DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

Contents

DANSKE MORTGAGE BANK PLC

BOARD OF DIRECTORS’ REPORT 2021................................... 3

Financial Highlights............................................................................10

Corporate Governance.....................................................................12

Risk Management Disclosure......................................................15

IFRS FINANCIAL STATEMENTS.................................................22

Statement of Comprehensive Income.....................................22

Balance sheet........................................................................................22

Statement of changes in Equity ..................................................23

Cash Flow Statement........................................................................24

NOTES TO THE FINANCIAL STATEMENTS.........................25

Summary of Significant Accounting

Policies and Estimates.....................................................................25

SEGMENT INFORMATION.............................................................27

OTHER NOTES ......................................................................................28

DANSKE MORTGAGE BANK PLC’S BOARD OF

DIRECTORS’ PROPOSAL TO THE ANNUAL

GENERAL MEETING FOR THE DISTRIBUTION

OF PROFIT AND SIGNING OF

ANNUAL REPORT 2021 ................................................................54

THE AUDITOR’S NOTE .....................................................................55

ACCOUNTING MATERIAL 2021 ...............................................56

Danske Mortgage Bank Plc is a Finnish bank, which is part of the Danske Bank Group. Danske Bank Group is one of the

largest ﬁnancial enterprises in the Nordic region. This Financial Statement and Board of Directors’ report covers Danske

Mortgage Bank Plc.

This document is an English translation of the ofﬁcial Finnish Annual Report.

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

Danske Mortgage Bank Plc

Board of Directors’ Report 2021

Danske Mortgage Bank Plc in brief

sheet holds enough free loans as collateral for issuing

covered bonds. Hedging and short-term funding were

executed normally through Danske Bank A/S. The

amount of cover pool eligible loans in the Danske Bank

Group’s Finnish operations has been stable.

Danske Mortgage Bank Plc is a wholly-owned subsidiary

of Danske Bank A/S, the parent company of Danske

Bank Group. Danske Bank Group operates in 10 coun-

tries. The Group is headquartered in Copenhagen and

Danske Bank’s share is quoted on the Nasdaq OMX

Copenhagen.

Throughout this Annual Report the term “Bank” refers to

Danske Mortgage Bank Plc. The Danske Bank Group is

referred to as “Group”.

Danske Mortgage Bank Plc is operating as an issuer of

covered bonds. Bonds issued by the Bank are covered by

a pool of loans consisting of Finnish household mort-

gages. The Bank does not act as the originator of hous-

ing loans as it purchases loans from Danske Bank A/S,

Finland Branch. Loan servicing process as many other

processes are outsourced to Danske Bank A/S. This way

loan purchases are not having an effect on the service

provided to customers. Loans included in the Bank’s bal-

ance sheet are Finnish households’ mortgage loans with

residential real estate or shares of housing company as

collateral.

Danske Mortgage Bank Plc is domiciled in Helsinki and

its business identity code is 2825892-7.

Operating environment

The Finnish economy started to recover fast from the

2020 recession during spring 2021. Economic growth

during the third quarter of 2021 brought the Finnish

GDP already above the pre-covid level. Positive develop-

ment in employment has lifted household purchasing

power. Vaccination programme against covid began in

December 2020 and the programme continues in the

form of booster vaccination rounds. Vaccinations have

improved health conditions and allowed stepwise open-

ing of the society in 2021, but increase in covid infec-

tions made the government to introduce new restric-

tions for restaurants, sports facilities and events in late

2021.

Danske Mortgage Bank Plc’s operations continued sta-

ble during 2021, but the increase in loan impairment

charges is mainly due to matching the treatments of

concessions with the Danske Bank Group’s changed

practices. Major part of the loans having concessions

were classified as non-performing. This classification

increased impairments. By the end of year, the conces-

sions had returned to the pre-covid levels. As the Bank

sold non-performing loans the amount of write-offs

increased. Viewing solely the past due events the effect

of the coronavirus pandemic cannot be observed. The

quality of the loan portfolio has remained at good level

and even improved. The Bank’s earnings were lower

compared to previous year being at moderate level.

Fall in employment happened largely via temporary lay-

offs when the covid crisis hit, and recovery was fast in

2021. The trend of employment rate reached its pre-

covid peak level 72.7% during autumn. The number of

employed persons was 65,000 higher in October than

one year ago, when recovery in the labour market had

just begun. The number of unemployed persons was

164,000 in October, which is 37,000 less than one year

ago. The trend of unemployment rate was 7.1% in Octo-

ber, which exceeds its pre-covid level by 0.4 percentage-

points. Figures indicate that labour participation rate has

developed surprisingly well during the covid era. Despite

small increase in labour supply, labour shortage is

becoming a significant barrier to economic growth.

Open vacancies were plentiful in late 2021 and compa-

nies reported lack of skilled labour. At the same time,

In January 2021 the Bank issued a covered bond with

nominal value EUR 500 million. Because the Group’s

funding need was low, the size of the loan book has been

reduced. The Bank bought housing loans only with 127

million euros, and sold housing loans back almost with

560 million euros. Customers were paying back their

housing loans with 1,1 billion euros. During the year 2,0

billion of covered bonds matured, and therefore balance

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

3

Financial review

The Ministry of Economic Affairs and Employment’s

unemployment benefit seeker statistics included signifi-

cantly higher number of long-term unemployed than

before the covid. The lockdown measures implemented

in late 2021 lift layoffs at least temporarily.

The comparison figures in parentheses refer to 2020

figures.

The Bank’s profit before taxes was EUR 17.1 million

(28.4 million). The result was EUR 13.7 million (22.7 mil-

lion).

The household financial situation has been good on aver-

age, because earnings have increased and savings rate

was elevated in 2020. Consumer confidence on their

own finances has been stronger than usual. Higher infla-

tion slowed down the increase in purchasing power in

late 2021.

Return on equity amounted to 4.1 per cent for 2021

(7.2 per cent). Equity has increased by EUR 22.7 million

during 2021 mainly due to a decision to refrain from dis-

tribution of profit in 2021.

Total operating income for 2021 amounted to EUR 37.7

million (44.9 million) and the net interest income was

EUR 36.2 million (42.2 million). The decrease was

affected by decreased loan portfolio. The Bank’s net fee

income totalled EUR 2.1 million (2.3 million). Net trading

income was EUR -0.8 million (0.4 million).

Construction permits and housing starts began to

increase in 2021. The flow of new finished apartments

did not turn into a significant growth, but the level

exceeded the average seen in this century. Housing mar-

kets have been very active and housing prices have risen

especially in the growth centers, but the strong demand

has brought activity also to smaller towns. Some people

have wanted more space when remote work brought

new needs. In addition, money not spent on consumption

and accumulated savings have flowed to the housing

market via demand for personal housing needs and

increasing buy-to-let investing. Scarcity of supply has

also had an impact on the market. According to Statis-

tics Finland’s preliminary data, prices of old dwellings in

housing companies rose 3.6% in the whole country in

November compared with a year earlier. However, the

rise in prices had calmed down in many cities relative to

the early part of the year. The Board of the Financial

Supervisory Authority (FIN-FSA) has decided to extend

the period of a tighter loan-to-collateral ratio on its meet-

ing on 16 December 2021. The maximum loan-to-collat-

eral ratio for new residential mortgage loans other that

first-home loans remains at 85%.

The Bank’s cost to income ratio was 47.0 per cent (35.2

per cent) and the Bank’s operating expenses totalled

EUR 17.7 million (15.8 million). The increase in costs is

explained by increase in the Group’s internal recharges.

Impairment charges and final write-offs totalled to EUR

2.9 million (0.7 million) of which final write-offs were 3.3

million euros (1.0 million). The increase in impairment

charges is explained by matching the treatment of con-

cessions with the Danske Bank Group’s changed prac-

tices. All forbearance shall be booked in the lowest or

second lowest stage. The order causes a move of per-

forming loans under forbearance mark generally from

rating category 8 to category 10. Further, the order has

the effect that weaker customers with facilities on stage

2 must be classified to rating category 10. The lower

credit classes will mean higher probability of defaults,

which in impairment models means considerably higher

impairments. Rating categories and corresponding prob-

ability of default ranges can be found in the Risk Manage-

ment Disclosure, page 15. However, we do not see dete-

riorating credit quality and consider the impairments

having a technical nature. Non-performing loans are sold

regularly to Danske Bank A/S, Finland Branch and final-

write offs realize from loan sales.

Monetary policy has been accommodative for a long

time. Market interest rates stayed low in 2021, and

interest rates are not expected to change significantly in

2022. Low interest rates make debt burden easier for

households and corporates. Drawdowns of new housing

loans amounted to EUR 1.9 billion in November 2021,

which was 3.1% more than a year ago. Buy-to-let loan

agreements accounted for EUR 180 million of the new

housing loans. The annual housing loan stock growth

rose to 4.2% in November. In January-November 2021,

drawdowns of housing loans increased by 12% com-

pared to the same period in 2020.

Balance sheet and funding

Danske Mortgage Bank Plc’s total balance sheet for

2021 was EUR 4,332.3 million (5,949.0 million). Loans

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

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RELATIVE NUMBER OF COLLATERAL IN COVER POOL BY TYPE

2%

and receivables from customers amounted to EUR

4,117.0 million (5,624.0 million). The decrease in bal-

ance sheet was consequence of net decrease of 1,5 bil-

lion euros in issued covered bonds and adjustments in

the loan book to correspond to the lower collateral need.

41%

57%

The Bank’s other investment securities portfolio con-

sists of liquidity coverage ratio (LCR) eligible bonds.

Other investment securities amounted to EUR 35.4 mil-

lion at the end of 2021 (40.8 million).

The financial and liquidity situation was good. All short-

term funding was received from the Group. The Bank’s

liquidity buffer was EUR 179.7 million at the end of

2021 (228.9 million) and it consisted of deposits in the

central bank and central bank eligible high quality liquid

bonds.

Shares of Housing Company

Properties

Other

Collateral types include shares of housing companies

and single properties. Other collateral types include typi-

cally deposits or securities that are not counted as eligi-

ble collateral for cover pool purposes.

With a liquidity coverage ratio (LCR) of 720 per cent end

of 2021 (906 per cent), the Bank was compliant with

the regulatory minimum requirement of 100 per cent at

the end of reporting period. According to the Capital

Requirements Regulation (EU) No 575/2013 banks

must have a LCR of at least 100 per cent.

LOAN VOLUME IN COVER POOL BY LOCATION

1%

16%

10%

9%

7%

Net Stable Funding Ratio (NSFR) presents the ratio of

available stable funding to required stable funding. Regu-

latory framework regarding binding Net Stable Funding

Ratio was applicable from June 2021. The Bank’s NSFR

was 127 per cent end of December 2021 (107 per

cent) which complies with the 100 per cent require-

ment. Available stable funding totaled to EUR 3,981.0

million end of December 2021 (4,337.5), which is EUR

851.0 million (293.8) above the Required stable funding.

Intra group funding was 1,720 million euros, of which

620 million had maturity less than one year.

12%

45%

Central Finland

Eastern Finland

Western Finland

Uusimaa

Other

Capital Area

Northern Finland

Loan exposures are concentrated to customers in Hel-

sinki capital area. In general loans have a high collateral

degree and they are predominantly located in the growth

areas.

At the beginning of 2021 the Bank’s equity was EUR

326.2 million. The Bank refrained from distribution of

profits in 2021. The result for 2021 was EUR 13.7 mil-

lion. At the end of 2021 the amount of equity totalled

EUR 339.8 million

Capital and solvency

The objective of the Bank’s capital and solvency manage-

ment is to have an adequate amount of capital to sup-

port its business strategy and to fulfil the regulatory cap-

ital requirements. The Bank also needs to ensure that it

is sufficiently capitalized to withstand severe macroeco-

nomic downturns.

Prime quality Finnish housing loans

Danske Mortgage Bank Plc loan portfolio consists of

prime quality Finnish housing loans. Customers are con-

centrated to the best rating classes on the rating scale.

Impairments are 0,05 per cent of the loan portfolio and

on the low level. The balance of non-performing loans is

low as they are sold back to Danske Bank A/S, Finland

Branch.

The Bank is using the internal rating based (IRB) approach

for calculation of capital requirements for credit risk for

retail exposures. Otherwise, standard method is applied

for credit risk. For operational risk standard method is

applied in calculating capital requirement.

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

5

Capital management and practices are based on an

internal capital and liquidity adequacy assessment pro-

cess (ICLAAP). In this process, the Bank identifies its

risks and determines its solvency need.

From 28 June 2021, credit institutions are subject to a

3 per cent leverage ratio requirement, which is a binding

constraint. The requirement comes from a reform pack-

age issued on 7 June 2019 in order to improve the resil-

ience of EU credit institutions.

Total capital consists of tier 1 capital that is common

equity tier 1 capital after deductions. On 31 December

2021, the total capital amounted to EUR 322.4 million

(297.6 million), and the total capital ratio was 63.4

(33.6) per cent. The common equity tier 1 capital ratio

was 63.4 (33.6) per cent. The reference year total capi-

tal ratio calculation includes 15 per cent risk weight

floor, which was removed by the FIN-FSA from the begin-

ning of 2021 onwards for residential mortgage loans.

The Board of the Financial Supervisory Authority has

decided on 30 September 2020 not to continue to use

the risk weight floor after 1 January 2021. Total capital

has increased by EUR 24.9 million mainly due to the

decision to refrain from distribution of profit in 2021.

FIN-FSA decided not to continue recommendation to

refrain from distribution of profit after 30.9.2021.

The Bank´s leverage ratio was 7.4 (5.0) per cent on 31

December 2021. The leverage ratio is calculated based

on the fourth quarter end figures whereby the tier 1 cap-

ital was EUR 322.4 million (297.6 million) and leverage

ratio exposure EUR 4,351.6 million (5,912.2 million).

Leverage ratio table is presented after the solvency

table as per 31 December 2021.

Capital buffers

In April 2020 the FIN-FSA decided to lower the Finnish

credit institutions’ capital requirements and the sys-

temic risk buffer for the Bank is 0%.

On June 2021 the FIN-FSA decided not to increase the

countercyclical capital buffer requirement (variable capi-

tal add-on) applicable to banks. The requirement will

remain at zero until further notice.

Risk exposure amount (REA) was EUR 508.8 million

(885.2 million).

The Pillar II requirement has increased, because the

interest rate risk of banking book has been increased in

the Bank’s internal calculations. The interest rate risk

has increased, because for large part of the loan book

the reference rate used in housing loan has been set to

be at least zero, and this item affecting the Bank’s earn-

ings has not been fully hedged.

Profit after taxes is not included in Tier 1 distributable

capital.

Leverage ratio

According to the Capital Requirements Directive (CRD

IV) credit institutions must have a well-established prac-

tice to identify, manage and monitor risks to avoid exces-

sive leverage. Indicators for excessive leverage shall

include the leverage ratio and shall be monitored under

the Pillar 2 process. Credit institutions must also be

able to withstand a range of different stress events with

respect to the risk of excessive leverage.

The minimum own funds requirements and capital buff-

ers as well as the Pillar II requirement are listed under

the leverage ratio table for the Bank.

MREL

In December 2021, the Finnish Financial Stability

Authority determined the minimum requirement for own

funds and eligible liabilities for the Bank starting from

1.1.2022. More detailed information of MREL-require-

ment can be found in the Risk Management Disclosure

on page 15.

The CRR/CRD IV requires credit institutions to calculate,

report and monitor their leverage ratios. The leverage

ratio is defined as ratio of tier 1 capital from the total

exposure. In order to count in the leverage ratio, the tier

1 capital must be eligible under the CRR. The total expo-

sure measure is the sum of the exposure values of all

assets and off-balance sheet items not deducted from

tier 1 capital. Specific adjustments apply to derivatives.

The Bank has processes in place for the identification,

management and monitoring of the risk of excessive lev-

erage. The leverage ratio is also part of the Bank’s risk

appetite framework.

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

6

SOLVENCY

Own funds

EURm

31/12/2021

31/12/2020

Common Equity Tier 1 capital before deductions

Share capital

339.8

70.0

326.2

70.0

Reserves for invested unrestricted equity

Retained earnings

215.0

41.2

215.0

18.5

Total comprehensive income for the period

13.7

22.7

Deductions from CET1 capital

-17.4

-13.7

-0.1

-28.6

-22.7

-0.1

Proposed/paid dividends /part of profit not included in CET1

Value adjustments due to the requirements for prudent valuation

IRB shortfall of credit risk adjustments to expected losses

-3.7

-5.8

Common Equity Tier 1 (CET1)

Additional Tier 1 capital (AT1)

Tier 1capital (T1 = CET1 + AT1)

Tier 2 capital (T2)

322.4

-

297.6

-

322.4

297.6

-

Total capital (TC = T1 + T2)

Total risk exposure amount (REA)

322.4

508.8

297.6

885.2

Capital requirement (8% of risk exposure amount)

Credit and counterparty risk

40.7

35.9

4.8

70.8

65.9

4.9

Operational risk

Common equity tier 1 capital ratio (%)

Tier 1 capital ratio (%)

63.4%

33.6%

Total capital ratio (%)

Company’s capital adequacy ratio has been calculated both in accordance with Credit Institutions Act Sect 9-10 and EU Capital Requirement Regulation (CRR).

LEVERAGE RATIO

EURm

31/12/2021

31/12/2020

Total assets

4,332.3

5,949.0

Derivatives accounting asset value

-9.0

32.0

-74.1

43.1

Derivatives exposure to counterparty risk ex. collateral

Adjustment to CET1 due to prudential filters

Total exposure for leverage ratio calculation

Reported tier 1 capital (transitional rules)

Tier 1 capital (fully phased-in rules)

-3.7

-5.8

4,351.6

322.4

7.4%

5,912.2

297.6

5.0%

Leverage ratio (transitional rules)

Leverage ratio (fully phased-in rules)

7.4%

5.0%

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

7

Minimum own funds requirements and capital buffers

31/12/2021

31/12/2020

Minimum requirements (% of total risk exposure amount):

Common Equity Tier (CET) 1 capital ratio

Tier 1 capital ratio

4.5%

6.0%

8.0%

4.5%

6.0%

8.0%

Total capital ratio

Capital buffers (% of total risk exposure amount)::

Capital conservation buffer¹⁾

2.5%

Institution-specific countercyclical capital buffer

Countercyclical buffer²⁾

Systemic risk buffer³⁾

0.0%

-

Minimum requirement including capital buffers

(% of total risk exposure amount):

Common Equity Tier (CET) 1 capital ratio

7.0%

Pillar 2 add-ons (EUR million)

Interest rate risk in the banking book (IRRBB)

10.0

6.0

-

Leverage ratio requirement:⁴⁾

3.0%

1) Valid from 1.1.2015 onwards.

2) On 16th December 2021, the FIN-FSA decided not to set any countercyclical buffer.

3) Valid from 1.7.2019 onwards until the FIN-FSA decided on 6 April 2020 to remove Systemic risk buffer requirement.

4) Valid from 28.6.2021 onwards

Credit ratings

Danske Mortgage Bank Plc’s shares, ownership and

group structure

Issued covered bonds are rated ‘Aaa’ by Moody’s Inves-

tor Services.

Danske Mortgage Bank Plc is part of the Danske Bank

Group. The parent company of the Danske Bank Group is

Danske Bank A/S.

Employees and organization

The Bank had 5 (6) employees at the end of the financial

year. The average during financial period was 6 (6)

Danske Mortgage Bank Plc’s share capital is EUR 70.0

million, divided into 106,000 shares. Danske Bank A/S

holds the entire stock of Danske Mortgage Bank Plc.

Danske Mortgage Plc’s Board of Directors, auditors

and committees

On 25 February 2021, Stojko Gjurovski (Chairman) was

elected and Glenn Söderholm resigned from Bank’s

Board of Directors. As members of the Bank’s Board of

Directors remained Robert Wagner, Kimberly Bauner,

Riikka Laine-Tolonen, Tomi Dahlberg and Maisa

Hyrkkänen.

Risk management

The Bank’s principles for risk management are based on

legislation for mortgage banks. The main objective of risk

management is to ensure that the capital base is ade-

quate in relation to the risks arising from the business

activities. The Board of Directors of the Bank establishes

the principles of risk management, risk limits and other

general guidelines according to which risk management

is organized at the Bank.

Pekka Toivonen is the CEO of the Bank and Jari Raassina

is his deputy.

On March 31, 2021 the annual general meeting of the

Bank elected Deloitte Ltd Audit Firm, as auditor of Dan-

ske Mortgage Bank Plc, with Aleksi Martamo, APA, as

the Key audit partner.

To ensure that the Bank’s risk management organization

meets both the external and internal requirements, the

Board of Directors has also set up a Risk Council com-

posed of the operative management members. The Risk

Council’s main objective is to ensure that the Bank is

compliant with the risk management guidelines issued

by the Board of Directors and that the Bank monitors all

types of risk and provides reports to concerned parties.

Related party loans and receivables are listed in note 19

and corporate governance principles are found on page

12.

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

8

The main risks associated with the Bank’s activities are

credit risk, interest rate and liquidity risks of banking

book, non-financial risks and various business risks. The

credit risk exposure has the largest impact on capital

requirement. The majority of the non-financial risks are

related to outsourced services and processes.

The global economy continues to recover from the

recession in 2022, after the coronavirus pandemic has

been suppressed with the help of vaccines, better treat-

ments and lockdown measures. According to Danske

Bank forecast, Finland’s GDP grows 2.8 % in 2022.

Households’ financial situation is good on average,

because of increasing earnings and savings accumu-

lated in 2020. Residential construction continues at fast

pace especially in growth centers. Demographic develop-

ment influences housing markets regionally.

The Bank’s risk position has been low. The main risks

associate with the development in the general economic

environment and investment market and future changes

in financial regulations.

The development of the Bank’s business volume is

dependent on the development of volume of Danske

Bank A/S, Finland Branch’s stock of housing loans and

Danske Bank A/S Group’s funding demand. In the future,

the Bank seeks to issue at least one benchmark-size

covered bond per year.

In relation to the loan portfolio, non-performing loans

were at a low level. Non-performing loans that are

delayed for over 90 days amounted to EUR 0.4 million

(0.5 million). Impairment charges and final write-offs for

2021 totaled EUR 2.9 million (0.7 million). Allowance

account at 31 December 2021 amounted to EUR 2.0

million (31 December 2020 EUR 2.2 million).

The Bank is rather well protected against changes in the

level of interest rates. Therefore, impact of interest rate

risk to net profit is limited. The development in the Finn-

ish economy affects it mostly through credit losses and

level of new sales loan margins. The refinancing cost of

the Bank is dependent on the credit rating of Danske

Bank A/S and development in the global and the Finnish

economy. The Bank’s business is stable and the number

of personnel is expected to remain at the current level.

More detailed information of risks and risk management

can be found in the Risk Management Disclosure on

page 15.

Sustainability

According to the Accounting Act, Chapter 3 a the Bank

does not prepare sustainability report. The Parent Com-

pany, Danske Bank A/S, with its registered office in Den-

mark, prepares a sustainability report for the Group of

which Danske Mortgage Bank Plc is part of. The Group’s

sustainability report is available on Danske Bank’s web-

sites https://danskebank.com/sustainability.

The New Act of mortgage banking activities will be effec-

tive in July 2022 and a Government proposal for Parlia-

ment approval exists. The Bank will adapt its operations

to the requirements set in the new legislation, and we

assume to continue our operations quite in a same man-

ner. Because of the rather short implementation time of

the legislation, it may be that new covered bonds are not

issued on the second half of 2022.

Events after the reporting period

The Bank has implemented new definition of default on

January 2022. More information on the new definition of

default can be found from Financial Statements note 6.

Otherwise, there are no material events after the report-

ing period.

We expect that the Group’s liquidity situation remains

strong, and because of this the average outstanding vol-

ume of the Bank’s covered bonds will decline, which will

cause the Bank’s net profits to be lower. Also the aver-

age loan balance in cover pool as a consequence will be

lower, which causes the Bank’s net profit for the year to

be lower than for 2021, yet remaining profitable.

Outlook for 2022

Both the shortest market interest rates and the

12-month Euribor rate are expected to remain negative

also in 2022. The European Central Bank is expected to

end the pandemic emergency purchase programme

(PEPP) in 2022, but we do not anticipate changes to

ECB policy rates, unless the global economic outlook

changes in a major way. Above 3 % inflation is expected

to fall towards ECB 2 % target. Risk of persistently

higher inflation is significant, however, and market inter-

est rates could rise earlier than anticipated.

This guidance is generally subject to uncertainty related

to future macroeconomic and business development.

Helsinki, 4 February 2022

Danske Mortgage Bank Plc

Board of Directors

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

9

FINANCIAL HIGHLIGHTS

EURm

2021

2020

2019

Revenue

55.6

36.2

65.0

17.1

30.7

37.7

17.7

47.0

4,332.3

339.8

0.3

89.3

42.2

47.2

28.4

31.8

44.9

15.8

35.2

5,949.0

326.2

0.4

94.4

35.6

37.7

23.1

24.4

38.2

13.8

36.0

5,286.5

303.5

0.3

Net interest income

% of revenue

Profit before taxes

% of revenue

Total income¹⁾

Total operating expenses²⁾

Cost to income ratio

Total assets

Equity

Return on assets, %

Return on equity, %

Equity/assets ratio, %

Solvency ratio, %³⁾

Impairment on loans and receivables⁴⁾

Off-balance sheet items

Average number of staff

FTE at end of period

4.1

7.2

6.5

7.8

5.5

5.7

63.4

2.9

33.6

0.7

35.8

1.4

-

6

5

6

7

The ﬁnancial highlights have been calculated as referred to in the regulations of the Finnish Financial Supervision Authority, taking into account renamed income

statement and balance sheet items due to changes in the accounting practice.

1) Total income comprises the income in the formula for the cost to income ratio.

2) Total operating expenses comprise the cost in the formula for the cost to income ratio.

3) Capital adequacy ratio has been calculated both in accordance with Credit Institutions Act Sect 9-10 and EU Capital Requirement Regulation (CRR). For calculation of

credit risk exposure amount in Retail, the Bank applies internal model (IRB) and otherwise standard method. For calculation of risk exposure amount in operational risk,

it applies standard method.

4) Impairment on loans and receivables includes impairment losses, reversals of them, write-offs and recoveries. (-) net loss positive.

Definition of Alternative Performance Measures

The Bank’s management believes that the alternative

performance measures (APMs) used in the Board of

Directors’ report provide valuable information to readers

of the financial statements. The APMs provide more

consistent basis for assessing the performance of the

Bank. They are also important aspect of the way in which

the Bank’s management monitor’s performance.

The Annual report contains a number of key perfor-

mance indicators (so-called alternative performance

measures - APMs), which provide further information

about the Bank. There are no adjusting items, which

means that net profit is the same in the financial high-

lights and in the IFRS income statement. The differences

between the financial highlights and the IFRS financial

statements relate only to additional figures being pre-

sented in Board of Directors’ disclosure which are not

required by the IFRS -standards.

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

10

Definitions of additional performance measures presented in Financial Highlights:

Revenues:

interest income, fee income, net result from items at fair value

and other operating income

Cost to income ratio, %:

staff costs + other operating expenses + depreciations and impairments

net interest income + net result from items at fair value + net fee income

+ other operating income

Return on equity, %

Return on assets, %

Equity/assets ratio, %

profit before taxes - taxes

equity (average) + non-controlling interests (average)

profit before taxes - taxes

average total assets

equity + non-controlling interests

total assets

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

11

Corporate governance

The Bank’s corporate governance complies with the gen-

eral requirements laid down in Chapters 7, 8 and 9 of

the Act on Credit Institutions. Further information on the

Bank’s corporate governance is available on the web:

https://danskebank.com/investor-relations/debt/dan-

ske-mortgage-bank

The Board of Directors has approved written rules of

procedure defining the Board’s duties and its meeting

arrangements. The Board of Directors and the chief

executive officer (CEO) shall manage the Bank in a pro-

fessional manner and in accordance with sound and pru-

dent business principles.

General meeting

The Board of Directors of the Bank convened 10 times

during 2021. The fee resulting from 2021 was EUR

32.0 thousand for the Bank’s Board members who are

not within the Group.

The supreme decision-making power in the Bank is exer-

cised by its shareholders at a General Meeting of share-

holders.

Board of Directors

Chief Executive Officer and Management team

The Bank’s Board of Directors appoints the CEO and

Deputy CEO. The CEO is responsible for the Bank’s day-

to-day management in accordance with the Limited Lia-

bility Companies Act and the instructions and orders

issued by the Board of Directors. The CEO’s duties

include managing and overseeing the Bank’s business

operations, preparing matters for consideration by the

Board of Directors and executing the decisions of the

Board.

The Board of Directors shall consist of at least three and

not more than seven ordinary members. The term of

office of a member of the Board of Directors ends at the

end of the first Annual General Meeting following the

election.

At their first meeting following the Annual General Meet-

ing, the members of the Board of Directors shall elect a

Chairperson from amongst themselves and a Vice Chair-

person for a term of office that ends at the end of the

first Annual General Meeting following the election.

The Bank’s CEO is Pekka Toivonen (b. 1967) and Deputy

CEO Jari Raassina (b. 1965).

At the end of the financial year the members of the Board

of Directors were Stojko Gjurovski (chairman), Kimberly

Bauner, Riikka Laine-Tolonen, Robert Wagner, Tomi Dahl-

berg and Maisa Hyrkkänen. Tomi Dahlberg and Maisa

Hyrkkänen are independent of the Danske Bank Group.

In 2021 the CEO and Deputy CEO were paid a salary and

fringe benefits of EUR 293.8 thousand.

CEO’s period of notice is six (6) months and the sever-

ance compensation to the CEO in addition to the salary

paid for the period of notice equals to six (6) months’ sal-

ary.

The Board of Directors is responsible for the Bank’s

administration and for organizing operations, and for

ensuring that the supervision of the Bank’s accounting

and asset management has been arranged properly. The

Board handles all important and significant issues of

general scope relevant to the operation of the Bank. The

Board takes decisions on matters such as the Bank’s

business strategy. It approves the budget and the princi-

ples for arranging the Bank’s risk management and

internal control. The Board also decides the basis for the

Bank’s remuneration system and other far-reaching mat-

ters that concern the personnel. In accordance with the

principles of good governance, the Board also ensures

that the Bank, in its operations, endorses the corporate

values set out for compliance.

The Management Team assists the CEO. It convenes at

the invitation of its chairman once a month. The Manage-

ment team is responsible for supporting the CEO in the

preparation and implementation of the Bank’s strategy,

coordination of the Bank’s operations, preparation and

implementation of significant or fundamental matters,

and ensuring internal cooperation and communication.

In its operations the Bank has high moral and ethical

standards. The Bank constantly ensures that its opera-

tions comply with all applicable laws and regulations.

The responsibility for supervising compliance with laws

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

12

and regulations lies with the operating management and

the Board of Directors. Various rules and regulations

have been issued to support operations and ensure that

applicable laws and regulations are respected through-

out the organisation.

concerning corporate governance in the Group is avail-

able on: www.danskebank.com.

The Bank is a bond issuer and therefore publishes the

following description of the main features of the internal

control and risk management systems related to its

financial reporting process. Further information on the

principles concerning corporate governance in the Bank

is available on www.danskebank.com/investor-relations/

debt/danske-mortgage-bank.

Remuneration

Preparation of the Bank’s remuneration policy is based

on the remuneration policy of the Group taking into

account the Finnish regulations. The remuneration policy

is subject to the approval of the Bank’s Board of Direc-

tors, which also monitors the implementation and func-

tioning of the policy each year.

The Bank uses internal control to insure

• the correctness of financial reporting and of other

information used in management decision-making

• compliance with laws and regulations and with the

decisions of administrative organs and other inter-

nal rules and procedures.

The Bank has a remuneration scheme covering the

entire personnel. The aim of the remuneration scheme is

to support the implementation of the Bank’s strategy

and to achieve the targets set for the business areas.

The Bank’s management operates the system of control

and supervision in order to reduce the financial report-

ing risks and to oversee compliance with reporting rules

and regulations. With the controls imposed the aim is to

prevent, detect and rectify any errors and distortions in

financial reporting, though this cannot guarantee the

complete absence of errors.

More information regarding remuneration can be found

in the Bank’s remuneration policy www.danskebank.com/

investor-relations/debt/danske-mortgage-bank under

section Remuneration.

Auditors

The Bank has one auditor, which must be a firm of

authorised public accountants approved by the Finnish

Patent and Registration Office. The term of the auditor

lasts until the next Annual General Meeting following the

auditor’s appointment.

The Bank’s Board of Directors regularly assesses

whether the company’s internal control and risk man-

agement systems are appropriately organised. The

Board’s assessment is based on e.g. reports prepared

by the Group’s Internal Audit unit. The Board and the

CEO regularly receive information on the Bank’s financial

position, changes in rules and regulations and compli-

ance with these within the Group.

The Bank’s auditor is Deloitte Ltd Audit Firm with Aleksi

Martamo, Authorized Public Accountant as the Key

audit partner. The primary function of the statutory audit

is to verify that the Bank’s financial statements provide a

true and fair view of the Bank’s performance and finan-

cial position for each accounting period.

The work of Internal Audit is subject to the Group’s Term

of Reference. This guidance states that the internal

auditing tasks include ensuring the adequacy and effi-

ciency of internal control and of the controls on adminis-

trative, accounting and risk management procedures.

Internal Audit also ensures that reporting is reliable and

that laws and regulations are complied with appropri-

ately. In the auditing process Internal audit complies with

the international internal auditing standards and ethical

principles and audit also uses auditing procedures

approved by the Group that are based on examining and

testing the functioning of the control arrangements.

Description of the main features of the internal

control and risk management systems related to the

financial reporting process

The Bank is a wholly owned subsidiary of Danske Bank

A/S. Danske Bank A/S is a listed company and is the

parent company of the Group. The governance of the

Danske Bank A/S Group accords with the legislative

requirements concerning Danish listed companies and

especially with the legislative requirements concerning

companies in the financial sector. The Bank complies in

all essential respects with the good governance recom-

mendations issued by Denmark’s Committee on Corpo-

rate Governance. Further information on the principles

Local internal auditing is undertaken in cooperation with

the Group’s Internal Audit. The Bank’s Board of Direc-

tors approves the yearly plan of internal audit. Internal

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

13

audit reports its auditing work to the Board of Directors

and monitors the measures taken in order to reduce the

risks detected.

monitoring of the quantity and quality of activities and

sales to reporting of risk-adjusted profitability. Most of

the indicators are monitored monthly, but selected indi-

cators are monitored weekly or even daily. Internal

Accounting also monitors the Bank’s market share and

developments among competitors and in the operating

environment.

Good control environment practice is based on carefully

specified authorisations within the Group, appropriate

division of work tasks, regular reporting and the trans-

parency of activities. In management’s internal reporting

the same principles are observed as in external report-

ing, and the principles are the same throughout the

Group. The Group’s common IT system creates the basis

for reliable documentation of accounting data and

reduces the financial reporting risks.

Besides the parties referred to above, supervision at the

Bank is also undertaken by the Company’s Risk Council.

The Committee’s chairman is the Company’s CEO. The

purpose of the Risk Committee is to oversee the Bank’s

compliance with all guidance on risk management set by

the Board.

Management Reporting supports the Banks’s senior

management by producing monitoring and analysis of

the performance. The indicators monitored vary from

More information on the Bank’s risk management can be

read on page 15.

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

14

Risk management disclosure

Risk management general principles and

governance

having adequate skills, operating procedures, systems

and controls in place to comply with the policies and man-

dates to exercise sound risk management.

The main objectives of the risk management processes

are to ensure that risks are properly identified, risk meas-

urement is independent and the capital base is adequate

in relation to the risks. The risks related to the Bank’s

activities and the sufficiency of the Bank’s capitalisation

in relation to these risks are regularly evaluated. Clearly

defined strategies and responsibilities, together with

strong commitment to the risk management process, are

our tools to manage risks.

The second line of defence is represented by functions

that monitor whether the operations and service organi-

sations adhere to the general policies and mandates.

These functions are located in Risk Management and

Compliance units.

The third line of defence is represented by Internal Audit.

The Board of Directors of the Bank is responsible for

ensuring that the Bank’s risks are properly managed and

controlled. The Board sets the principles of risk manage-

ment and provides guidance on the organisation of risk

management and internal controls. To ensure that the

risk governance structure is adequate both in terms of

internal and external needs, the Board has established

the Risk Council, which is composed of members of the

executive management and nominated the Bank’s CEO as

Chairman of the Council.

The Bank’s Risk Management, which is an independent

unit, monitors the Bank’s risk position according to the

principles and limits set by the Board of Directors of the

Bank. The Chief Risk Officer (CRO) is responsible for ade-

quate and sound oversight of the Bank’s risk manage-

ment, providing an overview of the Bank’s risks and creat-

ing an overall risk picture.

Finance is responsible for solvency reporting including

the ICLAAP process.

The Risk Council’s main tasks are:

The principles and practices of risk management in the

Bank are carried out consistently with the risk policies of

the Group and supported by the corresponding Group

functions. Additional information on the Group level risks

and risk approaches can be found in the Group’s Annual

Report and Risk Management Report for 2021.

• to ensure that the Bank is compliant with the risk

instructions issued by the Board of Directors

• to ensure that all risk types in the Bank are moni-

tored and reported to relevant parties including the

Board of Directors

• to ensure that the Bank’s risk position is aligned

with the Group’s risk strategy

Minimum regulatory capital

• to ensure that the Group’s risk policies are imple-

mented in the Bank

Banking is a highly regulated business. There are formal

rules for minimum capital and capital structure in capital

adequacy regulation. Also bank’s largest exposures are

limited based on the own funds of the bank.

• to ensure that the Bank fulfils all regulatory require-

ments.

The Bank’s day-to-day risk management practices are

organised in three lines of defence. This organization

ensures a segregation of duties between (1) units that

enter into business transactions with customers or oth-

erwise expose the Bank to risk, (2) units in charge of risk

oversight and control and (3) the internal audit function.

The credit Institutions Act gives multiple options for

methods institutions may use in capital adequacy calcula-

tion. In December 2017 the Bank got approval from its

supervisors to use the Internal Rating Based methodol-

ogy (IRB) for retail exposures. Hence, the Bank uses IRB

approach to its retail portfolio and standard method to

other credit risk portfolios. Standard method is used for

operational risks.

The first line of defence is represented by the operations

and service organisations and their support functions.

Each unit operates in accordance with the risk policies

and delegated mandates. The units are responsible for

Capital adequacy is reported quarterly to Finnish Finan-

cial Supervisory Authority (FIN-FSA). The Bank fulfilled

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

15

the regulatory minimum capital requirements in 2021.

requirement based on the leverage ratio exposure meas-

ure (“LRE”) amounting to 5.91 per cent. These require-

ments have to be met in full as from 1 January 2024.

Starting from 1 January 2022 the 17.25 per cent

requirement based on TREA has to be met and a require-

ment of 5.33 per cent based on LRE must be met.

From 28 June 2021, credit institutions are subject to a 3

per cent leverage ratio requirement, which is a binding

constraint. The requirement comes from a reform pack-

age issued on 7 June 2019 in order to improve the resil-

ience of EU credit institutions.

Minimum capital requirements set by capital adequacy

regulation are presented in the Risk Table 1 below. Total

capital requirement was EUR 40.7 million at end of 2021

(EUR 70.8 million). It decreased EUR 30.1 million from

2020 mainly due to change in residential mortgage port-

folio. In addition to this Pillar 2 requirement from the

interest risk is EUR 10 million (EUR 6 million).

In December 2021, the Finnish Financial Stability Author-

ity determined the minimum requirement for own funds

and eligible liabilities for the Bank. The internal MREL con-

sists of requirement based on the total risk exposure

amount (“TREA”), amounting to 17.25 per cent, and a

RISK TABLE 1

Pillar 1 regulatory capital requirements by portfolio,

Capital requirement

2021

Risk exposure amount

2021

EURm

2020

Credit and counterparty credit risk:

Standardised approach:

Institutions

0.9

0.2

0.0

1.2

0.4

0.6

0.2

0.0

1.2

11.1

2.4

5.0

7.9

Corporates

Covered bonds

2.0

2.6

Other items

0.0

Standardised approach, total

IRB approach:

15.5

Retail

34.6

0.0

64.7

0.0

433.1

0.0

808.2

0.0

Other non-credit obligation

IRB approach, total

34.6

35.9

4.8

64.7

65.9

4.9

433.1

448.6

60.2

808.2

823.7

61.5

Credit and counterparty credit risk, total

Operational risk - standardised, total

Total risk exposure amount

Total minimum capital requirement

508.8

885.2

40.7

70.8

Capital management process

Main risk types

The Bank follows the capital management practices in

the ICAAP (Internal Capital Adequacy Assessment Pro-

cess) for Pillar II that are defined in the regulatory frame-

work in the Capital Requirements Directive (CRD).

The major risk associated with the Bank’s activities is

the credit risk arising from the loans. Interest rate risk

arising from loan portfolio and its refinancing is hedged

by derivatives. Liquidity risk is not significant. Non-finan-

cial and business risks are inherent in all business

areas.

The Bank’s ICAAP consists of evaluating all relevant

risks that the Bank is exposed to. Besides the Pillar I risk

types – credit and operational risks – the Bank sets capi-

tal aside for interest rate risk of the banking book, busi-

ness risk and, if required by stress tests, for business

cycle volatility buffer. Liquidity risk is taken into account

through stress testing.

The mortgage banking result mainly depends on loan and

deposit margins, business volumes, the size and struc-

ture of the balance sheet, impairment losses and cost

efficiency. The margin between loans and deposits in

banking, with a hedged interest rate and liquidity risk

profile, changes slowly. Possible sources of result fluc-

tuations are unexpected losses in the credit and non-

financial risk areas.

The Bank’s ICLAAP (Internal Capital and Liquidity Ade-

quacy Assessment Process) 2020 report has been pre-

pared and approved by the Board of Directors and deliv-

ered to supervisors. The ICLAAP 2021 report will be

prepared during Q1 2022 as requested by supervisors.

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

16

both automatically and manually by an advisor. The

credit scores are updated monthly through an auto-

mated process. For more information about the Bank’s

classification models, including changes and improve-

ments to the models, see Risk Management 2021

report of the Group.

Credit risk

Credit risk is the risk of losses arising because counter-

parties or debtors fail to meet their payment obligations

to the Bank. Credit risk includes country, settlement and

counterparty credit risk.

The Bank’s loan portfolio consists of Finnish mortgages

that have been granted based on the Group’s credit pol-

icy, and in addition the loans bought to the Bank need to

be cover pool eligible. The Bank buys loans when needed

from Danske Bank A/S, Finland Branch. The Group’s

guidelines lay down uniform principles for credit risk

taking, with the aim of ensuring high quality in the credit

process. Loans that are not cover pool eligible are sold

to Danske Bank A/S, Finland Branch on regular basis.

Credit risks of customers

As part of loan granting process, the debt servicing

capacity is assessed and stressed by using materially

higher interest rates compared to current levels. Loans

are collateralised by housing company shares or resi-

dential real estate. Delinquencies are followed daily.

Credit exposure

The figures in Risk Tables 2 and 3 show the Bank’s

credit exposure. At the end of 2021 the Bank’s lending-

related credit exposure activities amounted to EUR 4.3

billion (5.8 billion). Exposures to the Danske Bank Group

were EUR 0.4 million (0.1 million) and they were

excluded from the tables.

Credit decision authority in the Bank is delegated to the

management of the Danske Bank A/S, Finland Branch

Credit department and to authorised credit officers in

the business units. The amount of the authorisation var-

ies according to customer rating, total exposure and col-

lateral level. All credit applications are initiated and pre-

pared in the business units. Credit decisions are primar-

ily based on rating, loan repayment ability, collateral and

other risk mitigates offered, as well as acceptable return

on allocated capital.

RISK TABLE 2

Credit exposure relating to lending

activities by segments, EURm

2021

2020

Public Institutions

Personal Customers

Total

165.1

4,117.0

4,282.1

208.2

5,624.0

5,832.2

Customer classification

All customers of the Group are assigned a credit grade

describing the creditworthiness of customer prior to

granting of credit facilities in order to ensure good credit

quality and provide credit to the customers in the most

capital efficient manner. The main objective of the risk

classification is to rank customer base according to

default risk by estimating the probability of default (PD)

of each customer. This credit grade consists of 11 main

rating grades and 26 subgrades.

The Bank’s credit exposure by credit classification is pre-

sented in Risk Table 3. The rating distribution is good. At

the end of 2021, the share of customers classified into

the seven best rating classes was 98 per cent of the total

exposure (94 per cent). Exposures are concentrated to

the capital area and to the largest cities.

The Bank assigns credit scores to retail customers. The

Bank has developed statistical models based on the

information it possesses about customers to predict the

likelihood that a customer will default. These scoring

models utilise public and internal information on the bor-

rower’s payment behaviour. The important variables in

scoring are e.g. education, employment and other rele-

vant factors in forecasting customer credit worthiness.

On top of the statistical calculation, the score can be

downgraded to another classification if a risk event is

registered on the customer. Risk events are registered

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

17

RISK TABLE 3

Credit portfolio broken down by rating category and stages in IFRS 9, EURm

Net exposure,

ex collateral

PD level

Gross exposure

Expected Credit Loss

Net exposure

2021

Upper

Lower Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3

1

0.00

0.01

0.03

0.06

0.14

0.31

0.63

1.90

7.98

25.70

0.01

0.03

0.06

-

259.8

700.3

-

0.3

-

0.0

0.1

0.0

0.3

-

0.0

0.5

0.1

0.7

0.0

1.5

-

259.8

700.3

1,332.1

1,052.1

514.9

133.9

9.7

-

0.3

-

165.4

3.1

-

2

-

3

7.3

-

7.3

-

0.1

0.2

0.5

1.0

0.2

0.1

0.3

0.0

2.5

-

4

0.14 1,332.1

0.31 1,052.2

14.3

24.9

24.4

-

14.3

24.9

24.3

128.2

15.9

19.8

31.6

0.2

-

9.9

-

5

-

10.7

6.4

-

6

0.63

1.90

515.0

-

7

134.0 128.7

-

2.4

8

7.98

9.7

2.8

3.6

0.0

16.0

19.9

32.3

0.2

-

0.2

-

9

25.70

99.99

0.2

6.0

0.1

6.3

0.0

0.1

0.0

2.8

0.2

5.9

0.1

-

10

11 *)

Total

3.6

0.0

0.1

0.0

0.1

100.00 100.00

0.0

4,009.7 268.1

0.1 4,009.4 266.6

6.2 198.1

*) Maksukyvyttömyystilassa

Net exposure,

ex collateral

PD level

Gross exposure

Expected Credit Loss

Net exposure

2020

Upper

Lower Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3

1

0.00

0.01

0.03

0.06

0.14

0.31

0.63

1.90

7.98

25.70

0.01

0.03

0.06

0.0

323.2

956.0

-

0.1

-

0.0

0.1

0.2

0.1

0.0

0.5

-

0.0

0.3

0.1

1.2

0.1

0.0

1.7

-

0.0

323.2

956.0

1,693.8

1,416.8

703.6

234.4

24.2

-

0.1

-

0.0

209.0

5.9

-

0.0

0.2

1.1

1.5

0.4

3.8

0.2

0.0

7.2

-

2

-

3

2.9

-

2.9

-

4

0.14 1,693.8

0.31 1,416.8

5.2

-

5.2

-

17.3

19.2

12.7

5.3

-

5

9.5

-

9.5

-

6

0.63

1.90

703.6

32.3

-

32.3

110.0

22.2

260.1

5.9

-

7

234.6 110.3

24.3 22.3

29.3 261.3

-

8

7.98

-

0.8

-

9

25.70

99.99

2.1

0.3

2.7

0.0

29.3

2.1

0.3

0.4

0.0

10

11 *)

Total

0.2

0.0

6.0

0.1

0.2

0.0

100.00 100.00

0.0

0.1

0.0

5,381.9 449.9

0.0 5,381.5 448.2

2.7 270.7

*) Maksukyvyttömyystilassa

In relation to loan portfolio, non-performing loans were at

low level. Non-performing loans that are delayed for over

90 days amounted to EUR 0.4 million at the end of 2021

(0.5 million). Impairment charges and final write-offs

totalled to EUR 2.9 million (0.7 million) of which final

write-offs were 3.3 million euros (1.0 million). Non-per-

forming loans are sold regularly to Danske Bank A/S,

Finland Branch.

Collateral is valued in accordance with the Group’s writ-

ten collateral valuation instructions, the requirement in

the EU regulation and EBA Guidelines on loan origination

and monitoring from 30.6.2021. All collaterals are val-

ued at the time they are pledged and regularly thereaf-

ter.

Residential properties, shares in a housing companies

and shares in real estate companies in residential use

must be assessed by a valuer who is independent of the

credit decision process. An independent valuer refers to

a person who has sufficient qualifications for and experi-

ence in valuation. Valuations are made within the Group

by an independent valuator or in some cases, external

independent valuators are used.

Credit risk mitigation and collateral management

In order to mitigate credit risk, the Bank applies a num-

ber of credit risk mitigation measures. The most impor-

tant ones are collaterals and guarantees. Loans in the

Bank have shares of housing company or residential real

estates as collateral. All collaterals are located in Fin-

land. Collateral is also a key component in the Group’s

calculation of economic capital and risk exposure

amount.

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

18

The latest housing price information is followed regularly

and monitored at least quarterly. The risk of changes in

fair value is covered by a similar haircut process

if there is a realistic possibility 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.

throughout the Group. Risk Table 4 presents the amount

of collateral allocated to agreements after haircuts.

If it proves impossible to improve a customer’s financial

situation by forbearance measures, the Group will con-

sider whether to subject the customer’s assets to a

forced sale or whether the assets could be realised later

at higher net proceeds.

RISK TABLE 4

Types of collateral, EURm

2021

2020

Real property

Bank accounts

Custody accounts/securities

Guarantees

4,527.5

6.8

5,529.3

9.2

COVID-19 concessions

0.8

0.9

62.2

0.0

97.3

0.1

In 2020, the Group and the Bank increased the use of

concessions to assist customers affected by the corona

crisis. In the Bank, interest only periods were used and

they increased remarkably during the spring, but the

number of new concessions returned to normal level

already during summer 2020. In the end of 2021 the

number of new concessions has been lower compared

to the level in the beginning of 2020 before the corona

crises. In average, length of payment holidays has been

less than six months. Part of the COVID-19 concessions

were defined to be forbearances. See Accounting princi-

ples for the definition when such concessions are con-

sidered to be a forbearance measure.

Other assets

Total

4,597.3

5,636.8

Non-performing assets and forbearance

The Bank applied the same principles as the Group in

non-performing asset and forbearance loan manage-

ment.

From the beginning of 2018, the Group has defined non-

performing loans as facilities in stage 3. For retail expo-

sures, only impaired facilities are included in non-per-

forming loans. For non-retail exposures with one or more

non-performing loans, the entire amount of the custom-

er’s exposure is considered non-performing.

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 composed of yield

curve risk, basis risk, and option risk arising from refer-

ence rate floors on floating rate loans. The Bank meas-

ures the effects of interest rate risk on valuation

changes based on net present value and earnings at risk.

Exposures in stage 3 with no impairment charges or

where the allowance account is considered immaterial

to the gross exposure, are not considered non-perform-

ing loan in the Group.

From August 2021 all exposures in stage 3 are consid-

ered non-performing loan.

The Bank can make use of forbearance measures to

assist the customers in financial difficulties and to mini-

mize credit losses. Concessions granted to customers

include interest-only schedules, temporary payment holi-

days, 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

forbearance customers in stage 3 for several years even

though customer starts to pay back loan normally.

Governance and limit structure

The Bank’s Board of Directors approves the market risk

policy and overall limits for market risk. The Board also

decides on the general principles for managing and mon-

itoring market risks based on the market risk policy and

delegated market risk limits provided by the Group. The

Chief Executive Officer (CEO) is responsible for the mar-

ket risks. The Bank’s Treasury actively manages market

risks within the set of allocated limits. Trades related to

position management are executed in the Treasury and

Trading function of the Group.

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

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

19

Measurement, monitoring and management reporting on

market risks are carried out in Risk Management. Mar-

ket risk exposure is calculated in a limit control system

that is linked to the trading systems. Limits are moni-

tored systematically, and in case of limit violations, fol-

low-up procedures have been established. In addition,

Risk Management monitors risk levels intraday and con-

ducts intra-day spot checks.

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 speci-

fies the aims, limits, calculation and responsibilities of all

parts of the Bank’s liquidity risk control and manage-

ment.

The Bank minimises the short liquidity risk. The Bank

conforms to the Liquidity Coverage Ratio (LCR) defined in

Capital Requirements Directive (CRD) and Capital

Requirements Regulation (CRR).

Market risk position

The Bank’s banking book interest rate risk arises primar-

ily from issued covered bonds, mortgages and deriva-

tives hedging both of these items. Also the liquidity

buffer bonds and short-term funding have an impact on

the interest rate risk. The goal is to hedge the balance

sheet in a way that interest rate risk changes do not

have essential impact on the Banks profitability. During

2021 the Bank had only EUR denominated business

activities. As part of the limit monitoring the banking

book interest rate position is stress tested by a 1 per-

centage point parallel increase and decrease of yield

curves as well as a 1 percentage point increase and

decrease of volatilities.

Structural liquidity risk is an inherent part of the Bank’s

business strategy and it is managed in support of a cau-

tious and conservative risk profile. The Bank adapts and

anticipates foreseeable regulatory requirements on

structural liquidity risk management and complies with

requirements of net stable funding ratio (NSFR) that

became binding in 28th June 2021.

The Bank’s Treasury is responsible for the practical and

day-to-day liquidity management and execution of the

Policy. Risk Management is responsible for day-to-day

monitoring, controlling and reporting the liquidity risk

limits. The Bank has a liquidity line from Danske Bank

A/S for short and medium term funding needs.

The bank also estimates interest rate risk exposure in

the banking book from the earnings perspective, called

net interest income (NII) risk. It is measured as the pro-

jected loss of earnings over a 12 month period upon a

parallel shift up or down in yields of 1 percentage point

while balance sheet structure remains unchanged. In

risk measurement, interest rate levels cannot fall below

the determined floor level of -2 per cent.

Liquidity management is based on monitoring and man-

agement of short-term and long-term liquidity risks. The

management of operational liquidity risk aims primarily

at ensuring that the Bank always has a liquidity buffer

that is able, in the short term, to absorb the net effects

of current transactions and expected changes in liquid-

ity, under both normal and stressed conditions. The

Bank’s liquidity buffer consists of deposits in the central

bank and central bank eligible high quality liquidity bonds.

At the year-end of 2021, net present value based inter-

est rate risk of the Bank in the scenario of parallel down-

ward shift of one percent across the yield curve is EUR

-0.4 million (EUR -0.2 million). Correspondingly, earnings

based risk of the Bank in the scenario of parallel shift of

one percent across the yield curve is EUR -5.9 million

(EUR -0.9 million).

Risk Table 5 presents the Bank’s financial liabilities at

the end of 2021 divided by maturity profile. The liabili-

ties, which have no contractual maturities, are included

in section “< 3 months”.

Liquidity risk

Liquidity risk means the risk that the costs to obtain

funds becomes excessive, lack of financing prevents the

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

20

RISK TABLE 5.

Maturity proﬁle of ﬁnancial liabilities based on contractual

maturities, EURm.

Liabilities

2021

Total

< 3 months 3-12 months

1-5 years

> 5 years

Due to credit institutions and central banks

Debt securities in issue

1,732.5

2,245.3

3,977.8

12.5

0.1

620.0

2.9

1,100.0

1,244.9

2,344.9

-

997.4

Financial liabilities total

12.6

622.9

Undrawn loans, overdraft facilities and other

-

2020

< 3 months 3-12 months

Liabilities

Total

1-5 years

> 5 years

Due to credit institutions and central banks

Debt securities in issue

1,789.3

3,800.3

5,589.6

78.3

-

2,017.4

1,711.0

765.9

-

1,017.0

Financial liabilities total

78.3

2,476.9

Undrawn loans, overdraft facilities and other

-

Non-financial risk

agement. The compliance function assists management

in ensuring that the Bank and its employees comply with

applicable laws and regulations as well as ethical stand-

ards in order to mitigate the Bank’s compliance risk.

Non-financial risk is the risks of losses resulting from

inadequate or failed internal processes or systems, staff

or from external events.

In the Bank reputation risk is assessed and managed in

line with the non-financial risk management approach

and can be seen as a consequence of non-financial risk

events or a failure to comply with the laws and rules, or

self-regulatory organisation standards and code of con-

duct applicable to the Bank.

The Bank applies the Group’s approach for identification,

assessment and management of non-financial risks. The

Bank conducts on ongoing basis the non-financial risk

identification and assessment process to identify all

material internal and external non-financial risks facing

the organisation. In addition, likelihood, monetary, cus-

tomer, regulatory and reputational impacts of the identi-

fied risks are assessed. The process also includes moni-

toring of the identified risks. Local key controls and pos-

sible key risk indicators are identified for the material

risks, so that the status of the risks can be monitored

over time. Action plans for material risks where the level

of internal control has been assessed to be ineffective

are established. General mitigation strategies for key

risks are developed and implemented by the Group and

local mitigation strategies are developed and imple-

mented by the Bank. The Bank’s Management Team,

Risk Council and the Board of Directors are regularly

informed about the Bank’s material non-financial risks.

Non-financial risks are divided into the following categories:

• Model risks

• Operational risks

• Technology risks

• Financial crime risks

• Regulatory Compliance risks

• Financial control and strategic risks

The Bank defines non-financial risk events as non-finan-

cial risks, which have occurred and have resulted in

financial losses/gains or could have resulted in financial

losses/gains (a near miss event). Non-financial risk event

may also have a reputational impact, customer impact or

regulatory impact. The management of non-financial risks

enhances the efficiency of the Bank’s internal processes

and decreases fluctuations in returns.

The Bank operates under a culture of open disclosure of

risks in which staff should report errors and weaknesses

within the Bank so future losses may be minimised by

taking preventative measures. Each employee within the

Bank is responsible for the day-to-day management of

non-financial risks and reporting of actual events within

their respective area. It is the responsibility of persons in

charge of the outsourced services in resource areas to

identify and manage the risks for which they are account-

able and disclose information on non-financial risk

events. Non-financial risk events are regularly reported

to the Bank’s Risk Council and Board of Directors.

The Bank’s Board of Directors approves proper and

effective non-financial risk policy, which creates a frame-

work for managing non-financial risks. Risk Management

is responsible for the independent oversight of non-finan-

cial risk management and governance, and it performs a

consulting and review role to the Bank’s approach to non-

financial risk management. Internal audit assesses the

adequacy and efficiency of internal control and risk man-

DANSKE MORTGAGE BANK PLC BOARD OF DIRECTORS’ REPORT 2021

21

IFRS ﬁnancial statements

Statement of comprehensive income

EURm

Note

1-12/2021

1-12/2020

Interest income calculated using the effective interest method

Other interest income

1

31.7

22.4

17.9

36.2

42.2

44.4

42.2

Interest expense

Net interest income

Fee income

2

3

2.1

0.0

2.3

0.0

Fee expenses

Net result from items at fair value

Other income

-0.8

0.2

0.4

0.1

Total operating income

37.7

44.9

Staff costs

4

5

0.7

17.0

17.7

0.7

15.1

15.8

Other operating expenses

Total operating expenses

Loan impairment charges

6

7

2.9

0.7

Proﬁt before taxes

17.1

28.4

Taxes

3.4

5.7

Net proﬁt after tax

13.7

22.7

Total comprehensive income for the ﬁnancial year

13.7

22.7

Balance sheet

EURm

Note

12/2021

12/2020

Assets

Cash and balances with central banks

Loans and receivables to credit institutions

Trading portfolio assets

Loans and receivables to customers

Tax assets

11

12

6

165.1

4.4

208.2

0.1

9.0

74.1

4,117.0

0.4

5,624.0

0.1

13

10

14

Other investment securities

Other assets

35.4

40.8

1.0

1.6

Total assets

4,332.3

5,949.0

Liabilities

Due to credit institutions and central banks

Trading portfolio liabilities

Debt securities in issue

Other liabilities

15

12

16

17

1,732.5

13.8

1,789.3

12.1

2,245.3

0.9

3,800.3

21.2

Total liabilities

3,992.5

5,622.8

Equity

Share capital

Reserves

70.0

215.0

54.8

70.0

215.0

41.2

Retained earnings

Total equity

339.8

326.2

Total equity and liabilities

4,332.3

5,949.0

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

22

Reserve for

invested un-

restricted equity

Statement of changes in equity

EURm

Retained

earnings

Share capital

70.0

Total

Equity at 1 January 2021

Total comprehensive income

Equity at 31 December 2021

215.0

41.2

13.7

54.8

326.2

13.7

70.0

215.0

339.8

Reserve for

invested un-

restricted equity

Statement of changes in equity

EURm

Retained

earnings

Share capital

70.0

Total

Equity at 1 January 2020

Total comprehensive income

Equity at 31 December 2020

215.0

18.5

22.7

41.2

303.5

22.7

70.0

215.0

326.2

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

23

Cash ﬂow statement

The Bank has prepared its cash flow statement

according to the indirect method. The statement is

based on the pre-tax profit for the year and shows

the cash flows from operating activities and the

increase or decrease in cash and cash equivalents

during the financial year.

Cash and cash equivalent consists of cash in hand

and demand deposits with central banks and

amounts due from credit institutions and central

banks with original maturities shorter than three

months.

EURm

1-12/2021

1-12/2020

Cash ﬂow from operations

Profit before tax

17.1

2.9

28.4

0.7

Loan impairment charges

Tax paid

-3.7

-4.7

-0.7

23.7

Other non-cash operating items

Total

-19.9

-3.6

Changes in operating capital

Due to credit institutions

Trading portfolio

-56.8

66.8

659.7

14.2

-0.5

Other financial instruments

Loans and receivables

Debt securities in issue net¹⁾

Other assets/liabilities³⁾

Cash ﬂow from operations

5.4

1,504.1

-1,555.0

-0.3

-630.2

-18.0

-6.8

-39.4

42.0

Cash and cash equivalents, beginning of period

Change in cash and cash equivalents³⁾

Cash and cash equivalents, end of period

188.2

-39.4

146.2

42.0

148.8

188.2

Cash in hand and demand deposits with central banks²⁾

Amounts due from credit institutions and central banks within 3 months

Total

144.4

4.4

188.1

0.1

148.8

188.2

1) Debt securities in issue are presented separately including both debt securities issued and matured during the ﬁnancial year. Comparison period corrected

correspondingly.

2) The minimum reserve is not included in the amount.

3) Figure corrected for comparative period.

Reconciliation of liabilities arising from financing

activities

On 31st December 2021 there were no liabilities aris-

ing from financing activities.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

24

Danske Mortgage Bank Plc

notes to the ﬁnancial statements

Accounting principles

Changes to significant accounting policies and

presentation during the year

Summary of Signiﬁcant Accounting

Policies and Estimates

On 1 January 2021 the Bank implemented the amend-

ments to IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16 (Inter-

General

est Rate Benchmark Reform, phase 2) and IFRS 16

(Covid-19 Related Rent Concessions). None of the

changes had an impact on the financial statements.

The Bank prepares its financial statements in accord-

ance with the International Financial Reporting Stand-

ards (IFRSs), issued by the International Accounting

Standards Board (IASB) and IFRIC Interpretations issued

by the IFRS Interpretations Committee, as endorsed by

the EU. In addition, certain requirements in accordance

with the Finnish Accounting Act, the Finnish Act on

Credit Institutions, the Finnish Financial Supervisory

Authority’s regulations and guidelines and the decision

of the Ministry of Finance on financial statements and

consolidated statements of credit institutions have also

been applied.

Standards and interpretations not yet in force

The International Accounting Standards Board (IASB)

has issued one new accounting standard (IFRS 17) and

amendments to existing international accounting stand-

ards (IFRS 1, IFRS 3, IFRS 9, IFRS 16, IAS 1, IAS 8, IAS

12, IAS 16 and IAS 37), that have not yet come into

force. The Bank has not early adopted any of the

changes. No significant impact is expected from the

changes to IFRS.

The financial statements are presented in euro (EUR), in

million euros with one decimal, unless otherwise stated.

The Risk management Disclosure is presented in euro

(EUR), in million euros with one decimal. The figures in

notes are rounded so combined individual figures might

differ from the presented total amount.

Critical judgements and estimation uncertainty

Management’s judgement, estimates and assumptions

of future events that will significantly affect the carrying

amounts of assets and liabilities underlie the prepara-

tion of the financial statements. The estimates and

assumptions that are deemed critical to the financial

statements are regarding the measurement of loans and

receivables. The estimates and assumptions are based

on premises that management finds reasonable but are

inherently uncertain and unpredictable. The premises

may be incomplete, unexpected future events or situa-

tions may occur, and other parties may arrive at other

estimated values

For the purpose of clarity, the primary financial state-

ments and the notes to the financial statements are pre-

pared using the concepts of materiality and relevance.

This means that the line items not considered material

in terms of quantitative and qualitative measures or rel-

evant to financial statement users are aggregated and

presented together with other items in the primary

financial statements. Similarly, information not consid-

ered material is not presented in the notes.

Measurement of expected credit losses on loans,

financial guarantees and loan commitments and

bonds measured at amortised cost

Significant accounting policies have been incorporated

into the notes to which they relate. Except the changes

presented below, the Bank has not changed its signifi-

cant accounting policies from those applied in the

Annual Report 2020.

The three-stage expected credit loss impairment model

in IFRS 9 depends on whether the credit risk has

increased significantly since initial recognition. The

impairment charge for expected credit losses depends

on whether the credit risk has increased significantly

since initial recognition. If the credit risk has not

increased significantly, the impairment charge equals

the expected credit losses resulting from default events

Financial statements is adopted by general meeting on

10. March 2022.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

25

The forward-looking information is based on a three-year

forecast period converging to steady state in year seven.

The base case is an extension of the Group’s official view

of the Nordic economies (the Nordic Outlook report from

October 2021) and reflects an expectation of further

recovery of the Nordic economies over the coming two

years, although lack of labour, materials and equipment

is becoming a break on growth.

that are possible within the next 12 months (stage 1). If

the credit risk has increased significantly, the loan is

more than 30 days past due, or the loan is in default or

otherwise impaired, the impairment charge equals the

lifetime expected credit losses (stages 2 and 3). The

allowance account is relatively stable in terms of

changes to the definition of significant increase in credit

risk. Non-performing loans are sold back to Danske Bank

A/S, Finland Branch.

In the upside scenario, consumers run down a large pro-

portion of the substantial savings accumulated during

the pandemic. There is a consumer-led global recovery,

and in this scenario there is slightly more support for

the housing market. GDP is about 1 per cent higher by

the end of this scenario compared to the base case. The

Group’s downside scenario is a severe recession sce-

nario, calibrated to a level of severity resembling the

recession in 2008-2009. A trigger of the economic set-

back could be another wave of coronavirus causing a

new round of countrywide lockdowns or just very cau-

tious consumers, an escalating confidence crisis in

Europe and some degree of financial crisis. Slowing pri-

vate consumption will shock the economy and plunging

global demand will hit European exports. This will lead to

a severe slowdown in the economies in which the Group

is represented.

The expected credit loss is calculated for all individual

facilities as a function of probability of default (PD), expo-

sure at default (EAD) and loss given default (LGD) and it

incorporates forward-looking information. The estima-

tion of expected credit losses involves forecasting future

economic conditions over a number of years. Such fore-

casts are subject to management judgement and those

judgements may be sources of measurement uncer-

tainty that have a significant risk of resulting in a mate-

rial adjustment to a carrying amount in future periods.

The incorporation of forward-looking elements reflects

the expectations of the Group’s senior management and

involves the creation of scenarios (base case, upside and

downside), including an assessment of the probability for

each scenario. The purpose of using multiple scenarios

is to model the non-linear impact of assumptions about

macroeconomic factors on the expected credit losses.

The scenarios used are described more closely in the

following section.

The applied scenarios in 2021 differ from those used at

31 December 2020. In Q1 2021 the downside scenario

was changed to the severe recession scenario applied in

the Bank’s ICLAAP processes and is similar in nature to

regulatory stress tests. The severe recession scenario

reflected negative growth and falling property prices for

a longer period. The change of the downside scenario

was made to capture the risk of prolonged lockdowns

due to new coronavirus variants, and in order for the

ECL calculation to include potential downside risks due

to the elevated asset prices. The scenario weightings

were also changed, and kept stable for the first nine

months of 2021. However, in Q4 2021 the scenarios

weightings have been updated to the current weights.

Accounting treatment of the impacts from the

COVID-19 pandemic

The effect of the coronavirus pandemic began to affect

the Bank’s credit portfolio in the first quarter of 2020.

The year 2021 marked the second year of the coronavi-

rus pandemic, and affected the expected credit loss dif-

ferently compared to the year 2020. The year 2021 has

seen overall good customer activity in the Group’s core

markets and reversals from modelled ratings. With the

ongoing detection of new variants of the coronavirus and

lockdowns imposed and lifted repeatedly throughout

2021, the uncertainty remains high in relation to credit

deterioration across most industries.

With the changed downside scenario the scenario

weighting was also changed and afterwards kept stable

for the first nine months of 2021. In Q4 2021, the sce-

narios weights have been updated to the current weights

of base case 70%, downside 20% and 10% upside.

The Bank has implemented the European Banking

Authority’s (the EBA’s) definition of loans subject to for-

bearance measures, which states that a probation

period of a minimum of two years must pass from the

date when forborne exposures are considered to be per-

forming again. Group has taken proactive forborne

measures to improve the financial position of weak cus-

tomers following the corona crisis.

Based on these assessments, the allowance account at

31 December 2021 amounted to EUR 2.0 million (31

December 2020 EUR 2.2 million). Loans accounted at

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

26

31 December 2021 for about 95.0 % of total assets

(31 December 2020: 94.5 %).

in foreign currency are translated at the exchange rate

of the transaction date. Gains and losses on exchange

rate differences between the transaction date and the

settlement date are recognised in the income statement.

Except as described above, all other policies and princi-

ples remain in place.

Non-monetary assets and liabilities in foreign currency

that are subsequently revalued at fair value are trans-

lated at the exchange rates at the date of revaluation.

Exchange rate adjustments are included in the fair value

adjustment of an asset or liability. Other non-monetary

items in foreign currency are translated at the exchange

rates at the transaction date.

More information regarding expected credit losses,

nature and extent of risks arising from financial instru-

ments can be found in Risk Management Disclosure

starting from page 15.

Translation of transactions in foreign currency

The presentation currency of the financial statement is

euro, which is also the functional currency. Transactions

Segment information

Danske Mortgage Bank Plc has only one business

segment and therefore separate segment report

outlined in IFRS 8 is not presented.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

27

Other notes

1. Net interest income

Interest income and expenses arising from interest-

bearing financial instruments measured at amortised

cost are recognised in the income statement accord-

ing to the effective interest method on the basis of the

cost of the individual financial instrument. Interest

includes amortised amounts of fees that are an inte-

gral part of the effective yield on a financial instru-

ment, such as origination fees and amortised differ-

ences between cost and redemption price, if any.

Interest income and expenses also include interest on

financial instruments measured at fair value through

profit or loss, but not interest on assets and deposits

under pooled schemes and unit-linked investment

contracts; the latter is recognised under Net result

from items at fair value.

EURm

Interest income calculated using effective interest method

1-12/2021

1-12/2020

Loans and receivables to credit institutions

Loans and receivables to customers

Other interest income

-1.5

32.9

0.2

-1.4

43.2

0.4

Total

31.7

42.2

Interest income

Debt securities

Derivatives, net

Total

0.0

22.4

0.2

44.2

44.4

Interest expenses

Amounts owed to credit institutions

Debt securities in issue

Other interest expenses

Total

-6.1

24.0

0.0

-2.5

46.9

0.0

17.9

44.4

Net interest income

36.2

42.2

Of which entities of the same group

Interest income

22.1

-6.1

44.0

-2.5

Interest expenses

Negative interest income and negative interest expenses during 2021 amounted to 1.5 million euros (2020: 1.4 million euros) and 6.1 million euros

(2020: 2.5 million euros), respectively. Negative interest income is offset against interest income and negative interest expenses against interest expenses.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

28

2. Fee income and expenses

Fee income and expenses are presented on a net fee

income basis as presented to key management for

decision making purposes. Net fee income is broken

down by fee type, on the basis of the underlying activ-

ity. Fee income consists mainly of loan invoicing fees

and loan change fees. Fees that form an integral part

of the effective rates of interest loans, advances and

deposits are carried under Interest income or Inter-

est expense.

Fee income is recognised to reflect the transfer of

services to customers at an amount that reflects the

consideration that is expected to be received in

exchange for such services. The Bank identifies the

performance obligation agreed with the customer,

and recognises consideration and income in line with

the transfer of services.

EURm

Net fee income by fee type

1-12/2021

1-12/2020

Loan fees and Guarantees

Other

2.1

0.0

2.1

0.0

2.1

2.3

0.0

2.3

0.0

2.3

Total, fee income

Fee expenses

Total

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

29

3. Net result from items at fair value

Net result from items at fair value includes realised

For financial assets and liabilities subject to fair value

hedge accounting, the fair value adjustments of the

and unrealised capital gains and losses on financial

assets and financial liabilities recognised at fair value hedged financial instrument and the hedging instru-

through profit or loss as well as exchange rate adjust- ments are recognised in Net result from items at fair

ments.

value. Therefore, any hedge ineffectiveness is pre-

sented in Net result from items at fair value.

EURm

1-12/2021

-0.8

1-12/2020

Net result from items at fair value

0.4

Net result from categories of ﬁnancial instruments

Loans and deposits

-7.0

-0.3

-0.4

0.1

Bonds (investment securities)

Issued bonds

57.7

-51.2

-0.8

13.8

-13.1

0.4

Trading portfolio assets and liabilities (Derivatives)

Total

4. Staff costs

Salaries and other remuneration that the Bank

expects to pay for work carried out during the year are

expensed under Staff costs and administrative

granted. Under defined contribution pension plans, the

Bank pays regular contributions to insurance com-

pany and has no legal or constructive obligations to

pay future contribution. Such payments are expensed

as they are earned by the staff, and the obligations

under the plans are taken over by the insurance com-

panies and other institutions. The retirement age of

the Managing Director and Deputy Managing Director

is statutory.

expenses. This item includes salaries, holiday allow-

ances, pension costs and other remuneration. Perfor-

mance-based pay is expensed as it is earned. Part of

the performance-based pay for the year is paid in the

form of conditional shares to Management and other

material risk takers. More about remuneration can be

read in the Bank’s remuneration policy on Internet:

www.danskebank.com/investor-relations/debt/dan-

ske-mortgage-bank under section Remuneration.

The Group is required to identify all employees whose

professional activities could have a material impact on

the risk profile of the Bank in accordance with current

legislation. In Danske Mortgage Bank Plc, there are

four Risk Takers including managing Director and Dep-

uty managing Director.

The Bank’s pension obligations consist of defined con-

tribution benefit pension plan for its personnel under

the Employees’ Pensions Act (TyEL) in Finland and no

voluntary supplimentary pension benefits has been

EURm

Staff costs

1-12/2021

1-12/2020

Wages and salaries

0.6

0.0

0.1

0.0

0.1

0.7

0.6

0.0

0.1

0.0

0.7

of which variable remuneration

Pension costs - defined contribution plans

Other social security costs

Other

Staff costs, total

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

30

Compensation paid by the Bank for termination of

employment contracts is determined in accordance with

legislation in force. During the accounting period the

Bank has not paid any signing bonuses for new employ-

ees or granted severance packages.

Share-based payments

Effective from 2018, Danske Mortgage Bank Plc has

granted rights to conditional shares to the

Management and other material risk takers as part

of the variable remuneration. Incentive payments

reflected individual performance and also depended

on financial results and other measures of value

creation for a given year. Rights were granted in the

first quarter of the year following the year in which

they were earned. The fair value of share-based

payments at the grant date is expensed over the

service period that unconditionally entitles the

employee to the payment.

Average staff

numbers

1-12/2021

1-12/2020

Full-time staff

6

Key management personnel

The key management personnel in Danske Mortgage

Bank Plc consists of the members of the Board of Direc-

tors of the Bank, Managing Director and Deputy Managing

Director.

Conditional shares – programme 2018

Rights to the Danske Bank A/S shares under the

conditional share programme vest up to four years

after being granted provided that the employee, with

the exception of retirement, has not resigned from

the Group. In addition to this requirement, rights to

shares vest only if the Group as a whole and the

employee´s department meet certain performance

targets within the next three years. Rights to buy the

Danske Bank A/S shares under the conditional

share programme are granted as a portion of the

annual bonus earned.

Management’s and board of directors’ remuneration

EUR 1,000

1-12/2021

1-12/2020

Remuneration for Managing

Director, Deputy Managing Director

293.8

32.0

293.5

32.0

Remuneration for the members of

Board of Directors

The members of the Board of Directors of the Bank, who

are employees of the Group, receive no remuneration for

the membership of the Bank’s Board of Directors .

The fair value of the conditional shares is calculated

as the share price less the payment made by the

employee. Intrinsic value is expensed in the year in

which rights to conditional shares are earned, while

the time value is accrued over the remaining service

period, which is the vesting period of up to three

years.

Loans and receivables from management

Management includes key management personnel with

close family members and entities that are controlled or

significantly influenced by these. There has not been

loans or receivables from key management personnel in

accounting periods 2021 and 2020.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

31

Number of shares

Fair value (1000 EUR)

End of year

Top

Manage-

ment

Employee

payment

price (EUR)

Conditional shares

Total

At issue

2020

Granted 2019

2019, beg.

Granted 2019

Exercised 2019

Forfeited 2019

Other changes 2019

2019, end

618

10.3

8.9

-371

-

247

-

4.1

3.6

3.3

Vested 2020

-

Exercised 2020

Forfeited 2020

Other changes 2020

2020, end

-

247

Vested 2021

-

Exercised 2021

Forfeited 2021

Other changes 2021

2021, end

-

247

4.1

14.5

5.8

3.8

15.1

6.0

Granted 2020

2020, beg.

Granted 2020

Exercised 2020

Forfeited 2020

Other changes 2020

2020, end

1,115

-669

-

446

-

Vested 2021

-

Exercised 2021

Forfeited 2021

Other changes 2021

2021, end

-

446

5.8

10.6

4.2

6.8

9.9

4.0

Granted 2021

2021, beg.

Granted 2021

Exercised 2021

Forfeited 2021

Other changes 2021

2021, end

655

-393

-

262

-

Share price at

grant date

(DKK)

Share price

at year end

(DKK)

Share price at

grant date

(EUR)

Share price

at year end

(EUR)

Conditional shares: Calc. used to calculate the fair value of

conditional shares as of 31 December 2021

EUR : DKK

Granted in 2019

Granted in 2020

Granted in 2021

124.21

96.60

112.95

7.4365

16.70

12.99

16.21

15.19

120.51

Conditional shares: Calc. used to calculate the fair value of

conditional shares as of 31 December 2020

Granted in 2019

Granted in 2020

124.21

96.60

100.65

7.4393

16.70

12.99

13.53

Conditional shares: Calc. used to calculate the fair value of

conditional shares as of 31 December 2019

Granted in 2019

124.21

107.80

7.4698

16.63

14.43

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

32

5. Other operating expenses and audit fees and ﬁnancial stability

authority contributions

EURm

Other operating expenses

1-12/2021

1-12/2020

Financial stability fund expenses

Other services^*)

1.3

15.7

17.0

1.3

13.8

15.1

Liiketoiminnan muut kulut yhteensä

*) Other operating expenses is mainly coming from the costs from services bought from the Group.

1000 EUR

Audit fees

1-12/2021

1-12/2020

Audit

59.9

22.3

82.2

68.1

-

Audit-related services

Audit fees, total (incl. VAT)

68.1

Financial stability authority contributions

The Financial Stability Authority manages the Finan-

cial Stability Fund, which includes the Resolution

Fund. Contributions used for building up the Resolu-

tion Fund are collected from all credit institutions

and investment firms within the scope of the resolu-

tion legislation. The contributions are determined

based on the size of the institution and risks involved

in its business.

The contributions of credit institutions are deter-

mined on the level of the Banking Union, and they are

calculated by the Single Resolution Board (SRB). In

the Banking Union, a single target level for the Single

Resolution Fund is introduced gradually. In other

words, the annual individual contributions of Finnish

institutions is increasingly dependent on the aggre-

gate amount of covered deposits in the entire Bank-

ing Union, not only in Finland.

Financial stability authority contributions

EURm

1-12/2021

1-12/2020

Financial stability authority contributions

Resolution contributions

1.3

0.0

1.3

0.0

1.3

Administration fee

Financial stability authority contributions, total

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

33

6. Loan impairment charges and loans and receivables from customers

The Bank buys the loans from Danske Bank A/S, Fin-

land Branch. Loans and receivables consists of loans

and receivables that have been granted to customers

by Danske Bank A/S, Finland Branch and have been

acquired after disbursement. Loans and receivables

includes conventional bank loans, except for transac-

tions with credit institutions and central banks.

quently, they are measured at amortised cost,

according to the effective interest method, less

impairment charges for expected credit losses. The

difference between the value at initial recognition and

the redemption value is amortised over the term to

maturity and recognised under Interest income. If

fixed-rate loans and receivables and amounts due are

accounted for under hedge accounting that is deter-

mined effective, the fair value of the hedged interest

rate risk is added to the amortised cost of the assets.

At initial recognition, loans and receivables are meas-

ured at fair value plus transaction costs. Subse-

EURm

2021

Loans and receivables from customers

Stage 1

Stage 2

Stage 3

Total

Gross carrying amount 1 January 2021

Transferred to Stage 1

Transferred to Stage 2

Transferred to Stage 3

New assets

5,173.7

79.7

449.9

-79.7

107.3

-4.0

2.7

5,626.2

-

-107.3

-2.3

6.3

-

97.2

2.7

99.9

Assets derecognised

-1,028.5

-367.9

3,844.6

-188.8

-19.3

268.1

-2.7

-

-1,220.0

-387.1

4,119.0

Other

Gross carrying amount 31 December 2021

*) includes loan repayments

6.3

EURm

2020

Total

Loans and receivables from customers

Stage 1

Stage 2

Stage 3

Gross carrying amount 1 January 2020

Transferred to Stage 1

Transferred to Stage 2

Transferred to Stage 3

New assets

4,769.3

43.4

225.7

-43.4

237.9

-0.2

1.4

-

4,996.4

-

-237.9

-2.1

-

2.3

0.4

-1.4

-

1,526.1

-544.1

-381.0

5,173.7

137.9

-94.6

-13.4

449.9

1,664.3

-640.1

-394.4

5,626.2

Assets derecognised

Other

Gross carrying amount 31 December 2020

*) includes loan repayments

2.7

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

34

Impairment for expected credit losses

The impairment charge for expected credit losses

depends on whether the credit risk has increased

significantly since initial recognition and follows a

three stage model:

The expected credit loss is calculated for all individ-

ual facilities as a function of the probability of default

(PD), the exposure at default (EaD) and the loss given

default (LGD) and incorporates forward looking ele-

ments. For facilities in stages 2 and 3, the lifetime

expected credit losses cover the expected remaining

lifetime of a facility.

• Stage 1: If the credit risk has not increased sig-

nificantly, the impairment charge equals the

expected credit losses resulting from default

events that are possible within the next 12

months.

Expected credit loss impairment charges are booked

in an allowance account and allocated to individual

exposures.

• Stage 2: If the credit risk has increased signifi-

cantly, the loan is transferred to stage 2 and an

impairment charge equal to the lifetime expected

credit losses is recognised.

The Bank sells non-performing loan agreements back

to Danske Bank A/S, Finland Branch.

• Stage 3: If the loan is in default or otherwise credit-

impaired, it is transferred to stage 3, for which the

impairment charge continues to equal the lifetime

expected credit losses but with interest income

being recognised on the net carrying amount,

Loan impairment charges

EUR 1,000

1-12/2021

1-12/2020

Impact of net remeasurement of ECL (incl. changes in models)

ECL on assets derecognised

3,049.5

-158.3

-3,258.2

3,255.2

-0.1

867.0

-139.8

-1,012.7

1,012.7

0.0

Decrease of provisions to cover realised loan losses

Final write-offs

Interest income, effective interest method

Total

2,888.2

727.2

Reconciliation of total allowance account

EUR 1,000

2021

Total

Stage 1

Stage 2

Stage 3

Balance at the beginning of period

Transferred to Stage 1 during the period

Transferred to Stage 2 during the period

Transferred to Stage 3 during the period

ECL on new assets

457.9

277.0

-80.7

-3.9

1,748.2

-275.0

88.6

20.9

-2.0

2,226.7

-

-7.9

-

-143.8

-

147.7

-

77.3

-158.3

3,055.6

-3,258.2

42.1

1,985.6

ECL on assets derecognised

-62.8

-239.7

-105.0

3.2

-95.5

-

Impact of net remeasurement of ECL (incl. changes in models)

Write-offs debited to the allowance account

Other changes

2,818.2

-2,675.0

52.4

477.1

-478.2

-13.4

144.2

Balance at end of period

323.4

1,517.9

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

35

Reconciliation of total allowance account

EUR 1,000

2020

Total

Stage 1

Stage 2

Stage 3

Balance at the beginning of period

Transferred to Stage 1 during the period

Transferred to Stage 2 during the period

Transferred to Stage 3 during the period

ECL on new assets

186.8

262.3

-37.9

-4.6

1,689.8

-262.3

47.8

6.7

-

1,883.3

-

-9.9

-

-377.8

174.1

-111.5

990.5

-426.8

24.6

382.4

-

451.8

-27.9

-385.1

-3.3

625.9

-139.8

871.8

-1,012.7

-1.9

ECL on assets derecognised

-0.4

Impact of net remeasurement of ECL (incl. changes in models)

Write-offs debited to the allowance account

Other changes

266.4

-582.5

-42.1

20.9

15.6

Balance at end of period

457.9

1,748.2

2,226.7

Significant increase in credit risk (transfer from stage 1

to stage 2)

(a) significant financial difficulty of the issuer or the

borrower;

The classification of facilities between stages 1 and 2 for

the purpose of calculating expected credit losses

depends on whether the credit risk has increased signifi-

cantly since initial recognition. The assessment of

whether credit risk has increased significantly since ini-

tial recognition is performed by considering the change

in the risk of default occurring over the remaining life

time of the facility and incorporating forward-looking

information. A facility is transferred from stage 1 to

stage 2 based on observed increases in the probability

of default:

(b) a breach of contract, such as a default or past

due event;

(c) the borrower, for financial or contractual reasons

relating to the borrower’s financial difficulty, having

been granted a concession that would not otherwise

have been considered;

(d) it is becoming probable that the borrower will enter

into bankruptcy or other financial restructuring; and

(e) the purchase or origination of a financial asset at a

high rate of discount that reflects the incurred credit

loss.

• For facilities originated below 1% in PD: An increase

in the facility’s 12-month PD of at least 0.5 percent-

age points and a doubling up of the facility’s lifetime

PD since origination.

It may not be possible to identify a single individual event

– instead, the combined effect of several events may

cause financial asset to become credit-impaired. Credit-

impaired facilities are placed in rating category 10 or

11. For customers in rating category 10, the stage 3

classification applies only to customers where a loss is

expected in the most likely scenario. For rating category

11 (default), all facilities are classified as stage 3 expo-

sures.

• For facilities originated above 1% in PD: An increase

in the facility’s 12 month PD of 2 percentage points

or a doubling of the facility’s lifetime PD since origi-

nation.

In addition, facilities that are more than 30 days past

due are moved to stage 2. Finally, customers subject to

forbearance measures are placed in stage 2, if the Bank,

in the most likely outcome, expects no loss, or if the cus-

tomers are subject to the two-year probation period for

performing forborne exposures.

Definition of default

To support a more harmonised approach regarding the

application of the definition of default, the European

Banking Authority (EBA) has issued the following prod-

ucts that guides the application of the definition of

default: the Guidelines on the application of the definition

of default, EBA/GL/2016/07 and the Regulatory Techni-

cal Standards (RTS) on the materiality threshold for

credit obligations past due, EBA/RTS/2016/06.

Stage 3 (credit-impaired facilities)

A facility is transferred from stage 2 to stage 3 when it

becomes credit-impaired. A facility becomes credit-

impaired when one or more events that have a detrimen-

tal impact on the estimated future cash flows have

occurred. This includes observable data about

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

36

The Bank has implemented the new requirements

related to the definition of default in January 2022 in

order to align the existing definition of default to the new

requirements outlined in the Guidelines and the RTS.

(through the organization) and a process for adjusting

scenarios given new information during the quarter.

The purpose of using multiple scenarios is to model the

non-linear impact of assumptions about macroeconomic

factors on the expected credit losses. Management’s

approval of scenarios can include adjustments to the

scenarios, probability weighting and management over-

lays to cover the outlook for particular high-risk portfo-

lios, which are not provided by the Group’s macroecono-

mists. The approved scenarios are used to calculate the

impairment levels. Technically, the forward-looking infor-

mation is used directly in the PDs through an estimate of

general changes to the PDs and the LGDs in the

The newly definition of default is used in the measure-

ment of expected credit losses and the assessment to

determine movements between stages. The definition of

default is also used for internal credit risk management

and capital adequacy purposes. According to the revised

definition of default, exposures that are considered

default are also considered Stage 3 exposures. This is

applicable for exposures that are default due to either

the 90 days past due default trigger or the unlikeliness

to pay default triggers.

expected credit loss calculation.

Calculation of expected credit losses

The forward-looking information is based on a three year

forecast period converging to steady state in year seven.

The base case is based on the macroeconomic outlook

as disclosed in the Group’s Nordic Outlook reports.

The expected credit loss is calculated for all individual

facilities as a function of the probability of default (PD),

the exposure at default (EaD) and the loss given default

(LGD). In general, the Bank’s IFRS 9 impairment models

and parameters draw on the Group’s internal models in

order to ensure alignment of models across the Group.

New models and calculations have been developed espe-

cially for IFRS 9 purposes, including models for lifetime

PD, prepayment and forward-looking LGD. All expected

credit loss impairment charges are allocated to individ-

ual exposures.

Modification

When a loan is replaced by a new loan or the original

loan contract is modified it is assessed whether this

should be accounted for as derecognition of the loan and

recognition of a new loan, or as a modification of the old

loan. This depends on whether the changes to the con-

tractual cash flows or other contractual terms are sig-

nificant or not. If the change is significant, it is accounted

for as derecognition of the old loan and recognition of the

new loan. If the change is not significant, the modification

is accounted for as a modification of the old loan. In gen-

eral, if the modification results in a new loan contract

and loan identification, the modification is considered

significant and leads to derecognition of the old loan and

recognition of a new loan. If this is not the case, the mod-

ification does not lead to derecognition of the original

loan.

Expected remaining lifetime

For most facilities, the expected lifetime is limited to the

remaining contractual maturity and is adjusted for

expected prepayment. For exposures with weak credit

quality, the likelihood of prepayment is not included. For

exposures that include both a loan and an undrawn com-

mitment and where a contractual ability to demand pre-

payment and cancellation of the undrawn commitment

does not limit the Bank’s exposure to credit losses to the

contractual notice period, the expected lifetime is the

period during which the Bank expects to be exposed to

credit losses. This period is estimated on the basis of

the normal credit risk management actions.

If the old financial asset is not derecognised, the original

effective interest rate remains unchanged, and the net

present value of the changed contractual cash flows rep-

resents the carrying amount of the financial asset after

the modification. The difference between the net present

value of the original contractual cash flows and the modi-

fied contractual cash flows are recognised in P/L as a

modification gain or loss. If the modification loss relates

to modifications on loans subject to forbearance meas-

ures the modification loss is presented in the income

statement under Loan impairment charges.

Incorporation of forward-looking information

The forward-looking elements of the calculation reflect

the current unbiased expectations of the Bank’s senior

management. The process consists of the creation of

macroeconomic scenarios (base case, upside and down-

side), including an assessment of the probability of each

scenario, by the Group’s independent macroeconomic

research unit, the review and sign-off of the scenarios

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

37

In terms of stage allocation, it is important whether a

modification leads to derecognition of the old loan and

recognition of a new loan or not. If the replacing loan is

considered to be a new loan, the loan will (unless the

new loan is credit-impaired at initial recognition) be rec-

ognised in stage 1 at initial recognition, i.e. the initial

credit risk is reset. If the replacing loan is considered an

amendment to the old loan, the initial credit risk is not

reset.

The Bank buys new loans from Danske Bank A/S, Finland

Branch. However, there might be modifications to the

loans that are in the Bank’s balance sheet if the modifi-

cations do not result in derecognition of the old loan and

recognition of the new loan.

Further information on the accounting treatment of the

impacts from the COVID-19 crisis can be found in the

Accounting principles in a separate section under Criti-

cal judgements and estimation uncertainty.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

38

7. Taxes

Calculated current and deferred tax on the profit for

the year are recognised in the income statement.

Current tax is calculated based on the valid tax rate.

EURm

1-12/2021

1-12/2020

Taxes on taxable income for the year

Taxes arising from previous years

Taxes for the ﬁnancial year total

3.4

0.0

3.4

5.7

-

5.7

Effective tax rate

20.0%

Reconciliation between income taxes in income statement and taxes

calculated at domestic tax rate 20% (20%)

Profit before taxes

17.1

3.4

28.4

5.7

-

Taxes calculated at domestic tax rate

Taxes arising from previous years

Taxes in Income statement

0.0

3.4

5.7

8. Classiﬁcation of ﬁnancial instruments and non-ﬁnancial assets

The purchase and sale of financial assets and liabili-

ties at fair value through profit or loss are recognised

in the balance sheet on the settlement date, or the

date on which the Bank agrees to buy or sell the asset

or liability in question. Loans are recognised as finan-

cial assets on the settlement date mentioned in the

loan purchase contract between Danske Mortgage

Bank Plc and Danske Bank A/S, Finland Branch. Deriv-

ative instruments, quoted securities and foreign

exchange spot transactions are recognized on and

derecognized from the balance sheet on the settle-

ment date.

assets has expired or all risks and rewards of owner-

ship have been transferred. Financial liabilities are

derecognised when they are extinguished, i.e. when

the obligation is discharged, cancels or expires.

Financial assets and liabilities are offset and the net

amount reported in balance sheet only if there is a

legally enforceable right to offset the recognised

amounts and there is an intention to settle on a net

basis. Transaction costs are included in the initial car-

rying amount, unless the item is measured at fair

value through the profit and loss. The Bank uses the

option in IFRS 9 to continue to apply the hedge

accounting provisions in IAS 39.

Financial assets are derecognised when the contrac-

tual right to receive cash flows from the financial

Classification and measurement of financial assets

and financial liabilities under IFRS 9 – general

Under IFRS 9, financial assets are classified on the

basis of the business model adopted for managing

the assets and on their contractual cash flow

characteristics (including embedded derivatives, if

any) into one of the following measurement

categories:

Financial assets are measured at AMC if they are held

within a business model for the purpose of collecting

contractual cash flows (held to collect) and if cash flows

are solely payments of principal and interest on the prin-

cipal amount outstanding. In general, this is the case for

the Bank’s loan portfolio.

Danske Mortgage Bank Plc does not have financial

assets that are measured at FVOCI.

• Amortised cost (AMC)

• Fair value through other comprehensive income

(FVOCI)

All other financial assets are mandatorily measured at

FVPL including financial assets within other business

• Fair value through profit or loss (FVPL)

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

39

models such as financial assets managed at fair value or

held for trading and financial assets with contractual

cash flows that are not solely payments of principal and

interest on the principal amount outstanding.

fair value at initial recognition less any subsequent

changes, e.g. due to repayment. The interest must

represent only consideration for the time value of

money, credit risk, other basic lending risks and a

profit margin consistent with basic lending features.

If the cash flows introduce more than de minimis

exposure to risk or volatility that is not consistent

with basic lending features, the financial asset is

mandatorily recognised at FVPL.

Generally, financial liabilities are measured at

amortised cost with bifurcation of embedded

derivatives not closely related to the host contract.

Derivatives are measured at fair value.

The SPPI test (solely payment of principal and

interest on the principal amount outstanding)

The second step in the classification of the financial

assets in portfolios being “held to collect” and “held

to collect and sell” relates to the assessment of

whether the contractual cash flows are consistent

with the SPPI test. The principal amount reflects the

In general, Bank’s portfolios of financial assets that

are “held to collect” (loans) have contractual cash

flows that are consistent with the SPPI test, i.e. they

have basic lending features.

The table below shows the classification of the

Bank’s financial instruments.

Fair value through

Amortised cost

proﬁt or loss

Held to collect

ﬁnancial

Non-ﬁnancial

assets and

liabilities

Managed at

fair value

Assets, EURm

assets Liabilities

Hedge

Total

Cash and balances with central banks

Loans and receivables to credit institutions

Trading portfolio assets

Derivatives

165.1

4.4

165.1

4.4

9.0

4.6

9.0

35.4

Investment securities, bonds

Loans and receivables to customers

Tax assets

35.4

4,112.4

4,117.0

0.4

1.0

1.4

Other assets

1.0

Total 31.12.2021

4,281.8

-

35.4

13.7

4,332.3

Liabilities

Due to credit institutions and central banks

Trading porfolio liabilities

Debt securities in issue

1,732.5

13.8

0.2

-> Bonds

2,245.1

2,245.3

0.9

Other liabilities

Total 31.12.2021

0.9

-

3,977.6

-

14.0

0.9

3,992.5

*) Varat, joiden tarkoituksena on kerätä sopimusperusteisia rahavirtoja, jotka koskevat yksinomaan pääomanpalautuksia ja niihin liittyviä korkoja.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

40

Fair value through

proﬁt or loss

Amortised cost

Held to collect

Non-ﬁnancial

assets and

liabilities

ﬁnancial

assets Liabilities

Managed at

fair value

Assets, EURm

Hedge

Total

Cash and balances with central banks

Loans and receivables to credit institutions

Trading portfolio assets

Derivatives

208.2

0.1

208.2

0.1

74.1

12.3

74.1

40.8

Investment securities, bonds

Loans and receivables to customers

Tax assets

40.8

5,611.7

5,624.0

0.1

1.6

1.7

Other assets

1.6

Total 31.12.2020

5,820.0

-

40.8

86.4

5,949.0

Liabilities

Due to credit institutions and central banks

Trading porfolio liabilities

Debt securities in issue

1,789.3

12.1

58.0

70.0

-> Bonds

3,742.3

3,800.3

21.2

Other liabilities

Total 31.12.2020

21.2

-

5,531.6

-

21.2

5,622.8

*) Varat, joiden tarkoituksena on kerätä sopimusperusteisia rahavirtoja, jotka koskevat yksinomaan pääomanpalautuksia ja niihin liittyviä korkoja.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

41

9. Balance sheet items broken down by expected due date

The balance sheet items are presented in order of

liquidity instead of distinguishing between current and

non-current items. The table below shows the balance

sheet items expected to mature within one year (cur-

rent) and after more than one year (non-current).

2021

EURm

Total

< 1 year

> 1 year

Assets

Cash and balances with central banks

Loans and receivables to credit institutions

Trading portfolio assets

Other investment securities

Loans and receivables to customers

Tax assets

165.1

4.4

165.1

4.4

-

9.0

5.9

3.1

35.4

-

35.4

4,117.0

0.4

333.7

0.4

3,783.3

-

Other assets

1.0

Total

4,332.3

510.5

3,821.8

Liabilities

Due to credit institutions and central banks

Derivatives and other financial liabilities held for trading

Debt securities in issue

1,732.5

13.8

632.5

-4.0

1,100.0

17.8

2,245.3

0.9

3.0

2,242.3

-

Other liabilities

0.9

Total

3,992.5

632.3

3,360.1

2020

EURm

Total

< 1 year

> 1 year

Assets

Cash and balances with central banks

Loans and receivables to credit institutions

Trading portfolio assets

Other investment securities

Loans and receivables to customers

Tax assets

208.2

0.1

208.2

0.1

-

29.2

40.7

5,179.7

-

74.1

44.9

0.1

40.8

5,624.0

0.1

444.3

0.1

Other assets

1.6

-

Total

5,949.0

699.3

5,249.6

Liabilities

Due to credit institutions and central banks

Derivatives and other financial liabilities held for trading

Debt securities in issue

1,789.3

12.1

78.3

6.9

1,711.0

5.2

3,800.3

21.2

2,017.4

21.2

1,782.9

-

Other liabilities

Total

5,622.8

2,123.8

3,499.0

Maturity analysis of past due ﬁnancial assets, net

EURm

2021

2020

Assets past due 30-90 days

4.9

6.4

0.4

-

4.2

Unlikely to pay

13.0

Nonperforming assets past due at least 90 days but no more than 180 days

Nonperforming assets past due at least 180 days - 1 year

Nonperforming assets more than 1 year

0.5

-

Receivables with forbearance measures, gross carrying amount

159.7

269.2

Maturity analysis for derivatives is included in note 12.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

42

10. Fair value information

Fair value

used to measure fair value. The fair value of more

complex financial instruments, such as swaptions,

interest rate caps and floors, and other OTC prod-

ucts, is measured on the basis of internal models,

many of which are based on valuation techniques

generally accepted within the industry.

Financial instruments are carried on the balance

sheet at fair value or amortised cost. The fair value of

financial assets and liabilities is measured on the

basis of quoted market prices of financial instru-

ments traded in active markets. If an active market

exists, fair value is based on the most recently

observed market price on the balance sheet date.

The results of calculations made on the basis of valu-

ation techniques are often estimates, because exact

values cannot be determined from market observa-

tions. Consequently, additional parameters, such as

liquidity and counterparty risk, are sometimes used

to measure fair value.

If a financial instrument is quoted in a market that is

not active, the valuation is based on the most recent

transaction price. It adjusts the price for subsequent

changes in market conditions, for instance by includ-

ing transactions in similar financial instruments that

are motivated by normal business considerations.

If, at the time of acquisition, a difference arises

between the value of a financial instrument calcu-

lated on the basis of non-observable inputs and

actual cost [day-one profit and loss] and the differ-

ence is not the result of transaction costs, the Bank

calibrates the model parameters to the actual cost.

If an active market does not exist, the fair value of

standard and simple financial instruments, such as

interest rate and currency swaps and unlisted bonds,

is measured according to generally accepted meas-

urement methods. Market-based parameters are

Financial instruments measured at fair value

prices category (level 1). Financial instruments valued

substantially on the basis of other observable input are

recognised in the Observable input category (level 2).

Other financial instruments are recognised in the Non-

observable input category (level 3).

Generally, the Bank applies valuation techniques to OTC

derivatives and unlisted trading portfolio assets and lia-

bilities. The most frequently used valuation and estima-

tion techniques include the pricing of transactions with

future settlement and swap models that apply present

value calculations, credit pricing models and options

models, such as Black & Scholes models. In most cases,

valuation is based substantially on observable input.

During the reporting period ending 31 December 2021,

there were no transfers between Level 1 (Quoted prices)

and Level 2 (Observable input) fair value measurements,

and no transfers into and out of Level 3 (Non-observable

input) fair value measurements.

Financial instruments valued on the basis of quoted

prices in an active market are recognised in the Quoted

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

43

Non-

observable

input

2021

EURm

Quoted

prices

Observable

input

Total

Financial assets

Investment securities, bonds

Derivative financial instruments

Total

30.3

-

5.1

9.0

-

35.4

9.0

30.3

14.1

44.4

Financial liabilities

Derivative financial instruments

Total

-

13.8

-

13.8

-

13.8

-

2020

Financial assets

Investment securities, bonds

Derivative financial instruments

Total

30.6

-

10.2

74.1

84.3

-

40.8

74.1

30.6

114.9

Financial liabilities

Derivative financial instruments

Total

-

12.1

-

12.1

-

12.1

-

Financial instruments at amortised cost

The fair value of Debt securities in issue amounted to

EUR 2,259.7 million (2020: EUR 3,759.8) compared to

the carrying amount of EUR 2,245.3 million (2020: EUR

3,800.3). For the majority of the debt securities issued

the fair value reflects the quoted price, i.e. a level 1

measurement. For other financial instruments, no signifi-

cant difference between the estimated fair value and

amortised cost exists.

For the vast majority of amounts due to the Bank, such

as loans and receivables, active market does not exist.

Consequently, the Bank bases its fair value estimates on

data showing changes in market conditions after the ini-

tial recognition of the individual instrument and affecting

the price that would have been fixed if the terms had

been agreed at the balance sheet date. Other parties

may make other estimates. The maturity of the items

included in cash and balances at central bank is so

short, that carrying amount represents also fair value.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

44

11. Cash and balances at central banks and loans and receivebles from

credit institutions

Amounts due from credit institutions and central

banks comprise amounts due from other credit insti-

tutions and term deposits with central banks.

Amounts due from credit institutions and central

banks are measured at amortised cost as described

under Loans and receivables at amortised cost.

EURm

2021

2020

Balances with central banks

165.1

208.2

Loans and receivables from credit institutions

Other loans

Allowances

Total

4.4

0.0

0.1

0.0

169.5

208.3

Balances with central banks are on stage 1 in the stage

division according to IFRS 9 -standard.

12. Derivative ﬁnancial instruments

The Bank uses derivative instruments for hedging pur-

poses. The derivatives used are interest rate deriva-

tives. Derivatives held for hedging purposes are used

for hedging loans and issued bonds. Interest rate

swaps are designated as fair value hedges. Hedges

protect the Bank against fair value changes caused by

the changes in market interest rates.

ing to a fixed rate, the interest rate risk against mar-

ket rates arises on the current period of the floating

rate loan. The Bank uses derivatives to hedge the

interest rate risk of the fixed interest rate period of

the fixed rate loans, floating rate loans and fixed rate

issued bonds.

If the hedge criteria cease to be met, the accumulated

value adjustments of the hedged items are amortised

over the term to maturity.

The Bank measures all loans and issued bonds at

amortised cost. Majority of the loans in the Bank are

floating rate loans. When a floating rate loan has a fix-

2021

2020

Fair value

Assets Liabilities

Fair value

Assets Liabilities

EURm

Notional

amount

Notional

amount

Derivatives held for hedging

Fair value hedges

9.0

13.8

8,247.4

74.1

12.1

8,375.7

Interest rate

OTC derivatives

9.0

13.8

8,247.4

74.1

12.1

8,375.7

Total derivatives held for hedging

9.0

13.8

8,247.4

74.1

12.1

8,375.7

with Group companies:

9.0

13.8

8,247.4

74.1

12.1

8,375.7

Nominal value of the underlying instrument

Remaining maturity

Less than

1 year

1-5

years

Over Less than

1-5

years

Over

5 years

1 year

1,000.0

-

8,103.9

143.5

6,301.5

1,074.3

with Group companies:

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

45

Explanation of hedge accounting

The Bank uses the option in IFRS 9 to continue to use

the fair value hedge accounting provisions in IAS 39.

With effective hedging, the hedged interest rate risk on

hedged assets and liabilities is measured at fair value

and recognised as a value adjustment of the hedged

items. Value adjustments are carried in the income

statement under Net result from items at fair value. Any

ineffective portion of a hedge that lies within the range

for effective hedging is therefore also included under Net

result from items at fair value.

The interest rate risk arising on the fixed-rate periods of

assets and liabilities is hedged by derivatives. Hedges

are executed when it is required to match the risk aris-

ing from assets and liabilities to minimize the total inter-

est rate risk.

For hedged assets and liabilities to which a fixed rate of

interest applies for a specified period of time starting at

the commencement date of the agreement, future inter-

est payments are divided into basic interest and a cus-

tomer margin and into periods of time. By entering into

swaps or forwards with matching payment profiles in the

same currencies and for the same periods, the Bank

hedges the risk at a portfolio level from the commence-

ment date of the hedged items. The fair values of the

hedged interest rate risk and the hedging derivatives are

measured at frequent intervals to ensure that changes

in the fair value of hedged interest rate risk lie within a

band of 80-125% of the changes in the fair value of the

hedging derivatives. Portfolios of hedging derivatives are

adjusted if necessary.

The ongoing Interest Rate Benchmark Reform will

replace existing benchmark inter-bank offered rates

(IBORs) with alternative risk-free rates. There is cur-

rently uncertainty as to the timing and the methods of

transition for the different IBORs and whether some

existing benchmarks will continue to be supported. The

calculation methodology behind EURIBOR has been

amended and is now recognised as being fully compliant

with the EU Benchmark Regulation. Further, it is

expected that EURIBOR will continue in a foreseeable

future

Hedge ineffectiveness relates to the fact that the fair

value changes to the hedged items are measured based

on the interest rate curve relevant for each hedged item

while the fair value of the fixed legs of the hedging deriva-

tives are measured based on a swap curve. Further, the

adjustment of the portfolios of hedging derivatives to

changes in hedged positions is not done instantly, and

some hedge ineffectiveness can therefore exist.

At the end of 2021, the carrying amounts of effectively

hedged financial assets and liabilities were EUR 4,128.3

million (5,638.0 million) and EUR 2,250.2 million

(2,808.0 million), respectively. The table below shows

the value adjustments of these assets and liabilities and

the hedging derivatives. The value adjustments have

been recognised in the income statement as Net result

from items at fair value.

At the end of 2021, the Bank has no derivatives that are

yet to transition to alternate benchmark rates.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

46

EURm

Effect of interest rate hedging on proﬁt

2021

2020

Effect of ﬁxed-rate assets hedging on proﬁt

Hedged loans

Hedging derivatives

Total

-7.7

7.4

-1.6

1.8

0.2

-0.3

Effect of ﬁxed-rate liability hedging on proﬁt

Hedged issues

Hedging derivatives

Total

57.7

-57.7

0.0

13.8

-14.5

-0.7

The tables below shows the hedging derivatives and the

hedged fixed interest rate financial instruments.

Carrying amount of

hedging derivatives

Changes

in fair value

used for

calculating

hedge

Nominal

amount of

hedging

derivatives

Assets

9.0

Liabilities

ineffectiveness

Interest rate risk (interest rate swaps), 2021

Interest rate risk (interest rate swaps), 2020

6,373.7

8,375.7

13.8

12.1

-50.4

-12.7

74.1

Accumulated amount

of fair value hedge

adjustments on the

hedged item included in

Change in value

used for

Carrying amount

of hedged items

calculating

hedge

Fixed interest rate risk on

2021

Assets Liabilities

Assets

Liabilities ineffectiveness

Loans

4,128.3

4.6

-7.7

Issued bonds

Total, 2021

2,250.2

0.2

57.7

4,128.3 2,250.2

4.6

0.2

50.1

2020

Loans

5,638.0

12.3

-1.6

13.8

12.2

Issued bonds

Total, 2020

2,808.0

58.0

5,638.0 2,808.0

12.3

58.0

Hedge ineffectiveness recognised in the income statement, 2021

Hedge ineffectiveness recognised in the income statement, 2020

-0.3

-0.5

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

47

Offsetting

Assets and liabilities are netted when the Bank and

the counterparty have a legally enforceable right to

set off recognised amounts and intend either to settle

the balance on a net basis or to realise the asset and

settle the liability simultaneously.

EURm

Derivatives with positive fair value

12/2021

12/2020

Derivatives with positive fair value before netting

Carrying amount

9.0

74.1

12.1

62.1

78.2

-16.1

Netting (under capital adequacy rules)

Net current exposure

13.8

-4.7

Collateral

-12.5

7.7

Net amount

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

48

13. Tax assets and tax liabilities

Current tax assets and liabilities are recognised on

the balance sheet as the estimated tax payable on

the profit for the year adjusted for prepaid tax and

possible tax payments for previous years. Tax assets

and liabilities are netted if permitted by law and pro-

vided that the items are expected to be subject to net

or simultaneous settlement.

Deferred tax is recognised under Deferred tax assets

and Deferred tax liabilities.

Deferred tax is measured on the basis of the tax reg-

ulations and rates that, according to the rules in

force at the balance sheet date, are applicable at the

time the deferred tax is expected to crystallise as

current tax. Adopted changes in deferred tax as a

result of changes in tax rates applied to expected

cash flows are recognised in the income statement

Deferred tax on all temporary differences between

the tax base of assets and liabilities and their carry-

ing amounts is accounted for in accordance with the

balance sheet liability method. Deferred tax is not

recognised on temporary differences of items if the

temporary differences arose at the time of acquisi-

tion without effect on net profit or taxable income.

Tax assets arising from unused tax losses are recog-

nised to the extent that such unused tax losses can

be used.

EURm

2021

2020

Income tax assets

0.4

0.1

Total tax assets

0.4

0.1

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

49

14. Other assets

Other assets includes interest and commission due and other receivables.

EURm

2021

2020

Other assets

Accrued interest

Other

1.0

0.0

1.0

1.6

0.0

1.6

Total

15. Amounts owed to credit institutions

Amounts due to credit institutions are measured at amortised cost.

EURm

2021

2020

Amounts owed to credit institutions

Other

1,732.5

1,789.3

Total

1,732.5

1,789.3

16. Debt securities in issue and ﬁnancial liabilities at fair value through p/l

Other issued bonds comprise bonds issued by the Bank. Other issued bonds are measured at amortised cost

plus the fair value of the hedged interest rate risk.

EURm

2021

2020

Debt securities in issue

Finnish covered bonds

2,245.3

3,800.3

Nominal value

EURm

31 December

2021

1 January 2021

Issued

Redeemed

Covered bonds

3,750.0

500.0

2,000.0

2,250.0

Nimellisarvo

EURm

31 December

2020

1 January 2020

Issued

Redeemed

Covered bonds

3,750.0

1,000.0

3,750.0

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

50

17. Other liabilities

Other liabilities includes accrued interest, fees and

commissions that do not form part of the amortised

cost of a financial instrument. Other liabilities also

includes pension obligations.

A provision is recognised if, as a result of a past event,

the Bank has a present legal or constructive obliga-

tion that can be estimated reliably, and it is probable

that an outflow of economic benefits will be required

to settle the obligation.

EURm

2021

2020

Provisions

-

0.0

Other liabilities

Accruals and deferred income

Deferred interest

Other accruals

0.3

0.6

0.1

0.9

20.7

0.4

Other

0.0

Total other liabilities

21.2

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

51

18. Contingent liabilities and commitments

Off-balance sheet items

Off-balance sheet items consist mainly of commitments

to extend credit. Commitments to extend credit are irrev-

ocable commitments and comprise undrawn loans. The

commitments are stated to the amount that can be

required to be paid on the basis of the commitment. Pro-

visions for irrevocable loan commitments are recognised

under Other liabilities if it is probable that drawings will

be made under a loan commitment. Off-balance sheet

items are mainly at the stage 1.

Danske Mortgage Bank did not have any material off-balance sheet items at 31 December 2020 and 31 December 2021.

Carrying amount

of encumbered

assets

Fair value of Carrying amount

encumbered of unencumbered unencumbered

Fair value of

Asset encumbrance

EURm

assets

Assets December 31, 2021

Equity instruments

Debt securities

5,027.7

-

205.3

-

35.6

-

35.6

169.7

35.6

Other assets

5,027.7

Assets December 31, 2020*⁾

6,182.2

-

277.9

-

40.8

-

Equity instruments

-

Debt securities

40.8

237.1

40.8

Other assets

6,182.2

*) Carrying amount of unencumbered assets for comparison year corrected.

Collateral received

Danske Mortgage Bank didn’t have any received collaterals at 31 December 2021.

Assets, collateral received

and own debt securities

issued other than covered

bonds and ABSs encumbered

Matching liabilities,

contingent liabilities

or securities lent

EURm

Encumbered assets/collateral received and associated liabilities

Carrying amount of selected ﬁnancial liabilities 31.12.2021

Carrying amount of selected ﬁnancial liabilities 31.12.2020

2,796.8

4,921.2

5,027.7

6,182.2

Loans and securities serving as collateral for covered

bond issuance is the main category of encumbered

assets. Coverd bond issuance is a strategic long-term

funding measure that entails ring-fencing assets accord-

ing to statutory regulation. Encumbered assets and

associated liabilities are disclosed based on median val-

ues of quarterly data.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

52

19. Related party transactions with group companies and other related parties

Parties with control interest

EURm

2021

2020

Loans and receivables

Securities

4.4

9.0

0.1

74.1

Deposits

1,732.5

13.8

1,789.3

12.1

Derivatives

Interest income

22.1

-6.1

44.0

-2.5

Interest expenses

Purchases from group companies

Sales to group companies

15.2

0.2

13.3

0.1

There are not expected credit losses booked for receiva-

bles from related parties. Interest expenses from related

parties are positive interest.

prises Board of Directors and executive management,

including close family members and companies, in which

key management personnel or their close family mem-

bers have considerable influence.

Related party comprises the parent company, key man-

agement personnel and other related-party companies.

Parties with significant influence include the parent com-

pany and its branches. Key management personnel com-

Information regarding management’s related party

transactions is presented in Note 4.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

53

Danske Mortgage Bank Plc’s

Board of Directors’ proposal to the

Annual General Meeting for the

distribution of proﬁt and signing

of Annual Report 2021

The company’s distributable assets in the financial

statements total EUR 269,829,962.86 of which profit

for the financial year totals EUR 13,662,161.66.

The Board of Directors proposes to the Annual General

Meeting of Shareholders that no dividend will be paid

and EUR 269,829,962.86 will be left in shareholders’

equity.

Helsinki, 4th February 2022

Stojko Gjurovski

(Chairman)

Kimberly Bauner

Robert Wagner

Tomi Dahlberg

Riikka Laine-Tolonen

Maisa Hyrkkänen

Pekka Toivonen

(CEO)

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

54

The auditor’s note

A report on the audit performed has been issued today.

Helsinki, 4th February 2022

Deloitte Ltd

Audit Firm

Aleksi Martamo

Authorized Public Accountant

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

55

Accounting material 2021

The Bank uses the accounting system of Danske Bank

A/S which is administered by the Group headquarters in

Denmark. In the year end this accounting material is filed

electronically and stored in Finland as two copies.

Financial statement and Board of Directors’ report as

bound versions are stored in Danske Bank A/S, Finland

Branch’s Accounting department.

General ledger accounting reports are stored electroni-

cally:

• Daily journals

• General ledger

• Income statements and balance sheets

• Charts of accounts

• Vouchers for notes to the financial statements

Financial statement specifications are mainly included in

the financial statement material gathered and stored by

Accounting department.

DANSKE MORTGAGE BANK PLC IFRS FINANCIAL STATEMENTS 2021

56