B Risk management

IFRS consolidated financial statements, notes related to risk management

The principles, role and responsibilities of risk management

Finnvera’s operational objectives in financing the growth, internationalisation and exports of enterprises and the strategies to achieve these objectives form the foundation of risk management. Finnvera supplements the financial market and takes greater credit risks than providers of financing operating on commercial grounds. Credit risk is the principal risk segment for the Finnvera Group. Other key risks are liquidity and market risks as well as operational risks associated with activities.

The task of risk management is to identify risks and to help Finnvera’s management in managing risks that could jeopardise the attainment of the company’s objectives. Risk management is of central importance for maintaining the Finnvera Group’s ability to take risks and for attaining the company’s long-term economic objectives. Finnvera’s Board of Directors and senior management are responsible for arranging and organising internal control and risk management. The company’s Board of Directors approves the principles of risk management, risk appetite, credit policy and decision-making powers, among other things.

In internal control and risk management, Finnvera applies a “three lines of defence” model. According to the model, business areas and other operations at the first line of defence own risks and are primarily responsible for risk management. The second line of defence is Risk Control, working independently of Finnvera’s business areas and responsible for the development of the methods and guidelines of risk management and for the monitoring of the Group’s risk position. Together with the business units, Risk Control is responsible for the development and maintenance of risk classification systems and for monitoring the functioning of these systems. In addition, Risk Control constantly assesses risks and reports its views to the Chief Executive Officer and the Board of Directors. The third line of defence is internal auditing which reports directly to the Board of Directors.

Risk appetite and risk policies

Finnvera has defined risk appetites for all major risk types. Finnvera’s risk appetite has been determined so that the company meets the ownership and industrial policy objectives in the medium and long term in relation to risk buffers and earnings power. The main credit risk indicators are the level of capital adequacy, the internal capital requirement and the expected loss of the credit portfolio. As for liquidity risk, Finnvera secures liquidity for a period defined in advance so that the financing of export credits and lending to domestic SMEs can be managed. Regarding market risks, Finnvera does not take visionary interest rate or currency risks and strives to keep the risk within defined limits. The risk appetite for operational risks has been derived from the ISO 9001 quality standard used by the company and from compliance with external requirements, taking into account the cost-quality ratio.

The State compensates Finnvera for some of the losses incurred in SME financing. During the economic cycle, the company must cover its share of domestic credit and guarantee losses incurred with cash flow financing. Apart from the buffer of accumulated equity, the State Guarantee Fund and the State of Finland secure the foreign country, bank and enterprise risks associated with export credit guarantee operations. In the long term, profits from operations must cover the expenses and guarantee losses arising from operations. Finnvera takes credit risks in a controlled manner and hedges against other risks or minimises them. Some of the investments in subsidiaries consist of capital invested by the State through the parent company, while some is capital invested directly by the parent company.

Risk-taking pertaining to SME financing is steered by means of the credit policy and business area specific risk-taking targets that take into account, among other things, differences in the clientele and the operating environment. Finnvera’s risk-taking is based on targets set by the owner for impact and profitability. Risk-taking pertaining to financing is steered by means of the credit, guarantee and country policies ratified by the Board of Directors. Instruments such as reinsurance or credit derivatives may be used to hedge some credit risks in export credit guarantee operations.

Finnish Export Credit is Finnvera’s subsidiary, the tasks of which are to finance Finnish exports by granting officially supported export and ship credits that are in line with the OECD Arrangement on Officially Supported Export Credits, as well as to manage the related interest equalisation system. The subsidiaries are controlled by the parent company and fall within the scope of risk management and internal auditing practised in the Group.

Credit and guarantee risks and risk classification systems

The risk of a credit loss arises when a debtor or another counterparty does not meet its obligations. In SME financing, the reason for credit losses is usually the insolvency of a corporate client. In the case of export credit guarantees, a guarantee loss may stem from the inability or unwillingness of a country, bank or corporate client to meet their payments.

Management of credit risks in SME financing is based on the assessment of each enterprise. Finnvera applies a risk rating system of eight categories, which is based on long-term observation of insolvency events for each risk category. The scale in use has seven categories for operating enterprises and one for insolvent enterprises. When a decision on financing is made, the account manager is responsible for assessing the credit risk, for giving the client the risk rating and for drafting the financing proposal. The Credit Decision Unit participates in the assessment of risk rating in conjunction with decision-making. The risk rating of Finnvera’s client enterprises is updated at least every second year and when new projects are introduced.

For granting export credit guarantees, Finnvera classifies countries into eight OECD categories. The classification is based on methods used by export credit agencies. Various factors affect the determination of the country category: assessment of the country’s ability to manage its external liabilities, expectations of the future trend of the country’s economy, and political stability and the legislative framework. The granting of export credit guarantees is based on country policy. Each country for which Finnvera can grant export credit guarantees is assigned one country policy out of four policy categories (A–D). Finnvera keeps a close eye on the economic and political situations of countries and makes adjustments to its country policy depending on the changes that have occurred. The category of each country is reviewed at least once a year.

The taking of bank risks is based on an assessment of each country’s banking system and on the risk analyses and risk ratings of individual banks. On the basis of both qualitative and quantitative factors, a risk-taking outline is determined for each individual bank, depending on the risk category. The risk rating of banks is updated whenever needed and always when new projects are introduced.

The taking of enterprise risks is based on an analysis of the enterprise’s management, business and finances. The analysis may be concise in the case of small and short-term guarantees. The enterprise analysis is conducted for domestic projects by the account manager and for export credit guarantee projects by an analysis team independent of business operations. The analysis results in internal risk classification, which is updated when new projects are introduced or otherwise at least once a year. The aim has been to calibrate the risk classification scale so that it is consistent with the scales used by international risk rating agencies.

The credit rating of enterprises is based on the Probability of Default (PD), the Loss Given Default (LGD) and the exposure at default. Finnvera’s financial products are mainly loans, loan guarantees and export credit guarantees. Owing to the nature of the products, it is justified to assume that the disbursed exposure is fully in use at the time of default. In the model for SME financing, the Loss Given Default is the exposure minus the value of collateral pledged, whereas in the model used for export credit guarantees, losses are estimated empirically. In the model for SME financing, the Probability of Default is based on Finnvera’s own historical data, accumulated for over 20 years, on the probabilities of default in various risk categories. There are considerably fewer loss events in export credit guarantee operations, so the probabilities of default have been derived from the data published by international credit rating agencies. Risk Control monitors the functioning of the risk classification models regularly, and amendments improving them are made whenever necessary.

The credit risk models are utilised, for instance, for the following:

  • assessment and pricing of credit risks when credits are granted
  • definition of credit policies
  • determination of the authority to make financing decisions
  • setting and monitoring qualitative objectives for the credit portfolio
  • risk reporting on the credit portfolio
  • internal assessment of capital adequacy and calculation of the expected loss.

In connection with the proposal for financing, the account manager or the credit risk analyst conducts credit rating using a rating tool suited for assessing the qualitative and financial factors of the risk object. The model generates a risk score (0–100) for the object, and that score determines the risk category. In addition to the model, SME financing uses, for minor risks and as a control, a so-called mechanical risk category that is based on financial key indicators and the client’s earlier payment behaviour with Finnvera. The risk category is determined when a proposal for financing is made is confirmed in connection with the financing decision. Whenever necessary, Risk Control gives its opinion on the risk ratings of the largest exposures.

The account manager is responsible for updating the risk rating. The system sends an update request automatically on the basis of certain criteria or when the validity of the rating has expired.

Correspondence between Finnvera’s rating categories and the rating used by S&P1
             
S&P rating AAA…AA- A+…BBB+ BBB…BBB- BB+…BB- B+…B- C
Finnvera A1 A2…A3 A3-…B1 B1-…B2 B2-…B3 C
1 Because of differences in the rating methods, the comparison with the S&P rating is only suggestive
             
             

Financing decisions are made by the Board of Directors and according to the authorisations delegated by the Board so that the amount of exposure and risk have an impact on the decision-making level. Finnvera’s Credit Committee makes decisions under its own authority, discusses proposals submitted to the Board of Directors for decision-making, and handles issues requiring a specific policy. The Credit Committee is chaired by the CEO. The Head of the Credit Decision Unit serves as the Vice Chair. Risk Control takes part in the Credit Committee’s work.

Monitoring of credit risks

Client monitoring takes place through annual analysis of the client enterprise’s financial statements, regular contacts with the client and through monitoring of the client’s payment behaviour and operations. In its monitoring, Finnvera utilises data from its own control systems, from beneficiaries of domestic guarantees and export credit guarantees, and from public registers on payment defaults. Elevated client risks are taken under special monitoring, and a special monitoring report on the most elevated client risks is drawn up every six months. The probability of credit losses and any needs for write-downs are assessed at the same time. In 2018, Finnvera will adopt the IFRS9-compliant write-down procedure.

The concentration of risks in counterparties, sectors and countries is monitored regularly. Owing to the purpose of the company’s operations, it is challenging to set precise limits for these risks. Risk appetite defines, in principle, maximum exposures for corporate counterparties and for country-related concentration risks. In SME financing, the credit policy defines the maximum exposure of an individual counterparty. Decisions greater than this maximum must be justified separately to the company’s Board of Directors and, whenever necessary, to the State owner. In export financing reinsurance agreements are used to hedge against risks associated with individual counterparties and concentrations.

Counterparty risks also arise in connection with asset and liability management operations. Finnvera’s goal is to keep the counterparty risks of asset management low by setting counterparty-specific limits, by concluding netting and security arrangements associated with derivative contracts, and by working with counterparties with high credit ratings.

Risk Control provides the Board of Directors and the management with quarterly reports on the risk-taking realised in relation to risk appetite and goals. In addition, the company’s reporting system generates constant reporting based partly on daily data and month-specific data. The main indicators in Finnvera’s risk management are the distribution of the current credit and guarantee exposure and the change in exposure by risk category, payment delays and non-performing receivables. In SME financing, the LGD estimate is largely based on the value of collateral, whereas in export credit guarantees, it is based on a separate estimate of recoveries. The level of risk-taking in relation to outstanding exposure, financing granted, and export credit guarantees is described by using the anticipated statistical value of credit losses (anticipated loss), the total loss, and the credit losses realised. These are reported quarterly. When estimating the total loss, Finnvera uses a VaR confidence interval of 99.5%.

Interest rate and currency risk

At Finnvera, interest rate risks arise when interest rates for borrowing and lending are determined at different times and when there are structural interest rate risks associated with equity. The interest rate of domestic lending intended for SMEs is mainly based on the 6-month Euribor. The interest rate in export financing is based either on the 6-month Euribor or on the 6-month USD-LIBOR. Interest determination dates are distributed fairly evenly over the various banking days throughout the year. Borrowing takes place in larger individual sums, and often with a fixed interest rate.  In the event that borrowing is based on a reference rate other than the 6-month Euribor (or USD-LIBOR), the reference rate is converted to the 6-month Euribor (or USD-LIBOR) by using interest rate swaps when the loan is taken. The interest rate risk arising from differences in the timing of interest determination dates between borrowing and lending is controlled by striving to distribute the interest determination dates for borrowing evenly over different months.

Structural interest rate risks arise when Finnvera’s own funds, classified as being interest-free, are used in lending as one source of funding. Finnvera monitors the consequent interest rate risk and, if necessary, hedges this risk. The company’s Board of Directors has determined that the target for return on equity is based on the 6-month Euribor, which governs the size of the structural interest rate risk.

The entire lending portfolio of Finnvera’s SME financing is denominated in euros, whereas export financing uses both euros and dollars. Finnvera acquires funds from a number of markets and in a number of currencies. To control the currency risk, the funds acquired are converted into euros or dollars by using currency swaps. Cash assets are also invested in the relevant currencies. The remaining currency risk is hedged using currency derivatives, if necessary.

Finnvera’s goal is to keep both the interest rate risk and the currency risk low.  Risks are monitored actively, and the company’s management and the Board of Directors receive regular reports on them.

Liquidity risk

Finnvera acquires long-term funding mainly within the EMTN programme. The programme is guaranteed by the State and has the same credit rating as the State of Finland. The company can also make use of a domestic commercial paper programme. These help distribute the acquisition of funds across several markets and investors.

Finnvera’s Board of Directors approves the principles of liquidity management. According to these principles, the liquidity buffer must at any given time cover the payments scheduled for the next 12 months. The principles also determine how much underfunding the company can accept in the longer term. Liquid assets are invested in objects that have a high credit rating Finnvera’s Asset Management is responsible for practical tasks associated with borrowing and liquidity management. The company’s accumulated own funds are an important element of the acquisition of funds for lending.

The potentially high claims arising from export credit guarantee operations may lead to a sudden need for liquidity that is greater than normal. Sudden changes in the financial markets may also impair the availability of financing. To prepare for the realisation of such liquidity risks, Finnvera has entered into contractual arrangements, for instance, with the State Guarantee Fund and the State of Finland.

Market risk

Finnvera does not trade in instruments subject to the effect of market prices. However, a small amount of market risk arises on the balance sheet when liquid assets are invested and when measures are taken to hedge against currency and interest rate risks. The aim is to invest liquid assets in instruments where investments can be kept until maturity. Since the investments are classified as available for sale, changes in market prices do not affect Finnvera’s financial performance.  Effort is also made to hedge risks so that the net effect of market changes on financial performance would be slight.

Operational risks

An operational risk is a risk of loss caused by insufficient or inoperable internal processes, systems, human resources or external events. Operational risks also include legal risks and the risk of damage to reputation. Loss resulting from an operational risk may materialise as higher costs, lower profits or lost reputation, for instance.

The management of operational risks has been developed systematically since 2006, and events caused by operational risks have been registered since the beginning of 2007. The process owners and units are responsible for developing the management of operational risks.  The development of information security is steered and monitored by a separate Information Security Group, with the Security Manager and IT Manager, among others, as its members. Risk Control supports and coordinates the development of operational risk management. Potential risks have been charted and the severity of any consequences they might involve has been assessed for all business areas and support units. In addition, Finnvera has drawn up risk scenarios that, if realised, would have serious consequences for the company’s operations. Responsibility for the implementation of actions to avert the risk scenarios and other severe risks has been divided between the various organisational units in line with their tasks. The management of operational risks is closely linked to Finnvera’s continuous improvement of quality. Finnvera has an ISO 9001 quality certificate and meets the requirements set by central government for the increased level of information security.  Safeguards are taken against operational risks, for instance, by introducing internal control mechanisms, by developing processes, information systems and the quality of operations, and by taking out insurance against risks.

Finnvera has a compliance function that is independent of business operations and responsible for ensuring that the company’s operations are in compliance with regulations.

Operational risks realised are registered into the management system of operational risks through a risk event portal that is accessible to the entire personnel. The reasons leading to the events and the measures taken to prevent the recurrence of similar events are described in the application. Finnvera’s management and Board of Directors receive regular reports on operational risks realised.

Venture capital investments

Within the Finnvera Group, venture capital investments are carried out by Veraventure Ltd and ERDF-Seed Fund Ltd. Investments made in these companies fall within the scope of Finnvera’s credit risk monitoring.

Risk management by the subsidiaries engaged in venture capital investments is based on enterprise analysis, limiting the size of investments, sharing the risk with other investors, and on sufficient diversification of the investment portfolio. The principles for liquidity investment are the same as those applied by the parent company.

The companies engaged in venture capital investments comply with the recommendations issued by the European Venture Capital Association (EVCA) on the valuation of portfolio companies and fund investments. Investments are carried at fair value in accordance with the above-mentioned recommendations.

Capital management, capital adequacy and external risk weight

Finnvera calculates its capital adequacy for SME financing according to the principles of the Basel III standard method even though Finnvera is not officially required to apply this method. Owing to the nature of its business, Finnvera must ensure that the amount of equity is sufficient in relation to the credit risks taken. The Ministry of Economic Affairs and Employment has set a goal of 12–20 per cent for Finnvera’s capital adequacy. Finnvera assesses the adequacy of capital through an internal process that includes, among other things, stress tests and scenario analyses, aimed at anticipating unfavourable circumstances.

Economic capital is calculated using a credit risk model that corresponds to the models generally used by banks. The model considers the probability of default for the risk objects and the loss resulting from the exposure should the default be realised. Internally, Finnvera’s aim is to attain as much economic capital as is needed to cover the annual losses arising from credit risks and counterparty risks with a certainty of 99.5 per cent. In addition, capital is reserved for operational risks.

Equity and retained earnings are allocated to the reserve for domestic operations and to the reserve for export credit guarantee and special guarantee operations. The State provides direct support for Finnvera’s domestic financing by paying credit and guarantee loss compensation for some of the credit losses incurred by Finnvera. At present, the compensation for credit and guarantee losses ranges from 35 to 75 per cent, depending on the project. The average is about 55 per cent of the outstanding credit and guarantee exposure. In export credit guarantee operations, the State of Finland is responsible, through bodies such as the State Guarantee Fund, for the losses that may arise during the financial period and exceed the assets in the reserve for export credit guarantee operations.

It has been ensured through legislation that, in the capital adequacy calculations of banks, the risk weight of Finnvera’s guarantees is the same as that applied to the liability of the State of Finland.

B1 Credit risks
  Finnvera Group
(EUR 1,000) 31 Dec 2017 31 Dec 2016
Receivables    
Loans to and receivables from credit institutions - payable on demand 1,036,499 892,555
Loans to and receivables from credit institutions - other 28,279 29,936
Loans to and receivables from customers 5,846,190 6,078,034
Investments - Debt securities 3,059,716 2,042,422
Derivatives 1 919 -4,565
Total 9,971,603 9,038,382
Contingent liabilities 2 19,008,094 14,847,002
                 
The format of the disclosure has been changed from previous years. The line itmes shown in the table have been updated to conform with the line items presented in the balance sheet. Comparative figures have been updated to reflect the new disclosure format.
1 Derivative receivables presented are the sum of net receivables per derivative counterpaty. Presentation has been changed from the previous year, the net receivable is adjusted with cash collateral received. The comparative figure has been changed accordingly. Accrued interest is not included in the market value. The net receivable before the adjustment of cash collateral received was EUR 34,0 million (EUR 40,8 million). Cash collateral received was EUR 33,1 million (EUR 45,4 million).
2 A more detailed analysis in Contingent liabilities.
                 
Debt securities by credit rating grades and sector
 
  Finnvera Group Finnvera Group
  31 Dec 2017 31 Dec 2016
(EUR 1,000) Credit institutions Corporates Governments/ Municipalities Total 1 Credit institutions Corporates Governments/ Municipalities Total 1
Risk class                
A1 957,592 34,492 466,843 1,458,927 422,921 8,996 97,211 529,128
A2 1,244,830 30,489   1,275,319 1,166,957 28,985   1,195,942
A3 60,350 5,999   66,349 41,128     41,128
B1 62,033 168,455   230,488 48,069 170,940   219,009
Total 2,324,804 239,435 466,843 3,031,083 1,679,074 208,921 97,211 1,985,206
1 SME-debt securities EUR 28,6 million (EUR 57,2 million) are excluded from the figures presented as they are included in the "SME and midcap Financing" section below.
                 
                 
SME AND MIDCAP FINANCING
 
B2 Receivables from customers and guarantees whose value has not impaired
                 
  31 Dec 2017 31 Dec 2016
(EUR 1,000)   %   %
Risk class        
A1 1,140 0 802 0
A2 7,355 0 5,025 0
A3 66,102 3 69,421 3
B1 316,535 14 346,643 15
B2 1,239,986 57 1,273,190 56
B3 453,753 21 498,082 22
C 49,409 2 48,000 2
D 49,394 2 42,319 2
Total 2,183,674 100 2,283,482 100
                 
                 
B3 Receivables from customers and guarantees by industry
                 
(EUR 1,000) 31 Dec 2017   31 Dec 2016
Rural trades 42,966   39,158
Industry 1,150,514   1,251,267
Tourism 175,120   180,335
Services to business 478,343   584,503
Trade and consumer services 336,731   228,219
Total 2,183,674   2,283,482
                 
                 
B4 Loans and guarantees by area
                 
(EUR 1,000) 31 Dec 2017   31 Dec 2016
Finland 2,183,674   2,283,482
Total 2,183,674   2,283,482
                 
                 
B5 Loans and guarantees, collateral shortage
                 
  31 Dec 2017
(EUR 1,000) Amount of commitment Amount of collaterals Collateral shortage Collateral shortage-%
Total 2,183,674 441,102 1,742,572 80
                 
  31 Dec 2016
  Amount of commitment Amount of collaterals Collateral shortage Collateral shortage-%
Total 2,283,482 525,201 1,758,281 77
                 
                 
B6 Impaired loans and guarantees for which a guarantee provision has been made
 
(EUR 1,000) 31 Dec 2017   31 Dec 2016
  Total   Total
Impairment losses on individually assessed loans and guarantee provisions      
Loans      
- Commitment before the impairment 67,645   63,926
- Impairment loss 22,412   19,987
- Commitment after the impairment 45,233   43,939
Export guarantees      
- Commitment before expert guarantee provision 6,837   11,409
- Export guarantee provision 6,422   9,754
- Commitment after export guarantee provision 415   1,655
Guarantees      
- Commitment before the guarantee provision 57,594   50,849
- Guarantee provision 19,554   17,302
- Commitment after the guarantee provision 38,040   33,547
Impairment losses on collectively assessed loans and guarantee provisions      
Loans      
- Commitment before the impairment 58,471   65,036
- Impairment loss 21,937   24,685
- Commitment after the impairment 36,535   40,351
Guarantees      
- Commitment before the guarantee provision 35,158   38,862
- Guarantee provision 12,679   14,878
- Commitment after the guarantee provision 22,479   23,984
                 
                 
B7.1 Doubtful receivables
                 
(EUR 1,000) 31 Dec 2017   31 Dec 2016
Receivables that are more than 90 days overdue 109,903   97,655
Classified as insolvent 118,509   129,818
Individually and collectively assessed impairment losses 1 -85,760   -87,853
Doubtful receivables net 142,652   139,619
       
0-interest credits 15,006   16,367
                 
Doubtful receivables are defined according to the definition of the European Banking Authority that entered into force in 2015.
1 All individually and collectively assessed impairment losses pertain to doubtful receivables.
                 
                 
B7.2 Past due receivables
                 
(EUR 1,000) 31 Dec 2017   31 Dec 2016
1 day–3 months 18,016   13,970
3–6 months 15,825   7,937
6–12 months 11,746   10,671
Over 12 months 46,940   59,867
Total 92,527   92,444
                 
Past due receivables comprise any interest payments, loan instalments, guarantee commissions and outstanding guarantee receivables that are unpaid at the balance sheet date for all current commitments, including loans subject to any impairment.
Past due receivables that are more than 90 days overdue are included in doubtful receivables.
                 
                 
EXPORT FINANCING
                 
B8 Enterprise, sovereign and bank commitments by risk category
                 
(EUR 1,000)       31 Dec 2017       31 Dec 2016
Risk category Sovereigns Enterprise commitments Bank commitments Total Sovereigns Enterprise commitments Bank commitments Total
A1   550,000 69,870 619,870   458,375 91,677 550,052
A2   137,091 368,860 505,952   0 334,142 334,142
A3   4,585,500 29,439 4,614,940   2,007,549 62,840 2,070,390
B1   8,791,875 83,674 8,875,548   2,776,409 44,480 2,820,888
B2   6,114,599 297,558 6,412,158   9,741,535 439,941 10,181,476
B3   674,993 106,293 781,286   1,772,574 68,094 1,840,668
C   151,056 15,889 166,945   9,400 601 10,000
D   7,883 0 7,883   2,428 0 2,428
No classification 276,486 169,476 0 445,961 319,138 167,655 1,718 488,511
Total 276,486 21,182,473 971,583 22,430,542 319,138 16,935,924 1,043,494 18,298,556
                 
                 
B9 Enterprise, sovereign and bank commitments by country category
                 
Country category (EUR 1,000) 31 Dec 2017   31 Dec 2016
0 16,644,526   11,732,702
1 45   344
2 862,505   1,060,971
3 1,213,366   1,499,986
4 1,706,086   1,734,332
5 1,606,088   1,815,614
6 326,346   365,964
7 71,580   88,643
Total 22,430,542   18,298,556
                 
                 
B10 Bank, enterprise, sovereign and political commitments by sector
                 
(EUR 1,000) 31 Dec 2017   31 Dec 2016
Telecommunications 4,092,485   3,993,867
Shipping companies 12,814,165   8,379,620
Wood processing 1,939,847   2,454,781
Metal industry and ore mining 310,331   255,311
Power generation 666,827   404,190
Other 610,629   672,297
Reinsurance 748,189   775,858
Sovereign and political commitments 276,486   319,138
Banks and financing 971,583   1,043,494
Total1 22,430,542   18,298,556
1The maximum idemnity amount of reinsurance arrangements valid at the end of the year was EUR 928,190 thousand (EUR 925,858 thousand).
                 
                 
B11 Liquidity risk, maturity of assets and liabilities
                 
The format of the disclosure has been changed from previous years, the comparative information has not been updated. The table for 31 dec 2017 presents the undiscounted cash flows for the items presented including interest. The table for 31 Dec 2016 shows the maturities of the nominal amounts without interest. Additionally the line itmes shown in the table for assets have been updated to conform with the line items presented in the balance sheet.
  Finnvera Group
(EUR 1,000) < 3 months 3–12 months 1–5 years 5–10 years > 10 years Total Carrying amount
31 Dec 2017              
Assets              
Loans to and receivables from credit institutions - Payable on demand 945,156 91,888 0 0 0 1,037,044 1,036,499
Loans to and receivables from credit institutions - Other 2 1,117 1,104 8,463 9,621 3,550 23,855 20,659
Receivables from customers - Loans 255,423 904,374 3,442,453 1,357,620 128,368 6,088,238 5,692,490
Debt securities 1,041,935 618,227 1,399,173 0 0 3,059,335 3,059,716
Total 2,243,631 1,615,592 4,850,089 1,367,242 131,918 10,208,472 9,816,984
               
Liabilities              
Liabilities to credit institutions 0 -27,593 -105,043 -73,157 0 -205,793 -187,609
Liabilities to others -76,778 -298,312 -1,149,429 -364,103 0 -1,888,622 -1,773,680
Debt securities in issue 0 -274,880 -3,715,023 -1,551,869 -1,418,595 -6,960,367 -6,483,055
Subordinated liabilities 0 0 0 -7,500 0 -7,500 -7,500
Total -76,778 -600,784 -4,969,495 -1,996,630 -1,418,595 -9,062,283 -8,451,845
Derivatives              
Derivatives - receivables 1,047 24,162 57,844 -2,323 32,118 112,848 79,792
Derivatives - liabilities -10,467 -32,142 71,450 101,965 68,906 199,712 -138,321
Total, net -9,420 -7,980 129,294 99,642 101,024 312,561 -58,529
Assets, liabilities and derivatives, net: 2,157,433 1,006,828 9,888 -529,746 -1,185,653 1,458,750 1,298,990
Credit commitments 4 -577,542 -1,526,936 -4,465,217 -1,205,947 0 -7,775,642  
Assets, liabilities and derivatives, net: 1,579,891 -520,108 -4,455,329 -1,735,693 -1,185,653 -6,316,892 1,298,990
               
Guarantees and export credit guarantees 1              
Guarantees 109,250 324,184 554,610 107,435 2,367 1,097,846  
Export credit guarantees 274,529 2,501,266 4,913,435 2,248,370 0 9,937,600  
 
(EUR 1,000) < 3 months 3–12 months 1–5 years 5–10 years > 10 years Nominal value Carrying amount
31 Dec 2016              
Assets              
Receivables from credit institutions 2 869,006 861 6,886 8,608 5,165 890,527 890,527
Receivables from credit institutions, debt securities 3 335,220 329,500 1,021,800 0 0 1,686,520 1,694,569
Receivables from customers 141,005 525,533 2,657,720 1,407,732 84,742 4,816,732 4,817,048
Debt securities 243,000 47,700 0 0 0 290,700 290,636
Total 1,588,231 903,594 3,686,406 1,416,340 89,907 7,684,478 7,692,780
Liabilities              
Liabilities to credit institutions 0 0 -106,726 -106,726 0 -213,452 -213,452
Liabilities to others -90,031 -271,982 -1,386,132 -572,688 -16,752 -2,337,585 -2,337,585
Debt securities in issue 0 -284,603 -1,933,708 -2,474,338 -157,027 -4,849,676 -4,891,873
Subordinated liabilities 0 -50,000 0 -5,025 -15,000 -70,025 -70,025
Total -90,031 -606,585 -3,426,566 -3,158,777 -188,779 -7,470,739 -7,512,936
Derivatives              
Derivatives - receivables 194,065 394,803 2,246,724 2,474,338 157,027 5,466,957 110,649
Derivatives - liabilities -204,391 -373,071 -2,392,968 -2,474,338 -155,190 -5,599,957 -208,334
Total, net -10,325 21,732 -146,244 0 1,837 -133,001 -97,685
Assets, liabilities and derivatives, net: 1,487,874 318,740 113,597 -1,742,437 -97,035 80,739 82,160
Credit commitments 4) -504,119 -811,021 -2,544,122 0 0 -3,859,263  
Assets, liabilities and derivatives, net: 983,755 -492,281 -2,430,526 -1,742,437 -97,035 -3,778,524 82,160
               
Guarantees and export credit guarantees 1              
Guarantees 105,579 313,291 535,984 103,841 2,289 1,060,984  
Export credit guarantees 637,538 1,672,417 7,798,143 5,372,345 2,945,733 18,426,175  
 
1 The guarantees in the table have been broken down according to their due dates. An individual guarantee may give rise to indemnity at any time during its period of validity. There is no historical information as to when such indemnities have been realised during the life cycle of a guarantee.In the table for 2017, export credit guarantees do not include export credit guarantees that correspond to the subsidiary’s undrawn credit commitments (undrawn credit commitments are presented as a separate line in the table), guarantees for the subsidiary’s drawn export credits (drawn loans are included in loan receivables from client), or offer-stage guarantees (guarantee offers). The table for 2016 has not been adjusted to correspond with the presentation for 2017.
2 The figure does not include the ERDF assets deposited, EUR 7,620 thousand (EUR 7,555 thousand). Their use is regulated separately.
3 Investments in debt securities issued by credit institutions.
4 Undrawn credit commitments are presented in the period when the loans are expected to be drawn. The figure for 2016 does not include SME financing’s credit commitments.
 
 
B12 Market risk sensitivities
                 
  Finnvera Group
(EUR 1,000) 31 Dec 2017   31 Dec 2016
Interest rate risk      
Market interest increase 1%      
- Change in net interest income during the next 12 months 17,160   14,910
- Changes in items carried at fair value 14,332   9,183
Market interest decrease 0,1%      
- Change in net interest income during the next 12 months -1,716   -1,491
- Changes in items carried at fair value -1,433   -918
Currency risk      
The USD strengthens by 10% against the euro 536   -481
The USD weakens by 10% against the euro -439   393