Responsible credit processes
Responsible credit processes
The bank aspires to be a leading actor in terms of responsible lending, and to ensure that it fills its role as a guide for the bank’s customers based on a regional and global perspective.
Responsible credit processes are important in ensuring that customers do not assume commitments they are unable to service, in contributing to the bank’s support for energy transition and in providing customers with information on sustainable and competitive solutions.
The bank provides credit both to retail customers and business customers. Its approach to the two customer groups differs slightly.
SpareBank 1 SMN’s credit strategy is adopted by the board of directors. The basic principle of sustainable lending to the retail market is enshrined in the bank’s overall strategy for sustainable lending (pdf), and in the bank’s credit policy with respect to retail customers. The requirements are operationalised through a credit practice manual that describes the bank’s specific requirements as regards to combating money laundering and the black economy. Together with the bank’s product policy, the credit practice manual sets restrictions for non-sustainable lending. This way, the bank helps to ensure that borrowers do not take on excessive debt commitments.
The bank also discourages customers from taking out loans, based on the purpose of the loan. This applies for example to customers who desire a loan in order to send money to unknown recipients, to free up a lottery win or inheritance, or other typical types of fraud.
The credit manager at Retail Banking has operative responsibility for product development and the associated sustainability. In 2017 the bank adopted a corporate social responsibility strategy which sets requirements for the development of green products, and operates credit procedures giving priority to socially responsible loans.
The bank has well-established complaint procedures. Filing a complaint is a simple matter, and all complaints are handled by complaints officers. Complaints officers conduct a review of whether the bank’s policies and procedures are complied with in each case. The bank’s complaints committee also conducts a quarterly review of lessons to be learned from complaints made. The committee considers any need to revise policy, procedures, marketing or products. The steering system for the product areas is evaluated annually, with a basis in complaints and events noted in the preceding year.
Socially sustainable banking services (GRI FS7)
It is particularly important for the bank as a regional bank to take on a social responsibility in the local community. The bank is known for doing this through its investments and gift fund, but it also does so through specific social products.
Access to basic banking services is imperative in a modern society. Even so, there are social groups in Trøndelag that for various reasons fall outside the scope of such services. In response, the bank has developed the product “municipal payout card”. The card is a cash card, but functions as an ordinary bank card and can be reloaded with money from one’s online bank and directly from municipal support schemes. The system can disburse benefits from the Labour and Welfare Administration (NAV) to social welfare clients, asylum seekers and refugees. Many individuals belonging to this group cannot open an ordinary bank account because they are unable to provide documentary evidence of their identity. Users of the card are spared burdensome and stigmatising trips to the bank to take out cash, often together with a support person who has to confirm their identity. The card is also popular among foreign students. The bank issued 26,548 municipal payout cards in 2018, and 42 per cent of the region’s refugees and asylum seekers utilise this service through the bank.
Children are another group whose access to banking services is, and must be, limited. In 2018 the bank improved its product offering for this group with an app named Spink, where the child along with his/her bank card and personal savings account has a good overview over his/her finances and learns to handle digital money. The bank issued 6,200 cards to children between 8 and 15 years of age in 2018.
The bank collaborates with the Norwegian State Housing Bank on start-up mortgages. Start-up mortgages require smaller down payments than other first-home mortgages and carry low interest. Start-up mortgages are granted to social groups in a vulnerable situation described here. In 2018, the bank granted a total of 120 start-up mortgages worth NOK 250m, corresponding to 8 per cent of the net volume of first-home mortgages.
Environmentally sustainable banking services (GRI FS8)
The bank also develops services with an environmental profile. In 2018, we offered green loans for solar cell installations in collaboration with the power company North Trøndelag Elektrisitetsverk (NTE). In 2018, the bank granted four such loans to a total value of NOK 2.1m.
The bank also has a smart app for environment-friendly driving which reduces car insurance. The bank sold 2,515 such services in 2018 to a value of NOK 16.4m, corresponding to 5 per cent of sales.
The bank gave the systematic effort to promote responsible lending to business activity a substantial boost in 2017 and 2018. The board of directors has adopted a new credit strategy and new requirements on sustainable lending: “Our requirements on sustainability in lending and owner positions”. The bank has also developed an associated guide on how staff should handle credit cases in practice, how they should assess the requirements and how they should implement the requirements in their own work.
Everyone who is involved in lending to businesses or in decisions related to the bank’s own investment decisions or those of the SpareBank 1 Alliance are required to be acquainted with the bank’s principles. These principles govern the purposes to which the bank lends money. They also govern how the bank is to act and exert its influence in shared investment decisions where the bank itself is not in a dominant position.
The bank does not wish to finance activities or projects that do not operate in keeping with the bank’s requirements, and existing corporate clients are expected to take steps to rectify any circumstances that breach these requirements. The bank is bound by loan contracts with existing clients, but any lack of action by clients to comply with the bank’s requirements entails increased risk, which may result in new pricing for the borrower. The bank has imposed high requirements on sustainability in all lending, but for the time being has no sustainable products specifically for corporate clients beyond those offered in the retail market. (GRI FS7 FS8)
Standard credit tools are applied in smaller credit cases. As from 2018, sustainability assessments will be incorporated in the actual credit tool by means of control points linked to the theme. The authorisation system ensures that documentation of sustainability assessments is quality assured. In credit cases considered by the credit committees, a separate template has been devised for assessing sustainability in lending. Assessments will also be quality assured when considered by the credit committees.
Documentation of sustainability assessments is included as a theme in the internal audit, with regular reviews of the quality of credit processes. Credit strategy with the associated document “Our requirements on sustainability in lending and owner positions” are part of a review process taking place at minimum annually.