The risk that a counterparty or borrower fails to meet its contractual obligations towards Swedbank and the risk that the pledged collateral does not cover the claims. Credit risk also includes concentration risk and counterparty credit risk including settlement risk.
Credit risks are found both on the asset side of the balance sheet, mainly in the form of lending to customers, and off the balance sheet in the form of guarantees and credit commitments to customers, which may entail a future credit risk.
Swedbank maintains a well-diversified credit portfolio with a low-risk profile. Lending is made to customers with good repayment capability and with adequate collateral.
Swedbank’s customers are primarily private individuals, and small and medium-sized companies in several different sectors and segments, but also large corporates. Lending is focused on segments where the risks are predicted to stay low. Private mortgages, property management and tenant-owner associations constitute the largest segments in the lending portfolio. Geographically, the largest lending volumes are in Sweden, and the rest in the Baltic countries and in the other Nordic countries.
The business units are responsible for the operational credit management of their customers and own all credit risks that arise within their area of operation. The head of each unit is fully responsible for the credit operations, including applying the credit process and ensuring that the credit transactions are in line with Swedbank’s strategies, policies, and instructions. The business units are also responsible for the profitability linked to the credit decisions.
Responsible lending is a prerequisite for a well-functioning bank. In consumer and business lending, Swedbank takes responsibility by explaining risks and reviewing each customer’s long-term financial situation. Responsible lending also means verifying that customers can repay loans and withstand adverse economic conditions.
The credit portfolio and individual customers are continuously monitored, and risks are analysed. For portfolio segments and individual customers where the risk of default appears higher, reviews are performed more frequently. Each business unit is responsible for monitoring signals and conditions that might suggest that the level of credit risk in individual exposures has increased, e.g. by using information from integrated early warning systems. Swedbank works proactively with customers who are at risk of financial difficulties. The aim is to find a sustainable solution as early as possible and avert problems before they arise, which helps the customer and reduces Swedbank’s risk.