KBN’s conservative risk profile requires that all interest and currency risk from its lending, liquidity and funding operations are fully hedged. Derivatives are used for hedging purposes only.
KBN maintains a liquidity portfolio of 12 months net cash requirement, including lending growth, which at 30 September 2009, stood at USD 12.7 billion. This portfolio is invested in highly rated deposits, bonds and floating rate notes (FRNs) issued by governments, supranationals, agencies and financial institutions.
The majority is invested in USD, EUR and NOK FRNs as floating USD, EUR and NOK are KBN’s base funding currencies.
The majority of investments have maturities shorter than 1 year, while the maximum maturity in accordance with the investment policy is 10 year.
All new investment names and products are subject to approval by the management credit committee.