Liquidity buffer
The minimum size of the liquidity buffer depends on outgoing and incoming cash flow levels during the survival horizon. The stress scenario assumes the acceleration of outflows and the disruption of inflows, as well as adverse market developments that affect the value of securities in the liquidity buffer and derivatives. The liquidity buffer consists of cash, money market instruments and securities, and it has the target survival horizon of one year.
At the end of September 2024, NIB’s total liquidity amounted to EUR 16,237 million, of which EUR 6,396 million (39% of the total) was in short-term money market instruments, and EUR 9,841 million (61% of the total) was invested in bonds with longer maturities.
Asset and liability management
During January to September 2024, NIB’s loan disbursements and Lending bond investments totaled EUR 2,348 million, and the Bank obtained EUR 8,227 million in new funding in 12 currencies. The EUR 6,396 million held in the short-term money market is used to manage the Bank’s daily payment obligations. The instrument distribution is shown in the graph.
The liquidity investments are limited by the counterparty and market risk framework that applies to Treasury operations.
Along with the counterparty and market risk framework, Treasury’s liquidity investments follow guidelines that will ensure the assets remain liquid even under stressed market conditions. At the end of September 2024, 92% of the liquidity was invested in accordance with the Basel III liquidity rules of being high-quality liquid assets (HQLA), and 90% of the liquidity was eligible as repo collateral in one or several central banks. NIB does not have direct access to central bank repos, but can repo its bond securities via intermediating banks.
* Reverse repos are repurchase agreements in which a bond is received as collateral for a cash deposit.
Portfolio management
The Portfolio Management team manages the bond security portfolios. The market value of these portfolios amounted to EUR 9,841 million at the end of September 2024. The securities are held on both amortised cost and fair value bases and include both floating-rate and fixed-coupon instruments. The instrument distribution of the portfolio can be seen in the graph.
Responsible investments
As a means to contributing to sustainable development and good business conduct, Treasury considers environmental, social and governance (“ESG”) related factors when making investment decisions and selecting transaction counterparties.
The principles for integrating these aspects into Treasury operations are laid out in NIB’s Responsible Investment Framework. The responsible investment approach covers all assets and activities of the Bank’s Treasury and aims at strengthening the Treasury’s objectives of mitigating risk and generating stable earnings.
ESG integration approaches:
Exclusion list
Best-in-class approach
Sustainable thematic investments
Counterparty selection and controversies monitoring
Active engagement