The company holds and manages a portfolio of securities to serve as a liquidity buffer. The securities portfolio consists of two sub-portfolios, the liquidity reserve portfolio and the portfolio hedge agreement (PHA) portfolio, that are described below.
Liquidity reserve portfolio
The liquidity reserve portfolio was established in the first half of 2008 after the entry into the portfolio hedge agreement. The purpose of the portfolio is to provide a liquidity buffer in scenarios where there is an imbalance between maturities on the asset and liability side of the balance sheet, and a buffer for fluctuations in the cash flow profile. The placements are made in money market instruments; such as commercial paper, certificates of deposit, repurchase agreements and bank deposits; and in securities such as bonds and covered bonds. The securities of the liquidity reserve portfolio are of shorter weighted average maturities than those in the PHA portfolio.
Portfolio hedge agreement (PHA) portfolio
The PHA portfolio consists of securities where market fluctuations are hedged by the portfolio hedge agreement (PHA) signed on March 1, 2008. With this agreement the company's owners undertook to hedge against further market value declines of the portfolio (up to NOK 1.5 billion) after that date, including credit losses. The securities of the portfolio are mainly held to maturity and are primarily senior bank notes and bonds, highly rated asset-backed securities and some bonds issued by unrated Norwegian savings banks.