Board of
IFRS Financial
Statements
Notes to the
Other
notes
Proposal for
The Auditor’s
Note
Accounting
material
Contents
Directors’ Report
Financial Statements
Distribution of Profits
The risk of changes in fair value is covered by a similar haircut
process throughout the Group. Risk Table 4 presents the amount
of collateral allocated to agreements after haircuts, thus possible
over collateralisation is not visible.
sponding to a risk scenario while the balance sheet structure
remains unchanged. The most central interest rate risk scenarios
tested by the Bank are the 1 percentage point parallel shift sce-
narios up/down, which are used in position management and the
so-called Supervisory Outlier Test scenarios by the European
Banking Authority, which are used in regulatory contexts.
RISK TABLE 4
Types of collateral, EURm
2024
2023
Governance and limit structure
Real property
Bank accounts
Custody accounts/securities
Guarantees
Other assets
Total
5,473.0
2.6
1.1
108.4
0.0
5,472.7
3.4
1.3
103.7
0.0
The Bank’s Board of Directors approves the market risk policy
and overall limits for market risk. The Board also decides on the
framework and strategy for managing interest rate risk and credit
spread risk in the banking book. In addition, the Board decides on
the general principles for managing and monitoring market risks
based on the market risk policy and delegated market risk limits
provided by the Group. The Bank actively manages market risks
within the limits approved by the Board of Directors. Trades
related to position management are executed in the Treasury and
Trading function of the Group.
5,585.1
5,581.2
Non-performing assets and forbearance
The Bank applied the same principles as the Group in non-per-
forming asset and forbearance loan management.
Measurement, monitoring and management reporting on market
risks are carried out in Risk Management. Market risk exposure is
calculated in a limit control system that is linked to the trading
systems. Limits are monitored systematically, and in case of limit
violations, follow-up procedures have been established. In addi-
tion, Risk Management monitors risk levels intraday.
The Group defines non-performing loans as facilities in stage 3.
For retail exposures, only impaired facilities are included in non-
performing loans. For non-retail exposures with one or more non-
performing loans, the entire amount of the customer’s exposure
is considered non-performing.
The Bank can make use of forbearance measures to assist the
customers in financial difficulties and to minimize credit losses.
Concessions granted to customers include interest-only sched-
ules, temporary payment holidays, term extensions, cancellation
of outstanding fees and in exceptional cases temporary interest-
reduction schedules. Because of the length of the workout pro-
cesses, the Group is likely to maintain impairments for forbear-
ance customers in stage 3 for several years even though cus-
tomer starts to pay back loan normally.
Market risk position and sensitivity
The Bank’s banking book interest rate risk arises primarily from
issued covered bonds, mortgages and derivatives hedging both
of these items. Also, the liquidity buffer bonds and short-term
funding have an impact on the interest rate risk. Positions in
scope for hedge accounting are detailed in Note 12: Derivatives.
The goal is to hedge the balance sheet in a way that interest rate
risk changes do not have essential impact on the Banks profit-
ability. During 2024 the Bank had only EUR denominated busi-
ness activities.
Forbearance plans must comply with the Group’s Credit Policy.
They are used as an instrument to maintain long-term customer
relationships during economic downturn if there is a realistic pos-
sibility that the customer will be able to meet obligations again.
The purpose of the plans is therefore to minimise loss in the
event of default.
The bank’s sensitivity to interest rates was at the year-end of
2024 as follows: net present value based interest rate risk of the
Bank in the scenario of parallel downward shift of one percent
across the yield curve is EUR -1.1 million (EUR -1.3 million). Cor-
respondingly, earnings based risk of the Bank in the scenario of
parallel shift of one percent across the yield curve is EUR -2.4 mil-
lion (EUR -3.8 million).
If it proves impossible to improve a customer’s financial situation
by forbearance measures, the Group will consider whether to
subject the customer’s assets to a forced sale or whether the
assets could be realised later at higher net proceeds.
Liquidity risk
Liquidity risk means the risk that the costs to obtain funds
become excessive, lack of financing prevents the Bank from
maintaining its current business model, or the Bank ultimately
cannot fulfil its payment obligations due to lack of funds. The
Board of Directors has approved a liquidity policy for the Bank.
The policy specifies the objectives, limits, calculation and respon-
sibilities of all parts of the Bank’s liquidity risk control and man-
agement.
In 2024 the number of concessions has been on the normal level.
Market risk
Market risk is defined as the risk of losses caused by changes in
the market value of financial assets, liabilities and off-balance
sheet items resulting from changes in market prices or rates.
Market risk in the Bank consists of the EUR interest rate risk and
credit spread risk in the banking book. Interest rate risk is com-
posed of yield curve risk, basis risk, and option risk arising from
reference rate floors on floating rate loans.
The Bank minimises the short term liquidity risk. The Bank con-
forms to the Liquidity Coverage Ratio (LCR) defined in Capital
Requirements Directive (CRD) and Capital Requirements Regula-
tion (CRR).
The Bank measures the effects of interest rate risk on valuation
changes based on net present value and earnings at risk. Net
interest income (NII) risk is measured as the projected loss of
earnings over a 12-month period upon a change in yields corre-
Structural liquidity risk is an inherent part of the Bank’s business
strategy, and it is managed in support of a cautious and conserv-
ative risk profile. When planning the funding structure, the Bank
DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2024
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