The risk that a borrower will fail to meet their contractual obligations to Swedbank and the risk that pledged collateral will not cover the claim. Credit risk also includes counterparty risk, concentration risk and settlement risk.
Swedbank’s customer base, which mainly consists of private individuals and small and medium-sized companies, is designed such that credit risk – Swedbank’s predominant risk – is low. Credit risks can be found on the asset side of the balance sheet, mainly in the form of lending to customers, but also outside the balance sheet in the form of loan commitments to customers and guarantees, which could entail a future credit risk. Swedbank’s lending to the public largely consists of mortgages in Sweden with low risk. Corporate lending is dominated by small and medium-sized companies in Sweden. The risk level here is higher, but still relatively low. The risk in lending to the Baltic countries is slightly higher than in the Swedish portfolio, but has gradually decreased since the financial crisis.
Swedbank maintains a well diversified and balanced credit portfolio with a low risk profile. Lending is made to solvent customers with satisfactory collateral. Diversification, which is sought within and between sectors and lending segments, contributes to low concentration risks. A strong risk culture and a lending process distinguished by duality create a balance between risk and return.
Responsible lending is a prerequisite for a well-functioning bank. In consumer and business lending, we take responsibility by explaining risks and reviewing each customer’s long-term financial situation. Responsible lending also means verifying that customers are able to repay and can withstand adverse economic conditions. We work proactively with customers who are at risk of financial difficulties. The aim is to find a sustainable solution as early as possible and avert problems before they arise, which helps the customer and reduces Swedbank’s risk. In addition, the bank actively and continuously monitors its customers and credit portfolios. Corporate customers undergo an assessment of sustainability risks, including risks related to corruption and the environment. If the company faces sustainability risks and/or the credit amount applied for is too high for the advisor alone to approve, the application is sent to a credit committee for final decision. If additional support is needed before a decision can be made, the application is brought before Swedbank’s Sustainability and Ethics Council.