Risk assessment and calculation of fees

To ensure that the guarantee system is self-supporting in the long term, the Budget Act stipulates that we shall apply a fee covering the expected loss and our administrative costs.

The expected loss is calculated on the basis of the size and maturity of the guarantee or loan and the probability that the guarantee holder or borrower will be unable to repay their loan. Also factored in the calculation is how much we think we can recover if we are forced to pay the guarantee holder's debt or if the borrower cannot amortise their loan with us.

Same rules for guarantees and loans

Regardless of whether the Government issues a credit guarantee or a loan, it takes a financial risk. Government loans are now covered by the same rules that apply to guarantees in terms of charging fees that reflect the degree of risk. This means that government lending will also become self-supporting in the long term. For new loans, we therefore charge fees that reflect the credit risk and use the same methods as for guarantees.

Market price promotes competition

So as not to distort the competition on a market when we issue a guarantee or a loan, the fee we charge may need to be adjusted. We then charge a market-price. This means that the fee corresponds to the price that a guarantee holder or borrower would have to pay on the market.

Calculating expected losses

There are various methods for calculating expected losses. As the conditions of our guarantee and credit undertakings can vary, we use different evaluation methods such as rating analysis and simulation models.

Under 'Rules' you can read more about the rules and regulations that govern our activities and our principles for charging fees.