Annual reports
Kommunalbanken Norway (KBN) is the largest provider of investment financing for the welfare services provided by Norwegian municipalities and county authorities, and offers attractive and long-term debt financing regardless of economic conditions. In 2017 KBN granted 646 new loans totalling NOK 55 billion. Municipalities, county authorities and intermunicipal companies have used these loans to finance projects including schools, health and care facilities, the water and wastewater area, and measures to prevent and adapt to the effects of climate change. KBN’s robust financial results and efficient operating model demonstrate that it is fulfilling its role in society successfully.

KBN’s lending grew by 5.7% in 2017, which is a slightly larger increase than in previous years. Long-term instalment loans showed good growth in 2017. Lending for climate and environment projects increased by 7% in 2017.

Profit for the year was NOK 1,429 million in 2017 as compared to NOK 689 million in 2016. Net interest income was higher than in 2016, and this was due to a combination of favourable funding conditions through large parts of 2017 and strong lending growth early in the year. KBN’s profit for the year was reduced somewhat by unrealised losses of NOK 163 million stemming from losses on KBN’s borrowings and exchange rate swap agreements used to convert non-NOK denominated borrowings into Norwegian kroner. For comparison, KBN had unrealised losses of NOK 974 million in 2016 as a consequence of losses on fixed rate loans and hedging derivatives. KBN’s return on equity after tax was 12.7% as compared to 6.3% in 2016.

KBN’s total common equity Tier 1 capital increased by NOK 1,440 million. KBN’s equity increased by a total of NOK 2,215 million in 2017, partly due to issuance of subordinated debt in June 2017. 


The Board of Directors confirms, in accordance with Section 3-3a of the Norwegian Accounting Act, that KBN’s ability to continue as a going concern remains unchanged, and that the financial statements (for 2017) have been prepared on a going concern basis. The Board of Directors considers that the financial statements and accompanying notes for the year ending 31 December 2017 provide an adequate description of KBN’s financial position at year-end. The annual accounts have been prepared in accordance with International Financial Reporting Standards (IFRS).

Profit for the year was NOK 1,429 million in 2017 as compared to NOK 689 million in 2016. Net interest income in 2017 totalled NOK 2,162 million as compared to NOK 2,087 million in 2016. Having been high in the first part of the year, KBN’s lending margins decreased somewhat in the second half of 2017. This related to KBN decreasing its lending rate with effect from 1 August 2017 and also to generally lower credit spreads in the market.

Net unrealised losses on financial instruments reduced KBN’s profit before tax by NOK 163 million in 2017. Net unrealised losses in 2016 totalled NOK 974 million. KBN’s unrealised losses in 2017 reflect losses on borrowings measured at fair value as a consequence of lower credit spreads on KBN’s own bonds and favourable changes in relation to currency swap agreements.

KBN’s liquidity portfolio investments and fixed rate loans generated unrealised gains when measured at fair value. KBN’s financial instruments are normally held to maturity and the effects of unrealised gains and losses on KBN’s profits reverse either when fluctuations in the market reverse or the instruments reach maturity.

Net trading income (from market transactions such as repurchasing KBN’s own bonds and selling securities held in the liquidity portfolio) totalled NOK 9 million in 2017, as compared to NOK 15 million in 2016.

Total operating expenses were NOK 193 million in 2017 as compared to NOK 177 million in 2016. This increase was in line with budget and was due primarily to an increase in staffing levels as well as to expenses related to further developing KBN’s customer portal and finance system and upgrading to 24/7 IT security monitoring. KBN’s operating expenses were also impacted by the financial sector tax introduced in 2017 and by implementation costs associated with new regulatory requirements. Total operating expenses represented 0.05% of total assets in 2017.

KBN had total assets at 31 December 2017 of NOK 412.9 billion as compared to NOK 418.3 billion at 31 December 2016. The decrease is primarily due to the Norwegian krone strengthening against other currencies, which reduces the NOK carrying amount of KBN’s assets and liabilities.

KBN’s total primary capital at 31 December 2017 was NOK 16,625 million, of which NOK 12,436 million is total common equity Tier 1 capital in the form of share capital and retained earnings. KBN’s Tier 1 capital consists of common equity Tier 1 capital and additional Tier 1 capital. The common equity Tier 1 capital adequacy ratio at 31 December 2017 was 18.41%, the Tier 1 capital adequacy ratio was 21.65%, and the total capital adequacy ratio was 24.61%. The leverage ratio at 31 December 2017 was 3.68%.


KBN granted 646 new loans totalling NOK 55 billion in 2017. Total lending to the local government sector at the end of 2017 was NOK 281.7 billion. KBN’s loan portfolio grew by NOK 15.2 billion in 2017, representing an increase of 5.7%. KBN’s market share for the sector was approximately 46%.

All Norway’s municipalities and county authorities as well as Longyearbyen Local Council had loans from KBN at the end of 2017. In addition, a range of municipal and inter-municipal companies have loans from KBN. Loans to limited liability companies require municipal or county authority guarantees. KBN offers long-term loans with the same interest rate terms to all its borrowers regardless of their size, ensuring all municipalities have equal access to debt financing on competitive terms. In its recommendation to Parliament regarding the national budget for 2018, the Standing Committee on Local Government and Public Administration wrote that “KBN plays an important sectoral-policy function that contributes to high-quality welfare services across Norway”.

At the end of 2017, loans to toll road companies accounted for NOK 26.3 billion of the NOK 56.6 billion in outstanding loans to municipal and inter-municipal companies and borrowers with municipal or county authority guarantees.

The level of investment taking place in the local government sector is increasing and is being driven by the need to invest in schools, the health and care sectors, and the water and wastewater area. Analysis shows that there continues to be a significant maintenance backlog in the water and wastewater area. In addition, there is expected to be an increasing need for investment in measures to prevent and adapt to the effects of climate change. In June 2017 the Norwegian Government increased the subsidies available for round-the-clock health and care services. This creates an incentive for municipalities to invest in modernising their existing offer and to develop new capacity. The level of investment activity in the health and care sectors is expected to grow strongly in the years ahead.

The rate of growth in Norway’s population has slowed over the last few years. It is unclear what the consequences of this will be in terms of investment levels going forward. In a number of municipalities that have previously experienced strong population growth, the level of investment is now decreasing relative to previously very high levels. Other municipalities will continue to need to invest significantly in the years ahead. The strong financial performance of the local government sector taken as a whole in recent years means that municipalities are financing welfare services from their own reserves to a greater extent than in previous years. Borrowing growth in the sector in 2017 was 4.9%, which is approximately in line with 2016. This represents a significantly lower rate of growth than in previous years.

KBN again conducted a customer survey in 2017, and this demonstrated that customers are very satisfied with KBN. KBN's high levels of service and availability, as well as its attractive lending margins and skilled customer managers, attracted particularly high scores. Approximately half of KBN’s customers adopted KBN’s debt management portal, KBN Finans, in 2017. Those customers that use KBN Finans are KBN’s most satisfied customers. KBN will continue to work to further develop KBN Finans as a tool for customers in 2018.

No customer has defaulted or had problems with making payments, so there are no grounds to expect any loan losses in 2018. 

The lending market

In 2017 the local government lending market was again dominated by KBN and by municipalities making direct use of the capital market. KBN is the most important provider of long-term, instalment  loans, which other market players only offer to a limited extent. There was satisfactory demand for long-term loans in 2017. Over the course of 2017 a number of customers chose to refinance short-maturity loans by arranging long-term, instalment loans.

The strong growth in the use of the capital markets seen in previous years stabilised in 2017. The amount of outstanding short-term local government sector borrowing decreased in 2017. This can be seen in the context of the more extensive information requirements regarding the maturity dates of interest-bearing debt that entered into force on 1 January 2017. Total local government sector borrowing in the capital markets grew by 3.7% in 2017, which represents approximately 30% of total debt growth in the sector in 2017.

KBN’s aim is to contribute to the availability of robust but simple financing solutions and responsible debt management to ensure the sector’s borrowing patterns are financially sustainable.

KBN’s portfolio of loans with maturities of less than 12 months represents a small part of its overall lending and is part of its ongoing liquidity and capital management activities. This portfolio represented 3.5% of KBN's overall lending at the end of 2017 as compared to 4.7% at the end of 2016. 

Green lending and green funding

KBN is committed to serving as a driving force in relation to municipalities making the transition into climate-robust low-carbon societies. KBN has offered a separate lending product specifically to finance investment in environmentally friendly projects since 2010, namely green loans. KBN finances its green loans by issuing green bonds in the capital markets, both in Norway and internationally.

The interest rate on KBN’s green loans is 0.1 percentage points lower than the interest rate on its ordinary interest rate products. In order to be granted a green loan, the customer must demonstrate that its project complies with KBN’s criteria, which were adopted in 2016. These criteria require the municipality to have a clear environmental ambition for the project and for it to exceed the requirements of the relevant legislation and regulations. A lower interest rate is intended to create incentives for municipalities and county authorities to invest in projects that are more ambitious from an environmental and climatic perspective.

At the end of 2017 KBN’s green lending portfolio totalled NOK 14.6 billion. This is an increase of around 7% from the end of 2016. NOK 11.5 billion of the NOK 14.6 billion in outstanding green lending satisfies KBN’s updated criteria set, which has been graded as “dark green” by CICERO Center for International Climate Research. “Dark green” means that the portfolio is compatible with the vision of making Norway a low-carbon society by 2050.

KBN granted new green loans totalling NOK 1.65 billion in 2017 to 47 different projects. Examples of projects financed using green loans include the new upper secondary schools in Romsdal and Horten that have been built in mass timber, an expansion to a seawater source heating system in Nordfjordeid, a biogas plant in Grødaland in Rogaland, and electrifying Båtsfjord port in Finnmark. Details of all the projects that were financed through green loans in 2017 are provided in KBN’s environmental impact report for 2017, which is published at the same time as the annual report.

KBN wishes to play a leading role in the development of green finance in Norway and internationally. KBN was elected to the governing body of Green Bond Principles in 2017, which is the leading international industry standard for green bonds. In 2017 KBN held and participated in a number of events designed to promote green finance solutions in order to drive forward the transition to a low-carbon society.

KBN published its first impact report for its green bonds in March 2017. KBN collaborated with nine other Nordic green bond issuers in 2016 and 2017 to produce a joint reporting framework. This document, entitled “Nordic Public Sector Issuers: Position paper on Green Bonds Impact Reporting”, was launched at an OECD event in October and has attracted a lot of attention both internationally and in Norway.


KBN’s AAA/Aaa credit ratings ensure it has stable access to funding on favourable terms. KBN pursues a diversified funding strategy that ensures it has a broad investor base and low refinancing risk.

New long-term borrowings amounted to NOK 118.5 billion in 2017, which is NOK 35.8 billion higher than in 2016. Japan, other Asian markets, Europe and the USA were KBN’s most important markets in 2017. KBN issued bonds in 13 different currencies in 2017.

KBN issued three USD-denominated benchmark bonds totalling USD 3.5 billion in 2017, while in Europe KBN issued a EUR-denominated benchmark bond of EUR 1.0 billion with a maturity of 10 years. These issues attracted a high level of interest from investors, and all KBN’s benchmark bonds were significantly oversubscribed.

KBN’s total borrowings decreased slightly in 2017 from NOK 376.8 billion to NOK 373.8 billion, and this change was due to the NOK exchange rate.


KBN’s policy is to operate with cash and cash equivalents that match its capital requirements, including lending growth, for the subsequent 12 months at all times. This means that KBN is able in any situation to meet its ongoing obligations over the next 12 months without having to raise additional funds.

KBN’s liquidity portfolio is primarily held in zero-risk-weighted investments, and primarily in foreign currencies. As a result of the Norwegian krone strengthening against the US dollar in 2017, the value of the liquidity portfolio at 31 December 2017 was NOK 107.5 billion, down from NOK 116.4 billion at the end of 2016.

The liquidity portfolio is managed in a way that is intended to ensure KBN has liquidity reserves sufficient to allow it to meet its obligations at all times. Excess liquidity is managed according to an investment strategy that is low risk in terms of both credit risk and market risk. There were sizeable exchange rate fluctuations in 2017, and this affected the value of the liquidity portfolio in NOK terms.

KBN’s liquidity reserves are invested in fixed income securities issued by governments, regional authorities, multilateral development banks and financial institutions that have high credit ratings as well as in covered bonds. KBN had a liquidity coverage ratio (LCR) of 570% at the end of 2017.

Credit margins for both financial institutions and European states fell in 2017, at the same time as interest rates rose in both Europe and the USA, with the Federal Reserve raising interest rates three times. Falling credit margins reduce the returns from the liquidity portfolio.


KBN complies with the Norwegian Code of Practice for Corporate Governance in those areas that are relevant to its type of company, its ownership structure and its financial regulatory requirements. KBN is organised as a limited liability company that is 100%-owned by the Norwegian state. In its White Paper on Ownership Policy (Diverse and Value-Creating Ownership, White Paper No. 27 2013-2014), the Government classified KBN as a ‘Category 3’ entity, which is to say an entity with commercial objectives and other specifically defined objectives that define the purpose of the state’s ownership of it.

The objectives set for KBN as a state-owned entity stipulate that its important functions include ensuring the markets used to finance the local government sector are efficient, compensating for any effects of market deficiencies and ensuring that municipalities have access to financing even when market turmoil reduces the capacity available in the capital markets. KBN offers long-term cost-efficient financing for municipal welfare investments with the same interest rate terms regardless of the size of the loan or municipality, and this is an expression of KBN’s sectoral-policy function.

As owner, the state determines KBN’s capital structure, the size of dividends paid and its target capital return. The target return is set in the National Budget for a three-year period, with the return for the 2016-2018 period having been set at 8%.

KBN’s governing bodies are organised in accordance with the provisions of the Norwegian Public Limited Liability Companies Act and the Financial Enterprises Act, as well as KBN’s Articles of Association. The Board of Directors and the Supervisory Board are elected by the Annual General Meeting. The Supervisory Board is a governing body required by KBN’s Articles of Association, and its purpose is, inter alia, to produce statements on issues that concern the company and to be particularly focused on corporate governance.

The Board of Directors is responsible for the management of KBN’s activities, which includes appointing the CEO, approving the mandate for the CEO, decisions on borrowing and authorising delegated borrowing authority, and appointing the internal auditor. The Board of Directors has set up three committees that prepare cases for its consideration and whose members are elected by and from amongst its own members, namely the Audit Committee, the Risk Management Committee, and the Remuneration Committee. An analysis of the proportion of time the Board spent on its various activities in 2017 shows that it allocated its time in a balanced way to strategy, organisational issues, internal control and audit, reporting and developing its work.

The CEO is responsible for running KBN on a day-to-day basis in accordance with the mandate issued by the Board of Directors and approved by the Supervisory Board. The Risk Management and Compliance department has overall responsibility for risk management and compliance at KBN. The Chief Risk and Compliance Officer reports to the CEO, but has a direct reporting line to the Board of Directors in accordance with Section 29 of the Norwegian CRD V Regulations. The Head of Compliance has a direct reporting line to the CEO and also to the Board of Directors for material breaches of compliance.



Each year the Board of Directors approves guidelines on the remuneration of senior executives in the following financial year. The Board submits its statement on the remuneration of senior executives to the Annual General Meeting each year. The statement and information on the remuneration paid to senior executives are provided in Note 6 of KBN’s financial statements in this annual report.


KBN finances its lending to Norwegian municipalities in Norwegian kroner by borrowing in the capital markets, primarily in foreign currencies from the international markets. KBN has a liquidity portfolio that consists of interest-bearing securities in a range of currencies. This means that its earnings and balance sheet are affected by market fluctuations and the level of correlation between different risk components in the markets in which it operates.

KBN seeks to avoid interest rate and exchange rate risk. However, its earnings and balance sheet, including its equity, are affected by changes in market prices as a consequence of the unrealised gains and losses that these create, as well as by the fact that the vast majority of its funding is denominated in currencies other than Norwegian kroner. Changes in credit spreads and indices also contribute to unrealised gains and losses.

Organisation and governance

KBN’s Board of Directors has established a risk appetite framework and sets policies and limits relating to KBN’s operational activities. These policies are reviewed annually. The Board of Directors has also produced policies on internal control and considers the CEO’s assessment of internal control on a yearly basis.

The purpose of risk management is to ensure that KBN manages its assets and liabilities responsibly. Risk assessments are carried out in relation to material risks for all KBN’s business areas at least annually. Stress tests and scenario analysis are used to assess the vulnerability of KBN’s key risk areas. The results of these stress tests are evaluated and considered as part of KBN’s strategy formation process, its capital planning process, its recovery planning, and decisions on central policies.

The Board of Directors is regularly informed of KBN’s activities, financial position and earnings situation. The Board considers the management’s assessment of risk exposure and risk events, with this forming an integral part of KBN’s routine activity reporting processes.

The Audit Committee’s role is to help the Board of Directors supervise the company’s financial reporting and control systems by preparing issues related to these areas and advising the Board on them. The Risk Management Committee’s role is to help the Board of Directors oversee and manage the overall level of risk at KBN by preparing issues related to this area and advising the Board accordingly. The Remuneration Committee’s role is to help the Board assess the company’s remuneration arrangements by preparing issues related to this area and advising the Board accordingly.

KBN operates three lines of defence. KBN’s operational activities represent the first line of defence and are responsible for monitoring and controlling whether KBN’s activities are carried out within the approved limits and in accordance with internal and external regulations. The second line of defence monitors, guides and helps to improve and report on the first line checks. This responsibility comprises risk management and compliance control in relation to both internal and external regulations. KBN’s financial control function and its risk management and compliance function comprise the second line of defence. The compliance function is part of the risk management function, and both functions have direct reporting lines to the CEO and the Board. The third line of defence is provided by the Board’s independent supervisory and control function, which is carried out by the internal auditor.

Credit risk

Credit risk in the lending portfolio is limited to payments being deferred as payment obligations cannot be cancelled. Section 55 of the Local Government Act stipulates that municipalities and county authorities may not be declared insolvent. The Local Government Act also contains provisions regarding the procedures that must be followed if payments have to be deferred. This in practice protects lenders from any losses in relation to debt and accrued interest.

KBN manages its liquidity by investing in securities with a low credit risk, and it has a low appetite for credit risk in relation to its liquidity counterparties.

KBN uses derivatives to reduce or eliminate the interest rate risk and exchange rate risk associated with its lending and funding activities and its liquidity portfolio investments. The risk associated with entering into derivative contracts is controlled by the use of central counterparties or other counterparties with a high credit rating, and by exchanging cash collateral in order to reduce KBN’s exposure. 

Liquidity risk

KBN has a very limited risk appetite with regard to liquidity risk and the purpose of liquidity management is to ensure it has sufficient liquid assets to cover its ongoing liabilities at any point. The liquidity portfolio is subject to requirements in respect of liquidity, ratings, diversification, counterparties and instrument types, inter alia. Liquidity management is designed to incur only limited price risk and to ensure KBN complies with the capital and liquidity requirements to which it is subject. 

Interest rate risk and exchange rate risk

KBN has a very limited risk appetite with regard to its exposure to interest rate and exchange rate changes. Interest rate risk and exchange rate risk are managed by ensuring that the risk exposure arising from KBN’s assets and liabilities is balanced at all times. Hedging transactions are also used to hedge interest rate risk and exchange rate risk.

Operational risk

The purpose of operational risk management is to identify risk across the organisation and to ensure there are sufficient risk-reduction measures (controls) in place to prevent losses. Annual risk reviews are undertaken for all critical functions. The operational risk management process is a tool for prioritising resources and balancing the costs associated with risk and risk-reduction activities. The processes and controls set up to reduce operational risk are intended to contribute to high-quality internal control at KBN.


The Board of Directors regards regular, high-quality contact with KBN’s major stakeholders as an important means of ensuring that there is a good understanding of its model and the framework in which it operates. The Government has expressed its expectations of the company in White Paper No. 27 (2013–2014) “Diverse and Value-Creating Ownership”.

KBN’s external communication activities are intended to help highlight issues that constitute potential obstacles to its ability to achieve its purpose or that affect its customers. In its external communications in 2017, KBN particularly emphasised the importance of a sustainable approach to borrowing by the local government sector, its green lending products, and its further development of its debt management portal KBN Finans.

KBN carried out a range of activities in 2017 to measure its reputation among major stakeholders. These activities prioritised KBN's customers in the local government sector as well as investors and investment banks active in the capital markets.

A good reputation is important to ensuring KBN is able to function effectively and to recruit skilled employees. KBN works closely with a range of organisations in the local government sector and is active in discussions concerning important local government finance issues. KBN arranged a number of different specialist conferences and seminars in 2017.

KBN held its annual conference in April 2017, the theme of which was the local government sector’s investment requirements through to 2040.

KBN organised two events at the Arendalsuka conference in 2017. One of these was in collaboration with the Norwegian Association of Local and Regional Authorities (KS) and addressed the local government sector’s role in the “green shift”. KBN organised the other event on its own, which addressed how digitalisation and innovation can help the local government sector to provide better welfare services using fewer resources in future. The main target audience of the events KBN organised was, in addition to customers for KBN’s lending products, local and national politicians and advisers, and the official authorities.

KBN carried out various marketing initiatives with a view to highlighting its position as a leading financial institution for the local government sector. Increasing KBN’s visibility in digital media was once again a priority area in 2017. The purpose of this was to improve the level of contact KBN has with its target audiences, to increase the level of understanding of the role KBN plays in society, and to drive more traffic to its website.


In 2016 KBN engaged in extensive dialogue with its stakeholders, revised its corporate social responsibility priorities and developed separate corporate social responsibility guidelines. In 2017 KBN worked on the priorities that it adopted in 2016. KBN’s corporate social responsibility work is incorporated into its strategy work and the process for developing its activity plans. This approach ensures corporate social responsibility is an integral part of KBN’s ordinary activities. KBN has produced a corporate social responsibility report for 2017 in accordance with the Global Reporting Initiative (GRI) reporting standard.

KBN decided to prioritise the following areas for its work on corporate social responsibility in 2018:

  • Topic 1: Ethical conduct
  • Topic 2: The supply chain
  • Topic 3: Green finance
  • Topic 4: Diversity and equality
  • Topic 5: Sharing expertise and responsible lending
  • Topic 6: Dialogue with stakeholders

For KBN’s reporting on corporate social responsibility for 2017 and its objectives for 2018, see the separate Corporate Social Responsibility Report.


KBN is a knowledge business that needs to recruit and develop skilled employees across a range of specialist areas in order to fulfil its aims.

KBN had 80 employees at the end of 2017 equating to 77.2 full-time employees. 70 employees hold permanent positions. The temporary employees are students, replacements for employees on parental leave and temporary staff appointed in connection with various projects.

Changes were made to KBN’s organisational structure in 2017 to further strengthen key deliveries and to ensure a unified allocation of responsibility for its various areas. Legal and regulatory affairs have been made into a separate department, and a new “People, strategy and digital development” department was also set up. This houses HR, cyber security, business management and internal service functions.

KBN increased its focus on building relationships with selected educational institutions to increase awareness of KBN’s activities and to further strengthen its reputation. It also for the first time participated in 2017 in a number of career days on various campuses and gave a number of guest lectures in its core areas for a number of courses. It also expanded the number of student placements it offers, which give students the opportunity to acquire practical experience relevant to their studies.

Diversity and Equality

KBN strives to work in a systematic and targeted way on diversity and equality across the organisation and to follow up targets with specific measures in its activity plans. Its work to promote diversity and equality is a fundamental part of its recruitment of new employees, its development of managers and employees, and its succession planning. KBN’s objective is to achieve a good gender balance at all levels and within all units, with an overall gender balance target of 40%.

When recruiting for or making changes to the composition of its management teams and organisational units, KBN accords particular weight to the gender balance and requires that the most qualified woman or man is identified before any decision is taken. No consideration is given to gender, disability, age, or cultural or geographic background when candidates’ professional and personal qualifications are being assessed.

All employees are treated equally and have access to the same opportunities with regard to personal and professional development and promotion. Employees who do not speak Norwegian are provided with training in Norwegian, and diversity and equality work is part of management development. Flexible working hours are offered to facilitate arrangements for employees who have care responsibilities at home.

The target for succession planning for management positions and other critical roles is for internal candidates of both genders to be identified and developed in order to reduce vulnerability and to develop expertise.

At the end of 2017 the proportion of women on the Board of Directors was 56%, while the equivalent proportions for the CEO’s management team and for all employees (permanent and temporary) were 40% and 43%. The average age of KBN employees was 41.

Health, safety and the working environment

KBN is committed to ensuring all its employees have high-quality working conditions. The Working Environment Committee’s aim is to actively contribute to the creation of a good working environment and the promotion of good physical health by building a culture characterised by well-being and collaboration. The Committee held regular meetings and carried out risk assessments in relation to health, safety and environmental issues. In 2017 the ethics program that was run for all employees focused on KBN’s zero-tolerance approach to discrimination and harassment. 

Regular health-promoting and social activities, including exercise facilities and health checks, were offered for all employees in collaboration with KBN’s various activity groups. 

No accidents or serious injuries were recorded as having occurred during working hours or in connection with journeys for work purposes or to or from work. No accidents or injuries were reported to the Norwegian Labour Inspection Authority.

The sickness rate was 2.73% in 2017 as compared to 1.41% in 2016. KBN’s target is for the sickness rate to be below 2.5%. KBN works actively on health, safety and the working environment, on preventing and following up sick leave, and on facilitating a swift return to work for employees following leave of absence and sickness. Staff turnover in 2017 was 11%.


The Board of Directors of Kommunalbanken AS proposes the following allocation of the profit for the 2017 financial year: NOK 443 million is to be paid to KBN’s owner as a dividend and NOK 986 million is to be transferred to retained earnings.


In 2017 the Norwegian economy grew at an annual rate of 1.5%, with unemployment at 3.0% at the end of the year. Norwegian municipalities’ finances are benefiting from the Norwegian economy’s good general progress and the strong income growth they have enjoyed in recent years. In the 2008-2017 period, the local government sector saw its total real average income grow by 2.3% per year. The positive trend seen for local government finances is expected to continue going forward.

The local government sector will continue to have sizeable investment needs, with this driven by demographic changes to Norway’s population, urbanisation, and the transition to a low-carbon society. KBN has worked with the analysis firm Menon Economics to produce a forecast of the local government sector’s investment and borrowing needs in the years ahead. This analysis indicates that borrowing by the local government sector will increase by 2.1% per year in the period up to 2040. This is approximately one-third the rate of growth seen in the previous 12 years and is more in line with growth in the sector’s income.

The Board of Directors of KBN has approved KBN’s strategy for the 2018-2020 period, which involves a greater focus on customers through digitalisation and simpler financial management. In dialogue with its customers, KBN will seek to develop the customer experience by adopting new technological solutions in relation to efficient customer management, operational robustness and analysis capabilities. KBN will fulfil its role in society by lending responsibly.

KBN’s framework, including its commitment to complying with all regulatory requirements and achieving the return requirement set for it, forms the basis of its activities. Achieving satisfactory earnings ensures KBN can achieve its mandate as a reliable and stable provider of long-term credit. A strong business performance enables KBN to satisfy the expectations of its customers and other stakeholders. The Board expects that KBN will maintain a stable market share for lending to the local government sector over time.

The regulatory requirements for financial institutions have increased in scope in recent years. KBN is working continuously on adapting to a range of new regulatory requirements. As a low-risk instrument of the state, KBN has a different business model. In designing the regulations, the EU has to some extent taken low-risk financial institutions such as KBN into account. Several countries have issued suitably adapted regulations for financial institutions that lend to the public sector, for example by classifying them as “promotional banks”. A predictable environment and framework conditions that are adapted to KBN’s distinctive nature are important to KBN’s ability to fulfil the major role it plays in building a better society. 

The Board of Directors would like to thank KBN’s employees for a job well done.

Oslo, 31 December 2017

28 February 2018 

The Board of Directors of Kommunalbanken AS