Report of the Board of Directors


  • The Board concluded NIB’s strategy review in 2015. There will be no change to the core business model. The Bank will continue with the mission of financing investments that improve competitiveness and the environment in the region. The Board sees both pillars as being of equal importance. It put emphasis on identifying bankable environmental projects and cross-border investments that support member country integration.
  • Furthermore, it was decided that NIB will develop lending activities in two ways. The first route is to better serve SMEs and mid-sized corporates, which are important for growth and jobs in the region. The other initiative is to increase flexibility in non-member-country lending. The new lending initiatives to be implemented in 2016 are expected to promote the favourable development of lending volumes and support sustainable growth in the region.
  • NIB’s lending activities continued to develop very positively in 2015, with disbursements of loans reaching an all-time high of EUR 2,716 million.
  • Loans achieving a “good” or “excellent” mandate rating accounted for 94% of the total amount of lending. The majority of the environmental loans were for projects aimed at climate change mitigation in the member countries. Loans promoting competitiveness mainly supported investments in R&D, infrastructure and energy.
  • The profit was EUR 215 million (2014: EUR 210 million).
  • NIB raised EUR 4.3 billion in new funding and continued to issue NIB Environmental Bonds.
  • The Bank’s overall risk position remained strong in 2015, the main drivers being high asset quality, solid liquidity, and strong capitalisation.
  • During 2015, the Bank strengthened its risk management practice in line with evolving market standards. The Bank implemented, amongst other things, an improved framework for estimating loss given default and started developing an internal capital adequacy assessment process.

Operating environment

Global growth weakened somewhat in 2015, reflecting uneven developments in the major regions. The recovery in advanced economies was not enough to fully offset the slowdown in emerging markets.

The Nordic–Baltic region experienced modest growth, but developments in the world economy affected the member countries in different ways. As a result of the low oil price, growth in oil-exporting Norway slowed down, whereas the rest of the region benefited from lower commodity prices. Some countries felt the effect of Russia’s weakened economy. On the positive side, Denmark, and particularly Sweden and Iceland, fared relatively well, and the Baltic countries showed resilience.

As a result of these developments, underlying demand for corporate investment-related credit remained subdued. The public sector’s demand for credit, however, was supported by large-scale investment needs. Against the background of a competitive Nordic banking sector and active bond markets, spreads remained compressed in most markets.

Strategy conclusions and implementation

In 2015, the Board of Directors concluded the Bank’s strategy review, which had been initiated one year before. During the process, the Board covered all relevant aspects of the Bank, such as its mission and success factors, lending operations, capital and liquidity, and the implications of possible changes in the strategy.

The key conclusion was that the present business model remains the foundation of NIB’s operations. The Bank will continue with the mission of financing investments that improve competitiveness and the environment in the region. The Board sees both pillars as being of equal importance. It put emphasis on identifying bankable environmental projects and cross-border investments.

NIB adopted a framework for monitoring and ex-post mandate assessment in order to evaluate the results of projects financed by the Bank.

Despite the unchanged focus, the Board saw it as important for the Bank to develop its lending activities in order to stay flexible and relevant for the future. The Board decided that during the coming years, NIB will seek to increase lending to SMEs in cooperation with financial intermediaries and to mid-sized corporates, which are important for growth and job creation in the region.

NIB will also put more emphasis on non-member-country lending. The Bank will cease to limit its non-member-country lending activities only to focus countries, with the aim of increasing non-member-country lending in the longer term, up to approximately one fifth of the annual new lending. By doing so, NIB is responding to its customers’ wishes for the Bank to become more involved in financing their investments outside the Nordic–Baltic region.

In addition, the Bank will increasingly focus on member country integration, investments in the Baltic countries and projects in the Arctic region.

The Board took its first decisions on how to implement the strategy conclusions for broadened lending activities. An Arctic Financing Facility with a framework of up to EUR 500 million in loans for projects in the Arctic region was set up.

The Board also adopted new financial policies for lending to SMEs and mid-sized corporates.

With the purpose of “keeping the house in order” and supporting the new lending initiatives, the Board stressed the importance of further advancement of compliance, governance and enterprise architecture, development of human resources, and improvement in the working environment. As a result, a number of projects were initiated, for instance an enhanced staff training programme.

Lending activities

NIB’s lending activities were better than anticipated in 2015. The Bank signed 45 loan agreements with an aggregate value of EUR 2,830 million. More than half of these loans were to new borrowers, which was in line with the Bank’s aim of broadening its client base. Lending volumes by business sector are displayed in the table below.

Disbursements of loans increased to an all-time high of EUR 2,716 million, compared to EUR 2,274 million in 2014. The largest sector was industries and services, with a substantial part of NIB’s financing provided for research and development. The public sector in the member countries was also a major recipient of loans.

High liquidity and subdued investment in the Nordic–Baltic region affected NIB’s loan portfolio through larger-than-average early redemptions of loans.

(in EUR million, unless otherwise specified)
Loans agreed according to areas:
Energy and environment710630
Infrastructure and telecom823557
Industries and services996926
Financial institutions and SMEs301277
Loans agreed, total2,8302,389
Member countries2,7402,327
Non-member countries9062
Loans disbursed, total2,7162,274
Member countries2,5462,181
Non-member countries17093
Number of loan agreements, total4545
Member countries4443
Non-member countries12
Loans outstanding and guarantees15,62715,156
Member countries13,34712,705
Non-member countries2,3412,506
Collective impairments-61-55

Mission fulfilment

Each NIB-financed project is rated regarding how well it fulfils the Bank’s mission to improve competitiveness and the environment of the Nordic–Baltic countries. In 2015, the loans achieving a “good” or “excellent” mandate rating accounted for 94% of the total amount of loans agreed.

Besides fulfilling its mission, NIB’s lending operations are expected to add value to what the market provides. This is achieved by offering flexible long-term loans, providing diversification of financing sources and sharing expertise. NIB does not compete with commercial or other financiers; it complements them, especially through longer maturities.

Mandate rating

NIB_2015graphs_pilar_Mandate rating

Competitiveness impact

In 2015, the largest part (36%) of NIB’s lending in the membership area was extended to industrial and service companies. NIB supported technological innovation in the member countries by providing financing to customers’ R&D programmes and investments in new production facilities. Moreover, a significant share of NIB’s lending to corporate clients was used to finance acquisitions of member and non-member area companies. Companies add value to their product offerings by developing and adopting new technology and skills through R&D and acquisitions. All agreed loans for corporates’ R&D activities received a “good” or “excellent” competitiveness rating. The share of acquisition projects rated at “good” and “excellent” was 44%. In total, lending to finance R&D projects and acquisitions accounted for 23% and 8%, respectively, of NIB’s loans agreed.

Infrastructure investments have a long-term impact on the region’s ability to maintain its attractiveness as a place to do business. As most of NIB’s member countries are sparsely populated, the quality of transport infrastructure and services is of utmost importance for creating a productive business environment. In 2015, NIB contributed 22% of its total loans agreed to transport infrastructure projects. All these loans received a “good” or “excellent” competitiveness rating.

The key focus of investments in the energy sector was on fuel diversification in order to reduce the region’s dependence on imported fuels. This trend also involved the upgrade of production technologies to increase the efficiency of energy assets. A significant share of NIB’s lending in the energy sector was provided for investments in new production facilities fuelled by local biomass resources.

Member area utilities continued to modernise and expand energy transmission and distribution networks. These investments help remove transmission bottlenecks and secure energy supply in all demand and weather conditions. NIB’s lending to the energy sector accounted for 25% of total loans agreed. The share of investments in new heat and power production facilities was 12%. All loans in this sector received a “good” or “excellent” competitiveness and/or environmental mandate rating.

In order to support small companies in better access to finance in member countries, NIB reached out to smaller counterparties by providing financing through financial intermediaries. Excluding unallocated credit lines, these loan programmes accounted for 7% of NIB’s total lending. This is considered an important method for NIB to strengthen the capacity of such companies to invest, grow and create jobs. Also, these loans were rated “good” or “excellent” for mandate impact.

Environmental impact

NIB defines loans to projects with significant direct or indirect positive environmental impacts as environmental loans, regardless of the sector in which they occur. In 2015, a total volume of EUR 1,019 million was agreed for projects with an environmental mandate rating of “good” or “excellent”, which is equivalent to 36% of the total agreed volume.

The majority of the environmental loans were related to projects aimed at climate change mitigation in the member countries. These were investments in energy efficiency improvements in public and commercial buildings, as well as investments in public rail transport infrastructure. Financing was also provided for renewable energy projects in the hydropower and waste-to-energy sectors.

When implemented, the NIB-financed energy projects will add 0.52 TWh annually to renewable energy generation. The Bank estimates that the loans agreed in 2015 are helping to reduce CO2 emissions by 50,100 tonnes annually, prorated to NIB’s share of the financing. Loans allocated for climate change mitigation projects accounted for 33% of NIB’s total lending volume.

Financing was also provided for two new wastewater treatment plants in Finland and for the technical improvement of industrial plants in Norway to reduce nitrogen oxide emissions into the air by 40%. Furthermore, an environmental loan was provided for an R&D programme with a focus on improving energy and resource efficiency in industrial production.

NIB’s Sustainability Policy and Guidelines cover the environmental, social and ethical aspects of the Bank’s operations. More detailed information on NIB’s corporate responsibility matters are described in the Annual Report 2015, specifically under GRI reporting, available online (click here).

Treasury activities

NIB acquires funds for its lending by borrowing on the international capital markets. During 2015, NIB raised EUR 4.3 billion in new funding through 25 funding transactions. At year-end, outstanding debt totalled EUR 20.9 billion in 18 currencies. The largest transaction in 2015 was a three-year, USD 1.25 billion global benchmark transaction, which was issued in March. In September, NIB launched its second US dollar-denominated benchmark transaction, a five-year, USD 1 billion transaction.

Of the new funding issued in 2015, over EUR 2 billion was issued in US dollars, 13% directly in euros and 12% in Nordic currencies.

NIB continued to issue NIB Environmental Bonds (NEBs) and launched its first EUR benchmark bond under the NEB programme. A seven-year, EUR 500 million Environmental Bond benchmark was issued in September. NEBs are mainly sold to investors following socially responsible investment principles. The proceeds from the bonds are used to finance eligible projects with a positive impact on the environment. In 2015, the Bank enhanced the information and reporting towards investors regarding NIB Environmental Bonds on its website.

Of the total NIB investor base in 2015, Europe (including the Nordics) accounted for 42% and the Americas for 21%, while investors based in Asia bought 18% of NIB’s new issuance, and investors from the Australia/New Zealand region contributed a share of 12%.

(in EUR million)
New debt issues4,2763,3614,080
Debts evidenced by certificates at year-end20,86219,44618,421
Number of borrowing transactions253542
Number of borrowing currencies111012

Risk management

The Bank’s overall risk position remained strong in 2015, with high asset quality, a solid liquidity and strong capitalisation being the main drivers.

The credit quality of the lending exposure was stable in 2015: 83% of the exposure was in investment-grade categories (risk classes 1–10), which was the same level as at year-end 2014. The exposure in the weakest risk classes (17–20), declined slightly to 0.4% (2014: 1%). The loan portfolio remained well balanced. There were no material changes in the geographical and sectoral distribution of the loan portfolio. At year-end, the member countries accounted for 84% (2014: 82%) of the total lending exposure, followed by 6% for Central and Eastern Europe, and 5% for Asia.

As in the previous year, the credit quality of the Treasury portfolio was strong, with close to 100% of the exposure in the investment-grade categories (risk classes 1–10). Of the Treasury exposure, 39% was within the member countries, compared to 35% the year before. The geographical distribution of the Treasury portfolio continued to be weighted towards Germany, Finland, the Netherlands and Sweden, accounting for 53% of the total exposure (2014: 57%).

The market risk remained largely unchanged. The Bank is mainly exposed to interest rate risk, credit spread risk in treasury operations and cross-currency basis risk. The market value sensitivities towards a one-basis-point shift in the specific yield curves were EUR 0.95 million, EUR 1.6 million and EUR 2 million, respectively.

The Bank’s liquidity position remained strong during 2015. At the end of the year, the liquidity buffer amounted to EUR 9,077 million, of which 29%, or EUR 2,653 million, was held as cash and short-term money market instruments, and 71%, or EUR 6,424 million, in securities with longer maturities.

The survival horizon, net stable funding ratio (NSFR) and liquidity coverage ratio[1] (LCR) are the measurements used for the purpose of assessing the liquidity risk. At year-end, the survival horizon measured according to the Bank’s liquidity policy was 431 days. The NFSR was approximately 150% and the LCR approximately 1,200%. The minimum NSFR and LCR requirements for commercial banks are 100% following the implementation of Basel III.

The Bank’s ordinary lending ceiling corresponds to 250% of the authorised capital and accumulated general reserves. At the end of 2015, the ordinary lending ceiling amounted to EUR 20,922 million, while the ordinary lending portfolio amounted to EUR 13,956 million.

The Bank strengthened its risk management in line with evolving market standards. During 2015, the Bank improved and implemented a framework for estimating loss given default and further developed risk management reporting to the decision-making bodies. Furthermore, the Bank started the work of developing an internal capital adequacy assessment process.

It was decided that the Bank should move from one-way to two-way credit support agreements. This is now the market standard and is expected to decrease the cost of derivative contracts for the Bank. It also requires a higher liquidity buffer to mitigate the need for the Bank to post collateral with swap counterparties.

[1] Liquidity coverage ratio is a measure banks need to report and adhere to. Given NIB’s business model based on long-term lending matched with long-term funding, LCR is less relevant for NIB than it is for commercial banks.


There were no allegations of corruption involving members of the Bank’s personnel. The Board of Directors was informed that three new external allegations of corruption were registered during 2015 and that the cases are currently under investigation by the Bank’s Committee on Fighting Corruption, in consultation with national enforcement agencies and co-financing partners. The Compliance Unit followed up with national enforcement agencies on other fraud and corruption cases for which investigations were concluded in 2013 and 2014.

During 2015, a major review of the Bank’s compliance and anti-corruption framework was undertaken. With the assistance of external consultants, the Bank also undertook a review of its current procedures and processes relating to anti-money laundering and counteracting terrorist financing. Proposed changes resulting from the reviews will be implemented in 2016.

[1] Liquidity coverage ratio is a measure banks need to report and adhere to. Given NIB’s business model based on long-term lending matched with long-term funding, LCR is less relevant for NIB than it is for commercial banks.

Financial results

NIB’s performance during the year demonstrates the underlying strength of its business model. Despite low interest rates, the Bank managed to improve its financial results. Profit totalled EUR 215 million, up from EUR 210 million in 2014.

The profit reflected growth in net interest income and lower loan impairment charges. This was partially offset by lower profits from financial operations.

The net interest income amounted to EUR 247 million, up 3% from the previous year. Both lending and treasury operations posted a net interest income higher than in 2014. Particularly encouraging was the net interest income growth from lending, mainly driven by a larger loan book. Commission income rose by EUR 3 million, to EUR 12 million.

The financial markets were volatile during the year, which resulted in greater uncertainty and wider spreads. In 2015, NIB updated its valuation model for derivative instruments in order to better align the valuation methods with the current market practice. A EUR 12 million net return on financial operations was recorded, which reflected the volatility of the markets and the fair value movements.

Administrative expenses and depreciation increased compared to 2014, mainly due to the changed depreciation methodology on intangible assets with a once-for-all effect of EUR 4.5 million. Further, the Bank made an extra provision of EUR 2 million for the purpose of planning, training and adapting to the changing banking industry requirements. As a consequence, the cost/income ratio based on underlying costs deteriorated from 15.1% in 2014 to 18.8% in 2015.

The quality of the loan portfolio remained high. Loan impairment charges were down, and in 2015 loan impairment charges amounted to EUR 3 million. New collective impairment charges amounted to EUR 6 million and the reversals of previously recorded impairments to EUR 3 million. The Bank continued to adopt a conservative approach in relation to impairments.

Since year-end 2014, the Bank’s total assets have increased by EUR 2 billion to EUR 27.3 billion.

(in EUR million)
Net interest income247239244
Profit/loss on financial operations122620
Administrative expenses and depreciation50*4139
Loan impairments32115
Total assets27,31124,87023,490
Solvency ratio (equity/total assets, %)11.5%12.0%12.1%
Cost/income ratio18.8%*15.1%14.3%
* Including the effects from changed depreciation methodology and the extra provision as mentioned above.


The Board of Directors proposes to the Board of Governors that EUR 55 million be paid as dividends to the Bank’s member countries for the year 2015.

Chairmanship and meetings

During the year, the Board had eight meetings and one online meeting, all chaired by Pentti Pikkarainen (Finland). As well as formal agenda items, the meetings included seminars (four during the year) with the Bank’s customers, investors and other invited experts. In connection with the Board meetings in Lithuania and Norway, the members visited the LNG terminal in Klaipeda, the Lysebotn 2 hydropower plant and the Ryfast road tunnel in Stavanger, which are financed by NIB loans. In London, the Board met with the rating agency Standard & Poor’s, the Financial Conduct Authority (FCA), HSBC and the EBRD. The Board continued its efforts to further improve the efficiency of the decision-making process on the basis of a self-evaluation process that had been finalised. The Board also discussed the possibility of undergoing a “fit and proper” test.


Going into 2016, prospects across the main regions remain uneven. Although global growth is projected to gather pace somewhat, uncertainties remain, caused by declining commodity prices, weaker emerging market economies and financial market volatility. Forecasts for the Nordic–Baltic countries vary from a slight pick-up in activity in Finland to continued robust growth in Sweden.

As Nordic banks continue to supply credit and corporate investment remains modest despite accommodative central bank policies, volumes and margins are unlikely to pick up in the near term. Meanwhile, the rise in short-term financing rates in the US dollar could further increase spreads in the euro corporate bond market.

In 2016, the Bank expects somewhat lower results compared to the previous year. This is due to lower income from treasury operations in the prevailing market conditions. NIB expects that the new lending initiatives, which will be gradually implemented in 2016, will further support the favourable development of lending volumes and sustainable growth in the region.