000
12 968 000
-
1 000 000
700 000
Total
23 078 000
8 410 000
12 968 000
-
1 000 000
700 000
Gap
-718 283
7 804 619
-8 819 548
421 994
274 628
-399 976
Financial derivatives
-
-931 130
817 268
73 568
-241 659
281 953
Net gap
-718 283
6 873 489
-8 002 280
495 562
32 969
-118 023
The Company’s interest rate sensitivity as at 31 December 2023 (2022), measured as value change in the event of one percentage point change in all interest rates, was NOK 4.7 (3.2) million.
Note 26 Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its obligations and/or finance increases in its assets without substantial additional costs arising in the form of price falls on assets which must be realised, or in the form of more costly financing.
26.1 MANAGEMENT OF LIQUIDITY RISK
The management of KLP Kommunekreditt’s liquidity risk must be viewed in the context of the management of the liquidity risk in the KLP Banken Group. A liquidity policy has been established for the Group containing principles, guidelines, requirements and limits that apply to the management of the liquidity risk. The policy states that the Group is to have a moderate liquidity risk profile and various requirements.The policy contains various requirements and limits to adhere to the desired liquidity risk profile, including targets for deposit cover, limits for refinancing needs for various timeframes and liquidity buffer requirements. The Board has also adopted an emergency plan for financial crises (including liquidity crises) as part of the Bank's recovery plan. In addition to the requirements at Group level, separate specific requirements have been established for KLP Kommunekreditt, including requirements for continuously positive cash flows, limits for refinancing requirements and requirements for liquidity reserves and drawing rights. The operational responsibility for managing the Company’s liquidity risk lies with the Finance Department. The Risk Management and Compliance Department reports the Company’s actual exposure in relation to limits in accordance with guidelines set by the Board.
26.2 MATURITY ANALYSIS
The tables below show the maturity analysis of the Company’s assets and liabilities including stipulated interest rates.
LIQUIDITY RISK KLP KOMMUNEKREDITT AS
Maturity analysis for assets and liabilities as at 31 December 2023:
NOK THOUSANDS
Total
Undefined
Up to 1 mth
From 1 mth to 3 mths
From 3 mths to 12 mths
From 1 year to 5 years
Over 5 years
Loans to and receivables from customers
21 657 560
-
57 546
199 073
1 071 815
6 098 069
14 231 056
Fixed-income securities
1 679 462
-
1 643
146 778
152 493
1 378 547
-
Loans to and receivables from credit institutions
568 248
-
354 371
213 878
-
-
-
Total
23 905 270
-
413 560
559 729
1 224 308
7 476 617
14 231 056
Liabilities created on issuance of securities
21 100 513
-
62 057
165 660
1 918 148
18 954 648
-
Financial derivatives
48 224
-
-11 842
3 095
33 648
16 895
6 427
Liabilities to credit institutions
737 761
-
2 863
1 522
11 571
721 804
-
Total
21 886 498
-
53 079
170 277
1 963 367
19 693 347
6 427
Net cash flow
2 018 773
-
360 481
389 452
-739 059
-12 216 730
14 224 629
Maturity analysis for assets and liabilities as at 31 December 2022:
NOK THOUSANDS
Total
Undefined
Up to 1 mth
From 1 mth to 3 mths
From 3 mths to 12 mths
From 1 year to 5 years
Over 5 years
Loans to and receivables from customers
23 023 578
-
95 932
240 075
1 030 010
5 246 445
16 411 115
Fixed-income securities
2 931 795
-
1 546
415 549
617 396
1 897 303
-
Loans to and receivables from credit institutions
547 868
-
342 637
205 231
-
-
-
Total
26 503 240
-
440 115
860 856
1 647 407
7 143 748
16 411 115
Liabilities created on issuance of securities
21 324 837
-
43 604
120 657
3 312 752
17 086 224
761 600
Financial derivatives
115 660
-
-9 370
279
36 024
69 316
19 412
Liabilities to credit institutions
1 784 372
-
4 227
3 180
24 727
1 752 236
-
Total
23 224 869
-
38 461
124 116
3 373 504
18 907 776
781 012
Net cash flow
3 278 372
-
401 653
736 740
-1 726 097
-11 764 027
15 630 103
A 24-month internal loan of NOK 700 million has been provided from KLP Banken AS to KLP Kommunekreditt AS, which is defined as “Liabilities to credit institutions”. This loan is rolled over currently every third month and the interest rate is set each month.
Note 27 Over-collateralisation
NOK THOUSANDS
Fair value
31.12.2023
31.12.2022
SECURITY POOL
Loans to customers
19 006 509
19 132 889
Financial derivatives (net)
84 952
112 913
Additional collateral 1)
4 196 638
3 974 463
Total security pool
23 288 100
23 220 266
Outstanding covered bonds incl. own funds and premium/discount
21 894 289
20 832 669
Coverage of the security pool
106.4%
111.5%
1) Additional collateral includes loans to and receivables from credit institutions, bonds and certificates.
Liquid assets used in the LCR liquidity reserve are not included in additional collateral.
Section 11-7 of the Regulations on Financial Institutions lays down a requirement for over-collateralisation by at least 2 percent of the value of the outstanding covered bonds.
Note 28 Hedge accounting
NOK THOUSANDS 31.12.2023
Nominal value
Changed value in hedged risk
Book value 31.12.2023
HEDGED OBJECT
Loan
1 661 635
-86 553
1 668 836
Debt
1 700 000
7 000
1 700 000
HEDGING INSTRUMENT
Interest rate swap loan
1 661 635
-7 868
89 294
Interest rate swap debt
1 700 000
86 783
-4 390
Hedge effectiveness as at 31.12.2023
99.2%
Hedge effectiveness through the year
99.2%
NOK THOUSANDS 31.12.2022
Nominal value
Changed value in hedged risk
Book value 31.12.2022
HEDGED OBJECT
Loan
1 788 972
-98 049
1 702 475
Debt
1 700 000
18 575
1 700 000
HEDGING INSTRUMENT
Interest rate swap loan
1 788 972
71 852
97 162
Interest rate swap debt
1 700 000
8 699
15 796
Hedge effectiveness as at 31.12.2022
101.4%
Hedge effectiveness through the year
101.4%
Note 29 Salary and obligations to senior management
2023 NOK THOUSANDS
Paid from KLP Kommunekreditt AS
Paid from another company in the same group
Salaries, fees etc.
Other benefits
Annual pension accumulation
Loans
Salaries, fees etc.
Other benefits
Annual pension accumulation
Loans
Interest rate as at 31.12.2023
Repayment plan 1)
SENIOR EMPLOYEES
Carl Steinar Lous, Department manager Public Market/Managing Director
-
-
-
-
1 547
24
309
3 244
4.70
A27/A39
BOARD OF DIRECTORS
Aage Schaanning, Chair
-
-
-
-
4 099
152
1 281
6 182
4.70
HC
Aud Norunn Strand
88
-
-
-
13
-
-
359
5.50
HC
Aina Iren Slettedal Eide (left the Board in March 2023)
-
-
-
-
-
-
-
-
-
-
Jannicke Elisabeth S. Falkenberg (from March 2023)
-
-
-
-
-
-
-
-
-
-
Jonas Vincent Kårstad, Chosen by and among the employeesin KLP Banken Group
-
-
-
-
126
-
-
-
-
-
EMPLOYEES
Total loans to employees of KLP Kommunekreditt AS
-
-
-
-
-
-
-
3 244
-
-
2022 NOK THOUSANDS
Paid from KLP Kommunekreditt AS
Paid from another company in the same group
Salaries, fees etc.
Other benefits
Annual pension accumulation
Loans
Salaries, fees etc.
Other benefits
Annual pension accumulation
Loans
Interest rate as at 31.12.2022
Repayment plan 1)
SENIOR EMPLOYEES
Carl Steinar Lous, Department manager Public Market/Managing Director
-
-
-
-
1 503
29
330
3 435
3.50
A27/A39
BOARD OF DIRECTORS
Aage Schaanning, Chair
-
-
-
-
3 912
144
1 377
9 600
3.50
HC
Aud Norunn Strand
85
-
-
-
12
-
-
3 000
4.15
HC
Aina Slettedal Eide
-
-
-
-
-
-
-
-
-
-
Kristian Lie-Pedersen, Chosen by and among the employees in KLP Banken Group
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-
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59
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-
-
-
-
Jonas Vincent Kårstad, Chosen by and among the employees in KLP Banken Group
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-
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70
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-
-
-
-
EMPLOYEES
Total loans to employees of KLP Kommunekreditt AS
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-
-
-
-
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3 435
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-
1) A= Annuity loan, last payment, HC=Home Credit.
The KLP Board of Directors has laid down principles and guidelines for remuneration that apply for the entire Group and set up a remuneration committee as a subcommittee of the Board.
The committee reports on and carries out checks that the remuneration schemes in the Group are in line with the Board's principles and guidelines.
Managing director is a contracted-in function from the parent company, KLP Banken AS, and the individual receives no benefits directly from KLP Kommunekreditt AS for the appointment. KLP Kommunekreditt AS refunds that part of the benefits associated with the role as managing director. The Managing Director has no agreement on performance pay (bonus) or guaranteed salary on termination. He is pensionable aged 70.
There are no obligations to provide the Chair of the Board of Directors special consideration or other benefits on termination or change in employment contract or appointment.
Directors’ fees are set by the General Assembly. Board members employed in the KLP Group, not having been elected by and from the employees, do not receive a fee for the Board appointment. Benefits in addition to Directors’ fees for Board members employed in the KLP Group are stated only if they are included in the senior management group employed in the KLP Group. This also applies to any loans they may have with the Group. Of the board members, Aage E. Schaanning, Jannicke Elisabeth S. Falkenberg, Aina Slettedal Eide, Kristian Lie-Pedersen and Jonas Vincent Kårstad are employed in the KLP Group.
All benefits are shown without the addition of social security costs.
The KLP Group offers loans for various purposes. There are separate loan terms for employees, and no senior employees have loan terms that deviate from these. Loans to external board members are only granted under ordinary loan terms. The interest rebate that accrues to employees is refunded to the lending company.
Attention is drawn otherwise to the description of the main principles on determination of remuneration in the KLP Group that may be found at klp.no.
Note 30 Number of FTEs and employees
KLP Kommunekreditt AS has two employees, but they do not receive any remuneration or other benefits from the Company. KLP Kommunekreditt AS buys personnel services from other companies in the KLP Group.
Note 31 Contingent liabilities
NOK THOUSANDS
31.12.2023
31.12.2022
Loan commitment
70 850
35 491
Total contingent liabilities
70 850
35 491
These are contractual payments to borrowers that are highly likely to be paid out.