Classification of financial instruments
Financial assets and financial liabilities are recognised in the balance sheet at the date when the Group becomes a party to the contractual provisions of the instrument. A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or the company transfers the financial asset in such a way that risk and profit potential of the financial asset is substantially transferred. Financial liabilities are derecognised from the date when the rights to the contractual provisions have been extinguished, cancelled or expired.
CLASSIFICATION AND MEASUREMENT
The Group’s portfolio of financial instruments is at initial recognition classified in accordance with IFRS 9. Financial assets are classified in one of the following categories:
• Fair value with value changes through the income statement
• Amortised cost
The classification of the financial assets depends on two factors:
• The purpose of the acquisition of the financial instrument
• The contractual cash flows from the financial assets
Financial assets assessed at amortised cost
The classification of the the financial assets assumes that the following requirements are met:
• The asset is acquired to receive contractual cash flows
• The contractual cash flows consist solely of principal and interest
All lending and receivables are recorded in the accounts at amortised cost, based on expected cash flows. The difference between the issue cost and the settlement amount at maturity, is amortised over the lifetime of the loan.
Financial liabilities assessed at amortised cost
Debt securities, including debt securities included in fair value hedging, loans and deposits from credit institutions and deposits from customers without agreed maturity, are valued at amortised cost based on expected cash flows. The portfolio of own bonds is shown in the accounts as a reduction of the debt.
Financial instruments assessed at fair value, any changes in value recognised through the income statement
The Group's portfolio of bonds in the liquidity portfolio is classified at fair value through the income statement as this portfolio is managed based on fair value. The Group’s portfolio of fixed interest rate loans and deposits are assessed at fair value to avoid accounting mismatch in relation to the underlying interest rate swaps.
Financial derivatives are contracts signed to mitigate an existing interest rate or currency risk incurred by the bank. Financial derivatives are recognised at fair value through the income statement and recognised gross per contract as an asset or liability.
The Group’s portfolio of shares is assessed at fair value with any value changes through the income statement.
Losses and gains as a result of value changes on assets and liabilities assessed at fair value, with any value changes being recognised in the income statement, are included in the accounts during the period in which they occur.
LEVELS IN THE VALUATION HIERARCHY
Financial instruments are classified into different levels based on the quality of market data for each type of instrument.
Level 1 – Valuation based on prices in an active market
Level 1 comprises financial instruments valued by using quoted prices in active markets for identical assets or liabilities. This category includes listed shares and mutual funds, as well as bonds and certificates in LCR-level 1, traded in active markets.
Level 2 – Valuation based on observable market data
Level 2 comprises financial instruments valued by using information which is not quoted prices, but where prices are directly or indirectly observable for assets or liabilities, including quoted prices in inactive markets for identical assets or liabilities. This category mainly includes debt securities issued, derivatives and bonds which are not included in level 1.
Level 3 – Valuation based on other than observable market data
Level 3 comprises financial instruments which can not be valued based on directly or indirectly observable prices. This category mainly includes loans to and deposits from customers, as well as shares.
|GROUP - 30.06.2018||Financial instruments at fair value through profit and loss||Financial instruments assessed at amortised cost|
|Cash and claims on Norges Bank||75|
|Loans to and receivables from credit institutions||2 751|
|Loans to and receivables from customers||3 585||55 284|
|Certificates and bonds||7 394|
|Shares and other securities||203|
|Total financial assets||12 057||58 110|
|Loans and deposits from credit institutions||756|
|Deposits from and liabilities to customers||1 347||32 892|
|Debt securities||27 374|
|Subordinated loan capital and Additional Tier 1 capital||1 016|
|Total financial liabilities||1 722||62 038|
|GROUP - 30.06.2017||Financial instruments at fair value through profit and loss||Financial instruments assessed at amortised cost||Financial instruments held available for sale|
|Trading||At fair value|
|Cash and claims on Norges Bank||1 174|
|Loans to and receivables from credit institutions||643|
|Loans to and receivables from customers||4 285||51 755|
|Certificates and bonds||6 152|
|Shares and other securities||-||153|
|Financial derivatives||1 082|
|Total financial assets||1 082||10 437||53 572||153|
|Loans and deposits from credit institutions||784|
|Deposits from and liabilities to customers||1 300||32 214|
|Debt securities||23 192|
|Subordinated loan capital and Perpetual Hybrid Tier 1 capital||1 360|
|Total financial liabilities||441||1 300||57 550||-|
|Net gains/losses on financial instruments|
|Q2 2018||Q2 2017||30.06.2018||30.06.2017||31.12.2017|
|Certificates and bonds||-6||6||-3||22||23|
|Foreign exchange trading (for customers)||10||11||19||20||38|
|Fixed income trading (for customers)||4||1||6||3||4|
|Net change in value and gains/losses from financial instruments||24||13||29||36||46|