Conflict of interest

 1. Purpose 

Eika Boligkreditt AS (EBK) must take all reasonable steps to identify potential conflicts of interest and tailor the structure and organisation of its business operations such that the risk of conflicts of interest between EBK, its employees and its customers is reduced to a minimum, see section 9-11 of the Norwegian Securities Trading Act (Verdipapirhandelloven) and section 16-1(4) of the Financial Institutions Act (Finansforetaksloven).

The purpose of these guidelines is to identify potential conflicts of interest which may arise in connection with EBK's business operations and describe the measures which have been established to prevent them, see section 35(2) of the CRR/CRD regulations.

2. Assessing potential conflicts of interest

The company’s management is responsible for performing regular assessments of potential sources of conflicts of interest in the company at least once a year. Such assessments will also need to be performed in such circumstances as the choice of new priority areas, the selection of new partners, or where close ties with partners (including brokers, facilitators, banks, system suppliers and service providers) are perceived as a possible source of conflicts of interest between EBK, its employees or its customers. The annual assessment is performed by the company’s heads of departments and the CEO in connection with the annual internal control review. The assessment must, at minimum, consider whether EBK, its employees or persons who act on its behalf could find themselves in positions where they:

• could achieve financial benefits or avoid financial losses at the expense of the interests of the owner banks or the mortgage holders,
• have financial or other grounds for prioritising the interests of a partner, facilitator or broker ahead of the interests of the owner banks or end customers.

3.   Company’s framework for handling conflicts of interest

Division of Roles and organisation

In order to handle conflicts of interest in practice, a clear distinction will always be made between execution and control. Such a division of roles provides a key instrument for dealing with conflicts of interest. Provision must be made for handling such conflicts to ensure that control functions and reporting in the company have adequate organisational independence with respect to who is responsible for performing them. As far as possible, conflicts of interest must be handled by organising the potential source away. Employees must continuously provide the company with information on possible conflicts of interest which might arise. As soon as an employee becomes aware of a possible conflict, they must inform their immediate supervisor and risk-reducing measures must be implemented.

 

Personal transactions by employees

EBK’s employees may conduct trades in financial instruments on their own account (personal transactions) which could come into conflict with EBK’s interests. The company’s board has therefore imposed some restrictions which could be significant in preventing possible conflicts of interest and impartiality issues, and which apply to all EBK employees.

• Employees are not permitted to undertake personal transactions in financial instruments issued by the banks holding shares in Eika Boligkreditt AS or Eika Gruppen AS.
• Trading when in possession of insider information is prohibited: Employees and their related parties may neither trade in nor subscribe for issues, if the employee is in possession of information about the financial instruments, their issuer or other conditions likely to influence the price of the instrument concerned, which is not publicly available or known in the market (insider trading). Special qualification requirements govern trading in financial instruments issued by a company in which the trader is a primary insider. In this connection, please also refer to EBK’s Guidelines for Handling the Duty of Disclosure.
• Employees may otherwise not participate in company decisions relating to the purchase or sale of or subscription to financial instruments issued by a company which the person concerned leads or in which they hold a leading position or serve as a member of the board or corporate assembly.
• Nor may employees participate in the consideration of any issue which has significance for themselves or their related parties, such that the person concerned must be considered to have a special personal or financial interest in the issue.
• Employees may not purchase financial instruments from EBK or sell financial instruments to the company in which they are employed.
• Where an employee is authorised to undertake trades in individual financial instruments on behalf of the company, and the company makes use of this opportunity, the employee concerned is prohibited from trading – directly or indirectly – in equivalent financial instruments.
• Employees are not permitted to buy or sell on their own account through EBK’s primary brokers. Primary brokers are securities companies that regularly provide EBK with investment services of a material size and scale.

Related parties are to be understood as defined in section 2-5 of the Norwegian Securities Trading Act.

The term “material size and scale” means more than 10 per cent of gross turnover in the past six months. The company will produce updated lists, quarterly or as required, specifying which securities companies may not be used. Updated lists are available in the company’s shared area.

Employees are, however, permitted to use online banking / eTrading solutions to trade in financial instruments through primary brokers of the company, since such trades are not deemed to be an interaction with the primary broker that gives rise to a conflict of interest.

Restrictions on the use of primary brokers do not apply to subscribing for shares in relation to pre-emptive rights pursuant to the Norwegian Limited Liability Companies Act (Aksjeloven) and Public Limited Liability Companies Act (Allmennaksjeloven).

Advance clearance 

All personal transactions relating to derivatives, bonds, certificates and other debt instruments must obtain prior written clearance from the company’s CEO. Such clearance is not required for trading in shares.

It is considered sufficient that the duty to obtain clearance applies to instruments of a type in which the company may invest. The CEO may delegate this aspect of their duties to a specifically appointed individual. Should the latter wish to conduct personal transactions of their own, they must clear these with the CEO. The CEO must clear their own trades with the chair of the company’s board of directors.

Personal transactions may be cleared without further investigation of the investment portfolio if the financial instrument concerned falls outside the area of investment in the company’s capital management strategy and associated investment mandates.

Elected office or position in other financial institutions/business activity

Sections 9-1, 9-2 and 9-3 of the Norwegian Financial Institutions Act impose restrictions on financial institutions’ directors and executives with respect to taking directorships or management positions in other financial institutions or in undertakings which have commercial ties with the financial institution, and their participation in business activity, since such positions may come into conflict with the financial institution’s interests. Holding such positions is, in principle, prohibited unless they are considered immaterial to the purpose of the Act.

EBK’s job descriptions and instructions for chief executives and holders of key functions explicitly require that approval be granted for other positions of employment and business-related elected offices. Furthermore, EBK’s board mandate states that, as a rule, members of its board of directors may not serve as directors or executives of another financial institution. However, this does not prevent employee representatives, CEOs or employees of Alliance banks from accounting for up to three quarters of the company’s directors, see section 9-1(4) of the Financial Institutions Act.

With respect to external positions or elected offices, the following notification structure applies in EBK:

As stated in the figure above, upon receiving such notice at risk.ebk@eika.no, Risk will keep an up-to-date register of the external positions and elected offices held by board members and members of executive management. Notice must be given before commencing the office/post.

Non-commercial work done or offices held by employees and directors, such as board membership in housing cooperatives or voluntary organisations, are not subject to the notification rules. Employees should note, however, that they are required to obtain their immediate supervisor's written consent before they can accept such offices/posts.

To ensure effective compliance with these rules, each member of the board is required to complete a disclosure form, in accordance with Appendix 1 to these guidelines, giving details of their external board and management positions. This disclosure form must be completed no later than 30 June each year.

See also the board’s mandate for a description of directors’ impartiality assessment and duty to act in good faith.

Capital management

Furthermore, there is a potential risk that employees may have incentives to take undesirably high risks on behalf of the company for their own financial benefit. To prevent such an undesirably high risk, guidelines have been established for capital management in the company – including maximum interest-rate and credit spread risk and maximum limits for each counterparty. Company employees are not entitled to bonuses, which also contributes to an extremely low risk of potential conflicts of interest related to capital management. Return on the liquidity portfolio must be measured against a composite reference index, “OB Money Market 3 Month Index” and the “OB Treasury Bills < 180 days index” with a respective weighting of 70/30. This is a natural comparison when investing in securities with a low interest and credit risk.

Remuneration

EBK’s remuneration system is described in its Guidelines for Remuneration. The company’s remuneration is not variable. Its remuneration system is considered to present little risk as a source of conflicts of interest.

Restrictions on competition

The company does not enter into agreements which restrict competition. It applies reputable methods when doing business with customers, suppliers and other partners. All distributor banks are charged the same borrowing rate, which is set at a level only sufficient for EBK to cover its costs. Distributor banks determine the mortgage rates they charge to their borrowers. The difference between interest rates paid by mortgage holders and the borrowing rate charged to the bank is repaid to the bank in its entirety as commission. EBK will ensure that no information is made available which could encourage restrictions on competition between the distributor banks with regard either to interest-rate terms for customers or market behaviour otherwise. 

Code of conduct

Employees are required to observe the ethical guidelines set out in the company’s Code of Conduct with regard to possible gifts from or entertainment provided by business associates. Furthermore, the Code of Conduct regulates matters relating to impartiality and the duty of confidentiality.

Outsourcing

In the event of outsourcing, all potential conflicts of interest and how these may be mitigated must always be assessed before any such contract is entered into. If it is not possible to establish measures to mitigate conflicts of interest, outsourcing must not be utilised.

4. Documentation

All potential sources of conflicts of interest must be documented and reported as part of the company’s internal control procedures. In the annual internal control review, each manager will conduct a self-assessment of management and control in their own area, including an assessment of how conflicts of interest are handled. If individual cases occur, these must also be described in the annual management confirmation.

As part of the internal control process, the employer can require that the employee provides a declaration confirming that the rules in these guidelines have been observed.

These guidelines were approved by the board of directors of EBK on 12 November 2024 and entered into force on the same date.