Annual Report (ESEF) • Mar 1, 2022
Preview not available for this file type.
Download Source FileF3JS33DEI6XQ4ZBPTN862021-01-012021-12-31F3JS33DEI6XQ4ZBPTN862020-12-31ifrs-full:RetainedEarningsMemberF3JS33DEI6XQ4ZBPTN862021-01-012021-12-31ifrs-full:RetainedEarningsMemberF3JS33DEI6XQ4ZBPTN862021-01-012021-12-31ifrs-full:ReserveOfChangeInFairValueOfFinancialLiabilityAttributableToChangeInCreditRiskOfLiabilityMemberF3JS33DEI6XQ4ZBPTN862021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMemberF3JS33DEI6XQ4ZBPTN862021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberF3JS33DEI6XQ4ZBPTN862021-01-012021-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberF3JS33DEI6XQ4ZBPTN862021-12-31ifrs-full:IssuedCapitalMemberF3JS33DEI6XQ4ZBPTN862021-12-31ifrs-full:ReserveOfChangeInFairValueOfFinancialLiabilityAttributableToChangeInCreditRiskOfLiabilityMemberF3JS33DEI6XQ4ZBPTN862021-12-31ifrs-full:ReserveOfCashFlowHedgesMemberF3JS33DEI6XQ4ZBPTN862021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberF3JS33DEI6XQ4ZBPTN862020-01-012020-12-31F3JS33DEI6XQ4ZBPTN862021-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberF3JS33DEI6XQ4ZBPTN862021-12-31ifrs-full:RetainedEarningsMemberF3JS33DEI6XQ4ZBPTN862019-12-31ifrs-full:IssuedCapitalMemberF3JS33DEI6XQ4ZBPTN862019-12-31ifrs-full:ReserveOfChangeInFairValueOfFinancialLiabilityAttributableToChangeInCreditRiskOfLiabilityMemberF3JS33DEI6XQ4ZBPTN862019-12-31ifrs-full:ReserveOfCashFlowHedgesMemberF3JS33DEI6XQ4ZBPTN862019-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberF3JS33DEI6XQ4ZBPTN862019-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberF3JS33DEI6XQ4ZBPTN862019-12-31ifrs-full:RetainedEarningsMemberF3JS33DEI6XQ4ZBPTN862019-12-31F3JS33DEI6XQ4ZBPTN862020-01-012020-12-31ifrs-full:RetainedEarningsMemberF3JS33DEI6XQ4ZBPTN862021-12-31F3JS33DEI6XQ4ZBPTN862020-01-012020-12-31ifrs-full:ReserveOfChangeInFairValueOfFinancialLiabilityAttributableToChangeInCreditRiskOfLiabilityMemberF3JS33DEI6XQ4ZBPTN862020-01-012020-12-31ifrs-full:ReserveOfCashFlowHedgesMemberF3JS33DEI6XQ4ZBPTN862020-01-012020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberF3JS33DEI6XQ4ZBPTN862020-01-012020-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberF3JS33DEI6XQ4ZBPTN862020-12-31F3JS33DEI6XQ4ZBPTN862020-12-31ifrs-full:IssuedCapitalMemberF3JS33DEI6XQ4ZBPTN862020-12-31ifrs-full:ReserveOfChangeInFairValueOfFinancialLiabilityAttributableToChangeInCreditRiskOfLiabilityMemberF3JS33DEI6XQ4ZBPTN862020-12-31ifrs-full:ReserveOfCashFlowHedgesMemberF3JS33DEI6XQ4ZBPTN862020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberF3JS33DEI6XQ4ZBPTN862020-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberiso4217:SEKiso4217:SEKxbrli:shares Annual and Sustainability Report Our customers and stakeholders We always put our customers’ needs at the core of our business. Their high expectations for both digital and personal services, and for quality advice and sustainable solutions, drive SEB’s business development and offerings. Our 15,500 employees work as a team to serve our customers and create value for our share- holders and for the societies where we operate. 2,000 Large corporations 1,100 Financial institutions 400,000 Small and medium-sized companies Of these, some 288,000 are home bank customers. 4,000,000 Private individuals Of these, some 1.5 million are home bank customers. 15,500 Employees 267,000 Shareholders Society Contents Introduction This is SEB 2 The year in summary 4 Statement from the Chair 6 Statement from the President and CEO 8 Strategy and value creation Strategic focus 12 Business plan 20192021 14 Business environment and trends 16 2030 Strategy 20 Business Plan 20222024 22 Long-term value creation 24 Overall targets and outcome 26 Our business Our customers 30 Our employees 34 Our shareholders 38 Our role in society 40 Sustainability report 42 Report of the Directors Financial review of the group 71 Risk, liquidity and capital management 86 Corporate governance 92 Financial statements and notes Financial statements 108 Notes to the financial statements 118 Five-year summary 199 Proposal for the distribution of profit 201 Signatures of the Board of Directors and the President 202 Auditor’s report 203 Sustainability notes 208 Other information Definitions 235 Pages 70202 constitute SEB’s formal annual report. SEB’s sustainability work is described in the sustainability report on pages 4269 and 208233. We connect ideas, people and capital to drive progress Being a leading northern European corporate bank with international reach, we support our customers in making their ideas come true. We do this through long-term relationships, innovative solutions, tailored advice and digital services – and by partnering with our customers in accelerating change towards a more sustainable world. SEB Annual and Sustainability Report 2021 — 1 Introduction “We see SEB as a pioneer in green financing, where the bank has been a valuable dialogue partner and service provider at an early stage. This is something that we have had much benefit from and that has enabled us to be at the forefront of the green transition.” Kerstin Ahlfont, CFO, Vattenfall We focus on four main areas in our 2030 Strategy… Our sustainability strategy outlines our role in the transition towards a sustainable society. As a key part, we have defined new ambitions and goals: The Brown Reducing our fossil fuel credit exposure in the energy portfolio by 4560 per cent by 2030 (baseline 2019). The Green Increasing our sustainability activities 68 times by 2030 (baseline 2021). The Future Assessing our credit portfolio’s alignment with the Paris Agreement by 2022 and setting targets for 2030. …in which we aim to be a leading catalyst in the sustainability transition Acceleration of efforts Strengthening our customer offering by continuing to build on existing strengths through extra focus and resources targeted at already established areas. Strategic change Evaluating the need for strategic change and transforming the way we do business in already established areas. Strategic partnerships Collaborating and partnering with external stakeholders and rethinking how we produce and distribute our products and services. Efficiency improvement Increasing our focus on strategic enablers, allowing us to improve efficiency and accelerate SEB’s transformation journey. #1 Sustainability Advisor in the Nordics 2021 Prospera 2 — SEB Annual and Sustainability Report 2021 Our purpose SEB has always believed that the future depends on making great ideas happen. Our purpose is to positively shape the future, with responsible advice and capital. Today and for generations to come. We have a strong ambition to accelerate the pace towards a sustainable future for people, businesses and society. We want to be a leading catalyst in the sustainability transition. Our employees strive to provide world-class service and offer our customers financial products and services that meet their ever- changing needs – both in our home markets in northern Europe and through our international network around the world. Introduction — This is SEB Home markets – we serve all customers with a wide range of products Sweden, Norway, Denmark, Finland, Estonia, Latvia, Lithuania, Germany and the United Kingdom. Geographical expansion – we expand our business for large corporate customers The Netherlands, Austria and Switzerland. International network – we support our home market customers around the world Beijing, Hong Kong, Kyiv, Luxembourg, New Delhi, New York, São Paulo, Shanghai, Singapore, St. Petersburg and Warsaw. …with a strong northern European market position #1 Corporate and Institutional Bank in the Nordics 2021 Prospera #1 Business Bank of the Year 2021 – for the third year in a row Finansbarometern #1 Bank of the Year 2021 Privata Affärer Large Corporates & Financial Institutions Commercial and investment banking services for large corporate and institutional customers in the Nordic region, Germany and the United Kingdom as well as in our international network. Corporate & Private Customers Full banking and advisory services for private individuals and small and medium-sized corporate customers in Sweden, as well as card services in four Nordic countries. Private Wealth Management & Family Office Leading private banking services with global reach for Nordic high-net-worth individuals. Baltic Full banking and advisory services for private individuals and small and medium-sized corporate customers in Estonia, Latvia and Lithuania. Life Life insurance solutions for private as well as corporate and institutional customers mainly in the Nordic and Baltic countries. Investment Management Management of SEB-labelled funds and mandates for customers channelled via other divisions. We serve our customers through our divisions… SEB Annual and Sustainability Report 2021 — 3 The economic recovery contin- ued and financial markets were less volatile as Covid19 vaccine rollouts progressed and central bank stimulus was maintained. This was despite continued uncer- tainties posed by new Covid19 waves, inflation concerns and sup- ply chain and energy shortages. SEB saw high activity among large corporate customers, contin- ued strong demand for mortgages in Sweden and strong growth of assets under management, while corporate card activity showed signs of recovery. Important events and trends during the year The year in summary SEB announced a geographical expansion of the offering for large corporates in the Large Corporates & Financial Institutions division, to the Netherlands, Austria and Switzerland. The new division Private Wealth Management & Family Office was established to strength- en focus on entrepreneurs and professional family offices and grow SEB’s savings and investments business. Key targets and figures Board’s financial targets 2021 2020 Dividend payout ratio of around 50 per cent of earnings per share 1,3) , per cent 51 106 Common Equity Tier 1 capital ratio of 100300 basis points over requirement 2) , basis points 590 840 Return on equity competitive with peers 3) , per cent 13.9 10.3 Key figures 2021 2020 Operating income, SEK m 54,614 49,717 Operating profit 3) , SEK m 30,864 20,846 Return on equity, per cent 13.9 9.7 Cost/income ratio 0.43 0.46 Earnings per share, SEK 11.75 7.28 Dividend per share 1) , SEK 6.00 8.20 Leverage ratio, per cent 5.0 5.1 Liquidity Coverage Ratio (LCR), per cent 145 163 Net Stable Funding ratio (NFSR), per cent 111 - 1) Board proposal for 2021. For 2020 an ordinary dividend of SEK 4.10 per share and a further ordinary dividend of SEK 4.10 per share. 2) Regulatory requirement estimated by SEB: 13.8% 12.6). 3) Outcome excluding items affecting comparability. 10% Operating income 48% Operating profit 13.9% Return on equity 6.00 Proposed dividend per share, SEK 4 — SEB Annual and Sustainability Report 2021 Introduction — The year in summary In the Swedish Quality Index survey (SKI), customer satisfaction among cor- porate and private customers increased and, for the first time, SEB earned the top ranking among the larger banks on the corporate side. Also, for the third consecutive year, SEB was awarded Business Bank of the Year in the Swedish customer survey Finansbarometern. SEB was also named Bank of the Year by Privata Affärer. SEB’s updated sustainability strategy was presented, including three new climate-related ambitions and goals – The Brown, The Green, and The Future – with the aim of accelerating the transition towards a sustainable society. We recently also presented our new 2030 Strategy and business plan for 20222024, aiming to future-proof our business. A dividend of SEK 6.00 per share was proposed by the Board of Directors, corresponding to 51 per cent of net profit for 2021. The Swedish FSA removed its recommendation to restrict dividends and SEK 8.20 per share in total was distributed during 2021, corresponding to approximately 50 per cent of net profit for 2019 and 2020. SEK 55bn in average value created per year 20172021 Dividends paid to shareholders 11 Salaries, pensions and benefits to employees 12 Payments to suppliers 10 Taxes and social security charges7 Interest paid to customers and bondholders 13 Regulatory fees 2 Income Expenses Operating profit 1) Excluding items affecting comparability. 2) Compound Annual Growth Rate (CAGR). Our profit development 1) , SEK bn 2000 2010 20212005 2015 +5% 2) +3% 2) 32 21 10 55 23 31 +8% 2) Cost/Income ratio Return on equity (%) 0.8 0.6 0.4 0.2 2 6 1410 18 SEB Nordic peers European Bank Index SX7E, latest available data Efficient and profitable compared to peers 2021 200 0 50 100 150 +36% +29% +49% Share price development 2021 SEB Class A share Index 1 January 2021 = 100 SEB Class A share OMXS30 European Bank Index SX7E SEB Annual and Sustainability Report 2021 — 5 Introduction — Statement from the Chair During 2021 we experienced solid financial markets, sound household economies, a favourable business environment and high activity among companies. The recovery was made possible thanks to the remarkable ability of people and organisations to join forces to counter the effects of the pandemic. This united response clearly underlines the importance of cooperation – both within societies and between countries. Such an extraordinary mobilisation brings hope for the future. Here, I also wish to point out the dedication, efforts and hard work that have been shown by our loyal and able SEB employees. As shareholders we owe them special gratitude for their contributions during the pandemic. We have now entered a new year that has initially been characterised by increased uncertainties, and we should all hold on to the spirit of collaboration. It is of great importance that we continue to uphold free trade and open borders. This has truly served global economies and companies as well as our customers well over the years. Embracing change with the future in mind At SEB, we aspire to be a long-term partner to our customers while continuously adapting to an ever-changing environment. Curiosity and receptive- ness to our customers’ evolving needs are essential to our value creation. As the megatrends of digitali- sation and sustainability put greater demands on us, our customers and society, we are committed to act with the long term in mind. With this ambition as a foundation, we will use our financial strength and competent employees to support our customers on their transition journeys. If we do this right, new ideas, innovations, business- es and jobs will flourish, thereby transforming and benefitting our ways of living. The Board of Directors is confident that SEB can play a vital and positive role in the continued transformation of business and society, as outlined in SEB’s 2030 Strategy. Partnering for a sustainable transition Many businesses are pioneering the ongoing and necessary change, and there is a clear interdepend- ence between accelerated digitalisation and the sustainability transition. Technical innovations are key in the transformation to a more sustainable so- ciety, as seen in the promising activity within green technology. This is creating business opportunities and driving economic growth. Future solutions will be dependent on the innovative ideas of start-ups as well as on the know-how and financial strength of more established industries. In this evolution, we as a bank play an important role in channelling capital through sustainable financing and supporting thought-leading ideas. In parallel, sustainability-related policies and classifications, like the EU Taxonomy, are being developed and new regulations are about to be implemented. This provides both opportunities and challenges for us and our customers. By staying closely engaged, we wish to support our customers with interpretation of the implications of these new regulations. Through proactive advice and innovative financial services, we can facilitate our customers’ transitions to a low-carbon society – tackling the effects of climate change together. Staying true to our heritage A vital part of SEB’s 2030 Strategy is our continued support for the next generation of businesses and entrepreneurs. For 166 years we have supported companies to develop, innovate and grow, and we have followed them as they have expanded around the world. By doing so, we have played an important role in building and developing our societies. Going forward, we will stay true to our heritage of entre- preneurship, striving to be there also for the next generation of entrepreneurs. By supporting these businesses as they grow, SEB is enabling companies to build for the future. A business built on trust Trust is our most important asset, and the Board of Directors is steadfast in its work on ensuring that SEB adheres to the highest standards of corporate governance, compliance and risk management. In addition to the increased focus on operational risks, both within the bank and among regulators, non- “We aspire to be a leading partner to our customers in their sustainability transitions.” Today and for generations to come Following a year dominated by the pandemic, contracting economies and the challenges that this brought along for people, companies and societies, 2021 developed into a year of recovery. 6 — SEB Annual and Sustainability Report 2021 financial risks continue to grow in importance. These are related to areas such as technology, sustainability and cyber security. As the financial industry becomes increasingly data-centric, data management and data ethics are of the highest priority. Easy access to accurate data is essential for meeting future regu- latory requirements. The continued focus on data is therefore a central part of SEB’s long-term strategy. Banks have a central role in preventing the finan- cial system from being exploited for financial crime, and we are committed to protecting our customers and SEB. Modern technologies are improving our ability to identify and mitigate cyber and information security risks while complying with increased regula- tory requirements in a proactive manner. Contributing to society SEB’s financial position remains strong, and in 2021 the Swedish Financial Supervisory Authority lifted its restrictive recommendation regarding banks’ repatri- ation of capital. Thus in 2021, SEB paid ordinary divi- dends on two occasions and initiated a share buyback programme. The dividends paid in 2021 correspond to roughly 50 per cent of SEB’s net profit for the financial years 2019 and 2020. For the 2021 financial year, the Board of Directors proposes a dividend of SEK 6.00 per share to the Annual General Meeting. Further- more, in 2022 SEB plans to distribute SEK 510 billion through share buybacks, subject to market conditions. SEB’s shareholders include more than 250,000 private investors, the industrial holding company Investor, some of Sweden’s largest pension funds representing millions of private individual benefi- ciary owners, and foundations supporting research and education. The capital we distribute is therefore an important contribution to the continuous develop- ment of society. People are the cornerstone in creating long-term value. Our employees all contributed to the strong results in 2021, as reflected in both our financial per- formance and the positive customer feedback that we have received. As a bank, we have a responsibil- ity to our customers, employees, shareholders and the societies in which we operate. Through responsi- ble advice and capital, we aim to positively shape the future, and continue creating long-term value. Today and for generations to come. Stockholm, February 2022 Marcus Wallenberg Chair of the Board SEB Annual and Sustainability Report 2021 — 7 Supporting our customers through business cycles is our highest priority, enabled by a strong financial position that provides resilience and flexibility. During 2021, the global economic recovery following the pandemic continued. Driven by sustained high customer activity, SEB’s operating profit increased significantly compared to 2020. In 2021, we con- cluded the last year of our 20192021 business plan, which was focused on advisory leadership, operational excellence and extended presence. It has developed broadly according to plan, and we are particularly pleased to see that our efforts have been appreciated by our customers, as reflected in various customer surveys. Future-proofing our business As we look ahead, we aim to build on our position of strength. We continuously strive to develop our capabilities and leverage trends transforming the banking industry, to meet our customers’ changing needs and behaviours. Based on this ambition, we have reviewed our strategic direction. This has resulted in SEB’s 2030 Strategy, which aims to future-proof the bank. Going forward we will continue to strengthen our efforts, with particular focus on Corporate and Investment Banking, digitalisation, savings and investments, sustainability, and regula- tory compliance. By further investing in our business, we aim to accelerate income growth and increase profitability – with the overall ambition to continue creating long-term shareholder value. Expanding our presence SEB’s presence spans more than 20 countries, and the financial contribution from our home markets has grown over the years. As our corporate customers expand their international footprint, so are we as we follow them around the world. We aim to be a leading corporate and investment bank in northern Europe with international reach, and will carefully expand our corporate banking business geographically, to the Netherlands, Austria and Switzerland. We will also broaden our Investment Banking services to small and medium-sized enterprises and entrepre- neurs. In addition, we will expand the Private Wealth Management & Family Office division in our Nordic home markets to further strengthen our focus on entrepreneurs and high-net-worth individuals and their families. Meeting our customers on their terms Our customers’ expectations for proactive and personalised advisory services in a digital format are growing. Toward this end, we will continue our digital transformation agenda, where speed, automation and simplicity remain key. This will include further development of our Retail Banking self-service offering, based on a mobile first approach. This will also free up time for our employees to focus more on activities that create value for our customers, includ- ing face-to-face meetings in moments that matter. Supporting savings and investments A number of trends will continue driving demand for savings and investments. As an example, Swedish households’ total assets have grown by eight per cent on average per year since 2000. This demand is reflected in our retail customers’ monthly average savings, which rose by nearly 30 per cent during the year compared with 2020. Meanwhile, assets under management and assets under custody grew by around 30 and 80 per cent, respectively, in 2021. To meet this growing demand, we will continue to strengthen our digital functionality and advisory capabilities while further developing our alternatives and sustainability investment offering. Supporting the sustainability transition We aim to be a leading catalyst in the transition towards a sustainable society. As a signatory of the UN Global Compact, the Principles for Responsible Banking and the Net-Zero Banking Alliance, we are committed to adapting our business to the Paris Agreement and the UN Sustainable Development Goals. During the year we presented our updated sustainability strategy, outlining how we aim to cap- ture the sustainability supercycle and support our Creating shareholder value through a long-term perspective As the banking industry transforms, we are striving to continuously develop our capabilities to meet our customers’ changing needs. Based on this ambition we have reviewed our strategic direction, resulting in SEB’s 2030 Strategy, which aims to future-proof our business. Introduction — Statement from the President and CEO “As we look ahead, we aim to build on our position of strength.” 8 — SEB Annual and Sustainability Report 2021 customers in their transitions. We also set new am- bitions and goals within the climate area: a Carbon Exposure Index (The Brown), a Sustainability Activity Index (The Green) and a Transition Ratio (The Future), the latter to be communicated in more detail during 2022. Going forward, we will transparently share our progress. We also established the SEB External Sustainability Advisory Board, composed of experts representing a diverse breadth of experience and professions outside the financial industry. It will pro- vide SEB with further insights concerning sustaina- bility and make the bank better equipped to manage future challenges and opportunities. Trust is our licence to operate Trust is a prerequisite for SEB to conduct business that benefits our customers and shareholders. As the regulatory pressure increases and non-financial risks continue to grow in importance, our ability to identify, monitor and mitigate these risks is critical. We will continue to strengthen our processes to efficiently manage new and emerging risks, such as those related to anti-money-laundering (AML), know-your-customer (KYC), cyber security and sustainability. Our Financial Crime Prevention unit will enable us to further improve our transaction monitoring and reporting, and strengthen our efforts to counter financial crime. This will be reliant on strong data governance and management, among other things. With strong business acumen People are at the core of everything we do. Based on strong business acumen and with a long-term per- spective, our employees enable us to continuously develop our offering. It is therefore reassuring to see that employee engagement and trust in our managers remain high, and that SEB is widely regarded as an at- tractive employer among both business and technolo- gy students, according to employer branding surveys. Creating long-term shareholder value As a bank we provide the financial infrastructure needed to keep societies functioning. Through long- term customer relationships, built on providing re- sponsible advice and capital, we help drive progress and innovation. As we now focus on future-proofing the bank, we aim to continue creating value for our customers, shareholders and society at large. Stockholm, February 2022 Johan Torgeby President & CEO SEB Annual and Sustainability Report 2021 — 9 10 — SEB Annual and Sustainability Report 2021 We invest to future-proof our business As society and the banking industry transform – with rapid developments in the areas of sustainability, technology and regulations – our customers’ needs and behaviours are continuously changing. For SEB, this means that we are constantly adapting our business to continue to create long-term value. We have now set out the path ahead in SEB’s 2030 Strategy and the new business plan for 20222024. Strategy and value creation SEB Annual and Sustainability Report 2021 — 11 Strategic focus over the years SEB’s ability to embrace change and adapt to new market conditions continues to grow in importance. Below is a summary of how we have adjusted our strategic focus over time to build for the future. 20052009 Refocus on the core Restructuring of SEB Group functions. 20102015 Strengthen the core Corporate expansion in the Nordics and Germany, as well as Retail transformation. 20162021 Transform and grow the core True customer-centricity in a digitalised world. Being part of the financial backbone of society, providing support, advice and capital to private individuals and businesses, we always strive to meet our customers’ ever-changing needs. A strategy of embracing change Throughout history we have developed together with our customers. Our solid balance sheet has enabled us to support our customers in good times and bad. This has enabled us to build long-term customer relation- ships with high customer satisfaction. Through our long-term commitments – in combination with our in- ternational approach through which we have followed our corporate customers abroad as they have expand- ed their businesses – we have been able to gain deep knowledge about our customers. Over the years, this has formed the foundation for the business acumen that is characteristic of SEB and our employees. Long-term focus Being knowledgeable is a prerequisite for innova- tion. It also contributes to our ability to proactively address and gain an even deeper understanding of our customers’ changing needs, most recently in the area of sustainability. This, in combination with our strive for high standards of governance, ethics and risk management, has helped strengthen our role in the markets in which we operate. Our long-term commitment to our customers, together with a long-term perspective of how we create shareholder value, also means that we are constantly looking around the corner, future-proofing our business for the years to come. This has been our overarching approach ever since we welcomed our first customer in 1856 and will continue to guide us also in the future. Adapting our strategic direction As the banking industry changes and competition increases, our core strengths as a bank are growing in importance. Over the last 15 years, we have therefore adapted our strategic direction – refocusing, strength- ening and transforming SEB’s core. This has entailed efforts such as a restructuring of SEB Group functions, corporate expansion in the Nordics and Germany, transformation of the Baltic and Retail divisions, and increased efforts aimed at achieving true custom- er centricity. During the past three years we have focused on accelerating the transformation based on our three strategic focus areas of advisory leadership, operational excellence and extended presence. Looking ahead, we recognise the need to continu- ously improve the way we do business, support our customers, and develop new financial products and services. We will therefore continue to invest for the future, to ensure that we remain relevant for our customers and that we continue to create long-term value for our shareholders. 12 — SEB Annual and Sustainability Report 2021 Strategy and value creation — Strategic focus 20222030 Future-proofing SEB Investments to further develop our capabilities and accelerate income growth by leveraging important trends in the banking industry over the years to come. Read more about our 2030 Strategy on p. 20. Long-term financial targets As we have adapted our strategy over time, our ambition has been to accelerate income growth and increase our profitability. This ambition will continue to guide us also going forward. Below are our long-term financial targets for the SEB Group. • A yearly dividend of around 50 per cent of earnings per share excluding items affecting comparability – distributing poten- tial capital in excess of the targeted capital position mainly through share repurchases. • A Common Equity Tier 1 capital ratio of 100300 basis points above the requirement from the Swedish Financial Super visory Authority. • A return on equity that is competitive with peers. In the long-term, SEB aspires to reach a sustainable return on equity of 15 per cent. Financial aspirations for the divisions SEB has introduced long-term divisional aspirations for profit- ability and cost efficiency based on two factors. First, each division has the ambition to achieve best-in-class profitability and cost efficiency compared to similar businesses among relevant peers. Second, each division’s aspiration is set to enable SEB to achieve its long-term aspiration of a 15 per cent return on equity on group level. These long-term aspirations are evaluated annually. Read more about our financial targets and aspirations on p. 39. SEB Annual and Sustainability Report 2021 — 13 Closing of business plan 20192021 By year-end 2021, we closed SEB’s business plan for 20192021. We have now embarked on the next three-year business plan for the bank as part of our 2030 Strategy to further sharpen our customer offering. Since 2019, SEB’s business has focused on acceler- ating progress towards operational excellence and reinvigorating growth through advisory leadership and extended presence. As we now close the chap- ters of both 2021 and the 20192021 business plan, we can conclude that we have seen growing demand for advisory services from our customers over the years. Lately, this has revolved a lot around handling the effects of the pandemic, but increasingly also supporting our customers to transition to more sus- tainable business models or ways of contributing to a low-carbon society. Also on the technological side, we have accelerated our efforts to live up to our cus- tomers’ needs and make sure we meet them on their terms. Following is a summary of the steps taken to deliver on our business plan for 20192021. Advisory leadership Overall, customer satisfaction has continuously improved since 2019. This has been achieved by providing value enhancing advisory services through in-person and digital channels as well as through refined offerings to our customers including a clear focus on sustainability. We have strengthened our advisory capacity with respect to environmental, social and governance factors (ESG), for example by creating an Energy Coverage team, supporting the ongoing transition in the energy sector. We have also sharpened our savings offering with digital advisory capabilities, including a digital advisory investment tool for both pension insurance and funds. To strengthen our focus on high-net-worth indi- viduals and their families, in 2021 we established the new Private Wealth Management & Family Office division. In parallel with this, the Life division’s distribution and the Private Banking Core segment were integrated with division Corporate & Private Customers in Sweden, in order to improve our oppor- tunities to leverage on and succeed with Bancassur- ance. SEB Investment Management has focused and deepened its sustainability product offering, where 82 per cent of the fund offering is now classified as either Article 8 or 9 according to the EU Sustainable Finance Disclosure Regulation. This means that the funds either promote sustainable characteristics or have sustainable goals as their objectives. Operational excellence During the last three years, further automation has increased speed and improved efficiency in our processes, for example the household mortgage process, improving customer experience and enabling cost efficiencies. Automation has been instrumental in enabling employees to focus more on proactive activities that generate value for our cus- tomers. Combined with improved data management, this has facilitated an accelerated digitalisation of products, services and processes. In addition, our newly established Operations team in the Baltics has resulted in more efficient ways of working. Regulatory pressure has remained high, and SEB’s governance and processes have continuously been strengthened. A new Financial Crime Prevention unit was established in 2021 to centralise and further strengthen our efforts to prevent money laundering and other forms of financial crime. Extended presence To widen our distribution and sharpen our customer offering, we have broadened our presence in exter- nal networks and have developed functionality to integrate with new platforms. We have launched new Application Programming Interfaces (APIs) to access data, products and servic- es, as well as to provide connectivity with other plat- forms. In 2021 we integrated the first external API with the Enterprise Resource Planning (ERP) provider PE Accounting within the Life division in Sweden, to further integrate with our customers’ digital eco- systems. This has provided our corporate customers with an improved overview of their employees’ occupational pension plans, via their ERP system. We have also entered into a strategic long-term partner- ship with Google Cloud to speed up our digitalisation efforts and provide new solutions to our customers. Through SEB Singular, our investment banking offering focused on digital business models and strategies, we have established a broad network among leading venture capital firms in our home markets, the US and among Nordic start-ups. Our strategic initiatives The three focus areas of the business plan for 20192021 were complemented by twelve strategic initiatives that address new, adjacent opportunities and aim to strengthen SEB’s long-term profitability. Overall, the initiatives have developed broadly in line with plan and slightly below forecasted cost. These initiatives have led to multiple deliveries and added value that will serve as a foundation for SEB’s business endeavours going forward, especially in areas such as data, digitalisation, sustainability, and exploration of new products and services. 14 — SEB Annual and Sustainability Report 2021 Strategy and value creation — Business plan 20192021 A selection of deliveries Financials Advisory leadership • Functionality to enhance savings and investment offering launched. • Private Wealth Management & Family Office division established. • Energy Coverage team set up. Operational excellence • New Financial Crime Prevention unit established. • Productivity increased through automation. • Automated, digital registry and administration platform launched for alternative assets within custody business. Extended presence • Further integration with customers’ digital ecosystems (for example Enterprise Resource Planning System). • New Application Programming Interfaces launched. • Partnership established with Google Cloud leveraging insights from SEBx. Average annual growth rate 20192021 6% Income 2% Expenses 11% Operating profit 1) Key figures 2021 2020 2019 2018 Return on equity 1) , per cent 13.9 10.3 13.8 13.4 Cost/income ratio 0.43 0.46 0.46 0.48 Common Equity Tier 1 ratio, per cent 19.7 21.0 17.6 17.6 1) Excluding items affecting comparability. SEB Annual and Sustainability Report 2021 — 15 Business environment and trends The road to economic recovery continues We are constantly exploring trends and opportunities that affect our business, and this work also forms the basis for our 2030 Strategy and new business plan. Below, some of SEB’s experts share their views on the macroeconomic development and the transformative landscape related to technology, sustainability, corporate and investment banking, savings and investments, and risk management. 2021 was a year of recovery for the global econo- my. Following a 2020 that was characterised by the pandemic, contracting economies and rising unem- ployment, growth numbers in 2021 turned upward, the job markets strengthened, and demand picked up. Moreover, the conditions in the financial markets remained favourable, with low interest rates and growth in the stock and housing markets as a result. The recovery was supported by extensive Covid19 vaccination campaigns and major efforts by govern- ments and central banks. Altogether it is estimated that at least 26 trillion dollars have been spent in the form of fiscal and monetary policy stimulus meas- ures since the beginning of the pandemic – an almost unfathomable amount. The speed bumps are many However, not all is fine and dandy. It is one thing that government debt has increased and that the central banks, which have created and lent new money to cover growing levels of national debt, find themselves with balance sheets of a size never seen before. But despite the stimulus measures, the road to full recovery has been cluttered with warning signs and speed bumps. Demand for goods is high, but supply is having a hard time keeping up. The supply chain disruptions are many. Much has been said about the shortage of semiconductors, but also commodities, wood products, glue, plastics and other input goods are hard to get hold of and/or have risen sharply in price. This has led to rising producer prices and slower production. In addition, the transport sector continues to suffer from major disruptions, with both long delivery times and prices that have doubled many times over as a result. This is being exacerbated by the Covid19 zero-tolerance policy that China ad- hered to during 2021, which among other things gave rise to shutdowns of large container ports, causing lengthy disruptions to global shipping. On top of this, the world faces an energy crisis. Granted, all of these problems will eventually be resolved, but it will take time and many challenges will remain during 2022. Another, but related, hot topic in 2021 was infla- tion. That we would see signs of inflation along with the restart of the global economy was not unexpect- ed. But inflation has been both higher and more en- during than expected. This applies especially for the US, where major stimulus packages, direct payments to households, shortages of a number of products, strong demand and more expensive energy have created a perfect environment for rapid inflation growth. Central banks, including the Federal Reserve, long viewed the inflation as being so temporary that no major monetary policy changes were needed. That view has now changed and both the Federal Reserve and the Bank of England, among others, have now announced tighter monetary policies. Other central banks, such as the European and Swedish Central Banks, still want to see inflation establish at higher levels before tightening monetary conditions. Hopes for a solid 2022 Although 2022 will probably not bring the growth rates and booming markets that we saw in 2021, there is a good chance economic recovery will continue, with GDP growth above trend, improving labour markets and growing corporate profits. But this will require continued global vaccination rollout, inflation not getting out of hand and a number of geopolitical risks that we see emerging in Eastern Europe, Middle East and Asia, not materialising into outright conflicts. “Strong growth numbers, improving job markets and higher demand during 2021.” Jens Magnusson Chief Economist 16 — SEB Annual and Sustainability Report 2021 Strategy and value creation — Business environment and trends Meet our experts Sustainability is an opportunity Societal development and climate change have considerable bearing on how SEB is meeting its stake- holders’ expectations and on the trust that has been instilled in us. We are being forced to a higher degree than ever before to challenge old truths and support new, exciting technological advancements and busi- ness models to achieve the goal of serving as a cata- lyst of the change that is now happening. In addition, we need to describe our decisions not only in terms of economic logic, but also in societal effects. In the light of these challenges it is important to integrate sustainability – starting with the climate issue – in all decision-making processes. As a large bank we have a responsibility to leverage our resources in support of our customers’ efforts and seize the opportunities presented by the industrial revolution that a future, sustainable society entails. Climate change is very high up on our customers’ as well as our own agendas. The phase-out of fossil fuels and greater investment in green technologies that can help solve the climate crisis must become a reality. As a financial institution we play a key role – both in reallocating capital flows and by being an engaged business partner that drives the transition and change. Sustainable development – and especial- ly the fight against climate change – entails risks, but it also offers major opportunities for us and for our customers. It is rewarding to be part of the mobilisa- tion that the entire economic system is undertaking with respect to climate and sustainability. Growing importance of digital technology We are seeing continued development of new tech- nology that is creating both better digital solutions for our customers and new business opportunities. New cloud services are one example, making it possible to process large volumes of data and on top of this apply increasingly improved artificial intelli- gence. Another area in which development is moving at a fast pace is advanced encryption technology, which is enabling more secure digital solutions. The trend of being able to couple various companies’ solutions together using application programming interfaces (APIs) is growing. Collaborative development among major banks, fintechs and large tech companies is leading to new depths of knowledge about products and customers along with modern, niche solutions that offer econo- mies of scale. In various studies we are seeing a trend break – older customers in western Europe are now open to using digital financial solutions as much as the younger generations, which will further accelerate the pace of digitalisation. We are seeing greater awareness of the importance of how one’s own per- sonal data is handled, which is being driven in part by growing cyber threats and the societal debate on how personal information is handled. Another aspect that is becoming increasingly important is the overall digital experience, which is expected to be increas- ingly personalised. “We want to be a catalyst of the change that is now happening.” Hans Beyer Chief Sustainability Officer “Advanced encryption technology enables more secure digital solutions.” Petra Ålund Head of Group Technology Follow our experts at sebgroup.com/experts SEB Annual and Sustainability Report 2021 — 17 Opportunity in capital markets Capital market activity reached new heights in 2021 with a record number of initial public offerings as well as other equity and debt capital market transactions. While capital markets have an element of cyclicality correlated to overall business cycles, at SEB we also see certain underlying trends. As such we are of the conviction that capital markets will continue to play a greater role for our corporate clients. The equity culture in our home markets has been very supportive towards allowing companies to use their stock market listings more actively to finance growth, which we believe is a continuing trend. Similarly, the corporate bond market is now supplying an increasing part of corporate financing alongside bank lending. For our corporate clients, the value of having a range of funding sources has been evident and increasingly important since the financial crisis of 2008. Further, this has played an important part in how our clients have managed to get through some of the challenges associated with the pandemic. Finally, the proliferation of sustainability-linked financing continues to aid and maintain focus on important ESG issues. We look forward to continuing to serve our clients with their financing and advisory needs in the coming years. Meet our experts All megatrends point to savings and investments Megatrends such as an ageing population, digitalisa- tion and sustainability, coupled with the pandemic, have both highlighted and accelerated the need of savings and investment among Swedish households. Today’s low-interest environment has driven up home prices to new, record levels and has prompted households to turn to the stock market in search of returns for their invested money. At the same time, sustainability and digitalisation have ascended as top priorities in households’ financial decisions. The younger generations have ever-higher expectations for sustainable investment opportunities and that financial decisions can be made quickly, conveniently and digitally. Last but not least, given that the population is ageing while the number of years in employment has not increased correspondingly, pensions have come under pressure. Together, these trends are leading to a situation where households – to a greater extent than before – need to save toward their future pen- sions and home purchases, and find new, sustainable investment alternatives. This is also increasing the bank’s responsibility to help individuals navigate in an increasingly complex financial daily life. “Younger generations have ever-higher expectations for sustainable investment opportunities.” Américo Fernández Household Economist “For our corporate customers, the value of having a range of funding sources has been evident and increasingly important.” Kristian Skovmand Head of Investment Banking Follow our experts at sebgroup.com/experts 18 — SEB Annual and Sustainability Report 2021 Strategy and value creation — Business environment and trends Growing focus on non-financial risks Banks operate in a market environment in which regulatory policies are constantly evolving. Activity among regulatory and supervisory authorities is expected to remain high, with an increased focus on documentation and enforcement of formal adherence to existing rules and regulations. Long- term trends affecting the banking industry, such as digitalisation, automation and non-bank financial intermediation, have further accelerated regulators’ focus on measures to ensure operational resilience and on how banks address non-financial risks. Risk management in banks follows both market developments and regulation, and has consequently also shifted towards a stronger focus on non-finan- cial risks. This heightened focus was confirmed in the 2020 global risk management survey conducted by the Institute of International Finance and EY, where seven out of ten top priorities for Chief Risk Officers listed in the report relate to non-financial risks. The growing focus on operational resilience and risks to financial stability from climate change will put sustainability matters even higher on the regu- latory agenda in the near to medium-term. Potential disruptive implications for nations, corporations and individuals are leading to rising expectations – both regulatory and commercial – on banks to align strategies, define risk tolerances and transparently demonstrate how banks will contribute to an accel- erated transition. What do these trends mean for SEB? To remain relevant for our customers and sharehold- ers, we must adapt to current and future trends in our industry. By further investing in our business, we are striving to continuously develop our capabilities to leverage these trends and meet our customers’ evolving needs and behaviours. “Activity among regulatory and supervisory authorities is expected to remain high.” Mats Holmström Chief Risk Officer Based on this ambition, we have set a 2030 Strategy for SEB in which we address all parts of our business, from the front to the back and everything in between. We aim to enhance the customer experience by meeting our customers on their terms and by continuously innovating new products and services. More specifically, we aim to build on our strengths in Corporate and Investment Banking through geographical and product expansion; enhance our Custody and Markets offering; grow our savings and investments business; expand our Private Wealth Management & Family Office division, and; continue to trans- form retail banking in Sweden and the Baltics. We will also future-proof our technology core by creating a scalable, automated and cloud-based platform that contributes to operational efficiency, robustness and security, as well as income growth. Lastly, our strategy also addresses measures to keep our house in order. For example, this relates to sustainabil- ity, data, transaction monitoring and reporting, regulatory com- pliance and anti-money laundering and cyber risk management. These topics are essential for SEB’s strong risk management and corporate culture – not only as a hygiene factor but also by offering a competitive advantage. As outlined in our 2030 Strategy, we will build our focus, rethink and investments in the following four main areas going forward: • Acceleration of efforts • Strategic change • Strategic partnerships • Efficiency improvement Read more about SEB’s 2030 Strategy on p. 20. SEB Annual and Sustainability Report 2021 — 19 2030 Strategy to build for the future Our overall ambition is to be a leading corporate and investment bank in northern Europe with international reach, providing our products and services to retail customers in Sweden and the Baltics in a digital format, with a human touch in moments that matter. Coming from a position of strength, we will accomplish this by accelerating our investments. This will enable us to continue to create long-term value for our shareholders. Based on our strong financial position, high customer satisfaction, improved competitive position, and Nor- dic and sustainability expertise, we will accelerate our efforts and strengthen our advisory capabilities. Through extra focus and resources, we will continue to build on existing strengths, aiming to: • Expand Corporate and Investment Banking. • Leverage Custody and Markets platforms to become a Nordic market leader. • Grow Savings and Investments in the Nordics and the Baltics. • Capture opportunities within the sustainability supercycle. We constantly adjust our business and offering to stay relevant for our customers and create long-term value for our stakeholders. We will evaluate the need for strategic change in how we conduct business within already established areas, aiming to: • Transform Retail Banking to go more digital, with a mobile first approach, in Sweden and the Baltics. • Establish Private Wealth Management & Family Office division in all our home markets. • Scale and implement SEBx capabilities. Acceleration of efforts Strategic change 20 — SEB Annual and Sustainability Report 2021 Strategy and value creation — 2030 Strategy Competition increases due to an accelerated pace in innovation, investments and consolidation in the market. To ensure that SEB’s broad range of core products and services remain competitive we see partnerships and collaboration with relevant stake- holders as key enablers. Therefore, we are aiming to: • Rethink ways of producing and distributing products and services. • Strengthen innovation and business momentum through external partnerships. To improve efficiency and accelerate SEB’s trans- formation journey, we will increase our focus on a number of strategic enablers, aiming to: • Change approach from automation to focus on end-to-end processes. • Develop into a fully data-driven organisation. • Accelerate technology development. • Enhance regulatory efficiency. Strategic partnerships Efficiency improvement SEB Annual and Sustainability Report 2021 — 21 SEB’s business plan for 20222024 builds on the four pillars of our 2030 Strategy, which in turn is our response to structural market trends within our industry. This means that developments related to for example technology, sustainability, corporate and investment banking, savings and investments, and risk management are the basis for our efforts going forward. By combining high customer satisfac- tion and strong employee engagement with a solid financial position including capital, liquidity, and cost control, we aim to continue to deliver long-term value to our shareholders. Acceleration of efforts Based on our successful expansion into other Nordic countries, Germany and the United Kingdom, we will continue to expand our corporate banking business geographically to the Netherlands, Austria and Switzerland. By doing this, we will leverage one of our core strengths of serving our customers locally. In addition, to further build on our strong offering towards small- and medium sized enterprises and entrepreneurs in Sweden, our Investment Banking services will be expanded to this target segment, through for example dedicated resources following our Corporate Finance Growth initiative. To establish SEB’s role as the premier Nordic custody provider, and leverage the opportunity presented as peers withdraw from this area, our custody platform will be scaled through automation and further develop- ment of our offering. We will broaden our savings offering, with particu- lar focus on sustainability and alternative products based on our customers’ increasing demand. In combination with the continued development of a fully digital platform enabling further proactivity, this will enable us to grow our savings and investments business in the Nordics and the Baltics. Our ambition is to be a leading catalyst in the sus- tainability transition and we aim to capture oppor- tunities arising from the sustainability supercycle by providing high-quality advisory services to support our customers’ transition journeys. To facilitate this, the work to classify our credit portfolio’s transition in relation to the EU Taxonomy and the Paris Agree- ment will continue, and we will transparently report on our progress towards reaching our ambitions and goals, as outlined in our sustainability strategy. In addition, we strive to further integrate sustainability into processes and decisions, also facilitating innova- tion of new financial products and services, accentu- ated by the integration, analysis, and visualisation of sustainability data. SEB enters the business plan period 20222024 from a position of strength, both in terms of profitability and capital. While the 2030 Strategy defines what we want to achieve in order to future-proof our business and accelerate income growth potential, the three-year business plan – which is updated annually – further details how we aim to get there. Business plan for 20222024 22 — SEB Annual and Sustainability Report 2021 Strategy and value creation — Business plan 20222024 Strategic change Accelerated digitalisation will enable us to deliver an enhanced customer offering with increased efficiency and speed, contrib- uting to further accessibility and improved customer satisfac- tion. In Sweden and the Baltics, the development of our digital functionality within our Retail Banking offering will continue, al- lowing us to meet our customers’ needs more efficiently through an improved self-service offering based on a mobile first approach. To further strengthen our focus on entrepreneurs, individuals and families and their businesses, we will expand our Private Wealth Management & Family Office division to all our home markets. This will include providing proactive high-quality products and advice incorporating sustainability, also in a digital format, and through a broadened offering leveraging expertise from across the bank, including Investment Banking. Furthermore, we will focus on scaling and implementing the capabilities of SEB’s innovation studio SEBx through contin- ued development of UNQUO, the recently launched customer offering targeting the growing group of self-employed business owners, so-called solopreneurs, as well as through further exploration of the opportunities presented by Banking-as-a- Service. In addition, continued collaboration will enable the SEB Group to leverage SEBx’s technology platform, allowing further scalability and an improved customer experience. Strategic partnerships To strengthen our innovation and business momentum, and to increase focus on our core strengths, we will rethink our ways of working and consider new ways of producing and distributing our products and services. Continuing to leverage Open Banking, allowing us to integrate partners’ products and services into our interfaces as well as to distribute our products and services via partners, will enable us to integrate with customers’ digital ecosystems and further improve our offering. Additionally, to accelerate progress in selected key areas we will collaborate with external stakeholders in cross-industry initiatives related to for example financial crime prevention, and continue to leverage our venture capital capabilities focusing on fintech startups and green technology. Efficiency improvement We want to ensure quality and speed in our customer deliveries and enhance customer value through easily accessible digital services. Therefore, our efforts will be focused on simplifying major end-to-end processes from a customer perspective. This involves the digital customer and product onboarding processes, as well as strengthening our capabilities within key regulatory areas such as AML and KYC. This will be reliant on our focus on strong data governance, management and quality, which will also enable an improved offering through the contin- ued development of data-driven business models leveraging artificial intelligence and machine learning. Furthermore, we will accelerate technology development by for example leveraging our cloud capabilities, while also continuing to enhance our regu- latory efficiency. Also, re-design and re-organisation of selected key areas will enable us to ensure more coherent governance structures and enhanced operational efficiency. Cost target for 2022 Our aim is to create shareholder value – by accelerating income growth, driving earnings per share growth, increasing our profitability and future-proofing our business. This will be achieved by capitalising on our position of strength and by further investing in our business, as outlined in our business plan for 20222024. The target entails growing our business in a capital-efficient manner to reach our long-term financial targets. In the short- term, we have a cost target for 2022 of SEK 24.5bn, assuming 2021 FX-rates. Read more on p. 73. SEB Annual and Sustainability Report 2021 — 23 Long-term value creation Customer centricity, long-term perspective and financial strength form the foundation for meeting the expectations of customers, employees and the communities in which we operate. Ultimately, this creates value for our shareholders. Our financial and technological strength… SEB strives for high standards for corporate governance and regulatory compliance, a sound risk culture and strong business acumen. This sets the foundation for our financial strength, which gives us the resilience and flexibility required to serve our customers in both good times and bad. We future-proof our systems by implementing new technologies in order to secure and protect SEB’s and our customers’ information, and to continue our customer- driven innovation. …enables us to create long-term customer value We provide people and businesses with financial advice, products and services. We are available for our customers at their convenience – via the mobile app, on the web, by phone and in our branch offices across the globe. We believe in a combination of digital services and in-person meetings, and our employees provide proactive and personalised advice to meet the unique needs of our customers. By supporting our customers, through long-term relationships, we also uphold a critical function in society and contribute to the stability of the financial systems. ...through SEB’s strengths in our business model... Meeting stakeholders’ expectations... Customers – 1.8 million Our customers’ needs are at the core of our business. Their high expectations on personal and digital service, quality advice and sustainable solutions drive our business development and offerings. Employees – 15,500 Our employees build and deepen customer relationships. Their commitment, skills and continuous learning are key in future-proofing our business. Shareholders – 267,000 The capital provided by SEB’s share holders is a prerequisite for conducting our business. Our shareholders expect a competitive and sustainable return on their investments. Many of the major owners have a long-term perspective on their engagement in the bank. Society Banks play a crucial role in society and are vital for creating economic growth and social value – and for the transition to a low-carbon society. We take great responsibility for how we act, to enable society to develop in a sustainable way. Value creation — Long-term value creation 24 — SEB Annual and Sustainability Report 2021 2 ...creates sustainable value. SEK 55bn in average value created per year 20172021 For our customers By providing proactive advice and a wide range of digital and personal services, we support our customers’ long-term aspirations and add value in all phases of people’s lives and in all stages of development of companies and institutions. See p. 29. For our employees Our employees value the opportunities for continuous learning within the bank. Employees also participate in SEB’s many partnerships to help communities develop and prosper. See p. 34. For our shareholders Dividends and growth in market value over time contribute to our shareholders’ financial security and enable new investments. By integrating environmental, social and governance aspects into our business operations, we increase our competitiveness and reduce long-term risks. See p. 38. For society SEB intermediates financial solutions, provides payment services and manages risks, which together promote economic growth and prosperity. We pay taxes and fees according to local rules, and we take responsibility as a provider of financing and as an asset manager and work proactively with environ mental, social and governance issues. See p. 40. Dividends paid to shareholders SEK 11bn Interest paid to customers and bondholders SEK 13bn 12 Salaries, pensions and benefits to employees SEK 12bn 7 Taxes and social security charges SEK 7bn Regulatory fees SEK 2bn Payments to suppliers SEK 10bn Trust is our licence to operate As a bank, SEB has a critical role in society by providing the infrastructure for payments and transactions, and by acting as an intermediary for financing and savings solutions, risk management and financial advice. In that mission, it is crucial that we continuously earn the trust from our customers, shareholders, employees and from society. To uphold that trust we as a bank are constantly vigilant of the changing regulations and market conditions as well as new customer behaviours. In everything that we do, we act with a strong business acumen and in line with external expectations and our high internal ethical standards. Read more about our Code of Conduct on sebgroup.com 11 10 13 SEB Annual and Sustainability Report 2021 — 25 Customers Customer experience and satisfaction Both internal and external metrics are used to measure customer satisfaction. Prospera’s external overall performance measurement and the internal measurement of customers’ willingness to recommend SEB are key metrics. Target Leading position in selected customer segments and meeting or exceeding the internal customer satisfaction targets. Overall targets and outcome The progress of the strategy and three-year business plan 20192021) is monitored and measured at many levels. These selected key metrics provide a progress overview. Employees Motivation and engagement SEB conducts an annual employee survey to measure employee engagement and the employees’ views of SEB as a place to work. Some 13,800 employees, or around 90 per cent of the work force, completed the survey in 2021. Target SEB’s target is to be the most attractive employer in the financial sector, particularly within banking. Progress is measured through an annual employee survey. 1) According to Prospera’s ranking. Overall performance Employee engagement, index Nordic large corporations 1) Nordic financial institutions 1) 2021 20202019 4.1 3.9 4.2 3.9 4.3 4.0 SEB Industry average 2021 20202019 3.9 3.7 3.9 3.8 3.9 3.8 Customers’ willingness to recommend SEB Key aspects of employee engagement, index 2) According to SEB’s Net Promoter Score method. Outcome represents a 12-month average for advisory services. Small companies in Sweden 2) Private individuals in Sweden 2) 2021 20202019 50 >50 55 >50 54 >50 2021 20202019 52 >45 48 >45 39 >45 Outcome Target Outcome Target 2021 20202019 80 72 80 74 79 77 SEB Financial sector average I’m excited about SEB’s future I feel comfortable being myself at work My work is meaningful 81 80 84 79 79 78 SEB Financial sector average Comment The number of personal meetings with small companies in Sweden was limited due to the pandemic. Going forward, we will focus on improving accessibility and quality. 26 — SEB Annual and Sustainability Report 2021 Value creation — Overall targets and outcome Society Financial targets Through the resilience and flexibility that come from a strong capital base, good access to funding, high credit ratings and cost efficiency, SEB can create shareholder value in varying market conditions. With the purpose to increase capital management flexibility, in 2021 the Board of Directors decided to change the long-term financial targets. Dividend payout ratio Target A yearly dividend that is around 50 per cent of the earnings per share excluding items affecting comparability, while distributing potential capital in excess of the tar- geted capital position mainly through share repurchases. Shareholders Sustainability SEB’s strategy is to expand its customer offering of sustainability products and services while lowering its direct CO emissions. Target The target is to increase sustainability- related business volumes. Including items affecting comparability Excluding items affecting comparability 2019 1) 2021 2020 2) 113 106 51 51 1) Per AGM decision, no dividend was paid out due to restrictions from the Swedish FSA. 2) Ordinary dividend of SEK 4.10 per share and a further ordinary dividend of SEK 4.10 per share. Per cent Common Equity Tier 1 capital ratio Target SEB shall maintain a Common Equity Tier 1 capital ratio of 100300 basis points above the requirement from the Swedish Financial Supervisory Authority (FSA). 2021 20202019 15.1 2.5 12.6 8.4 13.8 5.9 CET 1 capital requirement Buffer above requirement Per cent Return on equity (ROE) Target SEB shall generate a return on equity that is competitive with peers. In the long term, SEB aspires to reach a sustainable return on equity of 15 per cent. 13.7 13.8 9.7 10.3 13.9 13.9 2021 20202019 Including items affecting comparability Excluding items affecting comparability Per cent Target As a bank, SEB has relatively low direct environmental impact. How ever, the ambition is to lower the bank’s own CO emissions. Comment SEB’s total carbon emissions decreased, mainly due to reduced business travel in the wake of the pandemic and was significantly below the bank’s target. SEB achieved its goal to become climate neutral in 2021, through climate compensation. See p. 55 and 229. CO 2 emissions Tonnes 2021 20202019 22,525 9,389 9,734 Target for 2025 17,000) 19.1 1.5 24.7 4.0 29.4 7.9 2021 20202019 Sustainable financing SEK bn Sustainable investments Share of SEB’s fund company’s assets (SEK 831bn) managed in line with the EU Sustainable Finance Disclosure Regulation 1) . Green loans Green mortgages 1) See p. 58. Article 8: 80 % Article 9: 2 % Other: 18 % Reputation SEB monitors the result of Kantar Sifo’s Corporate Reputation Index, which measures the bank’s reputation among the general public. In 2021, SEB was ranked as no. 2 in Sweden. Corporate reputation index Target Reduce the gap to the no. 1 in the industry and in the long-term have the strongest reputation among industry peers. Sweden 36 20 40 26 41 32 2021 20202019 SEB Average 1) 1) SEB, SHB, Swedbank, Nordea, Danske Bank. SEB Annual and Sustainability Report 2021 — 27 28 — SEB Annual and Sustainability Report 2021 We support our customers on their terms The trust that our customers and shareholders place in us is the foundation for our business. Ever since we welcomed our first customer in 1856, we have been guided by engagement and curiosity about the future. By providing financial products and tailored advisory services to meet our customers’ changing needs, we build on our long-term relationships and do our part to contribute to a more sustainable society. SEB Annual and Sustainability Report 2021 — 29 Our business We have enduring and uniquely strong relationships with our large corporate customers in Sweden and other Nordic countries. We support them in their business and their international expansion and stay with them as a partner through good times and bad. SEB serves some 2,000 large corporations across a broad spectrum of industries. Many of them are global market leaders and most have extensive international operations. In the Nordic region, our customers are among the largest in their respective industries while in Germany and the United Kingdom, medium to large-sized companies with an interna- tional profile are in focus. Financial institutions We have a strong position among financial institu- tions in the Nordic markets and also serve customers internationally with capital market access, custody services and advice on capital, sustainability and as- set management matters. SEB serves approximately 1,100 financial institutions and acts as an intermedi- ary between Nordic and global financial markets. We offer our services to pension funds, asset managers, hedge funds, insurance companies, state-owned investment funds as well as other banks and SSAs (sovereigns, supranationals and agencies). Our four customer segments All customers have their individual needs, but smart digital solutions and personal relationships are key building blocks within all our four main customer segments. Our customers are looking for a partner who is proactive, provides a long-term perspective and can offer responsible advice in order for them to reach their goals. Development in 2021 Customer satisfaction remained high. The Covid19 related uncertainty prevalent among customers subsided gradually during the year. Customers were highly active within capital markets, with elevated levels within mergers & acquisitions which in many cases led to a need for new financing, especially towards the end of the year. Activity levels in equity capital markets were high throughout the year. The high stock market valuations, driven by lower inter- est rates were favourable and customers demanded advisory and execution services in equities. With lower volatility in interest rates customers’ need for risk management products, within foreign exchange and fixed income, decreased. Demand for traditional lending was stable and primarily driven by refinanc- ing activities in combination with clients’ focus on the transitional agenda increasing demand for sustaina- bility-linked loans and bonds. In addition, leveraged finance activity led to increased fund financing. All in all, operating income for the Large Corpo- rates & Financial Institutions division increased by 3 per cent compared to 2020. With lower net expected credit losses, operating profit increased by 64 per cent. Large corporates 30 — SEB Annual and Sustainability Report 2021 Our business — Our customers Small and medium-sized companies SEB has an established position as the bank for entrepreneurs and small business owners and currently serves some 400,000 small and medium-sized companies. Of these, some 184,000 were home bank customers in Sweden and 104,000 in the Baltic countries. The segment includes around 620 mid-corps – many with international operations – as well as customers in the real estate and public sectors in Sweden, such as government agen- cies, state-owned companies and municipalities. Private individuals SEB is one of the major banks in Sweden, Estonia, Latvia and Lithuania. We have a strong position and the bank is one of the market leaders in the Nordic countries in private banking. SEB provides a comprehensive range of products and services to private customers through our three distribution channels (digital, remote, and physical) as well as private-banking services with global reach to Nordic high-net-worth individu- als. We have approximately four million private customers in Sweden and the Baltic countries. Of these, around 500,000 are home bank customers in Sweden and approximately one million in the Baltic countries. We have around 33,000 Private Banking customers. See p. 80 for more information on our divisions and comments on the result. Development in 2021 Customer behaviour in both Sweden and the Baltic countries continued to be affected by Covid19, but compared with the previous year sentiment was more positive. Among private customers in Sweden, cards and payments ac- tivity that decreased during the pandemic, gradually reversed. The number of digital transactions and remote services con- tinued to increase while the number of in-person meetings de- clined. Strong stock markets and improved functionality in SEB’s bank app resulted in increased interest regarding investments in both funds and equities. Demand for mortgage loans continued to grow. On the corporate side, Swedish small and medium-sized companies’ demand for loans and deposits increased. Corporate customers were less active using cards and payments services than before the Covid19 outbreak. Operating income for the Corporate & Private Customers divi- sion was unchanged compared to 2020. With lower net expected credit losses the operating profit increased by 4 per cent. In the Baltic countries overall, the gradual withdrawal of restric- tions and the recovery from the Covid19 crisis gradually increased customer activity within for instance cards and payments. The number of digital transactions and remote services reached higher levels than before the pandemic. The volatile stock market result- ed in high brokerage activity. Private customers showed increasing optimism and loan demand increased. However, deposits in- creased more. Corporate customers remained cautious regarding making new investment decisions and loan demand was subdued especially in the beginning of the year but deposits increased. Operating income for the Baltic division was unchanged compared to 2020. With credit loss recoveries, operating profit increased by 25 per cent. SEB Annual and Sustainability Report 2021 — 31 Meet our customers Chemi-Pharm The Estonian company Chemi-Pharm develops, manufactures and sells disinfectants, cleaning and personal care products as well as detergents to more than 25 countries globally. Chemi-Pharm was chosen as Enterprise of the Year at the award event Best Estonian Companies 2021. “We moved into our new production facilities in 2019 and believed that we were well equipped to manage growth over the next five to ten years. But the pandemic meant that we had to scale up produc- tion dramatically. We are therefore expanding with a new facility,” says Kristo Timberg. Chemi-Pharm has been an SEB customer for many years and uses a broad spectrum of services such as overdraft facilities, leasing, and cash management. “We regard SEB as our home bank for international business. All our international transactions are made through the bank.” Kristo Timberg appreciates the bank’s proactive involvement. “SEB’s account manager is not just a contact we turn to with questions, but someone who constantly helps us to work out how to tackle future problems and initiatives. We truly appreciate our active, close relationship with the bank. We had a loan from SEB for the construction of our existing factory. This was a big step for us, and we received excellent help from SEB to get everything in place and working.” Virginie Berg Virginie Berg is from Marseille, but has lived in Sweden since 1994. After working some time as a consultant, in 1998 she started the company Sufraco-Savon de Marseille. The core business since the start has been the import of liquid soaps, but the product range has since been broadened, and today the company sells a wide array of beauty products aimed at “adding a gilt edge to life”. The company strongly emphasises that its products are made responsibly with respect to the environment, people and ingredients. Virginie Berg has been a private customer at SEB since 1994 and has had the same contact person at the bank the entire time, Tina Nordstrand, who today is branch manager in Gothenburg. “I came in contact with Tina and have followed her wherever she has moved. We understood each other from the start. It’s very straightforward with no fuss – she comes up with solutions for what I need,” says Virginie Berg. What’s most important in a banking relationship according to Virginie Berg is simplicity and avail- ability, and of course the personal relationship. “Yes, absolutely! Confidence is important. My re- lationship with my contact person is simple, straight- forward and serious, and I always get fast answers,” she says. “Our relationship is simple and serious. I get fast answers with no fuss.” Virginie Berg, private customer and entrepreneur “We appreciate our active, close relationship with the bank.” Kristo Timberg, acting manager, Chemi-Pharm Our customers contribute to the development of society. We assist them in realising their plans as well as in solving day-to-day challenges. Customer satisfaction is one of the most important factors in our business. 32 — SEB Annual and Sustainability Report 2021 Our business — Our customers Vattenfall Vattenfall is one of Europe’s largest energy compa- nies, with 20,000 employees and main markets in Sweden, Germany, the Netherlands, Denmark and the UK. The company plays a key role in the energy transition and has the goal “to enable fossil-free living within one generation”. “We will drive and be a leading actor in the transi- tion to a fossil-free society. That is our sustainability strategy, but also our business strategy – of course with full focus on being a profitable company,” says Kerstin Ahlfont. SEB has long been one of Vattenfall’s core banks. “We work with SEB in various parts of our business, both in our Treasury operations and in Markets, which is our interface to the energy markets, power exchang- es and energy trading. SEB supports us with liquidity management, foreign exchange transactions and a number of other financial services.” SEB is also an appreciated partner to Vattenfall in the green transition. “We see SEB as a pioneer in green financing, where the bank has been a valuable dialogue partner and service provider at an early stage. This is something that we have had much benefit from and which has enabled us to be at the forefront. But also in our daily activities we appre- ciate that SEB has knowledgeable staff and good products that suit a company like ours. When we are looking for a product, SEB often has it – tried and tested – so we do not need to be the first to try it out”, says Kerstin Ahlfont. Prime Capital Prime Capital is an asset manager focusing on alternative investments in infrastructure, real estate, transport and hedge funds. The company has its head office in Frankfurt and targets institutional investors such as insurance companies, private and public pension funds, and large family offices in Europe, with a focus on German-speaking countries. “We regard Scandinavia as an interesting invest- ment market especially for renewable energy, ener- gy transition and real estate. Here, SEB has stood out as a very visible player and we have received sup- port with financing and other matters. We have got to know one another well and the relationship has broadened more and more,” says Andreas Kalusche. Prime Capital’s relationship manager is based in Frankfurt and Andreas Kalusche attaches great value to SEB’s local organisation in Germany. “Our relationship manager has been very proac- tive in quickly identifying our needs and bringing together different parts of our organisation with the bank’s experts regardless of whether they are in London or Stockholm.” “We feel highly valued as a customer and appre- ciate the bank’s humble but ‘how can we help you?’ kind of proactiveness. This is a good starting point for collaboration, and we are holding a number of conversations about how we can broaden this still further.” “SEB is a very good partner for us in our green transition.” Kerstin Ahlfont, CFO, Vattenfall “We feel highly valued and appreciate your humble and helpful proactiveness.” Andreas Kalusche, CEO, Prime Capital SEB Annual and Sustainability Report 2021 — 33 Working at SEB To work at SEB is to be a positive force in society by helping our customers achieve their goals and contributing to a sustainable future. SEB’s annual employee survey shows that the bank’s employees continue to be highly engaged with strong key performance indicators (KPI) compared with the benchmark of the financial sector. The survey also shows that our employees share a strong belief in SEB’s future and confidence in SEB’s management, and that they feel they have opportunities to develop and contribute to change. The results form a strong foundation for the bank’s continued work with its long-term strategy. While the year was affected by the Covid19 pandemic, it also featured major steps forward with respect to diversity and inclusion, new ways of working, leadership, learning and development, and recruiting and engaging talent. Diversity for innovation and growth At SEB we are convinced that diversity is crucial for innovation, better decision-making and risk manage- ment. In this year’s employee survey, more questions connected to inclusion and diversity were added. The survey shows strong scores with respect to the employees’ perceived ability to be themselves at work and to equal opportunities. All forms of discrimination and harassment are unacceptable, and during the year we launched a new mandatory training to strengthen our ability to counter and act on cases of harassment. Examples of activities we worked with during the year include increasing the accessibility of our collaboration tools to make them more user friendly for employees with impaired vision and hearing. The diversity perspective has been strengthened also through the bank’s recruitment process, which strives from the start to be impartial regarding applicants’ identities, thereby promoting diversity in recruiting. In 2021, SEB launched a new programme, Diversify Finance, to support university students who are under-represented in the industry to apply for jobs with SEB. SEB also joined Diversity Charter Sweden, a non-profit organisation dedicated to promoting diversity in the workplace. The bank also participated in European Diversity Month with activ- ities and campaigns to raise awareness and highlight its position on the issue. Read more about our inclusion and diversity policy on p. 52 and 214. We are changing our way of working Since 2018 SEB has been implementing the agile work methodology to increase the bank’s ability to act quickly and flexibly. On account of the Covid19 pandemic, a large share of employees have worked from home, and in connection with this we have made great strides in implementing digital tools and new ways of working. During the year, SEB commu- nicated a new global policy for working from home, entailing that employees are being offered the 34 — SEB Annual and Sustainability Report 2021 Our business — Our employees opportunity to work from home for up to two days a week. The aim of this hybrid model is to enable the flexibility afforded by working from home combined with the advantages of working from the office while also reducing travel to and from work and thereby making a positive contribution to the environment. The bank continues to regularly follow up, re-evaluate and develop its ways of working to maintain its reputation as an attractive employer while also closely managing operating risk. Inclusive leadership A changing world and new ways of working also require inclusive leadership. During the Covid19 pandemic, managers have quickly adapted their leadership and found new ways to effectively lead virtually with digital tools, which can also be seen in the results of the annual employee survey. In 2021, SEB continued to work with its leadership philosophy and support leaders to drive change, promote innovation and contribute to an inclusive culture that attaches a premium to a diversity of perspectives. The framework for SEB’s leadership philosophy is based on scientific research and has been developed in col- laboration with SEB’s strategic partners, such as IMD Business School. At year-end, about 75 percent of the managers had been introduced to SEB’s leadership philosophy. Recruiting, developing and engaging employees Our employees are our absolute most important asset, and we work actively to be an attractive employer. In 2021 SEB was ranked as the most attractive employer in the banking sector in Sweden by IT students and senior business professionals. Among business students, young business professionals, and young and senior IT experts, SEB was ranked number two in the industry. In the overall ranking, SEB climbed significantly in most categories. In the Baltic countries, too, SEB is showing strong results, ranking as the third most attractive employer in Latvia and Lithuania across all sectors. SEB’s trainee programme was ranked as the third best among economics students. In 2021, we continued to develop our global talent strategy and work more data-driven to recruit critical competencies and encourage our employees to develop. We continued to develop our career por- tal, our global recruitment system, and our process for creating a more dynamic job market. During the year, continuous learning remained high on the agenda. The SEB Campus digital platform serves as a catalyst in this work, and twice a year new terms are started with a catalogue of courses that tailor to the compe- tencies that the bank views as critical for the future. Trainings conducted during the year included virtual courses in advanced advisory services with a sustainability focus. Well-being and safe work environment SEB offers services and benefits along with a wellness subsidy to employees in its efforts to promote a healthy and balanced lifestyle. During the Covid19 pandemic, SEB has expanded its efforts to improve employees’ health and well-being also when working from home, such as by facilitating the opportunity to purchase office furniture for home offices via a lifestyle benefit and offering virtual exercise sessions and meditation. Read more in the sustainability report on p. 52 and 216. Our core values SEB’s core values serve as the foundation for ways of working and culture. In combination with the vision – to deliver world- class service to our customers – they serve to motivate and inspire employees, managers and the organisation as a whole. These values are described in our Code of Conduct, which provides guidance on ethical matters for all employees. Customers first We naturally put our customers’ needs first, always seeking to understand how to deliver real customer value. Commitment We are personally dedicated to the success of our customers and are accountable for our actions. Collaboration We achieve more because we work together. We share, challenge and learn from our experiences as a team. Simplicity We strive to simplify what is complex. We respect our custom- ers’ time by being accessible, straightforward and transparent. Read the Code of Conduct on sebgroup.com 15,500 Number of employees 8.6 Employee turnover, % 48 Share of women in managerial roles, % SEB Annual and Sustainability Report 2021 — 35 Meet our employees Our 15,500 employees have different frames of experience, backgrounds, skills and perspectives. Through them we create enduring customer value and help drive progress in society. “Incredibly competent people.” Nabil Gharib Head Depositary Services “I am happy that SEB has an ambitious sustainability agenda.” Justas Jonikas Head of Transaction Services in New York From Lithuania to New York Justas Jonikas started his career at SEB in Lithuania and was subsequently put in charge of coordinating finance and trade activities and building up the busi- ness strategy for operations in the Baltics. When he entered the role as Head of Transaction Services for SEB in New York, it initially felt surreal. “It was a big decision to make together with my family, since it would entail a big change in life for all of us,” he says. “But I’ve never regretted it.” Justas Jonikas and his team work with providing various financial services, such as factoring, trade financing, cash management and leasing for corpo- rate customers in the US and Canada. “SEB has a solid customer base in the US, and most customers are currently in the process of expanding their operations,” he says. Despite the time differ- ence and periodically hectic schedule, Justas Jonikas explains that he is motivated by the op- portunity to work with professional and talented colleagues in various parts of the bank. And he is especially proud to work for a bank that always strives to assist its customers. “Even though profitability and shareholder return are two of our top priorities, these are complement- ed by the bank’s strong values, which we genuinely live by. The sustainability aspect is also very impor- tant for me personally, so I am happy that SEB has an ambitious sustainability agenda.” Many opportunities to develop Nabil Gharib came to Sweden from Syria as a three- year old and spent his college years in the US. Today he is Head of Depositary Services and responsible for the safekeeping of assets owned by mutual funds in accordance with applicable rules and regulations. Following his studies, Nabil Gharib worked as a bartender, during which time he applied for jobs in the financial sector. “My time as a bartender gave me a wealth of im- portant and basic experience in the service industry that I still carry with me today: to always have the customer in focus and make sure you provide good service with a smile,” he says. During his 20 years at SEB, Nabil Gharib has held a range of managerial roles in a number of the bank’s business areas, including two years in Luxembourg. “One of the things that makes my job so exciting is that I have the benefit of working with such incred- ibly competent people and learning new things every day. I am a social person, and my time working abroad gave me an opportunity to broaden my net- work,” he says. Nabil Gharib says that one of the benefits of work- ing in a large organisation like SEB is that there are so many opportunities. “You are responsible for driving your own development. Sure, support is available, but it is up to you to find out what paths are open and then to take the next step.” 36 — SEB Annual and Sustainability Report 2021 Our business — Our employees “My job is stimulating and meaningful.” Caroline Forsberg Fund Manager, Investment Management “There’s a warm and supportive culture at SEB.” Lena Ericsson Client Executive, Private Wealth Management & Family Office Influencing society in the right direction Caroline Forsberg manages Swedish equity funds in Investment Management. She explains that the sustainability aspect of fund management has grown gradually since 2015 and has accelerated in recent years. “It’s incredibly exciting to be part of the sustaina- bility transition and to help companies and society move in the right direction through their managed assets. It makes my job stimulating and meaningful,” says Caroline Forsberg. In a ranking of the best sustainability funds con- ducted by the news agency Bloomberg, two funds managed by Caroline Forsberg showed returns of 30 per cent, which is more than twice the industry average and better than all of the sustainability funds that Bloomberg monitors in Europe, the US and Japan. Caroline Forsberg explains that while funds are not always performing at such a level, her strategy is based on fundamental company research that also includes evaluation of sustainability risks across the entire supply chain. Understanding a company’s ecosystem requires continuous dialogue with its management. “Getting to know the management is the only way to gain a genuine understanding of a company’s ambition, commitment and its potential to live up to its sustainability ambition,” she says. “It is truly a privilege to continue being challenged and to develop after 23 years at the same workplace.” More than forty years at SEB Lena Ericsson has been with SEB for more than four decades, and her experience in advising private customers dates back to 1985. During the last 15 years she has worked with wealth management for families, now in the new Private Wealth Management & Family Office division. “A person’s private economy is highly personal and therefore requires a long-term and close customer relationship based on trust,” says Lena Ericsson. “It’s very rewarding and valuable to be able to help our customers manage their wealth over several gener- ations – from grandparents down to grandchildren – and guide them through their economic journeys.” Personal customer relationships is one of the factors that has kept her at SEB during her profes- sional life, combined with amazing colleagues and good leadership. “I have always had good managers who have given me recognition and supported me along the way, which has helped me develop in my career,” says Lena Ericsson. She explains that through her work at the bank she has gained an understanding of the interconnection between society, economics and politics, and keeps abreast of various trends, which she appreciates. “There’s a warm and supportive culture at SEB, and our employees are very generous when it comes to sharing their knowledge.” SEB Annual and Sustainability Report 2021 — 37 SEB is a leading northern European financial services group, founded in 1856. Our overall ambition is to become a leading corporate and investment bank in northern Europe with international reach, provid- ing our products and services to retail customers in Sweden and the Baltics in a digital format with a human touch in moments that matter. Our home mar- kets are the Nordic and Baltic countries, Germany and the United Kingdom. Engaged shareholders with a long-term focus Many of SEB’s larger institutional investors have had an ownership stake in SEB for more than a decade. SEB’s largest shareholder is Investor AB, where SEB is a core investment. Investor, northern Europe’s largest industrial holding company, was founded by the Wallenberg family in 1916. Investor is currently represented on the bank’s board with two seats, including the Chair. The engaged and long-term focused shareholder base of SEB enables us to look beyond business cycles, taking a long-term, structural perspective. This perspective gives us the opportunity to contri- bute to the economy and the development of society through the dividend that we pay to our share- holders. They include more than 250,000 private savers, some of Sweden’s largest pension funds and indirectly also foundations that support research and education. For information on our shareholders, see p. 93. Diversified business, profitable growth and financial strength Our earnings base and risk profile are diversified in terms of customer base, full-service product offering and geographical exposure. SEB has demonstrated strong profitable growth over time and continuously strives to improve its operating leverage through deepened customer relationships and continuous efficiency improvements. Our strong balance sheet creates flexibility for the future, enabling us to grow together with our customers. New strategy SEB recently launched its 2030 Strategy and related three-year business plan. Operating in an industry in constant transformation, we will build our focus upon four main areas: acceleration of efforts, strategic change, strategic partnerships and efficiency improvement. Coming from a position of strength, we will accel- erate our investments to future-proof the bank and ensure our competitiveness for the years to come. A key part of SEB’s future relates to sustainability. In 2021, we presented our updated sustainability strategy and three new climate-related ambitions and goals. These are: The Brown – Reducing our fossil fuel credit exposure in the energy portfolio by 4560 per cent by 2030; The Green – Increasing our sustaina- bility activities 68 times by 2030, and; The Future – Assessing our credit portfolio’s alignment with the Paris Agreement by 2022 and setting targets for 2030. See p. 20 for the 2030 Strategy and the business plan. SEB has a unique customer base and market position, committed owners with a long-term perspective, a solid financial buffer and the strength to grow and create shareholder value. Shareholder value in SEB Our business — Our shareholders 38 — SEB Annual and Sustainability Report 2021 AMF is a Swedish pension company owned by the Swedish Trade Union Confederation (LO) and the Confederation of Swedish Enterprise, and manages approximately SEK 790bn for some 4 million customers. AMF owns approximately 4 per cent of the shares in SEB, making it the fourth-largest shareholder. “We think SEB’s valuation is attractive based on the bank’s goals and relative to the stock market”, says Dick Bergqvist. “If you look back on the period from 2010 to 2020, the bank has had favourable profit growth of around 7 per cent per year before credit losses. It pays a good dividend yield, and we have a very positive view of the share repurchase programme that the bank has announced.” He appreciates that SEB breaks down its long-term aspirations for profitability and cost-efficiency at the divisional level in a transparent way. “This makes us confident and gives us an understand- ing of how the bank aims to achieve its long-term return target of 15 per cent”, According to Dick Bergqvist, SEB has built up its credibility in the market over a long period of time. “SEB has been best in class at delivering on its communicated cost targets. This instills credibility going forward if the bank were to need to ramp up its investment level and allow a slightly higher cost level in order to generate higher revenue further ahead. I think the bank exemplifies quality and continuity, and that it delivers on its set aspirations. This is the cornerstone of our investment case.” Sustainability is another key factor for AMF. “We want SEB to continue reducing is credit exposure to fossil activities while at the same time supporting its customers in their climate transition”, asserts Dick Bergqvist. “The sustainability strategy and the clear and concrete goals that the bank has communicated are something we truly appreciate and support.” Meet one of our shareholders “SEB exemplifies quality and continuity, and delivers on its set aspirations.” Dick Bergqvist Portfolio Manager Swedish Equities, AMF Shareholder value The shareholder value created can be measured as total shareholder return (TSR), where both market value change and dividends paid in a time period are taken into consideration. In 2021, the TSR for SEB’s class A share was 59 per cent. The Swedish FSA lifted its recommendation to restrict divi- dends in 2021 and SEB distributed SEK 4.10 per share twice, in total SEK 8.20 per share. In addition, during the year a share buyback programme was launched. SEB’s share price appre- ciated to SEK 125.85 from SEK 84.50. See p. 76 for dividend and share buyback information. Financial targets The Board of Directors of SEB has set financial targets in order to create lasting, long-term shareholder value. These targets are focused on the financial performance of SEB and capital repatriation to shareholders, while at the same time securing a solid financial buffer for the bank. The outcome of the financial targets for 2021: • Dividend: The SEB Board of Directors proposed a dividend corresponding to a payout ratio of around 51 per cent. • Common Equity Tier 1 (CET 1) capital ratio: a capital buffer of 590 basis points above the Common Equity Tier 1 requirement. • Return on equity (RoE): 13.9 per cent, whereas the average return on equity for Nordic peers was 10.9 per cent and for European peers 8.4 per cent. SEB’s long-term targets are described on p. 73. 2021 20172021 20122021 59% 67% 372% Total shareholder return SEB Annual and Sustainability Report 2021 — 39 Banks’ role in society Banks play a key role in order for society to work. The services and infrastructure we provide are essential for creating economic growth and social value. SEB makes it possible for households, entrepreneurs and businesses to finance, invest, and manage payments and savings. We identify and manage risks as well as opportunities, and in doing so we promote economic development, growth, new jobs and international trade, and contribute to financial security and stability. Sustainable entrepreneurship To meet tomorrow’s challenges, as a society we must hold confidence in the future in the pursuit of innovation and transformative power. SEB drives a number of initiatives to promote sustainable entre- preneurship and enable effective supply of capital for new ideas and initiatives. During the year our newly established SEB Greentech unit carried out its first investments. The aim of this initiative is to give newly started greentech companies early access to funding to develop green technologies. In 2021, SEB Greentech made investments in companies that are developing sustainable chemical production, technology for wave energy and methods of producing environ- ment-friendly biocoal, as well as planning tools that help cities reduce their carbon footprint. To date the unit has invested SEK 70m of its initial investment capital of SEK 300m. SEB’s Innovation Forum is another platform for giving start-ups access to venture capital. In partnership with educational institutions in the greater Stock- holm area, SEB selects promising companies to make pitches at special forums for potential investors among the bank’s corporate and private banking customers. Since the Innovation Forum was estab- lished in 2014, about 100 companies have had the opportunity to make pitches, and the invited inves- tors have accounted for 40 to 60 per cent of their raised capital. On top of this they have gained access to contacts and a valuable network. During 2021, SEB established The Next Awards in recognition of sustainable entrepreneurship. The award, which is conceived to be annual, is presented to innovators and pioneers who help make the world a better place. Nine finalists participated when the award was presented for the first time in a live web- cast from the Stockholm Concert Hall. Read more about one of them, Stella Futura, on p. 41. Support for young people SEB lends support to young people and has been a partner of the Mentor organisation since 1997, which works to build self-esteem among youths in Sweden as well as their confidence in the future. Through its participation in various mentoring programmes, every year the bank’s employees reach thousands of young people throughout the country. In 2021, SEB also supported the Sports Heart sports camp, enabling economically disadvantaged children in Sweden to attend free of charge. SEB is an integrated part of society. We have a long tradition of positively contributing to society, by encouraging sustainable entrepreneurship, supporting young people, and promoting financial equality. SEB in society Our business — Our role in society 40 — SEB Annual and Sustainability Report 2021 In the Baltic countries, too, we are strongly committed to children and young people, which is manifested through partner- ships, volunteering and sponsoring. During the year SEB started a two-year coding school in Estonia to address the shortage of software developers, which is a critical issue for the develop- ment of companies in the country. The hope is that many of the 215 prospective developers will eventually work for SEB, which will in turn benefit the bank’s corporate customers and contri- bute to development in the entire region. Financial inclusion During 2021, for the second year in a row, SEB conducted a wide-ranging campaign on financial equality with focus on en- couraging women to own, save and start businesses. This theme was the focal point of a number of activities related to savings, home mortgages, entrepreneurship and generational shifts. In parallel, an internal course on financial equality was introduced for all SEB employees, followed by a more in-depth training for advisers focused on unconscious biases that affect whether men and women receive the same advice. Factual data for the initiative has been produced in collaboration with the think tank Ownershift, which advocates for more equal ownership among women and men. During the year, SEB also launched Diversify Finance, a new diversity programme that aims to encourage and support students who are under-represented in the industry to apply for jobs at SEB. 15 students in Sweden, with various backgrounds and experiences, were welcomed to get to know SEB through internships, where they learned about career opportunities within investment banking and capital markets. Support for new thinking and innovation To tackle the growing problem of digital fraud, all parts of society must come together. With that theme, during the autumn 2021 SEB hosted the SEB Open Innovation Challenge on digital fraud prevention. The aim is to promote previously unfathomed solutions, innovative ideas and creative suggestions for how this problem can be solved. The challenge was open to the general public and attracted some 20 proposals. Five of these were chosen as finalists, who were invited to present their ideas at the end of the year to a jury of experts from SEB, universities and business. The winner, Rohon Kundu, received the award of EUR 10,000 for his idea. Stella Futura was one of the finalists when The Next Awards, SEB’s newly established sustainability tribute, were presented in 2021. The company works with expanding access to renewable energy in a commercially sustainable way. “Our journey started in Africa for the simple reason that there is where the major needs and major opportuni- ties exist. Plus, I had a network in western Africa from my previous work”, explains Ulrika Tornerefelt. In pace with the company building up its operations in Africa and amassing expertise in energy tenders and smart financial solutions, combined with technological solutions, the Swedish market began transforming. “Suddenly we faced a scenario where our offering in Africa could just as well be applied back home in Sweden”, she says. Among Stella Futura’s latest projects can be noted the first energy system that includes solar panels and battery storage for a dairy farm in Sweden, and a com- mercial flexibility project for a waste collection system in Stockholm’s Hammarby Sjöstad district. Both projects have resulted in substantial savings for the customers. “It’s not enough to just understand technology; it’s not enough to just understand business development, you must combine them in a very smart way to make your product interesting for buyers. We combine state-of-the- art technology with innovative business models”, Ulrika Tornerefelt says. Meet one of The Next Awards’ finalists “We combine state-of-the-art technology with innovative business models.” Ulrika Tornerefelt CEO and partner, Stella Futura SEB Annual and Sustainability Report 2021 — 41 Sustainability report CONTENTS Ambition, strategy and goals Sustainability at SEB 44 Strategy and goals 46 Focus areas Sustainable financing 48 Sustainable investments 50 People and community 52 Business ethics and conduct 54 The environment 55 Sustainability management Sustainability governance 56 Sustainability policy framework 57 EU regulatory development 58 Engaging with stakeholders 59 Climate report 60 Sustainability notes 208 GRI Index 222 SEB and the Principles for Responsible Banking 228 Auditor’s report 234 42 — SEB Annual and Sustainability Report 2021 We accelerate change At SEB, we are convinced that we can be a positive force for change in the sustainability transition. Innovation and responsible behaviour go hand-in-hand, which is also how we aim to conduct and develop our business. By partnering with our customers and supporting them on their transition journeys we believe we can make the greatest positive impact. We aim to accelerate the pace towards a sustainable future for people, businesses and society. SEB Annual and Sustainability Report 2021 — 43 Sustainability report SEB wants to be a leading catalyst in the sustainability transition. We have a strong ambition to accelerate the pace towards a sustainable future for people, businesses and society and believe we can make the greatest positive impact through global cooperation and by partnering with our customers on their transition journeys. Sustainability at SEB As a bank, SEB has the power, opportunity and responsibility to positively impact the world it operates in. We have a strong am- bition to accelerate the change that is needed to combat climate change and limit global warming. We recognise our role in the important work of closing the EUR 3,000bn investment gap that is estimated by the EU to meet near-term needs. We believe that global cooperation and partnerships between the private and the public sectors are prerequisites to succeed. By committing to the Paris Agreement through the signing of the UNEP FI Principles for Responsible Banking, the Net-Zero Banking Alliance and the Net Zero Asset Managers initiative, we strive to reorient capital flows in line with the bank’s updated vision and business strategy. See p. 46 and p. 57. Integrating sustainability into the business Our banking services contribute to the transition towards a sustainable society. We serve private, corporate and institution- al customers in our home markets and international network. Integration of environmental, social and governance (ESG) fac- tors is fundamental and encompasses climate and environment, human rights, social relations and anti-corruption. We strive to integrate these factors into everything we do – into products, advice and business processes. In line with SEB’s Corporate Sustainability Policy we work with short-, medium- and long- term perspectives. Impacts in two dimensions SEB has both direct and indirect impacts on stakeholders, and we regard impacts in two dimensions. On the one hand are SEB’s and our stakeholders’ impacts on the planet and society, and on the other are the impacts that the planet and society have on SEB and SEB’s stakeholders, including on our customers’ busi- ness models and thereby their repayment capacity. Our material focus areas Our main focus areas are sustainable financing and investments, where we aim to have a positive impact on the environment and to create value for people and society. We strive to avoid causing, contributing or being directly linked to negative impacts on people and the environment from our activities, products and services. Several areas serve as the foundation for our long-term achievements. Financial strength and resilience, risk manage- ment, business ethics and conduct, and crime prevention are all considered to be important in the long term for our stakeholders and are thus material for our business. Meeting stakeholders’ expectations In 2021 SEB further developed its sustainability work. To meet increased demands and expectations from customers, inves- tors, employees and society at large we put considerable efforts into product innovation and on strengthened policy frameworks, which together with strong governance are important corner- stones in our business. Another essential cornerstone is the transformation of our credit portfolio, work that was initiated in 2020 and where we use SEB’s Customer Sustainability Classification model. This tool enables us to engage in active dialogues with our customers (see p. 62). By advising and supporting our customers’ transition journeys, we believe we can make the greatest positive impact, and we are convinced that companies that actively work to inte- grate sustainability into their operations and business decisions will be better equipped for the future. Financing the transition We support our customers, share our knowledge and offer advisory services as well as sustainable financing and investment products. Acting as a thought leader We develop innovative products and services and set standards for how banks can contribute to a more sustainable society. Being a corporate citizen We fulfil our critical role in society and always strive to take an active part in building for the future. Transforming our own business We develop our own business, communicate our policies and goals, and transparently and continuously report on our position and progress. 44 — SEB Annual and Sustainability Report 2021 Sustainability report — Ambition, strategy and goals Our role Mirrored in the sustainability strategy and goals (see p. 46), SEB has high ambitions for how to contribute to the transition. This is how we believe we can be a leading catalyst in the transition towards a sustainable society: Impacting the UN Sustainable Development Goals By signing the UNEP FI Principles for Responsible Banking (PRB), we have committed to aligning our business strategy to international goals such as the UN Sustainable Development Goals (SDGs). Our key impacts, positive and negative, are related to the exposure we have through our financing and investment activities. In 2021 SEB conducted a PRB impact analysis, linked to the SDGs, which is based on sector exposures in the bank’s credit portfolio (see below). From an SEB Group perspective we prioritise five of the SDGs that are clearly linked to our business strategy and our sus- tainability ambitions. They are related to our strong heritage of creating long-term growth and innovation as well as maintaining responsibility and an international outlook. Climate action (SDG 13). Climate action is addressed through- out our business, from our pioneering role in green financing to our current work on helping our customers to transition and reduce their climate impacts. Decent work and economic growth (SDG 8). Through our business we drive economic development both directly and indirectly, and contribute to the creation of new jobs and growth in society, for example by supporting entrepreneurs and providing individuals and companies access to capital and financial services via our microfinance funds. Industry, innovation and infrastructure (SDG 9). Innovation, entrepreneurship and long-term relationships with industrial companies are part of our DNA, thereby contributing to a strengthening of infrastructure. We have long been active in standard-setting bodies such as the International Capital Market Association (ICMA). Through SEB Greentech we support compa- nies in the green technology sector. Peace, justice and strong institutions (SDG 16). Our business contributes to financial stability. We are committed to prevent- ing corruption and bribery in all forms, money laundering, cyber- crime, sabotage, intrusion attempts and financing of terrorism. Gender equality (SDG 5). Gender perspectives shall be taken into account in the advice we provide to corporate as well as to private customers. In our microfinance funds, one focus area is financial inclusion, which ensures support especially to women in emerging markets. Internally, gender equality is an integrated part of our work with inclusion and diversity. Impact analysis of SEB’s credit portfolio In 2021 SEB conducted an impact analysis – in line with our commitments to the Principles for Responsible Banking – on which SDGs we impact the most through our credit portfolio. The impact analysis was performed based on SEB’s own advisory tool, the Impact Metric Tool (IMT). The IMT is a quantitative portfolio analysis tool that measures ESG factors, impacts on the SDGs, alignment with the EU Taxonomy and the exposure to climate risks. The tool’s SDG module, which has been developed in collaboration with the Royal Swedish Academy of Sciences, identifies and measures impacts of investments on the SDGs from a sector impact perspective. SEB’s impact analysis was based on SEB’s exposure to each sector in its credit portfolio. The exposure was combined with the impacts each sector has, positive and negative, on the SDGs. Based on this approach, and considering that the bulk of SEB’s activities lie within northern Europe, the analysis showed that the areas where SEB’s sector exposure has a potential negative impact are climate change (SDG 13), biodiversity (SDGs 14 and 15) and fresh water (SDG 6). In these areas SEB’s commitments and engagements are particularly relevant. The areas with the most significant positive impacts were for example SDG 8 and SDG 9. SEB is actively developing its work in the identified areas. In spring 2022 SEB is updating its Environmental Policy – to cover climate change, biodiversity and fresh water – and several sector policies. The Green Bond Framework has been updated to support SEB’s second green bond of EUR 1bn, which was issued and positively received in February 2022. SEB will continue to develop its businesses, products and services, striving to contribute to positive development in the areas where we have most impacts. See SEB and the Principles for Responsible Banking Reporting and Self-Assessment Template 2021, on p. 228. SEB Annual and Sustainability Report 2021 — 45 Strategy and goals With the updated sustainability strategy, we have further raised our ambition level, clarified our role and taken the next step in accelerating the sustainability transition. As a key part of the updated sustainability strategy, we have defined new ambitions and goals, including laying out a path for reducing our fossil fuel credit exposure and at the same time setting growth ambitions for our sustainable products, advisory services and investments. Carbon Exposure Index – The Brown This index is a volume-based metric that captures our fossil fuel credit exposure within the bank’s energy portfolio. SEB’s goal is to reduce the fossil fuel credit exposure within power genera- tion and distribution (by 30 per cent), oil and gas exploration and production (by 70 per cent) and refining and distribution (by 30 per cent), for a combined reduction of 4560 per cent by 2030 compared with a 2019 baseline. Reaching this goal means that we will be in line with or outper- form the strictest 1.5-degree scenario assumptions provided by the International Energy Agency and Network of Central Banks and Supervisors for Greening the Financial System (NGFS). Sustainability Activity Index – The Green This index is a volume-based metric that captures our sustainability activity. It measures: • sustainable financing • sustainable finance advisory • greentech venture capital investments • Article 9 investment products (in line with the EU’s Sustainable Finance Disclosure Regulation, SFDR) as a share of SEB’s fund offering, own and external. The ambition is to increase average sustainability activity 68 times by 2030 compared with a 2021 baseline. Transition Ratio – The Future We will transition together with our customers as reflected in a Transition Ratio, which is a ratio based on our internal Customer Sustainability Classification model. This entails that we assess our customers’ climate impact and alignment with the goals set out in the Paris Agreement, thereby classifying our credit portfolio. By using this tool we gain a better understanding of our customers’ transition journeys and can support them in reducing their carbon footprints and ensuring their transition over time. We aim to complete the classification of our credit port folio in 2022 and to set targets for 2030. See p. 62, the Climate Report. In 2021 SEB presented an updated sustainability strategy that outlines the bank’s role in the transition towards a sustainable society, which is part of SEB’s business plan for 20222024 and a cornerstone of SEB’s 2030 Strategy. The Brown – Reduce our fossil fuel credit exposure in the energy portfolio 0 2019 20502035 100 2025 204520402030 45 to 60% reduction International Energy Agency, 1.5-degree scenario Net Zero by 2050 without Carbon Capture Usage and Storage, CCUS Network of Central Banks and Supervisors for Greening the Financial System, 1.5-degree scenario, REMIND model SEB credit exposure corridor for fossil fuel in the energy portfolio Sustainable Paris-aligned transition Transition Gradual change Status quo/not in transition Fictitious customer 20% 0 50% 100% 2010 2020 2030 2040 2050 The Future – Assess our customers’ greenhouse gas emissions A fictitious customer’s transition journey 2021 20302025 6x to 8x by 2030 800 600 100 The Green – Increase average volume-based sustainability activity 46 — SEB Annual and Sustainability Report 2021 Sustainability report — Ambition, strategy and goals Goals and outcome Area Description Outcome 2021 Outcome 2020 Goal 2021 Goal 2025 Innovation Create sustainable finance innovation centre to develop and launch new sustainable products and services 9 sustainable prod- ucts or services 12 sustainable prod- ucts or services 5 sustainable products or services Included in goals 2025 and 2030 above Sustainable financing Green loans 1) SEK 29bn SEK 25bn Increase Included in goals 2025 and 2030 above Green mortgages SEK 8bn SEK 4bn Increase Green bonds, underwriter, Nordic bank ranking 2) #2 #2 #1 Gradually transform our credit portfolio towards increased sustainable financing 50% of relevant credit exposure assessed, 30% classified. See p.63 Sector-based climate-impact classification of corporate credit portfolio performed Gradual transforma- tion of credit portfolio to increase share of transitional and sustainable assets Sustainable investment Total funds (AuM) with sustainability criteria / SFDR article 8 & 9, as share of SEB’s total AuM 3) 27% 14% Increase Included in goals 2025 and 2030 above SEB funds with sustainability criteria / SFDR article 8 & 9, as share of SEB’s fund company’s total AuM 3) 82% 45% Increase SEB funds with human rights criteria as share of SEB’s fund company’s AuM 100% 100% 100% SEB Impact and Thematic funds, total AuM 4) SEK 13bn SEK 12bn Increase People Integrate sustainability into KPIs for Top Senior Management 5) 90% 67% Implement for all direct reports to GEC Increase towards 100% Gender by management type, (men/women): • Group Executive Committee (GEC) 6733% 6436% Increase balance in senior management towards long- term ambition of 505010% Increase balance in senior management towards long- term ambition of 505010% • Top Senior Management 5) 5644% • Senior Management 6436% 6436% Business ethics and conduct Employees who have completed global mandatory training 6) , average 95% 81% Increase towards 100% Increase towards 100% Environment, direct impact Absolute CO emissions reduction by 66% by 2025 (compared with 2008) Gross 9,389 tonnes Net 0 (through compensation) 9,734 tonnes Reduce to 17,137 5% tonnes by 2025. Net zero emissions from 2021 Not to exceed 17,000 tonnes 5% by 2025 1) Green loans include project financing in the EU, the UK and the Nordic region, in line with SEB Green Bond framework sustainability criteria. 2) Bloomberg (ranking by volume). 3) SFDR, Sustainable Finance Disclosure Regulation applies from March 2021; article 8 funds are environmental and socially promoting and article 9 funds have a sustainable investment objective. 4) Includes SEB Micro Finance Funds, SEB Impact Opportunity Fund, SEB Green Bond Fund and Lyxor SEB Impact Fund. 5) Top Senior Management, GEC+GEC direct reports. 6) SEB global mandatory trainings: Code of Conduct, AML and Combating Financing of Terrorism, Fraud prevention, Cyber Security, GDPR, Sexual Harassment and Sustainability Training on Climate Change. Includes consultants, excludes employees on leave of absence. See p. 212. Goals 2025 and 2030 In line with the updated sustainability strategy, SEB has intro- duced three new goals: The Brown, The Green and The Future (see p. 46). These three goals will henceforth replace the corre- sponding targets that SEB has presented since 2017. The goals for the areas People, Business ethics and conduct, and Environ- ment, direct impact, will still remain, however the date has been adjusted to align with SEB’s new goals. Area Description Baseline Goal 2025 Goal 2030 The Brown Carbon Exposure Index, measuring the fossil fuel credit exposure in our energy portfolio (index) Index100, 2019 Decrease towards target 2030 Reduce by 4560 per cent The Green Sustainability Activity Index, measuring our activities that support sustainable development (index) Index100, 2021 Increase 34 times Increase 68 times The Future Transition Ratio, measuring our corporate and real estate credit portfolio’s anatomy from a climate perspective Baseline to be established in 2022 SEB Annual and Sustainability Report 2021 — 47 Sustainable financing Focus on sustainable development, especially on climate change, intensified across the globe in 2021. Extreme weath- er events, the Sixth Assessment Report of the IPCC and the COP26 climate summit in Glasgow all contributed to heightened attention. Also, SEB saw a clear increase in expectations from corporate customers, financial institutions and private individu- als on how we can support them with services and advice. Responsible lending Responsible financing and lending are important cornerstones of our business. We take a restrictive approach to doing business in industries with a high risk for corruption, negative impacts on human rights and labour rights, and businesses that operate in jurisdictions with low or no respect for human rights, and where proper mitigation is lacking. For private customers we adapt our advice and services to their specific needs and circumstances in processes and decisions. SEB’s Customer Acceptance Standards include environmental, social and governance (ESG) factors in what the bank considers to be critical requirements when accepting new customers and retaining existing ones. SEB’s group-wide policies define how the bank is to take sustainability risks into account in financing activities. All transactions are to adhere to these policies. See p. 57. Our processes aim to ensure that material sustainability risks are identified, assessed and incorporated into the credit analy- sis and considered from SEB’s compliance and reputational risk perspective. Particularly sensitive matters are to be discussed and approved within the divisional Sustainability Business Risk Committees before they are assessed in the Credit Committees. See p. 56. Dialogue and advice We engage in constructive and concrete dialogues about our customers’ needs in relation to sustainability challenges and op- portunities. The Customer Sustainability Classification model is a hands-on tool for SEB’s client teams that enables us to deepen our relationships and mutual understanding of our corporate customers’ decarbonisation journeys, see p. 62. We strive to proactively offer solutions that we identify as relevant for them, based on a structured analysis. The Impact Metric Tool (IMT) continued to be an appreciated advisory service by our customers. This quantitative analysis tool, developed by SEB, consists of modules that measure ESG aspects of companies’ performance on a portfolio level. It also assesses positive and negative impacts with respect to the SDGs as well as the alignment of investment portfolios to the EU Taxonomy. More than 150 customer portfolios were analysed using this tool during the year. We are convinced that we can make the greatest positive impact by being engaged in our customers’ transition journeys. A proof that our customers appreciate our advisory services are the Prospera surveys, published in 2021 and 2022, focusing on banks’ sustainability advice. SEB was two years in a row ranked number one by companies as well as institutions in the Nordic region. Sustainable and sustainability-linked bonds and loans Sustainability aspects are incorporated across a broad range of financial solutions in the bank. Among the products we offer are green bonds, social bonds, sustainable bonds, sustainability- linked bonds, green loans and sustainability-linked loans. In 2021 SEB was the first bank in the Nordic region to start offering sustainability-linked supply chain financing. For private customers in Sweden, green mortgages continued to grow, reaching SEK 7.9bn, and loans for solar panels were increasingly appreciated. In late 2021 SEB also began offering green mort- gages in the Baltic countries. Among corporate customers, performance-based solutions such as sustainability-linked loans and bonds saw particularly strong growth in the Nordic market and especially in Sweden. The financing cost for these products is linked to the customer’s ability to perform on pre-defined sustainability-related KPIs such as climate impact mitigation or social issues. In 2021 SEB The financial sector can be regarded as one of the main drivers in the transition towards a more sustainable economy. At SEB we are convinced that we can accelerate the pace of this transition by supporting our customers through close collaboration, providing first-class advice and innovative financial solutions that are tailored to their needs. 48 — SEB Annual and Sustainability Report 2021 Sustainability report — Focus areas was involved in several transactions, including H&M, SSAB, Maersk and EQT. The market for green bonds saw its strongest year ever with USD 474bn in new issuances globally, up 56 per cent from 2020. This type of funding is earmarked for low carbon and/or environ- mentally sustainable investments. SEB is a pioneer and has been a global thought leader in green bonds for close to 15 years. In 2021 SEB had a leading position in the Nordic market with an 18 per cent share of global transactions by Nordic banks and underwrote an aggregate volume of USD 6.2bn. SEB aims to continue the development and creation of new financial services. As part of its sustainability strategy, SEB has set goals for growing sustainable products and advisory services by 2030. See p. 46. Updated Green Bond Framework To finance projects and assets that support an environmentally sustainable society, SEB issues green bonds. In January 2022, SEB published its updated Green Bond Framework which defines eligible assets that can be financed by green bonds issued by SEB. The updated framework, which is in line with the 2021 ICMA Green Bond Principles, has been made more inclusive to also support areas such as biodiversity and the transition to a circular economy. It is also broadly aligned with the technical screening criteria of the EU Taxonomy as of December 2021. To ensure that the framework meets high climate and environmen- tal ambitions and international standards, SEB has obtained an independent, research-based, evaluation from Cicero Shades of Green. Cicero’s second opinion rates the framework Medium Green and SEB’s governance Excellent. In February 2022, SEB issued a green bond of EUR 1bn under the updated framework, refinancing its first green bond from 2017. As per 31 December 2021, eligible green assets under the 2016 framework amounted to SEK 23bn. SEB’s goal is to contin- ue to grow its green lending as part of the ambition to increase sustainability-related financing. Poseidon Principles In 2021 SEB reported on the climate alignment of our loan port- folio in the shipping sector, according to the Poseidon Principles, signed by SEB in 2020. The Poseidon Principles establish a global framework for responsible ship finance that aims to quantitatively assess and disclose whether financial institutions’ lending portfolios are aligned with climate targets set by the International Maritime Organization (IMO), a specialised agency of the UN responsible for regulating shipping. The IMO’s ambition is to reduce total annual greenhouse gas (GHG) emissions from international shipping by at least 50 per cent by 2050, based on 2008 levels. The ambition is presented as a trajectory with annual emission values until 2050. SEB’s result shows a climate alignment score for the bank’s shipping portfolio for 2020 that was 2.5 per cent above target. Excluding the Cruise segment, which was an outlier in 2020 due to the Covid19 related layup of vessels, the score would have been 3.8 per cent below target, implying that the bank’s portfo- lio is aligned with the Poseidon Principles trajectory. The results will be helpful in the process of aligning the bank’s decision processes, and thereby the lending portfolio, with the shipping industry’s transition towards a low carbon future. Equator Principles For project financing, since 2007 SEB has been adhering to the Equator Principles (EP), a voluntary set of guidelines used by financial institutions to assess the social and environmental im- pacts of large projects and assist customers in managing them. In 2021 we conducted eight project finance transactions under the Equator Principles – four in category B (projects with potential limited adverse environmental and social risks) and four in category C (projects with minimal or no social or environ- mental impacts). SEB’s green loan portfolio by sector 2021 Per cent Renewable energy 41 Green buildings 27 Sustainable forestry 15 Clean transportation 14 Energy efficiency 3 Water and wastewater management 1 Waste management 1 SEB Annual and Sustainability Report 2021 — 49 Sustainable investments We aim to have a comprehensive and competitive offering to private, corporate and institutional customers where environ- mental, social and governance (ESG) factors are fully integrated into the investment processes. Our offering covers a broad variety of products and services, including funds managed by SEB Investment Management, funds managed by external fund managers, equities and certificates, discretionary portfolio management and self-service investment solutions. The offering is evaluated on an ongoing basis. SEB Investment Management became a signatory of the UN Principles for Responsible Invest- ment (PRI) in 2008. All external fund companies have signed the PRI. SEB Investment Management managed assets worth SEK 831bn at year-end 2021. Sustainability at SEB Investment Management SEB Investment Management strives to integrate sustainability as- pects into all types of investments and asset classes. This is done by investing in companies that have integrated sustainability into their business models or have well-defined transition plans, by excluding industries and companies that do not meet SEB Invest- ment Management’s sustainability criteria, and by continuously engaging with the companies in which we invest or might invest. In 2021 SEB Investment Management joined the Net Zero Asset Managers initiative, to commit to achieving net zero green- house gas emissions by 2040 and aligning all investments with the Paris Agreement. To achieve this, SEB Investment Manage- ment has set interim targets to reduce financed emissions by 50 per cent by 2025 and 75 per cent by 2030 1) . This commit- ment is formalised in SEB Investment Management’s Climate Statement. In addition, the fund company will increase invest- ments in companies that contribute to sustainable solutions or enable transition (see Sustainability Activity Index, p. 46), and will work to support companies on their transitional journeys. SEB Investment Management continuously evaluates its product offering and strives to improve its work by updating strategies and improving processes. In 2021 an updated Sustainability Policy was implemented. Focus on integration SEB Investment Management invests in companies that actively manage environmental, social and governance factors in their operations. We aim to identify companies that work to solve global sustainability challenges, for example by investing in line with the UN Sustainable Development Goals. To strengthen its analyses, in 2021 SEB Investment Management launched a proprietary sustainability model that assigns each potential investment a sustainability rating. It is used as a tool to create a fundamental view of companies’ sustainability work. Criteria for exclusion SEB Investment Management’s funds do not invest in compa- nies that fail to respect international conventions and guide- lines, such as the UN Global Compact, the OECD Guidelines for Multinational Enterprises, the UN Universal Declaration of Human Rights, the UN’s Guiding Principles on Business and Human Rights, the ILO Core Conventions on Labour Standards and Children’s Rights and Business Principles. In 2021 all of SEB Investment Management’s funds were managed in accordance with human rights criteria. These funds are also managed in accordance with the same, strict exclusion criteria. The funds exclude companies that pro- duce fossil fuels, including unconventional extraction, and com- panies that generate electricity from fossil fuels. Exemptions can be made for companies that demonstrate clear transition plans, as many of these will be crucial for realising the sustaina- ble transition. Companies that produce pornography or tobacco or have more than five per cent of their turnover from alcohol and commercial gambling are also excluded. SEB Investment Management’s Exclusion Committee makes the formal decision regarding which companies are to be excluded from investment. The exclusion list is reviewed at least quarterly, and the screen- ing is done through the external advisor ISS ESG. Active ownership SEB Investment Management works actively to influence the companies in which it invest, in their effort to achieve positive change. In Swedish and Nordic companies, where we are often one of the largest shareholders, this commitment is implement- ed directly through dialogues with the company’s executive management and board. Moreover, we vote at shareholder annual general meetings and serve on nomination committees. During 2021, SEB Investment Management voted at 331 annual and extraordinary general meetings and served on 35 nomina- tion committees in listed Swedish companies. Collaboration initiatives and partner-led dialogues SEB Investment Management is a signatory of or has joined more than 20 collaboration initiatives focusing on various themes and issues, together with other investors. Among these are the UN PRI, the Institutional Investors Group on Climate Change (IIGCC), the CDP and the Investors Policy Dialogue on Deforest- ation (IPDD). These engagements are reviewed and evaluated on a case-by-case basis by SEB Investment Management’s sustainability team together with relevant investment teams to ensure the objectives are aligned with our priorities and those of our customers. Federated Hermes EOS is one of the world’s leading organisations within corporate engagement, maintaining SEB is one of the largest institutional investors in the Nordic region. As an asset manager, we have high ambitions to contribute to sustainable development by investing in companies and other assets that can contribute to the transition to a more sustainable economy, meeting the expectations and requirements from customers and regulators. 1) Baseline year 2019. 50 — SEB Annual and Sustainability Report 2021 Sustainability report — Focus areas continuous dialogues with corporate executives. During the year, Federated Hermes conducted more than 2,700 dialogues on various sustainability-related issues on behalf of SEB and other investors. Our collaboration with the IIGCC is part of the Climate Action 100+ initiative. The aim is to influence the 167 companies that account for the largest carbon emissions globally. BP, Rep- sol and Royal Dutch Shell are among the companies that in re- cent years have made long-term climate-related commitments. In 2021 SEB Investment Management was engaged in the CDP’s water programme, urging companies to disclose environ- mental data on climate change, deforestation and water secu- rity. SEB Investment Management is also actively focusing on matters related to biodiversity. As an example, the matter was raised through the IPDD where SEB Investment Management discussed sustainable land use and management of natural resources with the Brazilian government, with the aim to combat accelerating deforestation. Impact investments Starting in 2013, SEB Investment Management has been a pioneer in offering microfinance funds and is today one of Europe’s largest managers of this type of impact funds. SEB Investment Management launched its ninth microfinance fund in 2021, and through the local microfinance institutions, the current funds reach nearly 20 million entrepreneurs in 55 developing countries with more than SEK 7bn in total assets under management 1) . In 2021 SEB Investment Management launched the Global Climate Opportunity Fund – a thematic fund focusing on compa- nies that are assessed to have solutions to global climate chal- lenges. The fund is classified as “dark green” according to the EU’s Sustainable Finance Disclosure Regulation (SFDR), which means that it has sustainable investments as its goal, see p. 58. SEB’s Impact Opportunity Fund also works with impact investments, but with a broader mandate to invest in various sectors with a positive impact on sustainable development and the environment. The Lyxor SEB Impact Fund invests in companies that, through their products or services, offer innovative solutions to environ- mental or social challenges. The fund invests in five focus areas, including sustainable energy and resource efficiency. The SEB Global Equal Opportunity Fund, launched in 2021, is a thematic fund that invests in companies that outperform peers in terms of gender equality and diversity in their organisations. The fund also invests in companies delivering services or prod- ucts that directly or indirectly support equal opportunities from a gender perspective. SEB Investment Management assets under management 31 December 2021 Have sustainable investments as their objective (article 9) 2% Promote environmental and social characteristics (article 8) 80% Other 18% 831 SEB Investment Management assets under management, SEKbn 20 million entrepreneurs are reached by microfinance loans 1,250 Number of companies engaged with SEB Life and Pension SEB’s life insurance company offers insurance and savings solu- tions for customers mainly in Sweden and the Baltic countries. Sustainability is integrated into the investment process through close collaboration with SEB’s asset management organisation with resources that are dedicated entirely to working with sustainability and active ownership. In 2021 several new investments were made within SEB Traditional Insurance, offered by the Swedish life insurance company. Among the examples are an investment in infrastruc- ture that focuses on technology for fossil-free energy. The aim is to support the transition to lower carbon emissions in sectors such as transport and the industrial sector. Another example is an investment in unlisted companies whose main purpose is to find solutions to environmental and climate challenges, but also to matters such as food waste, health and education. 1) Includes the Impact Opportunity Fund. SEB Annual and Sustainability Report 2021 — 51 People and community Respecting human rights and labour rights is part of SEB’s responsible business practice. We believe in equal rights for children, women and men, and that diversity is a resource that is to be supported, respected and applied. Equal rights and opportunities shall be supported irrespective of gender, national or ethnic origin, religion or belief, age, transgender identity or expression, sexual orientation or disability. Inclusion and diversity Inclusion and diversity are high on SEB’s agenda, not least with respect to our employees, and we strive to be a role model in all countries in which we operate. SEB has an Inclusion and Diver- sity Policy in place, and we work in a structured way to actively recruit women to leadership roles, promote equal pay, recruit, develop and promote people with an international background, and increase diversity within teams and management groups. Through clear routines we ensure a wide selection of appli- cants when positions are to be appointed, we set key perfor- mance indicators and targets at the senior managerial level, and we continuously monitor our progress. Our aim is to ensure diversity in SEB’s talent pool and in succession planning for people who in the future are relevant to the bank’s various managerial roles. In 2021 a new recruitment system was introduced, based on various tests to match the right person to the right role. Instead of information about a person’s background, gender and age, the manager receives the results from the candidate’s test and can therefore make a more objective assessment. Mandatory training in the prevention of sexual harassment was also introduced for everyone who works for SEB. The pur- pose is to increase knowledge about what can be considered as sexual harassment and give employees tools to act if something were to occur to oneself or a colleague. At year-end, 93 per cent of all employees had completed the training. Moreover, we became a member of Diversity Charter Sweden, a non-profit organisation that works to promote diversity in the workplace. Building competence among employees We have a strong focus on expanding sustainability competence among employees. In collaboration with Stockholm Resilience Centre, SEB offers a training on climate change, which is man- datory for our 15,500 employees globally. In 2021 we also introduced a sustainability training for employees working with private customers as well as small and medium-sized corporate customers. The training aims to lay the foundation for sustain- able finance knowledge from an ESG perspective with a key focus on sustainability risks and opportunities and the changing regulatory environment. For several years we have also been offering training in sustainable finance, developed by SEB in collaboration with the United Nations. Through continuous learning we aim to ensure that employees have the skills needed to perform and develop. In doing so we have been able to avoid major reorganisations with redundan- cies as a result. In situations where lay-offs for organisational reasons must be implemented, SEB in Sweden works according to a process that is regulated in collective agreements with the trade unions. Health and work environment SEB works long term and preventively to ensure a safe and healthy workplace where employees have a good balance be- tween work and private life. In 2021 a new global employment policy was introduced. A majority of all employees can now choose to work from home for up to two days a week. During 2021, another year marked by the Covid19 pandemic, sick leave at SEB in Sweden remained low, at just below three per cent. SEB offers a range of measures to promote both mental and physical health among employees, including digital training sessions and lectures on mental health. For a number of years, we have also been offering employees the opportunity to speak anonymously with a psychologist, free of charge. SEB is committed to having a social impact to enable people and communities to prosper and grow. Through our expertise, products and services we have direct and indirect impacts on employees, customers, portfolio companies and suppliers. Sustainability Key Performance Indicators (KPIs) linked to remuneration SEB recognises the importance of aligning incentive structures with its sustainability ambitions. The bank has group-wide as well as specific goals for the various divisions and units, targeting environmental, social and governance areas, for example carbon emissions, diversity and regulatory compliance. Sustainability KPIs are integrated in the allocation process of long-term incentive structures for members of SEB’s Group Executive Committee (GEC), for managers who report to GEC, as well as for other eligible positions. SEB aims to integrate the bank’s updated ambitions and goals (see p. 46) into evaluations of SEB’s senior managers. For more information on SEB’s remuneration principles, see p. 106. 52 — SEB Annual and Sustainability Report 2021 Sustainability report — Focus areas Human rights risks in our business SEB assesses the risk for human rights violations in accord- ance with the group’s Human Rights Policy and international agreements. We aim to avoid causing, contributing to, or being directly linked to adverse human rights impacts, and we strive to identify and assess areas where we could po- tentially have a negative impact in financing or investments through our business relations. A customer with low human rights ambitions, that might expose people to, for example, danger or violations, could in addition to the risk of causing negative impacts on human beings present a credit risk for the bank. There is also high reputational risk associated with investing in such compa- nies. This type of risk is to be assessed and monitored in the credit and investment processes. SEB Investment Manage- ment has strict criteria for how its actively managed funds are to relate to holdings that verifiably breach international norms regarding human rights criteria. Our approach to child labour and forced labour SEB is committed to the principles of protecting children and other vulnerable groups from any form of exploitation, including child labour and forced labour. We acknowledge that we, through our business activities, have a potential impact on child labour and forced labour issues. We strive to identify and mitigate our exposure to risks related to these areas and to influence our customers and portfolio companies to have appropriate labour policies and monitor- ing systems of sufficient quality. We are also a member of the Swedish Financial Coalition against Commercial Sexual Exploitation of Children which seeks to prevent and impede payments associated with child abuse through the Swedish financial system. Mandatory training completed, % of all employees, 2021 0 40 20 60 80 100 Sexual harassments Climate change General Data Protection Code of conduct Cyber security Fraud prevention Anti-money laundering Labour law and trade unions Cooperation with employee representatives of trade unions and works councils, for example, is an integral part of daily opera- tions and something that is encouraged. We cooperate through the European Works Council (EWC) and with local employee representatives. In Sweden, SEB cooperates with the trade unions at the workplace, at both the divisional and group levels. Trade unions are represented on SEB’s board. We adhere to a number of industry-wide collective agreements, and we have entered into local collective agreements to regulate conditions for employees in several countries where we operate. Gender distribution (men/women), % Top senior management 1) 5644 All managers 5248 Board of Directors 5644 Men Women 1) Includes the Group Executive Management (GEC) and managers who report directly to GEC. SEB Annual and Sustainability Report 2021 — 53 Business ethics and conduct It has always been a priority for SEB to maintain the highest standards of business ethics and we strive to continuously improve processes and procedures. We are guided by global initiatives and international standards, and over the years we developed own documents that steer and support our work. Code of Conduct SEB’s Code of Conduct describes SEB’s way of working, the bank’s values, ethics and standards of business conduct and provides guidance on how employees are to abide by these values. The Code covers all employees of the SEB Group – in all markets where we operate – and helps employees in their efforts to build enduring relationships with customers and other stakeholders. Training in SEB’s Code of Conduct is mandatory for all 15,500 employees. See sebgroup.com Customer data ethics In 2021 SEB adopted a Customer Data Ethics Policy, which sets the framework for responsible handling of customer data, data-driven innovation and the use of artificial intelligence. The policy consists of eight principles for responsible business development and innovation that aim to protect customers and ensure confidence in the bank. These principles aim to safeguard human rights, protect customers and ensure that customer data is handled in an ethical and responsible manner in the continuous development of SEB’s services and offering. See sebgroup.com Protecting privacy is of utmost importance to SEB when pro- cessing customers’ personal data. Our customers should always feel safe in their relationship with SEB and in the processing of their personal data. We therefore always make sure that we process information provided by customers correctly and in compliance with applicable confidentiality and personal data protection regulations. Furthermore, we always require that persons who are charged with the handling of personal data on our behalf undertake by written agreement to observe a duty of confidentiality and SEB’s strict IT-security requirements. Anti-corruption SEB works actively to prevent the risk of being used for corrup- tion in line with applicable rules and regulations as well as its own internal rules and ethical standards. SEB does not engage in or tolerate unlawful or unethical business practices, and does not tolerate involvement in or association with corruption under any circumstances. In 2021, SEB adopted an Anti-Corruption Policy, which sets the framework for anti-corruption meas- ures in SEB and establishes principles for analysing the risk of corruption and measures to prevent corruption. Furthermore, the policy establishes principles for managing corruption risks associated with intermediaries and other third parties. SEB’s employees are required to comply with relevant external and internal restrictions pertaining to giving and accepting gifts and business entertainment, in order to avoid allegations of bribery or corruption. Position on lobbying and unethical influence SEB has strict guidelines for unethical influence, whether within business or society. All actions and decisions are to be in com- pliance with laws, regulations and other external rules as well as with internal instructions and policies, such as SEB’s Code of Conduct. We may not support political parties through donations or otherwise. Whistleblowing SEB has a whistleblowing process for reporting irregularities. Employees or other persons who suspect potentially unethical or unlawful behaviour are to report their observations. Reports can be made completely anonymously via the digital service WhistleB. This service is entirely independent from SEB and meets the most stringent security requirements regarding encryption, data security and protection of the whistleblower’s identity. All reported incidents or circumstances are promptly investigated and, when applicable, reported to the bank’s CEO and the Audit and Compliance Committee. Our approach to tax In SEB’s business, tax management and tax governance are rele- vant and important. With operations in more than 20 countries, SEB acknowledges the changing landscape around tax from both regulators and society and puts strong efforts in securing compliance with applicable tax laws and regulations. The bank strives to maintain high standards for tax governance, monitor- ing risks and ensuring tax compliance. Products and services offered by SEB impact the tax situation for SEB and its customers and must always have business ra- tionale. SEB must not use, encourage or facilitate – nor cooper- ate with external parties to facilitate – products or services that are in conflict with tax legislation or anti-tax avoidance law. SEB has policies and procedures in place, and works active- ly with risk assessment, frameworks and controls, to ensure compliance with applicable tax laws and regulations related to its business. SEB is committed to meeting expectations on transparency in respect of its tax management. The Tax Policy is adopted by the Board and is reviewed annually. 2019 4,717 2020 4,100 2021 5,441 SEB’s income tax expense, SEKm 54 — SEB Annual and Sustainability Report 2021 Sustainability report — Focus areas Trust in the financial system is crucial for SEB to do business that benefits customers, shareholders, economic development and society at large. The environment SEB Annual and Sustainability Report 2021 — 55 Involving stakeholders In the development of the Environmental Policy, SEB organises stakeholder meetings with actively engaged civil society organisations to get technical input and insights on the relevant challenges and priorities that are identified in the impact analy- sis that is described on p. 45. SEB has also joined the network Business@Biodiversity Sweden, to gain further knowledge that can be integrated into the work with biodiversity in product development and risk management. SEB’s direct environmental impacts SEB has a responsibility and works actively to reduce its direct environmental impacts. Since 2008 we have been measuring our carbon emissions from energy consumption, use of paper, company cars and business travel. From 2021 we also measure our carbon emissions from waste. We have set the following direct CO targets: 2021 2025 2030 Net zero CO emissions onwards Absolute reduction of CO emissions by 66% (compared to 2008) Absolute reduction of CO emissions by 75% (compared to 2008) Near zero absolute CO emissions 2045 To achieve these targets SEB will: • improve energy efficiency of operations and buildings • use renewable energy in buildings owned or rented by SEB • reduce business travel by using alternative meeting formats and reduce travel-related fossil emissions • shift to an electrified fleet of company cars • work together with suppliers to minimise SEB’s broader carbon footprint • provide transparent reporting on SEB’s emissions profile and the actions SEB undertakes to manage and mitigate emissions. SEB is a signatory to the CDP. In 2021 we continued to see the effects of the Covid19 pandemic, mainly on business travel, which more than halved in terms of carbon emissions compared to 2020. SEB’s total carbon emissions decreased by almost 4 percent from 9,734 tonnes in 2020 to 9,389 tonnes in 2021, which is significantly below the bank’s target of limiting emissions to 17,000 tonnes 5 percent by 2025. The long-term ambition is to reduce own carbon emis- sions to close to zero in 2045. In 2021 SEB acquired emission rights corresponding to 5,000 tonnes, compensating for part of the direct emissions measured in 2020. SEB achieves the goal to become climate neutral for 2021, through climate compensation. Emission rights are acquired during 2022. At SEB we address environmental aspects in our financing and investment activities as well as in managing our direct impacts. Our environmental responsibility concerns the impact that we or our business partners have on living and non-living natural sys- tems, including ecosystems, land, air and water. We are aware of and develop our abilities to manage impacts on the environment as well as the risks and opportunities that a changing environ- ment may entail for us and our customers. In order to better address SEB’s impact on climate, fresh water and biodiversity we continuously develop policies related to this area. In late 2021 and early 2022 SEB worked with developing and updating its Environmental Policy with the aim to adopt it in the spring. Interconnection of three areas The interconnection between climate change, fresh water and biodiversity is inseparable, with significant impacts on society. Extreme weather events and changing habitat structures caused by climate change, are having an impact on various spe- cies. Conversely, biodiversity contributes to ecosystem services that support climate change adaptation and mitigation. The same interconnection applies to fresh water, vital as drinking source for flora and fauna, which can impact climate and biodi- versity through for example evaporation and absorption effects. Climate Biodiversity Fresh water The aim of SEB’s Environmental Policy is to set the principles and approaches for managing environmental factors in financing and investments, primarily through sector policies. With the policy we acknowledge our role as a financial intermediary, our potential impacts and our position in each of the focus areas. Furthermore, we express what we expect from the companies in sectors with potential significant impact and how we aim to assess and engage with the customers in order to support a transition. SEB aims to further develop its methodologies to integrate climate, fresh water and biodiversity considerations in business decisions as well as explore the integration of more environmen- tal areas in the policy. See our Environmental Policy at sebgroup.com See Sustainability notes, p. 208. Board of Directors President and Chief Executive Officer Group Executive Sustainability Committee SEB’s External Sustainability Advisory Board Group Risk Committee Sustainable Banking Large Corporates & Financial Institutions Corporate & Private Customers Baltic Private Wealth Management & Family Office Life Investment Management Advising SEB, upon invitation by the President. See p. 101. Sustainability governance Strong and effective governance is important for successful progress. SEB has created a robust sustainability governance model that, with clear roles and mandates on different levels, covers the economic, social, environmental (including climate), and ethical dimensions of the business. This model determines how we set our strategy and work to implement it in practice. The strengthened sustainability organisation, Sustainable Banking, is now well established, and since 2021 designated sustainability managers have been appointed in all of SEB’s home markets. The Board of Directors is ultimately responsible for establishing a strategy for corporate sustainability and an organisation to execute this strategy. SEB’s sustainability endeavours are an integral part of the business and are regularly included on the Board’s agenda, together with an annual review of policies and instructions. The Board approves SEB’s strategy and business plan, including sustainability considerations, the Corporate Sustainability Policy, thematic policies and the Sustainability Report. Sector policies are approved by the Board’s Risk and Capital Committee. The President and Chief Executive Officer (President) is responsible for execution of the sustainability strategy and implementation of the governance structure set by the Board. At the executive level, sustainability issues are handled within the Group Executive Sustainability Committee (GESC), chaired by the President. The GESC is a group-wide decision-making body that addresses matters related to corporate sustainability activities in SEB. The Group Risk Committee (GRC), also chaired by the President, is a group-wide decision-making body that addresses all types of risk at the group level, including sustainability and reputational risks. The Chief Sustainability Officer is a member of the extended Group Executive Committee (GEC), the GESC and GRC, and is also Head of Sustainable Banking. This is a first-line, operational body in the SEB Group that gathers SEB’s expertise and takes a holistic approach both strategically and commercially. As a bank we have a responsibility for how we conduct our business, what we finance and what we invest in. With a clear governance structure, internal policies and in line with our commitments we ensure that our efforts are implemented throughout the group. Sustainable Banking is responsible for coordinating and driving the overall sustainability agenda in close collaboration with the divisions, group staff and support functions. Assessment of new products Administrated by Sustainable Banking, the Sustainability Product Committee (SPC) centralises assessments of new products. The SPC decides on the right for SEB units to use any sustain- ability reference in the marketing or distribution of products or services, such as, reference to ESG (Environmental, Social, Governance) factors, the UN Sustainable Development Goals and the EU Taxonomy. The Environmental and Sustainable Product Steering Committee (ESPSC) is a sub-committee of the SPC and decides on the eligibility of assets for the SEB Group’s sustainability-related funding programmes. Procedures and controls Each Head of Division, Head of Group Support function and Head of Group Staff function is responsible for ensuring that procedures and controls are in place to implement and follow up sustainability objectives, and that strategy and policies set by the Board, the President and the GESC are adhered to. The Sustainability Business Risk Committees in the divisions assess and decide on new customers or transactional proposals from a sustainability risk perspective before bringing the onboarding or transaction for decision by the relevant decision-making body. Sustainability governance in SEB Investment Management The subsidiary SEB Investment Management is a division and is included in SEB’s governance structure. As a subsidiary, the fund company is a separate legal entity with its own board of directors. The company operates in accordance with the Sustain ability Policy for SEB Investment Management and Principles for Shareholder Engagement for SEB Investment Management. Within the executive management team, the Head of Sustain ability and Governance is responsible for developing and coordinating this work, including climate change. 56 — SEB Annual and Sustainability Report 2021 Sustainability report — Sustainability management SEB’s sustainability policy framework covers the Corporate Sustainability Policy, thematic policies and sector policies. The framework provides guidelines on best practice and on the international conventions and standards that the bank encourages companies to follow. Overall framework Corporate Sustainability Policy Corporate Sustainability Governance Instruction Sustainability Policy Implementation Instruction Environmental Policy Human Rights Policy Thematic policies Mining and Metals Renewable Energy Shipping Forestry Fossil Fuels Arms and Defence Transportation Tobacco Gambling Sector policies Sustainability policy framework The Corporate Sustainability Policy defines the framework for sustainability in SEB and provides a governing platform for our sustainability work for all business decisions, including invest- ment and credit decisions. The thematic and sector policies primarily take a risk-based approach to address sustainability in financing and investment activities. The framework is reviewed annually in order to strengthen the business and in line with regulatory, technological and indus- try-specific development. In 2021 SEB made a major revision of the Sector Policy on Fossil Fuels, and also updated the Policy on Mining and Metals. The Environmental Policy, covering climate change, fresh water and biodiversity, is adopted in spring 2022, after a major review. The policies on Forestry, Renewable Energy and Shipping were also updated. Moreover, SEB published its first Sector Policy on Transportation. See p. 55. Other group policies SEB has several other group-wide policies that guide our employees in relation with customers as well as with colleagues. Examples include: • Code of Conduct See p. 54 • Customer Adoption Standards (CAS) See p. 89 • Anti-Corruption See p. 54 • Customer Data Ethics Policy See p. 54 • Inclusion and Diversity Policy See p. 52 • Modern Slavery Act See sebgroup.com • Tax Policy See p. 54 Sustainability commitments SEB has committed to numerous international codes and agree- ments and signed frameworks that guide the work of the bank. Among the international agreements that SEB supports are the Paris Agreement, the UN Sustainable Development Goals (SDGs), the Universal Declaration of Human Rights, and the UN Guiding Principles on Business and Human Rights. For the full list, see sebgroup.com SEB has joined or publicly endorsed (year of signature): • The UN Global Compact 2004) – a framework for companies to implement sustainability principles on human rights, labour rights, the environment and anti-corruption. • The UNEP FI Principles for Responsible Banking 2019) – a sustainability framework for banks to positively contribute to society by integrating the Paris Agreement and SDGs in objectives and business processes. See p. 45. • The Net-Zero Banking Alliance, NZBA 2021) – SEB is a founding signatory of the NZBA, which aims to accelerate the transition of the global economy to net zero emissions by 2050. • Net Zero Asset Managers initiative 2020) – commitment to support the goal of net zero greenhouse gas emissions by 2050. • Task Force on Climate-related Financial Disclosures, TCFD 2018) – recommendations for voluntary climate-related financial disclosures. • The Principles for Responsible Investments, PRI 2008) – the UN-supported six investment principles for incorporating sustainability aspects into investment practice. • The Equator Principles 2007) – voluntary framework for lenders and borrowers in project finance. • The Poseidon Principles 2020) – a framework to promote international shipping’s decarbonization. • Responsible Ship Recycling Standards 2021) – a bank initiative for ensuring environmentally and socially responsible dismant- ling and recycling of ships. SEB Annual and Sustainability Report 2021 — 57 EU Taxonomy reporting For credit institutions the main Taxonomy-related key performance indicator will be the Green Asset Ratio, GAR, which shows the share of Taxonomy-aligned assets. Such as- sets are defined as assets which fulfill the Taxonomy criteria, including substantially contributing to at least one of the six environmental objectives stated in the Taxonomy regulation. Full GAR-reporting is required from 2024, for financial year 2023. For financial year 2021, credit institutions are required to, among other things, report the share of Taxonomy-eligible and non-eligible assets to total assets. Taxonomy-eligible assets relate to economic activities covered by the Taxonomy environmental objectives, which have the potential of being defined as Taxonomy-aligned based on future undertaking/ investee Taxonomy reporting. Credit institutions’ mandatory Taxonomy disclosures should be based only on information reported by undertakings/issuers. Since non-financial under- takings will start reporting in accordance with the Taxonomy regulation in 2022, financial institutions have limited access to such information. However, public information and customer knowledge may be used to voluntarily disclose Taxonomy- eligible assets. SEB’s Taxonomy reporting covers the SEB Group, including life insurance business. The 2021 mandatory report includes household mortgage loans identified as Taxonomy-eligible assets, based on the underlying collaterals (real estate). Other assets, Taxonomy eligible or non-eligible, can be identified based on taxonomy reporting provided by undertakings/ issuers only from 2022 onwards. Voluntary Taxonomy report For SEB’s voluntary Taxonomy report, see p. 209. EU regulatory development To achieve the commitment set out in the EU Action Plan on Sustainable Finance, a number of interlinking regulations have been enacted to redirect capital flows to a sustainable economy. The EU classification system, the Taxonomy Regulation, provides definitions of sustainable economic activities, and specifies reporting requirements on the proportion of environmentally sustainable economic activities in businesses, investments or lending activities. SEB is integrating the EU Taxonomy into its busi- ness strategy, processes and procedures (such as in the updated Green Bond Framework and the Customer Sustainability Classifi- cation model) and in product development and customer advice, for financing and investments (see p. 22, 45, 49, 56, 62, 64). SEB is incorporating the sustainability reporting requirements in accordance with the current Taxonomy disclosure delegated act (see Taxonomy mandatory report below and Taxonomy Voluntary report on p. 209). As the availability of taxonomy-related data increases, banks and other financial institutions will be able to pro- vide complete taxonomy reporting on their assets, including the Green Asset Ratio (GAR) and the Green Investment Ratio (GIR). Sustainable Finance Disclosure Regulation (SFDR) The SFDR is designed to make it easier for investors to distinguish and compare sustainable investment strategies and provide greater transparency on the degree to which financial products have sustainable characteristics or objectives. The first part of the regulation came into force in 2021, and at year-end all funds managed by SEB Investment Management were categorised based on whether the fund has sustainability as its objective (Article 9 or dark green), promotes sustainable characteristics (Article 8 or light green) or does not integrate sustainability- related considerations into investment decisions (Article 6 or grey). SEB has included information in its fund lists and has intro- duced new web pages to help its customers understand, compare and monitor sustainability characteristics in SEB’s fund offering. EU Platform on Sustainable Finance The EU Platform on Sustainable Finance is an expert group with the mandate to advise the EU Commission on development and application of the EU Taxonomy. SEB is one of two European commercial banks represented in the platform. SEB has actively worked with the Nordic and Baltic banking associations and their members to share the latest public information about progress and gather views regarding the development of the Taxonomy. The members of the platform advise the EU Commission in the following areas, among others: • development of a taxonomy for the remaining four environ- mental objectives (in addition to climate mitigation and adaptation) – biodiversity, water and marine resources, pollution prevention and control and circular economy • the conceptual framework for an extended taxonomy including the disclosure of activities that are harmful or have low environmental impact • the conceptual framework for a social taxonomy. Assets Assets SEKm 2021 Share of total assets, % Exposures to Taxonomy-eligible assets 1) 618,756 19 Exposures to Taxonomy non-eligible assets 1) – – Exposures to central governments, central banks and supranationals 492,093 15 Derivatives (hedge accounting) 973 0 Exposures to non-NFRD undertakings 1) 2) – – Trading portfolio (incl. derivatives excl. hedge accounting) 350, 692 11 On demand inter-bank loans 6,745 0 Mandatory EU Taxonomy report 1) Reported only to the extent data is reported for the underlying economic activity. 2) EU Non-Financial Reporting Directive, requiring Sustainability reporting for certain large companies ( > 500 employees). 58 — SEB Annual and Sustainability Report 2021 Sustainability report — Sustainability management Customers For corporate customers, sustainable finance became increas- ingly important in advising, products and services. Customers appreciate that SEB has been a strong financial partner through the pandemic. However, they expressed some frustration about the administrative burden banks put on them with thorough know-your-customer (KYC) and anti-money laundering pro- cesses. SEB earned the top rating in the Prospera survey on sustainability advice (published in 2021 and 2022) among large corporates and financial institutions in the Nordic region. Private customers in Sweden are highly engaged in sustain- ability. More than 7,000 customers responded to SEB’s annual sustainability survey. They cited climate change, clean water and sanitation, and biodiversity as areas they want SEB’s fund company to prioritise in its engagement work. Moreover, cus- tomers appreciated the improved services in the mobile bank app as evidenced by high usage. Investors, shareholders and analysts The effects of the pandemic continued to be in focus among investors, shareholders and analysts, however more from a point of economic recovery, both in terms of increased revenue momentum and how net expected credit losses would evolve in 2021 and 2022. With the lifting of dividend restrictions in autumn 2021, capital repatriation was a frequently discussed topic. SEB paid an additional ordinary dividend in November, and also initiated a share repurchase programme. The strong inflow of deposits and its effect on SEB’s funding mix and funding plans was a topic among both equity and debt investors. Sustainability remained high on the agenda. Employees SEB’s employees are engaged, have great confidence in SEB’s future and management, and feel that they can speak their minds, develop, and contribute to change. Among areas of improvement, employees noted cross-functional collaboration, communication in connection with decision-making and further Engaging with stakeholders We engage with key stakeholders to ensure that we prioritise the most important issues. Among all our stakeholder groups, strong focus was on sustainability, especially on climate, change during the year. improvement of the customer experience. A survey associated with the pandemic showed that employees generally felt well-supported, knew how to prioritise their tasks, and felt that the bank had taken big steps forward in technology and collaboration tools. See p. 26. Society – regulators, media and NGOs SEB is engaged in continuous dialogues with regulators and supervisors at the national and international levels, through bilateral and multilateral meetings and in various industry forums. Topics of focus during the year included, among others, anti-money laundering, customer protection and sustainability, such as integration of sustainability and climate risk in process- es and disclosures. We had dialogues with non-governmental organisations (NGOs), consumer advocate groups and the media through direct dialogues, local engagements, round table dis- cussions and press conferences. In 2021, among both the media and NGOs, strong focus was on our approach to climate change and fossil fuels, while the engagement on biodiversity increased among NGOs. In the media the pandemic remained a key topic, with focus on the economic recovery and the return to the workplace. Also, fraud and crime prevention were in focus. Our suppliers SEB has established procedures to evaluate and select suppli- ers and contractors, based on financial, environmental, social and governance aspects. These aspects include environment, labour practices and human rights, fair business practices and sustainable procurement. These are to be taken into account in procurement decisions along with other risk factors and commercial aspects. We monitor suppliers’ processes and performance where appropriate. These standards are described in SEB’s Code of Conduct for Suppliers. To identify sustainability risks among our suppliers, SEB starts with an initial assessment. The sustainability risk level for each supplier is determined by country, industry sector and business criticality. Suppliers that are identified as having a potential elevated risk level in the risk assessment are subject to an enhanced assessment. In 2021 SEB’s Group Technology strengthened its screening of approximately 30 key suppliers with deeper assessments and enhanced ESG requirements on their products and services. During 2022 an updated tool for the initial assessment will be launched. The tool will also enable a wider portfolio review. SEB Annual and Sustainability Report 2021 — 59 Public administration (SEK 83bn) Corporates SEK 1,473bn Real estate SEK 414bn Households SEK 756bn Climate risk strategy With this report we aim to provide a transparent overview of our strategy for reducing the bank’s climate impact and share our risk management process for identifying, assessing, and man- aging climate-related risks. The report is prepared based on the TCFD recommendations and covers the SEB Group including the subsidiary SEB Investment Management (the fund company). The fund company’s climate report is presented on p. 69. SEB is uniquely positioned to contribute to the transition SEB aims to contribute to a more sustainable society by sup- porting our customers and portfolio companies in meeting their climate-related goals. We do this by offering innovative and sustainable financing, advisory and investment solutions. As a bank we have an important role to play in channeling the vast investments required to make the transition happen. One of the most important challenges for tackling climate change is the transformation of large industrial companies in sectors with a material carbon footprint, such as power gener- ation, transportation, and construction. As a long-term major financial partner to large Nordic companies and a prime Nordic asset manager, SEB is uniquely positioned to support customers in this transformation. We also participate in the transformation of small- and medium-sized corporate customers. We believe that we can add value to customers in this segment as well by leveraging our experience from working with the transformation of large corporates. SEB is uniquely positioned to contribute to the transformation due to its position as a large corporate bank SEK 2,726bn credit portfolio as per 31 Dec. 2021 Our climate change strategy includes engaging in active dia- logues with customers, and in return we expect our customers to be transparent and share their transition plans and progress. SEB believes that engagement and inclusion are the best ways to achieve the necessary transformation. However, SEB orderly phases out engagements where convictions do not align. Ambitions and goals SEB has defined three new climate-related ambitions and goals, including laying out a path for the reduction of our fossil fuel credit exposure and at the same time setting growth ambitions for our sustainable products, advisory services and invest- ments. The goals are presented in more detail on p. 46. The metrics can be summarised as follows: • Carbon Exposure Index – The Brown: Measuring the fossil fuel credit exposure within the bank’s energy portfolio • Sustainability Activity Index – The Green: Measuring volumes for sustainable financing, sustainable finance advisory, ven- ture capital investments within greentech, and Article 9 finan- cial investment products’ share of assets under management • Transition Ratio – The Future: Assessing our customers’ climate impact and alignment with the Paris Agreement, by classifying our credit portfolio using our internal Customer Sustainability Classification model. These ambitions and goals will be followed up and reported on an annual basis. 60 — SEB Annual and Sustainability Report 2021 Sustainability report — Climate report Climate change is accelerating and has become the greatest and most urgent challenge of our generation. SEB is committed to aligning its strategy with the Paris Agreement and contributing to the transition to a low-carbon society. As a bank, we have both a responsibility and the ability to create financial solutions that accelerate the transition while supporting our customers. During 2021, we intensified our efforts to manage risks related to climate change. Measuring our credit portfolio’s climate impact SEB’s credit portfolio from a top-down climate perspective Understanding the carbon footprint of the bank’s credit portfolio is the starting point for taking action on climate change and setting meaningful strategic targets. As illustrated in the chart below, SEB has categorised its corporate and real estate credit portfolio into industry sectors. The industry sectors have there- after been sorted into four categories based on their average carbon footprint: 1. Sectors with a material carbon footprint. This includes sec- tors such as power generation, transportation, automotive, construction, and agriculture. 2. Sectors with a slight carbon footprint, such as real estate, capital goods, pulp and paper as well as wholesale and retail. 3. Sectors with a very limited, or even positive carbon footprint, such as producers of renewable energy. 4. Sectors that are currently out of scope due to their non- material carbon footprint. The service sector is such an example. It is important to note that these categories only reflect the sectors’ average carbon footprint, and not the individual custom- ers’ footprint. Customers within the same sector have different carbon footprints depending on, for instance, the technology used and energy sources. The customers’ future climate impact may differ even more depending on their transition plans. The break-down of SEB’s corporate and real estate credit port- folio is a high-level overview of SEB’s credit exposure from a climate perspective. Breakdown of SEB’s corporate and real estate credit portfolio reflecting the sector’s carbon footprint SEK 1,886bn, representing 69 per cent of the total credit portfolio, as per 31 Dec. 2021 SEK bn 1) Production and wholesale & retail. 2) Companies with a power generation mix that is non- renewable or a mix of non-renewable and renewable. 3) Exploration and production, oilfield services and offshore. 4) Transport, distribution & storage, refining, retail and other. Credit exposure type Lending Contingent liabilities and trading products Transportation Food and beverages 1) Power generation: conventional/mixed 2) Automotive Oil & gas: upstream-related 3) Construction Chemicals Metal and mining Agriculture Oil & gas: other 4) Textiles Cement 5 6189 150 62 9734 35 5318 45 10661 31 7139 26 4014 22 3614 15 5 2712 2519 2416 8 115 6 Material carbon footprint 10880 187 5355 109 2842 70 2220 43 19 20 38 1610 26 Non-material carbon footprint Finance and insurance Services Pharmaceuticals and healthcare IT and media Telecommunications Other 1725 65 42 6 11 Positive net impact Power generation: renewables Wind turbines 55365 420 11260 172 2612 38 1616 32 126 18 512 17 145 20 Slight carbon footprint Real estate Capital goods Pulp and paper Wholesale and retail Consumer durables Power transmission Forestry SEB Annual and Sustainability Report 2021 — 61 To understand the climate impact of SEB’s credit portfolio, assets and customers are analysed from different perspectives. SEB’s credit portfolio from a bottom-up climate perspective – The Customer Sustainability Classification model To gain a more correct and granular view of our corporate and real estate portfolio’s climate impact, we have to assess each customer’s actual climate impact. For this purpose, we have developed a proprietary model: the Customer Sustainability Classification model (CSC). The CSC model assesses how aligned the customer’s business activities are with the climate objectives of the Paris Agreement. The model is used in customer meetings as a hands-on tool to discuss the customers’ transition plans. The CSC model will be a key component of both business strategy and risk management going forward. The CSC model focuses on customers in the sectors that have a material or slight carbon footprint. SEB has developed its own methodologies for assessing 32 industry sub-sectors within these two categories. These methodologies currently cover roughly 70 per cent of the corporate and real estate portfolio’s credit exposure. The methodologies draw on definitions, targets, and transition indicators set in the EU Taxonomy, the Paris Agreement as well as EU or country-specific regulations, and initiatives. To perform the assessment, SEB collects information about the customer’s baseline year and current emissions, and its short-term (5 years), medium-term 615 years) and long- term 16 years2050) reduction targets compared to baseline. This results in four data points that illustrate the customer’s transition journey. The customer’s transition journey is then compared to what the sector as a whole needs to achieve in order to reach the objec- tives of the Paris Agreement. The outcome at each data point in the customer’s transition journey is then weighted into one final overall classification of the customer. There are five customer classification categories: Sustainable: Companies with already sustainable activities and/or very limited greenhouse gas (GHG) emissions Paris-aligned transition: Companies in transition with plans aligned with the Paris Agreement target to limit global warming to 1.5°C (net zero GHG emissions by 2050) Transition: Companies in transition with plans aligned with a target to limit global warming to around 2°C (net zero GHG emissions by 2070) Gradual change: Companies in transition but with plans that are not aligned with the 2°C target Status quo: Companies with no or limited transition plans. In the chart below a fictitious customer’s transition journey between 2020 and 2050 has been plotted against what is needed for the relevant sector as a whole to achieve a Paris-aligned transition. As a result of the individual classification, a company with a credible and ambitious transition plan but active in a sector with a material carbon footprint could still be classified as in ‘transition’ or in ‘Paris-aligned transition’. 20% 0 50% 100% 2010 2020 2030 2040 2050 Baseline year 2010 Close to net zero GHG emissions 1.5°C pathway 45% reduction by 2030 vs. 2010, net zero GHG transmissions by 2050) 2°C pathway 25% reduction by 2030 vs. 2010, net zero GHG emissions by 2070) Sustainable Paris-aligned transition Transition Gradual change Status quo/not in transition Fictitious customer Sample sector transition scenarios and a fictitious customer’s transition journey 62 — SEB Annual and Sustainability Report 2021 Sustainability report — Climate report Selection of sector methodologies for the CSC model The availability and accuracy of greenhouse gas emissions data differs between companies and sectors. For large companies in sectors where regulatory thresholds are either defined or in scope for the EU Taxonomy (e.g., power gen- eration and automotive), indicators are often publicly disclosed, which allows for modelling of transition paths. For other sectors like capital goods and food processing, where emissions related to the supply chain are significant, data availability, while improving, remains limited. The table below shows which indicators are used for a selection of sectors in SEB’s model. Sector Indicators 1) Food and beverages Scope 1, 2 & 3 supply chain and transport Power generation gCO /kWh Automotive gCO /km Oil & gas gCO /MJ Construction- infrastructure Scope 1, 2 & 3 supply chain Chemicals Scope 1, 2 & 3 supply chain Steel Tonnes CO per tonne crude steel Textiles Scope 1,2 & 3 supply chain Cement Tonnes CO per tonne cement Real estate kWh/square metre Capital goods Scope 1, 2 & 3 supply chain Food retail Scope 1, 2 & 3 supply chain Pulp & paper Scope 1, 2 & 3 transport Consumer durables Scope 1, 2 & 3 supply chain 1) Scope 1: Direct emissions from sources owned or controlled by the company. Scope 2: Indirect emissions resulting from electricity, heat, or steam purchased by the company. Scope 3: Indirect emissions from sources not owned or controlled by the company, e.g. related to the supply chain. Customer sustainability classification – 2021 progress The CSC model was developed in 2020 and was tested in a pilot project comprising a large number of customers in sectors with material or slight carbon footprint. In 2021, an ambitious goal to assess 50 per cent of the total corporate and real estate credit portfolio in sectors with mate- rial or slight carbon footprint was reached. In addition, the CSC model has been integrated into the business decision process by introducing a requirement to classify customers in sectors with a material carbon footprint. To promote lending in line with SEB’s sustainability strategy and targets, an internal funding cost adjustment based on the outcome of the classification has been introduced for large cor- porate customers. New green financing (eligible based on the criteria in the Green Bond Framework) receives a discount, while a surcharge is applied to new lending that is classified as brown or orange in the model. Not all assessments result in an actual classification of the customer due to a lack of sufficient data and/or data quality issues. Of the credit portfolio assessed, 60 per cent had been classified by year-end 2021. As companies gradually improve their climate reporting, the quality and coverage of the classifi- cation will improve. Once individual customers have been classified, the results can be aggregated on a portfolio level to show the climate impact of a certain sub-portfolio (for example SEB’s automotive or power generation portfolio) or the whole corporate and real estate credit portfolio. In 2021 SEB introduced a new credit portfolio goal called Transition Ratio. This ratio shows the share of SEB’s corporate and real estate credit portfolio that is classified as dark green, light green, or yellow in the model. The Transition Ratio will be a powerful tool for setting strategic goals with the purpose to further develop SEB’s activities in line with the objectives of the Paris agreement. The Transition Ratio is described on p. 46. The most valuable outcome of the assessments so far has been the insight the process has provided into the challenges and opportunities our customers face when transforming their operations. This has enabled SEB’s client executives to engage in constructive dialogues with customers about their transition plans and to support them with advisory services and financing. Classification of customers will continue in 2022, and the long-term ambition is to expand the CSC model to cover a broad- er sustainability spectrum than climate, such as for example biodiversity and water. SEB Annual and Sustainability Report 2021 — 63 Governance and management of climate-related risks SEB’s climate risk governance is an integrated part of the sustainability governance framework. Climate risk management focuses on both physical and transition risks. Governance of climate-related risks Climate-related sector policies SEB has adopted sector policies as sub-policies to the thematic Environmental Policy, which is part of the overall sustainability policy framework. These sector policies have been developed to ensure that lending and investment decisions contribute toward fulfilling SEB’s overall sustainability ambitions. The policies clarify SEB’s expectations and restrictions for providing financial services to, and making investments in, companies involved in certain activities. As stated in the General Credit Policy, all lend- ing should be in line with the sustainability sector policies. In order to emphasise SEB’s commitment to the Paris Agree- ment, one of the principles in the bank’s Customer Acceptance Standards (CAS) states that “customers in industries with a high negative climate impact and without a credible plan to manage the transition to a low-carbon economy shall be avoided.” SEB’s CAS are described on p. 89. During 2021 SEB continued to develop and strengthen its climate-related policy framework by sharpening its sector policy for companies with activities in fossil fuels and introducing a new sector policy for companies with activities in mining and metals. These policies are based on operational guidance on sustainable practices for certain industries, provided by the Paris Agreement and the EU Taxonomy. In general, SEB expects customers and portfolio companies in these sectors to develop transition plans in line with the Paris Agreement and have public or non-public policies reflecting those plans. The bank also defines risk strategies and portfolio caps for certain sub-portfolios, which are reviewed on an annual basis. SEB’s sector policy on fossil fuels strengthened in 2021 SEB’s sector policy on fossil fuels is deemed to be the most important policy from a climate perspective. SEB has long-term relationships with corporate customers that have fossil fuel-related activities such as coal-fired power generation and oil and gas exploration and production. This customer base is largely a reflection of the national energy and industry mixes in SEB’s home markets (the Nordic countries, the Baltic countries, Germany, and the United Kingdom). However, the extraction and burning of these fuels must be gradually reduced and replaced as part of a transition to a low carbon society. SEB has therefore adopted a strategy for cus- tomers in this sector, which involves a gradual shift away from companies without a credible transition plan aligned with the Paris Agreement. Managing and reducing thermal coal exposure SEB’s policy since many years is to not provide dedicated financing to thermal coal mines. The bank also avoids entering into new business relationships with companies that operate thermal coal mines or have major business in coal-fired power generation (CFPP). With respect to existing customers SEB does not finance new projects or capacity expansion related to ther- mal coal extraction, greenfield and brownfield mine expansion, related infrastructure projects and new CFPPs, including lifetime extensions and capacity increases of existing plants. In general, providing financing to or investing in existing cus- tomers with a material share of revenues from coal mining and coal-fired power generation is avoided. By 2025, SEB will have exited current customers with more than 5 per cent of revenues from thermal coal mining or coal-fired power generation. There is a time-limited exception for Germany, where the phase-out will be completed by 2038 in line with the German Coal Phase- out Act. Managing and reducing oil & gas exposure In 2019 SEB defined a risk appetite in absolute terms for credit exposure to the exploration and production of oil & gas and oil- field services segments. The risk appetite is revised downwards on an annual basis. In 2020 the bank also put in place an exit strategy for the offshore segment. The bank’s credit portfolio of oil & gas upstream- related ac- tivities is comprised of exploration and production 70 per cent), oilfield services 17 per cent) and offshore 13 per cent), and amounts in total to SEK 53bn. SEB will not provide financing for or invest in projects and assets related to environmentally sensitive areas (such as the Arctic), and unconventional oil and gas (such as oil sands and fracking). In addition, the bank will not enter into new business relationships with companies that have more than 5 per cent of revenues from activates in these areas. Current business rela- tionships with such companies will be phased out by 2030. During the transition period, SEB aims to only work with oil companies that have the lowest scope 1 and scope 2 emis- sions and to primarily engage with existing core customers in home markets. 64 — SEB Annual and Sustainability Report 2021 Sustainability report — Climate report Implementation of sector policies to clarify expectations SEB uses three different implementation levels in its sector polices to clarify expectations and requirements for providing financial services to and making investments in companies. Implementation level Description Example Expectations Non-adherence to SEB’s expectations requires actions that over time will ensure adherence. This triggers dialogue with cus- tomers about their plans and commitments. SEB expects customers and portfolio companies to develop a Paris-aligned tran- sition plan for scope 1, 2 and 3 GHG emissions including relevant targets. Requirements Non-compliance requires active decisions on SEB’s engagement by a relevant committee. SEB requires shipping com- panies to comply with the applicable Energy Efficiency Index (EEXI or EEDI) and Carbon Intensity Indicator (CII) when applicable. Restrictions SEB restricts financial services to companies in breach of certain criteria. SEB will not provide new dedicated financing to coal mines or coal-fired power plants. Customers are screened against the sector policies with respect to the exposure and/or size of the customer and potential sus- tainability risks. See p. 57 for more information on sector policies and our sustainability policy framework. Management of climate-related risks Two climate-specific risk factors are considered in risk manage- ment: physical risks and transition risks. Physical risks arise from acute weather events, such as floods, droughts, wildfires, and storms, as well as from chronic climate changes, such as sea-level rises and changed temperature patterns. These climate changes may lead to, for example, prop- erty damage or supply chain disruptions. Financially, this can negatively impact customers’ profitability, cash flow, and asset values. In Europe, physical risks are unevenly distributed, with northern regions being more prone to flooding while southern regions are more exposed to heat stress and wildfires. Main categories of physical risks Risk driver Potential impact Horizon Acute weather events (mainly flood related in northern Europe) Lower collateral valuations in real es- tate portfolios in areas with increased flood risk. Increased default risk for companies with operating facilities in areas with elevated flood risk. Changes in chronic weather patterns Lower collateral valuations in real estate portfolios along low-elevation coastal areas. Increased default risk for companies with global supply chains. Short term < 3years Medium term 310 years Long term > 10 years To mitigate physical climate risks, a transition to a low-carbon society is necessary. For our customers, the transition itself can also be a risk. Transition risk materialises through events such as changes in policies and regulations or new disruptive technolo- gies. It can also take the form of changes in market sentiment. Depending on the nature, speed and focus of these changes, transition risks may, just like physical climate risks, pressure business models, earnings potential, and asset values. Main categories of transition risks Risk driver Potential impact Horizon Policy and regulation Surge in carbon price affecting the repayment capacity for companies in carbon-intensive sectors. Technology Rapid breakthrough in low-carbon technologies leading to stranding of fos- sil-related assets and thereby impacting both collateral values and default risks for companies in relevant sectors (e.g. energy, transportation, metals and mining, and manufacturing). Market Change in consumer preferences to low-carbon alternatives affecting business models (e.g. less air travel, less meat and dairy, energy-efficient housing, energy-efficient appliances). Reputation and litigation Increasing litigation against companies with certain environmental issues, culminating in increased costs and reputational damage affecting access to capital and thereby default risk. Short term < 3years Medium term 310 years Long term > 10 years SEB Annual and Sustainability Report 2021 — 65 Climate-related risks are integrated in existing risk frameworks SEB does not view climate-related risks as a separate risk cate- gory, but as a risk factor that drives existing risk types such as credit, market, and non-financial risk. There is an ongoing initiative to integrate climate-related risks into existing risk frameworks starting with credit risk. Transition risk Physical risk Credit risk Energy efficiency standards may trigger substantial adapta- tion costs and lower corporate profitability, which may lead to a higher probability of default as well as lower collateral values. Default risk and collateral values may be impact- ed within sectors or geographies vulnerable to physical risk, e.g. due to elevated flood risk. Market risk Transition risk drivers, e.g. carbon tax, may cause repricing of securities and derivatives for products associated with high carbon content. Severe physical events may lead to sudden repric- ing and higher volatility in some markets. Liquidity risk An abrupt repricing of securi- ties, due to asset stranding, may reduce the value of banks’ high- quality liquid assets, thereby affecting liquidity buffers. Liquidity risk may be affected if customers (e.g. insurance companies and financial institutions) withdraw large amounts of money due to extreme weather-related events Non-financial risk Changing consumer sentiment regarding climate issues may lead to reputation and liability risks for the bank. Reputational risk primarily relates to financing or investing in customers with a material climate impact. The bank’s operations may be disrupted due to physical damage to its property, branches and data centres as a result of extreme weather events. Considering transition risk in the credit process Industry transformation as well as sustainability-related risks have always been part of our credit analysis of corporate customers as well as an important factor in the credit approval process. In 2021 we further sharpened our focus on climate- related transition risks in the credit analysis. ESG specialists worked together with credit analysts to refine the methodology and to develop sector-specific guidance on the most material issues that need to be assessed for customers in sectors with material climate impact. The focus of the transition risk analysis is our customers’ awareness, readiness, and ability to manage the challenges they face. Do they understand the magnitude of these challenges and do they have credible transition plans aligned with their overall strategic goals? Have they taken tangible action to manage the challenges, such as securing funding for investments in research and development and in technology? Finally, the financial impact of these considerations is estimated and translated into a potential impact on the risk class the bank has assigned to the customer. Special attention is paid to capital expenditure needs over the next 7 to 10 years, repayment capacity, and refinancing risks. The integration of climate-related risks in credit analysis is continuously evaluated and will be expanded to more sectors going forward. A requirement was introduced during 2021 to include an explicit transition risk analysis in the credit analysis of select- ed corporate customers, specifically in sectors with material climate impact. The analysis is part of the annual review of these customers, which means that it is evaluated by the relevant credit committee and documented as part of the credit decision. At year-end 2021 the bank had completed transition risk anal- yses of customers with a combined credit exposure of approxi- mately SEK 185bn. In addition to analyses of individual companies, SEB also performs portfolio reviews of sectors facing particularly large climate-related challenges such as automotive and power generation. These reviews are presented to the Group Risk Committee and the Board’s Risk and Capital Committee, where sector-specific business strategies and risk appetite levels are defined. 66 — SEB Annual and Sustainability Report 2021 Sustainability report — Climate report Climate scenario analyses in 2021 Measuring financial risks from climate change is complex. It in- volves assessing the combined impact of physical and transition risks under multiple climate scenarios. The time perspective for climate-related risks is also much longer than in traditional credit analysis, which typically covers one to five years. In 2021 SEB continued to expand its methodologies and tools for assessing climate-related risks under various climate sce- narios. The transition risk pilot project for the oil & gas sector in 2020 was expanded to the power generation portfolio. An analysis of physical risks in Swedish residential mortgages was conducted during 2021 as a pilot project. Scenario – physical climate risks in Swedish residential mortgages Physical climate risks vary greatly across geographical loca- tions and types of hazards. In general, physical risks stemming from climate change are lower in Sweden compared to the European and global average. Flooding and rising sea levels are considered to be the most predominant sources of phys- ical climate risk in northern Europe, not least in Sweden with its 3,000 km coastline. The coastal areas in southern Sweden are more exposed than the rest of the country, since in the northern part of Sweden, the postglacial land uplift counter- acts most of the sea level rise. In 2021 a record-high rain fall caused severe flooding in Gävleborg and Dalarna counties in central Sweden. Such flooding may become more frequent in specific regions if global climate mitigating actions are insufficient. The flooding in 2021 did not cause any substantial impact on SEB’s asset quality; however, more frequent flooding could lead to falling property prices as a result of reduced demand or direct dam- age to pledged collateral. It could also lead to higher insurance costs as premiums are repriced annually, or exclusion of flood damage from general policy coverage. To better understand the potential impact of such events, SEB conducted a physical climate risk pilot project during 2021. Portfolio scope and method The key concept of the physical risk pilot is to match the location of properties SEB has financed with areas at risk of flooding and/or sea level rise in order to assess SEB’s exposure at risk and the potential financial impact. Flood and sea level rise maps from the Swedish Civil Contingencies Agency (MSB) have been used in the analysis. These maps show areas along lakes and watercourses that would be submerged in a flood that statistically occurs once every 100200 years, adjusted for future climate change, and coastal areas that will be sub- merged due to rising sea level. A conservative assumption of a two-metre sea level rise was used in the pilot, although such increase is deemed unlikely within the next century, even in a future with intensive fossil fuel use. A price decrease of at least 20 per cent of property values is assumed for flooded areas. SEB’s household mortgage portfolio amounted to SEK 594bn at year-end. Around 10 per cent of the total portfolio is located within 500 metres of the coast, indicating increased risk for both flood risk and sea level rise. However, the vast majority of coastal housing in Sweden is situated more than two metres above sea level. Results and conclusions The total gross exposure at risk of being flooded is estimated to SEK 6.3bn (approximately 1 per cent of the Swedish mortgage portfolio). The gross risk exposure is ex- tensively mitigated by insurance policies and other mitigating actions undertaken by municipalities, for example flood pro- tection infrastructure. The financial impact for SEB is there- fore deemed very limited. Next step We will continue to develop the methodology going forward, and the physical risk pilot will be extended to other regions and portfolios. Highlighted areas show where collateral is at risk of being flooded in Sweden. SEB Annual and Sustainability Report 2021 — 67 Scenario – transition risk in the power generation portfolio SEB has developed a methodology to integrate science-based climate scenarios with more traditional credit risk measure- ment approaches. The methodology was piloted on the oil & gas sector in 2020 and was expanded to the power genera- tion (electricity and heat) sector in 2021. Methodology overview SEB’s transition risk methodology is predominantly based on a bottom-up assessment to capture the fact that transition risk will affect individual counterparties differently, even within the same industry. The counterparty-specific results are then extrapolated to portfolio level. The assessment does not take into consideration any counterparty-specific transi- tion plans, but assesses the transition risks based on status quo operations. The specific power generation methodology is centered on carbon price, the generation mix of the utilities, and the over- all generation mix in the respective electricity markets. As the electricity price is set at the cost of the marginal producer, a carbon price increase would ultimately lead to a higher electricity price. Climate scenarios The climate scenario used for assessment of transition risk has been updated to the latest suite of climate scenarios from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), published in 2021. SEB has also developed customised short-term scenarios to assess a potential disorderly transition. The main scenario used in the pilot study was a sharp and unexpected increase in the EU carbon price up to EUR 150/tonnes CO . Results and conclusions SEB’s credit exposure to the power generation sector amounted to SEK 139bn at year-end. Around 20 per cent of this exposure is related to fossil-based energy production and energy-from-waste. The creditworthiness of energy utilities is generally high, with predicable cash-flows and high barriers to entry. An increase in carbon price would impact the unit costs of utilities proportionally to the carbon content of their generation mix. In the climate scenario, utilities with a high carbon intensity (such as coal and oil-based generation) would experience neg- atively affected cash-flows and repayment capacity. As SEB’s credit exposure to utilities with principal cash-flows from coal/ oil-based generation assets is very limited, the short-term credit risk impact would also be limited for SEB’s portfolio under the selected scenario. The analysis focuses mainly on the short-term impact of a carbon price shock and, as such, assumes that the system’s generation mix was held constant. In the medium- and long- term, the overall generation mix is expected to transform towards low-carbon technologies as the amplified carbon price creates strong incentives for renewable expansion. The longer-term balance sheet effects in this scenario is heavily reliant on assumptions for capital expenditures and impair- ments of legacy generation assets. The pilot project also in- cluded more advanced long-term simulations for a few chosen deep-dive cases. The results of these deep-dives indicate that a sharp increase in carbon price will lead to marginally dete- riorating credit quality over the long-run, with limited credit losses for the bank. Input Output An overview of SEB’s transition risk methodology Climate scenarios Key drivers • Price • Volume • Unit costs • Capital expenditures • Asset values Link to credit model Scenario-adjusted risk classification Company financial reports and emission data Scenario-adjusted financial statements and qualitative scores • Financial statements • Qualitative scores 68 — SEB Annual and Sustainability Report 2021 Sustainability report — Climate report Board of Directors Stockholm, 21 February 2022 Skandinaviska Enskilda Banken AB (publ) Corporate registration number 5020329081 In 2020 a strengthened Sustainability Policy was adopted by the fund company’s board of directors. The policy was imple- mented in 2021 along with a statement outlining the fund com- pany’s strategy to contribute to accelerating decarbonisation of the global economy while upholding its primary fiduciary duty of delivering positive long-term risk-adjusted returns. The fund company aims to align investments with the Paris Agreement, but aims to reach net zero greenhouse gas emissions already by 2040. In addition, the aim is to reorient capital flows to climate solutions, climate-resilient and transitionary business models, and to exit investments in activities that contribute negatively to climate change. Through active ownership and dialogue the fund company shall promote climate resilience in business models. The fund company is a member of the Net Zero Asset Manager Initiative. Managing indirect climate impact in investments Engagement and exclusion In line with the updated sustainability policy, the fund company has a strict approach to fossil fuels. All funds exclude companies that extract or process fossil fuels, including unconventional fossil fuels, such as oil sands and deep-sea drilling in particularly sensitive areas. Similar restrictions apply for power generation and distribution of fossil fuels. Exceptions can be made for companies that have clear targets and credible transition plans in line with the Paris Agreement. Direct engagement with companies on their work to limit climate change is an important tool for SEB Investment Manage- ment. Through engagement, the fund company can accelerate change and support companies to include climate-related strat- egies and practices in their business models. This is done either directly with companies or through investor collaboration. The fund company has been involved in dialogues with the world’s largest greenhouse gas emitting companies through IIGCC Climate Action 100+. See p. 51. Measuring the carbon footprint of funds Carbon footprint is one method to measure climate-related risk in funds. In 2014 SEB Investment Management started to meas- ure carbon footprint for some of the equity funds. At that time quality and quantity of data was limited. Since then data quality, methods and tools have been significantly developed. Although more companies are reporting climate-related data today, there are still limitations in what is included in the calculations and carbon footprint metrics still provide little insight into potential future exposure. From 2021 we use ISS ESG’s tool Sustainable Development Scenario (SDS). The scenario is based on World Energy Model and builds on the total remaining global carbon budget accord- ing to the International Energy Agency (IEA) distributed across industries and companies. The scenario charts a path fully aligned with the Paris Agreement: to keep the global tempera- tures rise to well below 2 degrees Celsius and pursuing efforts to limit it to 1.5 degrees Celsius and meets objectives related to universal energy access and cleaner air. In 2021 an analysis was made based on 93 per cent of SEB Investment Management’s equity and corporate bond funds investments. The output from the ISS Sustainable Development Scenario, as per 31 December 2021, indicates that the holdings in this scenario represented a temperature rise of 1.7 degrees Celsius, which is in line with the Paris Agreement. Our commit- ment and target is net-zero greenhouse gas emissions in 2040 at the latest. The measurement shows the carbon exposure at a fixed point in time, but provide little insight into the potential future exposure. See SEB Investment Management Sustainability and Active Ownership Report 2021 at sebgroup.com About the Sustainability Report The Sustainability Report covers the SEB Group, i.e. the parent company Skandinaviska Enskilda Banken AB (publ) and its subsidiaries. SEB reports in accord- ance with the Swedish Annual Accounts Act and the Global Reporting Initiative, GRI Standards, core option. The report is aligned with the TCFD (Task Force on Climate-related Financial Disclosures) and UNEP FI Principles for Responsible Banking. Areas covered include climate and environment, human rights, labour rights and social relations, and anti-corruption. The diversity policy applied for the Board is described in the Corporate Governance Report (see p. 94). SEB has published a sustainability report since 2007. This report covers the fiscal year 2021. The previous report was published in March 2021. No significant changes have been made in the scope and boundaries. SEB’s auditor EY has expressed an opinion that a statutory sustainability report has been prepared according to the Swedish Annual Accounts Act, and has performed a limited review of the sustainability report according to GRI Standards, core option. Contact: Chief Sustainability Officer, Hans Beyer, tel: 46 771 62 10 00, sebgroup.com. Climate stance in investment management SEB Investment Management (the fund company) has SEK 831bn of assets under management in SEB-labelled mutual funds and aims to reduce climate-related risks and enable a transition to sustainable and low-carbon fund management solutions. SEB Annual and Sustainability Report 2021 — 69 Report of the Directors CONTENTS Financial review of the group 71 Result and profitability 71 Financial structure 74 Profit related to business volumes 78 Divisions 80 Geographic markets 83 Markets shares and customer contacts 84 Risk, liquidity and capital management 86 Risk management 86 Liquidity and capital management 90 Corporate governance 92 Board of Directors 96 Group Executive Committee 102 Remuneration 106 70 — SEB Annual and Sustainability Report 2021 Report of the Directors — Financial review of the group interest expense. The Markets trading operations' contribution to net interest income was higher than the previous year. Net fee and commission income increased by 17 per cent com- pared with 2020 and amounted to SEK 21,142m 18,063). 2021 was characterised by higher transaction volumes, increasing asset values and gradual recovery within the card operations. The rebound of the equity and debt capital markets com- pared with 2020 had a positive effect. Corporate customers increasingly sought advisory services with regard to corporate transactions such as mergers and acquisitions or bond issues, which increased income from the issue of securities and advi- sory services by 76 per cent to SEK 1,954m. Gross lending fees increased by SEK 196m to SEK 3,200m. Also reflecting the gradual reversal from the pandemic, equity markets developed positively compared to 2020. The gross fee income from custody and mutual funds, excluding performance fees, increased by SEK 1,455m to SEK 9,328m year-on-year. Performance fees amounted to SEK 675m, an increase of 122 percent compared with 2020. The negative 2020 Covid19 impact on payment and card fees gradually reversed in 2021 as customer activity and consumption rebounded. Net payment and card fees amounted to SEK 3,512m which represented an increase of 7 per cent year-on-year. Financial review of the group SEB’s operating profit improved significantly compared with the challenging pandemic year of 2020, in line with the global economic recovery, rising stock markets and an improved sentiment. Return on equity reached 13.9 per cent. The bank's financial position is strong with a Common Equity Tier 1 capital ratio of 19.7 per cent and the Board of Directors proposes a dividend of SEK 6.00 per share. Profit before credit losses increased by 16 per cent to SEK 31,368m 26,970). Operating profit before items affecting comparability increased to SEK 30,864m 20,846). Operating profit amounted to SEK 30,864m 19,846) and net profit reached SEK 25,423m 15,746). Operating income Total operating income increased by SEK 4,897m, 10 per cent, and amounted to SEK 54,614m 49,717). Net interest income amounted to SEK 26,321m, which repre- sented an increase of 5 per cent compared with 2020 25,143). Net interest income includes regulatory fees where resolution and deposit guarantee fees increased to SEK 1,364m in total 1,248). SEK m 2021 2020 Change, % Customer-driven net interest income 26,029 27,585 6 Net interest income from other activities 292 2,442 Net interest income 26,321 25,143 5 Customer-driven net interest income mainly reflects the net in- terest income derived from loans to and deposits from the public. Customer-driven net interest income decreased by SEK 1,556m compared with 2020. Higher margins on lending compensat- ed for a net interest income decrease related to lower, mainly corporate, average lending volumes. Net interest income on deposits decreased significantly and this was mainly an internal transfer pricing effect. Customer deposit volumes increased with a partial positive effect on customer-driven net interest income. Net interest income from other activities includes funding and other Treasury activities as well as trading. This net interest income improved by SEK 2,734m compared with 2020. Internal transfer pricing effects was the main reason for the increase. During the year maturing market funding was not replaced as the bank experienced strong inflow of deposits. This lowered –5 0 5 10 15 20 25 2019 2020 2021 Net interest income SEK bn Customer loans Customer deposits Other Result and profitability Fee and commission income, gross SEK bn 0 3 6 9 12 15 2019 2020 2021 Payments, cards, structured lending, deposits, guarantees and other fees Secondary market & derivatives Custody & mutual funds New issues & advisory fees Life insurance income Operating income SEK bn 0 5 10 15 20 30 2019 2020 2021 25 Net fee and commission income Net other income Net interest income Net financial income SEB Annual and Sustainability Report 2021 — 71 In addition, the equity markets development was reflected in the net life insurance commissions in the unit-linked insurance business that increased to SEK 1,207m 1,084). Net financial income increased to SEK 6,992m year-on-year 6,275). During the year the financial markets normalised from the Covid19 effect in 2020 that led to volatility in asset prices and credit spreads. As the financial markets were less volatile than in 2020, customers' need for risk management services was lower which led to a decrease in the related net financial income. The change in market value of certain strategic holdings increased net financial income by SEK 557m, an increase of SEK 246m compared with 2020. There was a SEK 514m valuation gain relating to an agreement with Visa Inc. for the acquisition of SEB’s shares in the fintech company Tink. The fair value credit adjustment (defined as unrealised valu- ation change from counterparty risk (CVA) and own credit risk standing in derivatives (DVA)) amounted to SEK 300m as credit spreads continued to tighten leading to an improvement of SEK 511m compared with 2020. Net financial income within the Life division primarily related to the traditional life portfolios in Sweden improved by SEK 384m year-on-year. Net other income amounted to SEK 159m 236). Realised cap- ital gains as well as unrealised valuation and hedge accounting effects were included in this line item. Operating expenses Total operating expenses increased by 2 per cent year-on-year and amounted to SEK 23,245m 22,747). The cost/income ratio improved from 0.46 to 0.43. Staff costs increased by 3 per cent mainly due to increased salary expenses and social costs for long-term incentive pro- grammes which increased in line with the appreciation of the SEB share price. Reduced travel and fewer events in the wake of Covid19 among other things decreased other expenses by 2 per cent. Supervisory fees amounted to SEK 170m 141). 2021 was the last year in the business plan for 20192021. Our strategic initiatives have developed broadly in line with plan and will serve as a foundation for SEB’s activities going forward. The new cost target, relating to the business plan for 20222024, is commented upon on p. 23. Net expected credit losses Net expected credit losses amounted to SEK 510m 6,118), corre- sponding to a net expected credit loss level of 2 basis points 26). The asset quality of the credit portfolio continued to be strong. Model overlays were made in 2020 for the oil portfolio in the Large Corporates & Financial Institutions division and for potential negative Covid19 effects in the Corporate & Private Customers and Baltic divisions. These were maintained during the year on the back of continued uncertainty around the pan- demic development. A fourth wave of the coronavirus escalated towards the end of the year in many countries resulting in renewed restrictions and a prolongation or reintroduction of var- ious government support measures which may delay potential negative effects on asset quality. See further comments on credit risk on p. 87 and notes 12 and 18. Important events and trends in 2021 First quarter • SEB’s expansion plans for the Netherlands, Austria and Switzerland were announced. • The establishment of a new division, Private Wealth Management & Family Office, was decided. • A strategic, long-term partnership to accelerate the bank’s digitisation journey was entered with Google Cloud. • SEB joined the Net-Zero Banking Alliance and signed the Net Zero Asset Managers Initiative. Second quarter • Corporate customers were more active within SEB’s Investment Banking business with equity capital market activity reaching historical highs. • The continued reopening of society had a positive impact on SEB’s private card business, with card turnover back at pre-pandemic levels, while the corporate card turnover remained muted. • SEB Venture Capital signed an agreement to sell its shares in the Swedish fintech company Tink, resulting in a positive valuation effect of SEK 0.5bn. Third quarter • High activity level among large corporate customers. • SEB’s innovation studio SEBx launched its first product publicly – UNQUO – targeting the growing group of “solopreneurs”, i.e. self-employed business owners. Fourth quarter • The Swedish FSA lifted its restrictive recommendation for Swedish banks’ repatriation of capital. SEB’s Board of Directors decided to initiate a SEK 2.5bn share buyback program and proposed a further ordinary dividend. • A new sustainability strategy was set, outlining SEB’s role in the transition towards a sustainable society and setting new ambitions and goals within the climate area. • The Swedish government introduced a risk tax for nine banks and credit institutions from 2022. For SEB, which has argued that the tax distorts the competitive landscape, this results in an extra levy of SEK 1.0bn, net, in 2022 and about SEK 1.2bn a year thereafter. • The three-year business plan 20192021 closed and a new strategy, a three-year business plan and a new cost target were established. Operating expenses SEK bn 0 4 8 12 16 20 2019 2020 2021 Staff costs Other expenses Depreciation/ impairment 72 — SEB Annual and Sustainability Report 2021 Report of the Directors — Financial review of the group Items affecting comparability There were no items affecting comparability in 2021, but in 2020 an item affecting comparability was reported. See note 13. Income tax expense Income tax expense rose to SEK 5,441m 4,100) with an effective tax rate of 17.6 per cent 20.7). A number of factors affected the effective tax rate, namely the lower corporate tax rate in Sweden and certain tax-exempt gains. See p. 54 for SEB’s approach to tax and note 15. Return on equity Return on equity for 2021 improved to 13.9 per cent 9.7). Return on equity excluding items affecting comparability was 13.9 per cent 10.3). Other comprehensive income was high and increased shareholders' equity. All else equal return on equity was thereby lower. Other comprehensive income Other comprehensive income amounted to SEK 14,783m 637). The value of SEB’s pension plan assets exceeded the defined benefit obligations to the employees. The net value of the defined benefit pension plans increased which affected other comprehensive income by SEK 14,061m 1,839). The net effect from the valuation of balance sheet items that may subsequently be reclassified to the income statement, i.e. cash flow hedges and translation of foreign operations amount- ed to SEK 708m (1,132). Regulatory supervision of SEB Regulatory supervision is a part of every-day banking operations. SEB’s main supervisor is the Swedish FSA, but SEB continuously has numerous ongoing supervisory activities in all the countries where the bank operates. Far from all reviews are formally catego- rised as inspections, but nevertheless require significant resources to ensure timely responses with high quality. In 2021, there were around 54 supervisory reviews handled by SEB in Sweden, and some 47 were concluded. In the past few years, authorities have had anti-money laundering matters as a focus area, but all banking processes are subject to supervision. Long-term financial targets With the purpose of increasing capital management flexibility, the Board of Directors’ long-term financial targets are: • to pay a yearly dividend that is around 50 per cent of the earnings per share, excluding items affecting comparability, and distribute potential capital in excess of the targeted capital position mainly through share buybacks, • to maintain a Common Equity Tier 1 capital ratio of 100300 basis points above the requirement from the Swedish Financial Supervisory Authority (FSA), and • to generate a return on equity that is competitive with peers. CET 1 ratio target The targeted buffer of 100300 basis points offers SEB more flexibility to manage its capital position and to grow its business. Dividend target and share buybacks The use of a combination of annual dividends and share buybacks is intended to provide the benefit of increased financial flexibility. Share buybacks will be used for distributing excess capital. It will be considered when SEB’s capital buffer exceeds, and is projected to remain above, the targeted range based on a forward- looking assessment. Since share buybacks are conducted over time, SEB retains the flexibility to adjust the amounts, based on the current or projected financial position. Return on equity target In the long term, SEB aspires to reach a sustainable return on equity of 15 per cent. Cost target The aim is to create shareholder value – by accelerating income growth, driving earnings per share growth, increasing profitability and future-proofing the business. This will be achieved by capital- ising on SEB's position of strength and by further investing into the business, as outlined in the business plan for 20222024. The plan entails growing business in a capital-efficient manner to reach the long-term financial targets. In the short-term, the cost target for 2022 is SEK 24.5bn, assuming 2021 FX-rates. Financial aspirations for the divisions The long-term divisional aspirations for profitability (RoBE) and cost efficiency (C/I-ratio) are set mainly based on two factors. Firstly, each division will have the ambition to achieve best-in-class profitability and cost efficiency compared to similar businesses among relevant peers. Secondly, each division’s aspirations are set so that they enable SEB to achieve its long-term aspiration of 15 per cent return on equity on group level. These long-term aspirations are evaluated annually and the cost-income ratio target for Baltic was increased. SEB is reorganising so that parts of the Corporate & Private Customers division formed the Private Wealth Management & Family Office division. The return on business equity and cost/ income ratio aspirational targets were updated accordingly. Division Return on business equity Cost/ income ratio Large Corporates & Financial Institutions 13% 0.50 Corporate & Private Customers 16% 0.40 Private Wealth Management & Family Office 25% 0.50 Baltic 20% 0.40 Life 30% 0.45 Investment Management 40% 0.40 SEB’s sustainability report SEB’s sustainability work is described on p. 4269 and 208233. The statutory sustainability report prepared in accordance with the Annual Accounts Act is presented on p. 4269. SEB Annual and Sustainability Report 2021 — 73 Customer trading Customer trading Derivatives Derivatives Credit institutions Credit institutions Central bank deposits Liabilities in the insurance operations amounted to SEK 459bn 362). Out of this, SEK 424bn 332) was related to financial commitments for investment contracts (mostly unit-linked insur- ance), while SEK 35bn 30) was related to insurance contracts (mostly traditional and risk insurance). The insurance liabilities are mainly covered by financial assets. See note 28, 42 and 43. Derivatives The fair value of the derivative contracts is presented as assets and liabilities on the balance sheet. They amounted to SEK 126bn 165) and SEK 118bn 162) respectively. The mix and volumes of derivatives reflect the demand for derivatives by the bank’s customers for their management of financial risks. The bank is a market maker for derivatives and also uses derivatives for the purpose of protecting its own cash flows and fair value of its financial assets and liabilities from for instance interest rate fluctuations. See note 21. Total assets at 31 December 2021 increased by SEK 264bn to SEK 3,304bn 3,040). Loans Total loans to the public increased by SEK 76bn during the year and amounted to SEK 1,846bn 1,770). SEB’s credit portfolio, which includes loans, contingent liabilities and derivatives, increased by SEK 237bn to SEK 2,828bn 2,591). The corporate credit portfolio increased by SEK 165bn, 13 per cent. The household credit portfolio (mortgage loans and other household credits) increased by SEK 44bn. The commercial and residential real estate manage- ment portfolios in total were unchanged. Credit-impaired loans, gross (stage 3) decreased during the year by SEK 5,063m to SEK 9,827m 14,890). The gross credit- impaired loans (stage 3) were 0.53 per cent of total loans 0.87). See note 18 and 40a. Debt securities Debt securities held for the purpose of serving customer risk management and trading needs as well as internal liquidity man- agement on the balance sheet amounted to SEK 206bn 265). The debt securities volume decrease reflects the increasing volume of customer deposits. SEB is a market maker in certain debt securities. The short position (liability) in the debt securi- ties amounted to SEK 20bn 20). SEB’s credit risk exposure in this portfolio, which consists of debt securities, certain credit derivatives and futures, amounted to SEK 177bn 241). See note 19, 30 and 40a. Equity instruments Equity instruments held for the purpose of customer risk man- agement and trading needs as well as to facilitate the bank’s role as a market maker amounted to SEK 121bn 82). The short posi- tion (liability) in equity instruments amounted to SEK 14bn 11). See note 20 and 30. Insurance assets and liabilities Financial assets within the insurance operations amounted to SEK 462bn 363). Out of this, financial assets where policy- holders carry the risk (mostly unit-linked insurance) amounted to SEK 424bn 331) and other assets (mostly traditional and risk insurance) amounted to an additional SEK 38bn 32). 2019 2020 2021 0 400 800 1,200 1,600 2,000 Loans to the public SEK bn Private sector Public sector Non-financial corporates Financial corporates Financial structure Short-term fundingStable funding Other Other Life insurance Life insurance Liquidity portfolio Central bank balances Household deposits Household lending Equity Short-term funding Long-term funding Corporate and public sector deposits Corporate and public sector lending “Banking book” Liquid assets Assets Liabilities and equity Balance sheet structure 31 December 2021 74 — SEB Annual and Sustainability Report 2021 Report of the Directors — Financial review of the group The financing of the group consists of deposits from the public (households, corporates, etc.), borrowings from financial institu- tions as well as issuance of money market instruments, bonds, covered bonds and subordinated debt. Deposits and borrowings Deposits and borrowings from the public amounted to SEK 1,597bn 1,371). Household deposits increased by SEK 56bn while deposits from non-financial corporations increased by SEK 68bn during the year. Throughout 2021, both non-financial and financial corporations and households chose bank accounts as a safe investment alternative as quantitative easing measures continued to increase liquidity in the financial system. Debt securities issued Short-term funding, in the form of commercial paper and certificates of deposit, decreased by SEK 44bn during the year. Approximately SEK 146bn of long-term funding matured or was called during 2021 (consisting of SEK 79bn covered bonds and SEK 58bn senior debt). An AT1 bond (subordinated debt) in the amount of SEK 10bn was repurchased. As part of the bank's funding management, the bank issued SEK 75bn (consisting of SEK 41bn covered bonds, SEK 20bn senior debt, SEK 10bn sen- ior non-preferred debt and SEK 5bn subordinated debt) during the year. Subordinated debt amounted to SEK 29bn. See p. 90 and note 40f for liquidity management information. Assets under management and custody Total assets under management amounted to SEK 2,682bn. The market value moved with the equity markets and increased by SEK 526bn. The net inflow of assets under management was SEK 50bn. Assets managed by the Investment Manage- ment division amounting to SEK 831bn are part of total assets under management. Assets under custody amounted to SEK 21,847bn 12,022). The Nordic custody market changed during the year with one player exiting the business. SEB was able to assist customers and several new mandates were brought on. At the same time positive financial markets increased asset values. Rating Fitch rates SEB’s long-term senior unsecured debt at AA–. The rating is based on SEB’s low risk appetite, stable and well-executed strategy, and robust asset quality and capitalisation. The rating was affirmed in October 2021. Moody's rates SEB’s long-term senior unsecured debt at Aa3 based on the bank’s strong asset quality and solid capitalisation which are expected to be resilient in the aftermath of Covid19 induced economic disruption. While the bank has good underlying earnings generation, the corporate banking focus could add earnings cyclicality. The rating of the senior unsecured debt was downgraded to Aa3 from Aa2 in October 2021, following the Swedish National Debt Office’s (the resolution authority) proposal to amend its rules on Minimum Requirements for Eligible Liabilities and Own Funds (MREL) which will result in most Swedish banks needing to issue lower levels of additional loss-absorbing debt. S&P rates SEB’s long-term senior unsecured debt at A+. The rating is based on the stable and low-risk operating environment in Sweden, the bank’s stable and well-diversified revenue base and leading position among large Nordic corporates, robust capitalisation and resilient earnings, despite expected increasing pressure on reve- nues and asset quality in the economic environment. The rating was affirmed in May 2021. Moody’s S&P global Fitch Short 1) Long 2) Short 1) Long 2) Short 1) Long 2) P1 Aaa A1+ AAA F1+ AAA P2 Aa1 A1 AA+ F1 AA+ P3 Aa2 A2 AA F2 AA Aa3 A3 AA– F3 AA– A1 A+ A+ Outlook stable Outlook stable Outlook negative 1) Short-term debt and commercial paper. 2) Long-term senior unsecured debt. Deposits from the public SEK bn 2019 2020 2021 0 400 800 1,200 1,600 Private sector Public sector Non-financial corporates Financial corporates Number of outstanding shares 31 December 2021 Share Class A Share Class C Total no. of shares Total number of issued shares 2,170,019,294 24,152,508 2,194,171,802 Repurchased own shares for equity-based programmes 1) 27,603,309 0 27,603,309 Repurchased own shares for capital purposes 2) 10,171,296 0 10,171,296 Total number of outstanding shares 2,132,244,689 24,152,508 2,156,397,197 1) Utilisation of authorisation from the Annual General Meeting 2021 to acquire own shares for long-term equity programmes. 2) Utilisation of authorisation from the Annual General Meeting 2021 to acquire own shares for capital purposes. Assets under management SEK bn 2021 2020 2019 Beginning of the year 2,106 2,041 1,699 Inflow 755 499 585 Outflow 705 512 512 Change in value 526 78 269 End of the year 2,682 2,106 2,041 SEB Annual and Sustainability Report 2021 — 75 Total equity Total equity at the opening of 2021 amounted to SEK 172bn. Total dividends paid out amounted to SEK 18bn. Net profit amounted to SEK 25bn and other comprehensive income increased equity by SEK 15bn. At year-end 2021, total equity was SEK 193bn. SEB’s share capital amounts to SEK 21,942m distributed on 2,194 million shares. Each Class A share entitles the holder to one vote and each Class C share to 110 of a vote. The Board of Directors’ share buyback programme of SEK 2.5bn was an- nounced on 19 October 2021 to run between 21 October 2021 to 21 March 2022. At 31 December 2021, 10,171,296 shares had been bought back at a value of SEK 1.4bn. Dividend In 2021, the Swedish FSA lifted is recommendation to restrict distribution of capital. An ordinary dividend of SEK 4.10 per share and a further ordinary dividend of SEK 4.10 per share, were dis- tributed to the shareholders in 2021. The dividends correspond to around 50 per cent of SEB’s net profit for the financial years 2019 and 2020 combined. The Board of Directors proposes to the Annual General Meeting a dividend of SEK 6.00 per Class A and Class C share, which corre- sponds to 51.1 per cent of the 2021 net profit. The total dividend amounts to SEK 12.9bn calculated on the total number of issued 2021 2020 2019 2018 2017 Return on equity, % 13.9 9.7 13.7 16.3 11.7 Return on equity excluding items affecting comparability, % 13.9 10.3 13.8 13.4 12.9 Return on total assets, % 0.7 0.5 0.7 0.8 0.6 Return on risk exposure amount, % 3.4 2.1 2.7 3.7 2.6 Cost/income ratio 0.43 0.46 0.46 0.48 0.48 Basic earnings per share, SEK 11.75 7.28 9.33 10.69 7.47 Weighted average number of shares 1) , millions 2,164 2,163 2,162 2,164 2,168 Diluted earnings per share, SEK 11.67 7.23 9.28 10.63 7.44 Weighted average number of diluted shares 2) , millions 2,179 2,177 2,175 2,177 2,178 Net expected credit loss level 3) , % 0.02 0.26 0.10 0.06 0.05 Stage 3 loans/Total loans, gross, % 0.53 0.87 0.67 0.50 Stage 3 loans/Total loans, net, % 0.22 0.44 0.36 0.30 Liquidity Coverage Ratio (LCR) 4) , % 145 163 218 147 145 Net Stable Funding Ratio (NSFR) 5) , % 111 Risk exposure amount, SEK m 787,490 725,560 745,637 716,498 610,819 Risk exposure amount, expressed as own funds requirement, SEK m 62,999 58,045 59,651 57,320 48,866 Common Equity Tier 1 capital ratio, % 19.7 21.0 17.6 17.6 19.4 Tier 1 capital ratio, % 21.4 22.7 20.8 19.7 21.6 Total capital ratio, % 23.1 25.1 23.3 22.2 24.2 Leverage ratio, % 5.0 5.1 5.1 5.1 5.2 Number of full time equivalents 6) 15,551 15,335 14,939 14,751 14,946 Assets under custody, SEK bn 21,847 12,022 10,428 7,734 8,046 Assets under management, SEK bn 2,682 2,106 2,041 1,699 1,830 1) The number of issued shares was 2,194,171,802. SEB owned 32,211,451 Class A shares at year-end 2020. During 2021 SEB has purchased 2,909,266 shares for the long-term equity programmes and 7,517,408 shares have been sold/distributed. During 2021 SEB has purchased 10,171,296 shares for capital purposes. Thus, at 31 December 2021 SEB owned 37,774,605 Class A-shares with a market value of SEK 4,754m. 2) Calculated dilution based on the estimated economic value of the long-term incentive programmes. 3) 20182021: Net ECL level based on IFRS 9 expected loss model. 2017: Credit loss level based on IAS 39 incurred loss model. 4) 20182021: In accordance with the EU delegated act. 2017: According to Swedish FSA regulations for respective period. 5) In accordance with CRR2. 6) Average for the year. For a five year summary of the Group's and the Parent bank's income statements and balance sheets, see p, 199200. For definitions, see p. 235. Key figures 0 4 6 8 10 12 2017 2019 3) 2021 5) 2018 2) 2020 4) 2 0 40 60 80 100 120 20 SEK Per cent Earnings/share 1) , SEK Dividend/share, SEK Dividend payout ratio, % Earnings and dividend per share 1) Excluding items affecting comparability. 2) Excluding extraordinary dividend in 2018. 3) The 2019 dividend proposal was reverted and the AGM decided that no dividend would be paid out. 4) Including ordinary dividend of 4.10 per share and a further ordinary dividend of 4.10 per share. 5) A dividend of SEK 6.00 per share is proposed for 2021. 76 — SEB Annual and Sustainability Report 2021 Report of the Directors — Financial review of the group Market capitalisation SEK m 2021 2020 2019 2018 2017 Year-end market capitalisation 1) 276,266 185,485 193,345 188,925 211,293 Turnover 2) 99,952 121,000 106,915 128,241 123,889 1) Based on Nasdaq Stockholm share price of SEK 125.85 for Class A-shares and SEK 131.20 for Class C-shares. 2) Shares traded at Nasdaq Stockholm. Holistic management Creating sustainable value is a continuous process in an environ- ment that is under constant change. The Board of Directors sets the conditions by deciding on the bank’s long-term strategic direction, financial targets, business plans and overall risk tolerance. Profita- bility targets are set within the framework of the risk tolerance level and the capital adequacy targets. In order to maximise customer and shareholder value, the financial consequences of business decisions are evaluated and operations are managed proactively based on these aspects: 1. growth, mix and risk level of business volumes 2. capital and liquidity requirements driven by the business 3. profitability. Pricing in accordance with risk is thereby a natural part of the business and monitoring nominal and risk-based returns is an impor- tant part of management. The Board’s overarching risk tolerance statements convey the direction and level of risk, funding structure, liquidity buffers and capital targets. SEB’s main risk is credit risk. In 2021, Covid19, and in the last several years, climate-related challenges were increasingly in focus. Such challenges are reflected throughout SEB’s risk management. SEB strives to continuously iden- tify and manage potential future risks, for instance by using stress tests and scenario analysis. The capital buffer and liquidity reserves are held to cover the risk in case of unforeseen events. All activities are carried out responsibly and in accordance with regulations and expectations – all in order to maintain the trust of the stakeholders. Risk, liquidity and capital management Strategic, financial and operational plans Risk strategy and risk tolerance Profitability requirements Performance management Pricing shares as per 31 December 2021, excluding own shares held. If the AGM decides in accordance with the proposal, the proposed record date for the dividend is 24 March 2022 and dividend payments will be paid out on 29 March 2022. The SEB share will be traded ex-dividend on 23 March 2022. Share value and stock exchange trading The closing price at year-end of the SEB class A share was SEK 125.85 84.50). Earnings per share amounted to SEK 11.75 7.28). The SEB share is listed on Nasdaq Stockholm but is also traded on other exchanges such as Chicago Board of Exchange, London Stock Exchange, Turquoise among others. 175 2017 2018 2019 2020 2021 0 75 50 100 125 25 150 Share price development SEB Class A share Index 1 January 2017100 SEB Class A shares OMXS30 European Bank Index SX7E Data per share 2021 2020 2019 2018 2017 Basic earnings, SEK 11.75 7.28 9.33 10.69 7.47 Diluted earnings, SEK 11.67 7.23 9.28 10.63 7.44 Shareholders’ equity, SEK 89.61 79.53 71.99 68.76 65.18 Net worth, SEK 98.00 85.99 78.42 74.74 73.60 Net expected credit losses 1) , SEK 0.24 2.83 1.06 0.54 0.37 Dividend per A and C share, SEK 6.00 2) 8.20 3) 0.00 4) 6.50 5) 5.75 Year-end share price 6) per Class A share, SEK 125.85 84.50 88.08 86.10 96.30 per Class C share, SEK 131.20 87.70 91.50 86.40 96.05 Highest price paid 6) per Class A share, SEK 141.85 104.90 99.38 102.70 109.00 per Class C share, SEK 155.00 112.00 102.20 103.60 109.90 Lowest price paid 6) per Class A share, SEK 83.80 59.80 78.88 79.16 94.05 per Class C share, SEK 87.00 69.50 81.70 80.50 95.15 Payout ratio (dividend as a percentage of earnings), % 51.1 112.6 3) 0.0 4) 60.8 77.0 Payout ratio, excluding items affecting comparability % 51.1 105.9 3) - 4) 69.8 7) 69.7 Dividend yield, % 4.8 9.7 3) 0.0 4) 7.5 6.0 P/E (share price at year end/earnings) 10.7 11.6 9.4 8.1 12.9 Number of outstanding shares, million average 2,164.1 2,163.1 2,161.7 2,164.4 2,167. 6 at year-end 2,156.4 2,162.0 2,162.7 2,163.9 2,167.0 1) 20182021: Net ECL level based on IFRS 9 expected loss model. 2017: Credit loss level based on IAS 39 incurred loss model. 2) As proposed by the Board of Directors. 3) Ordinary dividend of SEK 4.10 per share decided by the Annual General Meeting and a further ordinary dividend of SEK 4.10 per share decided by the Extraordinary General Meeting in November 2021. 4) The 2019 dividend proposal was reverted and the AGM decided that no dividend be paid. 5) Ordinary dividend of SEK 6.00 per share and extraordinary dividend of SEK 0.50 per share. 6) Source: Nasdaq Stockholm. 7) Excluding extraordinary dividend. SEB Annual and Sustainability Report 2021 — 77 The macroeconomic situation is of great importance for cus- tomer behaviour and, together with the bank’s own actions, it is a major factor impacting the business and the result. In times of positive economic development, both businesses and private individuals are more likely to invest and consume. This may lead to increased lending, more payments, a higher number of corporate transactions, among other things, all of which affect net interest and net commission income positively. In an unfavourable part of the business cycle, customers may be more restrictive and growth in business and transaction volumes may level out while credit losses may increase. On the other hand, customers hedge their risks in uncertain and volatile times, which may increase net financial income. Income statement, simplified SEK m 2021 A Net interest income 26,321 B Net fee and commission income 21,142 C Net financial income 6,992 D Net other income 159 Total operating income 54,614 Total operating expenses 23,245 2 3 4 5 Net expected credit losses and other 504 Operating profit 30,864 Income tax expense 5,441 NET PROFIT 25,423 2021 17 Assets under management Customers invest in for instance mutual funds 2,682 17 Assets under custody The bank safekeeps securities and administrates dividends and interest on customers’ behalf 21,847 17 Commitments Preapproved customer credits 814 17 Guarantees The bank assists customers with credit risk management 160 17 Payments and cash management Customers make payments and manage account balances 17 Card transactions Customers make card payments 17 Securities transactions Customers use the bank as an intermediary in securities transactions, for instance equities 17 Corporate transactions Corporate customers seek advice and assistance for various corporate transactions, such as acquisitions, IPOs etc. Sample business volumes outside the balance sheet SEK bn Profit related to business volumes Customers’ financial needs are the source of SEB’s business volumes and result. Here, the general relationships between customer-driven business volumes reported on- and off-balance sheet, and the income statement as well as external factors are outlined. LIABILITIES AND EQUITY 2021 9 Deposits from central banks and credit institutions 75,206 10 Deposits and borrowings from the public 1,597,449 11 Financial liabilities for which the customers bear the investment risk 424,226 12 Liabilities to policyholders 34,623 13 Debt securities issued 730,106 14 Short positions 34,569 – of which equity instruments 14,405 – of which debt securities 20,164 15 Derivatives 118,173 Other financial liabilities 5,721 Other liabilities 90,929 16 – of which subordinated debt 28,549 Total equity 193,228 TOTAL LIABILITIES AND EQUITY 3,304,230 Business volumes in the balance sheet SEK m ASSETS 2021 1 Cash and cash balances with central banks 439,344 2 Loans to central banks 4,454 3 Loans to credit institutions 60,009 4 Loans to the public 1,846,362 5 Debt securities 205,950 6 Equity instruments 120,742 7 Financial assets for which the customers bear the investment risk 422,497 8 Derivatives 126,051 Other assets 78,822 TOTAL ASSETS 3,304,230 78 — SEB Annual and Sustainability Report 2021 Report of the Directors — Financial review of the group A Net interest income Net interest income is the difference between income from lending and expenses associated with deposits and borrowings. Margins and business volumes have a major bearing. Interest margins differ in various markets, mainly due to varying maturities, risk and competition. B Net fee and commission income Net fee and commission income increases with growing transaction volumes. Com- missions may increase in ad- vantageous financial markets and with increased business volumes, and vice versa. C Net financial income Net financial income includes both the market value and realised gains and losses on transactions with securities, currencies and derivatives. The development in financial markets plays a major role. D Net other income Items in net other income occur sporadically with no clear link to macroeconomic factors. Customer loans generate interest income over the life of the loan. Up-front fees on new loans are treated as interest income. 1 2 3 4 SEB participates in, or leads, syndications of loans leading to net fee and commission income or expenses. 4 Loans SEB maintains an inventory of debt securities for customer trades and liquidity manage- ment. They accrue interest over life. 5 14 SEB holds debt securities for customer trading and liquidity management. The customer trading activity as well as the market value of the inventory affect net financial income. 5 14 Sales from the bank’s inventory of debt securities held for liquidity management or investment affect this item. 5 Debt instruments Brokerage fees in equity trading are received or paid. 17 SEB holds equity instruments for customer trading and is a counterpart in equity swaps. The customer trading, changes in the market value, dividends and realised gains/losses affect this item. 6 14 Dividends from the bank’s own equity holdings affect the item. 6 Equity Instruments Interest rate derivatives that are used by SEB to reduce volatility in the result (so-called hedging) accrue interest over life. 8 15 In certain cases, SEB charges and pays fees when trading in derivatives. 8 15 SEB is a counterparty for cus- tomers wishing to manage risk (for instance foreign exchange and interest rate risk) using derivative instruments. Both customer trades and the mar- ket value of the holdings affect financial income. 8 15 The market value of derivatives that SEB uses for hedging. 8 15 Derivatives SEB pays interest on customers' deposits. 9 10 Certain bank accounts generate fee income. 9 10 Deposits and borrowings SEB provides savings in unit-linked insurance, deposit insurance and similar products where the customer bears the risk. Invested volumes gen- erate fee income. In addition, distribution generates fee expenses. 7 11 17 SEB provides savings in tradi- tional pension with a certain guaranteed return, sickness and health insurance and relat- ed services. SEB invests mainly in equity instruments and debt securities to safeguard the outcome of insurance claims. 5 6 12 Insurance and savings SEB’s operations are partly funded by long and short-term interest-bearing securities, all of which generate interest expense. 13 16 The market value including the credit risk in SEB’s issued index-linked bonds affects this item. 13 Early redemption by SEB of its debt instruments affects this item. 13 16 Issued securities and sub- ordinated debt Various customer services are provided which generate both fee and commission income and expense. Most fees are fixed and transaction based; some are market value based. 17 Business volumes outside the balance sheet The relation between operating income and customer-driven business volumes SEB Annual and Sustainability Report 2021 — 79 Divisions Large Corporates & Financial Institutions Corporate & Private Customers Business offering The division serves 2,000 large corporate customers and 1,100 financial institutions and offers advisory-driven commercial and investment banking services in the Nordic region, Germany, United Kingdom and through the international presence. The division has a full-service offering supporting enterprises with capital and offering investment opportunities for pension funds and other investors. Customers are offered capital markets transaction services (equity and debt); financing as well as advice relating to investment banking activities (mergers and acquisitions, etc); products and services for cash management and trade finance; brokerage and trading services; post trade investor services such as custody, risk and valuation services and collateral management; macroeconomic analysis and securities research. Business offering The division serves some 501,000 private and 184,000 corpo- rate home bank customers in Sweden with universal banking services through digital meeting points, about 100 physical meeting places and a contact centre with 247 accessibility. The division has a broad offering for both private and cor- porate customers, ranging from everyday banking services to private individuals and smaller companies, to Private Banking services with global reach for high-net-worth individuals in the Nordic countries. In addition, complex banking and advisory services are provided to medium-sized companies. The division also issues cards in the Nordic countries under SEB’s own brand as well as for Eurocard and several other partner brands. Comments on the 2021 result Operating profit increased by 64 per cent to SEK 12,177m. Net interest income was 1 per cent lower than 2020, primarily due to internal transfer pricing effects. Strong equity markets and low interest rates led to high customer activity in corporate transactions and net fee and commission income grew by 20 per cent. With volatilities lower than 2020, net financial income decreased. Operating expenses were flat and net expected credit losses lower than 2020 when oil-related credit reserves were set up. The net expected credit loss level was 5 basis points. Comments on the 2021 result Operating profit increased by 4 per cent to SEK 9,518m. Net interest income was 6 per cent lower than 2020, primarily due to internal trans- fer pricing effects. Net fee and commission increased by 12 per cent as private customers' card usage returned from 2020 levels. Operating expenses increased with a goodwill impairment relating to the card business in Norway. Net expected credit losses decreased compared to 2020 when pandemic-related reserves were established. The net expected credit loss level was 1 basis point. Operating income and profit 0 5 10 15 20 20212019 2020 SEK bn Operating income Operating profit Operating income and profit Operating income Operating profit 0 5 10 15 20 20212019 2020 SEK bn Aspiration and outcome 0 4 8 16 -19-20 RoBE -21 0.30 0.50 0.45 0.35 0.40 12 -19-20-21 C/I Return on business equity, RoBE, % Cost/income, C/I, ratio Long-term aspiration Aspiration and outcome 0 20 -19-20 RoBE -21 0.30 0.50 0.45 0.35 0.40 -19-20-21 5 10 15 C/I Return on business equity, RoBE, % Cost/income, C/I, ratio Long-term aspiration Divisional head Jonas Söderberg Divisional heads Joachim Alpen Jonas Ahlström 80 — SEB Annual and Sustainability Report 2021 Report of the Directors — Financial review of the group Baltic Life Business offering The division provides universal banking including advisory ser- vices to private individuals and all corporate customer segments in Estonia, Latvia and Lithuania, with significant market shares across key segments and products in all three countries. The division has 61 branch offices in the three Baltic countries and serves approximately 1 million private home bank customers and 105 000 home bank customers among small and medium-sized companies. Digital services, such as mobile applications, electronic document signing and remote video advice, are increasingly used by customers. Business offering The division provides life insurance solutions to about 810,000 private and 96,000 corporate customers with 402,000 policy holders. Operations are carried out mainly in the Nordic and Baltic countries through digital and remote meeting points, physical meeting places and contact centres. The insurance offering includes unit-linked, portfolio bond and traditional insurance as well as health and sickness insurance. The division aims to serve customers throughout life with long- term advice and solutions in order to provide companies and individuals with the right insurance coverage. Comments on the 2021 result Operating profit increased by 25 per cent and amounted to SEK 3,233m. Net interest income decreased by 4 per cent, primarily due to currency effects. Net fee and commission income increased by 7 per cent mainly due to high performance fees in mutual funds. Operating expenses were unchanged. Net expected credit losses were positive as a larger recovery exceeded new provisions. The net expected credit loss level was 11 basis points. Comments on the 2021 result Operating profit increased by 60 per cent to SEK 2,346m. Net fee and commission income increased by 16 per cent mainly as a result of the positive financial markets. Net financial income, primarily from the traditional life operations, increased by 58 per cent, also partly due to the advantageous market conditions. Operating expenses decreased by 3 per cent. Operating income and profit Operating income Operating profit 0 2 4 6 8 20212019 2020 SEK bn Operating income and profit Operating income Operating profit 0 1 2 3 4 20212019 2020 SEK bn Aspiration and outcome 0 30 -19-20 RoBE -21 0.28 0.40 -19-20-21 10 20 0.32 0.36 C/I Return on business equity, RoBE, % Cost/income, C/I, ratio Long-term aspiration Aspiration and outcome 0 60 -19-20 RoBE -21 0 0.6 -19-20-21 20 40 0.2 0.4 C/I Return on business equity, RoBE, % Cost/income, C/I, ratio Long-term aspiration Divisional head Nina Äikäs Divisional head David Teare SEB Annual and Sustainability Report 2021 — 81 Per cent Large Corporates & Financial Institutions 43 Corporate & Private Customers 34 Baltic 10 Life 7 Investment Management 6 1) Excluding group functions and eliminations Operating income 1) Operating profit 2) Per cent Large Corporates & Financial Institutions 41 Corporate & Private Customers 32 Baltic 11 Life 8 Investment Management 7 2) Excluding group functions Employees Per cent Large Corporates & Financial Institutions 14 Corporate & Private Customers 22 Baltic 14 Life 7 Investment Management 1 Group functions, including support and staff 42 Divisions’ share of:Investment Management Business offering The division offers asset management services through a broad range of funds and tailored portfolio mandates to institutional investors, as well as retail and Private Banking customers. The operations are carried out in Sweden, Denmark, Finland and Luxembourg. Assets are managed across equities, fixed income, alternative investments and multi-strategy management. The products are distributed mainly via the bank’s other divisions, but also via external parties. The division is aiming to be the advisory leader with a goal to enhance and deepen the focus on the sustainable product offering in order to meet customer needs and expectations. Comments on the 2021 result Operating profit increased by 50 per cent to SEK 2,164m. In the favour- able financial markets base commissions reached SEK 2,403m driven by record high assets under management. Performance fees amounted to SEK 659m with generally higher market values as well as a number of one-time items. Operating expenses increased by 2 per cent. Operating income and profit Operating income Operating profit 0 1 2 3 4 20212019 2020 SEK bn Private Wealth Management & Family Office To further strengthen the relationship with the segment from entre- preneurs to professional family offices and to continue to expand SEB’s savings and investments business, a new division, Private Wealth Management & Family Office, was established. This division will gather the Private Banking expertise and leverage SEB's full range of products and services, in particular within Investment Banking. The divisional results will be reported starting from the first quarter of 2022. Divisional head Javiera Ragnartz Aspiration and outcome 0 80 -19-20 RoBE -21 0 0.4 -19-20-21 20 60 0.1 0.3 C/I 40 0.2 Return on business equity, RoBE, % Cost/income, C/I, ratio Long-term aspiration 82 — SEB Annual and Sustainability Report 2021 Report of the Directors — Financial review of the group Geographic markets Market Comment Global with Sweden Johan Torgeby President and CEO Universal banking Sweden is SEB’s main market with a complete banking, pension and insurance offering to a wide range of customers. Despite lasting Covid19 effects, 2021 showed stable growth in household and corporate lending volumes, while significant investments in strategic initiatives were made. Estonia Allan Parik Country manager Universal banking Estonia was one of the first economies in the eurozone where GDP grew to above pre-pandemic levels. SEB's services supported the rapid recovery in both private consumption and investments, led by a combination of fewer restrictions and a reform of the Estonian pension system. Latvia Ieva Tetere Country manager Universal banking The Latvian economy weathered the Covid19 pandemic well but a new wave in the end of the year resulted in new restrictions, dampening economic activity. SEB continued to support customers and improve digital means, such as mobile onboarding functionality and investment advice in the mobile app. Lithuania Sonatą Gutauskaitę- Bubnelienę Country manager Universal banking After a minor drop in 2020, Lithuania‘s economy expanded rapidly in 2021, despite several spikes in Covid19 cases. SEB continued to support the economy and customers, especially by increased lending to corporate customers. Denmark Mark Luscombe Country manager Corporate banking Both the economic and business climate were strong in Denmark and this was reflected across the corporate and investment banking activities. Norway John Turesson Country manager Corporate banking With continued high activity in the capital markets SEB participated in an increased number of transactions and took a strong position for advisory services within investment banking. SEB has been deeply involved in the customers’ transition towards sustainability, both through green and sustainability-linked products and advisory. Finland Marcus Nystén Country manager Corporate banking Customer activity was very strong during the year and resulted in growth in investment banking services and energy, infrastructure and sustainable banking solutions. Demand for core banking prod- ucts also increased. SEB ensured the position as a leading transition bank and custody operator for institutional clients. Germany Johan Andersson Country manager Corporate banking The German economy recovered but growth was hampered by precautionary measures against the pandemic and global distur- bances in the supply chain. Customers exited Covid-related facilities while investment activities were high in infrastructure, energy and in relation to the future de-carbonisation of most industry sectors. United Kingdom Anders Engstrand Country manager Corporate banking GDP rebounded, supported by successful roll-out of vaccination programs, lifted restrictions and an increase in consumption. During the year SEB has continued to develop corporate and institutional customer relationships with a focus on sustainable business models. Other markets The inter national network SEB continued to serve customers through its presence in Luxembourg, Poland, Russia, Ukraine, China, Hong Kong, Singapore, India, USA and Brazil and worked to expand the business in Netherlands, Austria and Switzerland. Per cent Sweden 62 Estonia 4 Latvia 2 Lithuania 5 Denmark 5 Norway 6 Finland 4 Germany 5 United Kingdom 3 Other markets 4 Per cent Sweden 52 Estonia 7 Latvia 6 Lithuania 9 Denmark 2 Norway 2 Finland 2 Germany 1 United Kingdom 1 Other markets 4 Global services in Latvia and Lithuania 14 Share of SEB’s employees Share of SEB's operating income SEB Annual and Sustainability Report 2021 — 83 Market shares and customer contacts Households, deposits Households, lending Market shares, Sweden Per cent Customer contacts 2021 2020 2019 Number of syndicated loans in Nordic countries 99 69 78 Number of equity capital market transactions in the Nordic countries 52 28 25 Number of Nordic mergers and acquisitions 9 10 31 International Private Banking branch offices 12 12 12 Number of Swish payments via SEB’s app (million) 87 49 45 Number of branch offices 156 172 184 Number of ATMs 1) 2,280 2,293 2,370 1) of which 1,600 jointly owned by major Nordic banks. 202120202019 10 15 20 25 202120202019 25 20 15 10 Companies, deposits Companies, lending SEB SHB Swedbank Nordea 202120202019 10 15 20 25 202120202019 10 15 20 25 SEB’s market shares Per cent 2021 2020 Total market, SEK bn 2021 Market growth Lending to general public Sweden 14.6 14.4 7, 314 6 Lending to households 12.7 12.6 4,720 7 Lending to companies 18.1 17.6 2,594 5 Estonia 1) 25.8 27.5 228 5 Lending to households 26.1 26.4 105 3 Lending to companies 25.5 28.4 122 6 Latvia 1) 21.4 23.2 145 3 Lending to households 18.6 19.2 58 2 Lending to companies 23.2 25.9 87 4 Lithuania 1) 29.4 31.2 210 3 Lending to households 28.2 28.9 115 5 Lending to companies 30.9 33.9 95 0 Deposits from general public Sweden 16.9 16.5 4,149 11 Deposits from households 12.2 11.6 2,418 9 Deposit from companies 23.5 23.8 1,731 15 Estonia 1) 20.9 21.3 275 15 Deposits from households 21.5 21.5 124 19 Deposit from companies 20.4 21.2 151 11 Latvia 1) 19.4 18.2 197 6 Deposits from households 19.7 18.1 111 6 Deposit from companies 19.0 18.3 87 4 Lithuania 1) 28.7 28.6 337 12 Deposits from households 29.3 29.5 197 16 Deposit from companies 27.7 27.5 139 6 Equity trading Stockholm 4.3 4.8 11,917 6 Helsinki 1.6 2.8 3,193 1 Copenhagen 2.4 2.0 4,969 4 SEK-denominated corporate bonds 20.5 13.2 192 26 Mutual funds, total volumes 2) Sweden 9.9 10.2 6,951 27 Finland 1.0 1.2 1,627 22 Unit-linked insurance, premium income Sweden 3) 13.1 13.2 76 8 Total life insurance, premium income Sweden 3) 12.5 7.8 238 13 1) Excluding financial institutions & leasing. Estonia, Latvia and Lithuania per September 2021. Market growth in local currency, September YoY. 2) Excluding third-party funds. 3) Per September 2021. Sources: Statistics Sweden, Swedish Investment Fund Association, Estonian Finantsinspektsioon, Finance Latvia Association, Association of Lithuanian Banks, Swedish Insurance Federation, Nasdaq etc. 84 — SEB Annual and Sustainability Report 2021 Report of the Directors — Financial review of the group SEB Annual and Sustainability Report 2021 — 85 The financial and economic consequences of the Covid19 pandemic have been extensive in SEB’s home markets and the continued recovery is dependent on the pandemic development and government and central bank measures. SEB is continuously assessing the asset quality of its credit portfolio using different economic scenarios. Financial markets volatility may adversely impact fair values of certain financial instruments and holdings, and consequently, net financial income and capital. The interest rate levels – in Sweden in particular the repo rate – are key factors affecting net interest income and operating profit. At the latest monetary policy meeting, the Executive Board of the Swedish central bank decided to hold the repo rate unchanged at zero per cent. The central bank expects that the repo rate will be raised at the second half of 2024. A sensitivity analysis assuming a repo rate hike of 25 basis points indicates an increase of approximately SEK 1bn in net interest income, all else equal. SEB assumes credit, market, liquidity, non-financial as well as life insurance risks. The risk composition of the group, as well as the related risk, liquidity and capital management, are described on p. 8691 and in note 40 and 41, in the Capital Adequacy and Risk Management Report for 2021 as well as the quarterly additional Pillar 3 disclosures. Further information is available in the Fact Book that is published quarterly. Re-assessment of credited withholding tax in Germany SEB and its subsidiaries are continuously subject to tax field audits where local tax authorities review previous years’ tax returns. The German tax authorities have in relation to SEB’s wholly owned German subsidiary, DSK Hyp AG (DSK) re-as- sessed DSK’s crediting of withholding tax in its securities finance business for the years 20082014 and claimed the repayment by DSK of EUR 936m, plus interest. DSK has over the years 20082015 claimed and credited approximately EUR 1,500m in withholding tax against its corporate income tax. SEB and DSK are of the opinion that the securities finance business of DSK under review by the German tax authorities was conducted in accordance with market practice, law and administrative guidance applicable at the time. SEB and DSK, as supported by its external legal advisor, are of the view that it is more likely than not that it will be ultimately confirmed in a fiscal court proceeding that the withholding tax has been claimed and credited correctly by DSK. Hence, to date and in accordance with current accounting rules, no provisions have been made on a group level. The legal proceedings are estimated to take several years as it is expected that the matter will be appealed to the highest fiscal court. It cannot be ruled out that the re-assessment by the German tax authorities of DSK’s crediting of withholding tax may lead to negative financial effects for the SEB Group. Supervisory matters SEB is subject to various legal regimes, laws and requirements in all jurisdictions where the bank operates. Over the past years, the laws and regulations of the financial industry have expanded and further sharpened, and the regulators have increased their supervision. This is a development which is expected to continue to evolve. Competent authorities regularly conduct reviews of SEB’s regulatory compliance, including areas such as financial stability, transaction reporting, anti-money laundering, investor protection and data privacy. SEB has policies and procedures in place with the purpose to comply with applicable laws and regulations and has continuous dialogues and cooperates with authorities. SEB has received requests from authorities in juris- dictions where it operates, including US authorities, to provide information concerning measures against money laundering, which SEB is responding to in dialogue with these authorities. It cannot be ruled out that current and future supervisory activities and requests from authorities could lead to criticism or sanctions. Investigation of alleged tax evasion of a severe nature The public prosecutor in Cologne, Germany, is investigating whether former and current employees of DSK and SEB have been involved in alleged tax evasion of a severe nature. DSK and SEB are cooperating with the prosecutor in the investigation. As far as SEB and DSK are aware, no indictments have been filed against any of the aforementioned employees. It is unclear what impact this investigation may have on the re-assessment by the German tax authorities of DSK’s crediting of withholding tax referred to above. It cannot be ruled out that the investigation or potential indictments may lead to negative financial effects for the SEB Group. Events after the balance sheet date Jeanette Almberg, currently Head of Group Human Resources and a member of the bank’s Group Executive Committee (GEC), has been appointed as new Head of Business Support & Operations and a member of GEC. Robert Celsing, currently Head of FICC Markets at SEB, has been appointed new Head of Group Human Resources and a member of GEC. Nina Korfu-Pedersen, currently Head of Business Support & Operations, has been appointed Chief Transformation Officer for Control & Staff Functions. The changes are effective as at 1 February 2022. Future uncertainties Risk profile The Board of Directors decides on the overarching risk tolerance. The President and CEO is responsible for managing SEB’s risks overall and ensuring that the risk profile is within the Board’s risk tolerance and capital adequacy targets. Board’s risk tolerance statements in brief Measurement 2021 2020 Credit risk and asset quality Maintain a robust credit culture based on long-term relation- ships, knowledge about customers and focus on their repay- ment capacity. This will lead to a high-quality credit portfolio. • Total loans, contingent liabilities and derivatives (SEK bn) • Expected credit losses in relation to total exposure (%) • Share of loans that are classified as credit-impaired (%) 2,828 0.02 0.53 2,591 0.26 0.87 Market risk Target low earnings volatility by generating revenues based on customer-driven business. • Statistical measure of the largest trading loss that can be expected in a ten-day period (VaR) (SEK m) 138 210 Non-financial, business and reputational risk Mitigate non-financial, business and reputational risk in all activities and maintain the bank’s good reputation. • Non-financial risk losses in relation to operating income (%) 0.37 1.94 1) Liquidity and funding risk Have a sound structural liquidity position, a balanced whole- sale funding dependence and sufficient liquid reserves to meet potential net outflows in a stressed scenario. • High-quality liquid assets in relation to the estimated net liquidity out- flows over the next 30 calendar days (Liquidity Coverage Ratio) (%) • Available stable funding in relation to the amount of required stable funding over a one-year horizon (Net Stable Funding Ratio) (%) 145 111 163 Aggregated risk and capital adequacy Maintain satisfactory capital strength in order to sustain aggre- gated risks and guarantee the bank’s long-term survival and its position as a financial counterparty, while operating safely within regulatory requirements and meeting rating targets. • Risk-weighted business volumes (risk exposure amount) (SEK bn) • Capital in relation to the risk exposure amount (CET1) (%) • Capital in relation to total assets (leverage ratio) (%) 787 19.7 5.0 726 21.0 5.1 Risk management Risk development SEB’s overall risk profile remained strong in 2021. Asset quality is robust, credit losses are at historically low levels and the portfolio overlays made in 2020 for potential losses related to Covid19 remain in place. Market risk decreased, and volatility toward the end of the year due to movements in energy com- modity prices and rising inflation was managed well within risk tolerance levels. The liquidity and capital positions were both at historically strong levels at the end of the year. The global economy recovered significantly in 2021 and credit growth was strong, primarily among corporates and household mortgages. The main scenario is that the recovery continues in 2022, albeit at a slower pace. There are however a number of uncertainties that could potentially impact the overall supportive environment. Supply chains have been disrupted by the pandemic, which combined with higher demand and the European energy crisis is driving inflation and interest rates higher. These trends highlight concerns related to elevated debt levels and inflated asset values. In addition, geopolitical tension has increased in several regions. The Covid19 pandemic remained at the centre of attention in 2021, and new waves of infections and restrictions cannot be ruled out. The impact of the eventual phase-out of government and central bank support programmes also remains to be seen. SEB has managed the consequences of the pandemic well. Focus has been on supporting customers while at the same time Risk, liquidity and capital management Managing risk is an integral part of banking, and risk awareness is deeply embedded in SEB’s corporate culture. Megatrends such as digitalisation and sustainability as well as increasing regulation are leading to new, primarily non-financial, risks which are increasing in importance. The bank has a comprehensive framework for risk, liquidity and capital management that is continuously being developed to reflect the current environment. managing the increasing risks. The bank’s crisis management and pandemic plans were activated already at the onset of the pandemic and have been continuously developed since. This has resulted in new ways of working without major disturbances to the bank’s significant processes. Incidents and losses related to non-financial risks have remained low. Employees returned to SEB’s premises when restrictions were lifted, although this development was temporarily reversed at the end of the year. A new remote-working policy was also introduced in 2021. In a longer perspective, the rapid transformation of the bank- ing industry continues, driven by megatrends such as digitalisa- tion and sustainability as well as increased regulations. On the back of this, focus has partly shifted from managing traditional financial risks to non-financial risks such as data management, cyber, technology and third-party risks. Machine learning and artificial intelligence will be fundamental for future risk man- agement and may be used for compliance efficiency, better credit decisioning, audits and stress testing, among other things. Within sustainability, climate-related risks in particular are increasingly analysed, measured and integrated into strategic decision-making. The evolution of the global regulatory land- scape for banks over the last 1520 years, partly in response to the global financial crisis 20072008), is still ongoing. In response to these trends, SEB is continuously developing its risk management framework for both financial and non- financial risks. This is done by developing relevant definitions, a control framework focused on prevention and mitigation, and an integrated risk and control assessment that considers emerging risks, including the quantification of such risks. 1) Excluding an administrative fee of SEK 1bn, issued by the Swedish FSA, the non-financial risk loss in relation to operating income would have been 0.45 per cent. 86 — SEB Annual and Sustainability Report 2021 Report of the Directors — Risk, liquidity and capital management Overall robust asset quality SEB has a well-balanced credit portfolio (which includes loans, contingent liabilities and derivatives) mainly comprised of Nordic large corporates and Swedish households. Overall asset quality remained stable in 2021, with historically low levels of expected credit losses. The impact of Covid19 remained limited on the bank’s larger portfolios such as large corporates, real estate, small and medium-sized companies and households. Early warning indi- cators such as late payments, negative risk class migration and bankruptcy statistics are closely monitored and have remained stable. That said, there are a number of developments that could become concerns, including the phase-out of the government support programmes that were introduced to mitigate the economic effects of Covid19, and a potentially prolonged period with higher energy prices and supply chain challenges, as well as rising interest rates. Net expected credit losses (ECL) in 2021 amounted to SEK 510m 6,118), corresponding to a net ECL level of 2 basis points 26). Credit-impaired loans (gross loans in Stage 3) amounted to SEK 9.8bn at year-end 14.9), corresponding to 0.53 per cent of gross lending 0.87). The Stage 3 ECL coverage ratio increased during the year from 48.4 per cent to 57.8 per cent. The portfolio overlays made in 2020 are maintained largely unchanged. These include the overlays in the Large Corporates & Financial Institutions division to capture the challenges facing the oil industry and the overlays in the Corporate & Private Customers and Baltic divisions to capture the potential neg- ative effects on asset quality from the pandemic. Total ECL allowances amounted to SEK 8,786m 10,165). Strong credit portfolio growth Credit portfolio growth was strong in 2021, mainly driven by corporates and continued good demand for Swedish household mortgages. The total credit portfolio amounted to SEK 2,828bn 2,591) by year-end. Robust growth in the corporate segment More than half of SEB’s credit portfolio consists of exposure to corporates. SEB is unique among its peers in that its corporate portfolio consists primarily of large investment grade corporate customers, mainly Nordic and German customers in a wide range of industries, of which the largest is manufacturing. In gen- eral, SEB’s large corporate customers have remained resilient during the pandemic. In total, the corporate portfolio grew to SEK 1,473bn 1,308) in 2021. Growth was mainly driven by a surge in demand for M&A-related financing among large corporates toward the end of the year. Activity was also high among small and medium-sized enter- prises (SMEs), especially the mid-corporate segment. SEB’s SME portfolio grew to SEK 176bn 149). SEB’s exposure to SMEs is mainly in Sweden and accounts for 12 per cent 11) of the total corporate portfolio. Strong growth in Swedish household mortgages Activity in the Swedish housing market remained high in 2021, with large price increases that began to level off during the latter part of the year. The price development has been supported by continued low interest rates, increased demand for larger housing and lower consumption during the pandemic. SEB’s Swedish household mortgage portfolio continued to grow in line with the market at around 7 per cent and amounted to SEK 594bn at year-end 560). The portfolio is of high quality with low historical credit losses, a sound portfolio loan-to-value (LTV) ratio (weighted average max LTV of 50 per cent) and a proven strong repayment capac- ity among customers. Lending decisions are based on the bor- rower’s repayment capacity, including the ability to manage a stressed scenario with a higher interest rate. Where applicable, the stressed scenario takes into account the borrower’s share of the housing association’s total debt. The general exemption from the amortisation requirement law, implemented by the Swedish FSA when the pandemic escalated, expired in August 2021. The amortising share of the portfolio has thereafter returned to pre-pandemic levels, that is 97 per cent of the portfolio with LTV higher than 70 per cent. Credit loss development 1) Per cent 20182017 2019 2020 2021 0 0.2 0.1 0.3 0.4 0.5 1) 20182021: Net ECL level based on IFRS 9 expected loss model. 2017: Credit loss level based on IAS 39 incurred loss model. Credit portfolio, development by customer segment SEK bn -17 -18 -19 -20 -21 -17 -18 -19 -20 -21 -17 -18 -19 -20 -21 -17 -18 -19 -20 -21 -17 -18 -19 -20 -21 -17 -18 -19 -20 -21 300 0 600 900 1,500 1,200 Corporates Households Real estate management Housing cooperative associations Public administration Banks SEB Annual and Sustainability Report 2021 — 87 Solid real estate portfolio SEB’s credit exposure to residential real estate management is mainly in Sweden and consists of high quality, private and publicly owned real estate companies as well as institutional investors. Weighted average LTV for the portfolio was 46.4 per cent at year-end 46.5). Demand for residential real estate in Sweden is stable and non-cyclical due to the structural housing deficit. In 2021, growth in the residential real estate portfolio was mainly driven by high buy and sell activity among existing customers. The portfolio amounted to SEK 152bn at year-end 143). SEB also has SEK 74bn 66) in credit exposure to housing cooperative associations, a common form of residential home ownership in Sweden. SEB’s credit exposure to commercial real estate companies consists mainly of strong counterparties in the Nordic region with sound financing structures and diversified property port- folios. Weighted average loan-to-value for the portfolio was 44.6 per cent at the end of 2021 45.5). Asset quality remains high with no credit losses or signs of deterioration. The market outlook for commercial real estate continues to be supported by low interest rates although the outlook varies between the different sub-segments. The acceleration of trends such as e-commerce and remote working, as well as reduced travelling during the pandemic, has impacted segments such as retail-related properties and hotels. Demand for office space remains stable but with some uncertainties such as longer lead times in letting activities and a slight increase in vacancy levels. SEB’s commercial real estate portfolio amounted to SEK 188bn 196) at year-end. SEB governs its exposure to the real estate sector through a group-wide risk tolerance level for the commercial real estate portfolio, divisional volume growth limits and through a strict real estate credit policy. Balanced growth in the Baltic countries SEB’s Baltic credit portfolio consists mainly of corporate and household exposures. Exposure to real estate management is limited. Lithuania is SEB’s largest market in terms of credit expo- sure in the Baltic countries, followed by Estonia and Latvia. Asset quality remained stable in 2021. The Baltic economies continued to recover, and credit portfolio growth was main- ly driven by increasing demand for household mortgages as remote working drove demand for larger housing. Corporate volumes were stable. SEB’s total Baltic credit portfolio increased to SEK 194bn 188). Decreased market risk Market risk arises in SEB’s customer-driven trading activity as well as within the treasury function, which is responsible for the Group’s funding and liquidity management. The risk in trading is measured as Value at Risk (VaR), which estimates the bank’s expected maximum loss during a period of ten trading days, with a probability of 99 per cent. Interest rate risk in the banking book (IRRBB) arises as a result of balance sheet mismatches in currencies, interest terms and interest rate periods, and is managed under the IRRBB frame- work taking potential value and earnings risks into account. 2021 was characterised by tighter credit spreads, equity markets reaching all-time highs and lower market volatility. However, the trend reversed towards the end of the year with large volatility in e.g. the commodity and interest rate markets. As a result of market developments during the year, SEB’s mar- ket risk decreased, and average VaR (which is based on changes in market risk factors over the past twelve months) declined to SEK 138m 210). Stable risks in the insurance business SEB’s life insurance business consists mainly of unit-linked prod- ucts, where the market risk remains with the customer. In 2021, unit-linked products accounted for 77 per cent of total premium income 67). In addition to unit-linked products, SEB also offers risk insurance in Sweden and in the Baltics, and traditional life insurance in Sweden. The traditional life insurance portfolios expose SEB to market risk due to the guaranteed elements of the products. However, the difference between the value of the assets and the guaran- teed commitments serves as a buffer against earnings volatility. During 2021 this buffer continued to increase due to strong financial markets and new business volumes. Allocations to alternative investments are expected to con- tinue to be material, at around 40 per cent 40) of the portfolio. Alternative investments generally increase the overall risk level, as valuation, market, liquidity, and non-financial risks are deemed higher relative to traditional investment asset classes. These risks are primarily mitigated by high levels of diversification within the asset class as well as a strengthened governance structure. Managing non-financial risks throughout the pandemic and supporting the recovery By continuously developing and improving governance and risk practices, SEB strives to mitigate non-financial risks – both traditional and emerging risks – in its daily business and pro- cesses. Net non-financial losses from incidents amounted to SEK 219m 1,235) in 2021. At the outbreak of the Covid19 pandemic in 2020, crisis management plans were activated across SEB. A pandemic response scenario devised as part of SEB’s business continuity planning formed the backbone of the bank’s response and has evolved along with the development of the pandemic. Concerns related to increased losses from non-financial risks, not least due to extensive remote working, did not materialise. Instead, losses have remained at historically low levels. During the autumn of 2021, SEB employees returned to office premises in most geographies. Credit portfolio, distribution by geography 1) Per cent Sweden 64 Other Nordic countries 16 Baltic countries 7 Germany and the UK 10 Other 3 1) Distribution based on SEB’s operations. 88 — SEB Annual and Sustainability Report 2021 Report of the Directors — Risk, liquidity and capital management Cybersecurity, data management and model risk Global connectivity and increased usage of cloud services, third-party vendors and outsourcing are megatrends in the banking industry that at the same time are increasing the risk of cybercrime. SEB proactively works with threat identification, threat scenarios, threat intelligence and risk management to minimise this risk. To protect SEB’s intellectual property, customer data and other sensitive information from unauthorised access by cyber criminals, activities to identify, protect against, detect, respond to, and recover from cybercrime are developed continuously. Security updates, system upgrades and security tests are performed on a regular basis. Using zero-trust and least privi- lege access principles along with technical safeguards provide additional protection to manage and monitor devices, users, applications, and networks. Just as important is to foster a sound risk culture and to raise security awareness, not only among the employees, but also among SEB’s customers. This is done through trainings, informa- tion and regular communication. In addition, SEB has adopted a group-wide cyber risk policy. Data management and data ethics continue to grow in importance as the financial industry becomes increasingly da- tacentric. In addition, correct and timely data is part of growing regulatory requirements. Furthermore, SEB’s efforts to counter- act the risk of money laundering and the use of third-party ar- rangements increase the need for adequate data management and data processing. SEB’s well-defined processes for managing such risks are being continuously adapted. In recent years, SEB has established a group-wide information governance frame- work, including data management tools and processes. In 2021 SEB adopted a customer data ethics policy with the objective of guiding and setting criteria for managing customer data. Model risk is another area affected by evolving regulatory re- quirements. SEB has established a model risk policy framework, and significant improvements have been made to the independ- ent validation of models used for financial crime prevention, pric- ing of lending products and algorithmic trading. Procurement of an IT application to support model risk management is ongoing. Prevention of financial crime By being active in the financial markets with a diverse and global offering, SEB is exposed to the risk of being used for corruption, money laundering and terrorist financing (“finan- cial crime”). SEB works actively to prevent such risks in line with applicable rules and regulations as well as its own ethical standards. Knowledge, awareness and a strong risk culture are firmly embedded in the entire organisation, from the Board of Directors to individual employees. In 2021, SEB decided to further enhance the governance and operating model for fighting financial crime by establishing a global function with responsibility for the area. The Financial Crime Prevention function (FCP) was set up during the year and facilitates the group’s holistic governance, steering and control of measures to prevent financial crime. SEB works continuously to develop its capabilities in the finan- cial crime prevention area by developing procedures, processes and system support as well as by reinforcing internal controls. Employees are continuously trained to strengthen awareness around financial crime. One of the most important activities of preventive work is the customer due diligence process. In this process, information to understand the business relationship and manage potential Customer Acceptance Standards (CAS) SEB’s credibility and reputation are essential to the bank's success and are built on long-term customer relationships, a strong busi- ness and risk culture based on clear ethical standards, social and environmental responsibility and professionalism. SEB’s reputation is also dependent on the type of customers SEB is associated with. SEB’s CAS are nine principles that repre- sent what the bank considers to be critical requirements when accepting new and existing customers. They complement internal and external rules and aim to further institutionalise and reinforce SEB’s sound risk culture. The principles for SEB’s Customer Accept- ance Standards are: 1. SEB’s active choice. To be a customer of SEB shall be the result of an active decision by the bank. Customer relationships are built on trust, and the relationship will be reviewed as required. 2. The purpose of the relationship must be fully understood. SEB shall have a good understanding of the customer’s pur- pose for using SEB and why it makes sense that SEB provides those services. 3. Transparency is a requirement. Openness and the ability to provide satisfactory information is a requirement to become and remain a customer of SEB. 4. Customers shall comply with laws and regulations with a respectful distance to grey zones. 5. Customers in industries with a significant negative climate impact and without a credible plan to manage the transition to a low-carbon economy shall be avoided. SEB is committed to align- ing its business strategy with the Paris Climate Agreement and encourages sustainable practices in partnership with customers. 6. Industries with negative social impact shall be avoided. SEB is committed to aligning its business with the UN Guiding Principles on Business and Human Rights and therefore has a very restric- tive attitude to business activities in industries that could be seen as creating negative conditions for people involved in them. 7. Customers domiciled in high risk countries, where legal systems, infrastructures or financial disclosures are considered deficient and where corruption is high, shall be avoided. 8. Customers with heightened money laundering or sanction risk shall be treated with caution. Certain customers carry, by virtue of their activities, domicile, ownership, employees or payment patterns, a heightened risk for money laundering. 9. Customer acceptance shall be based on an approved business strategy, and SEB shall have the capacity to follow up and control customers and related risks. risks associated with the customer is collected and assessed. All new customers are assessed in this process, and the process is repeated on a regular basis throughout the duration of the relationship. The process is risk-based, and an extended risk as- sessment is conducted for customers operating in areas where the bank is deemed as more exposed, for example customers with specialised products or connections to high risk countries. During the year, work to define second line’s assessment of cus- tomer risk continued within the Chief Risk Officer function. Another important activity is transaction monitoring, which is used to detect suspicious transactions and behaviours. Any suspicious activity that is discovered is reported to the relevant authorities. In such cases, SEB will also consider terminating or limiting the business relationship. In 2021, SEB reported more than 3,900 Suspicious Activity Reports to the authorities in the countries where it operates. SEB also performs sanction screen- ing to prevent payments to and from persons or entities subject to financial sanctions. SEB Annual and Sustainability Report 2021 — 89 External cooperation is an essential part of the work to prevent financial crime. In 2021 SEB continued the work with a joint know-your-customer (KYC) platform, Invidem, that was initiated together with five other Nordic banks in 2019. The cooperation between the Swedish Police Authority and the large Swedish banks against money laundering, SAMLIT, continued with the aim to increase information sharing between the public and private sector. SEB’s work to detect and prevent all types of fraud, both internally and in cooperation with the police, is continuously developed and adapted to new criminal behaviours. SEB’s Code of Conduct and core values, mandatory train- ing and dialogues on ethical and value-related dilemmas strengthen employees’ awareness of the importance of their conduct. Employees are urged to report unethical or illegal incidents, if needed through an independent, external whistleblowing procedure. Sustainability risks in credit analysis and customer onboarding As a bank, SEB plays an important role in society by providing credit and managing financial assets in ways that promote sustainable economic growth and prosperity. Both in its cus- tomer onboarding and credit granting processes, SEB considers sustainability risks and the extent to which such risks can impact SEB’s ambition to be a sustainable bank as well as the custom- er’s ultimate repayment capacity. Tools for identifying, defining, monitoring, measuring and controlling sustainability risks are developed continuously. For more information on SEB’s sustainability management see p. 42 and for specific information on climate-related risk management, see p. 60. Liquidity and capital management A well-balanced liquidity and funding strategy Access to the liquidity and funding markets is vital in all circum- stances. SEB’s liquidity and funding strategy is managed from three perspectives: 1) optimising the liquidity structure of the balance sheet to ensure that less-liquid assets are matched with stable funding, 2) monitoring wholesale funding dependence, and 3) ensuring that the bank has sufficient liquidity reserves to withstand a severely stressed scenario. In 2021 deposits continued to outgrow lending, resulting in a historically low loan to deposit ratio of 111 per cent 122) and a lower need for funding in the financial markets. Financial markets were well functioning and offered attractive funding opportunities. SEB raised long-term funding amounting to SEK 75bn 117) while SEK 151bn 126) matured, lowering SEB’s total wholesale funding to SEK 474bn 580). A high credit rating is important as it forms the basis for SEB’s cost of wholesale funding. SEB maintained its rating from S&P, Fitch upgraded the outlook to stable, while Moody’s downgrad- ed SEB’s senior unsecured debt and deposits from Aa2 to Aa3 with stable outlook. Moody’s downgrade followed the Swedish National Debt Office’s (the resolution authority) proposal to amend its rules on Minimum Requirements for Eligible Liabilities and Own Funds (MREL), resulting in most Swedish banks needing to issue lower levels of additional loss-absorbing debt. See p. 75 for credit ratings and composition of new funding. SEB manages its assets and liabilities in line with the Net Stable Funding Ratio (NSFR) regulatory requirement of at least 100 per cent, a requirement that came into force in 2021. At year-end SEB’s NSFR was 111 per cent, which is well within the minimum regulatory requirement as well as the Board’s risk tolerance for a sound structural liquidity risk position. At the end of 2021 SEB’s liquid assets amounted to SEK 672bn 617). The size and composition of liquid assets are regularly analysed and assessed against estimated needs. The Liquidity Coverage Ratio (LCR) measures to what extent SEB’s liquid assets are sufficient to cover short-term cash out- flows in a short-term stressed scenario. At the end of 2021 SEB’s LCR was 145 per cent 163) and is thus in compliance with Liquidity Coverage Ratio, Core Gap Ratio and Net Stable Funding Ratio 1) Per cent 2019 2020 2021 Liquidity Coverage Ratio requirement/ Net Stable Funding ratio requirement 0 50 100 150 200 250 Liquidity Coverage Ratio Core Gap ratio Net Stable Funding Ratio 1) Core Gap Ratio is an internal measure of how long-term lending is matched by long-term funding. In 2021 the Net Stable Funding Ratio replaced it as a structural liquidity measure. For detailed information on risk, liquidity and capital management, see notes 40 and 41. 90 — SEB Annual and Sustainability Report 2021 Report of the Directors — Risk, liquidity and capital management the minimum requirement of 100 per cent. SEB also meets the minimum LCR requirement for individual currencies, including euro, dollar and other significant currencies. The capital position continues to be strong Despite a strong risk culture and risk management, unexpect- ed losses can occur in banking. SEB’s capital management is designed to ensure that the bank has sufficient capital to absorb such unexpected losses. The Board of Directors sets SEB’s capital target taking into consideration financial stability requirements by the regulators, debt investors and business counterparties, as well as the Board’s view on capital need and credit rating ambitions. These requirements must be balanced with the shareholders’ required rate of return. In 2020 new capital requirements started to apply for Swedish banks, when the EU Banking package was transposed into Swed- ish law. As part of the 2021 Supervisory Review and Evaluation Process (SREP), the Swedish FSA introduced a Pillar 2 Guidance (P2G) of 1.5 per cent for SEB. The Common Equity Tier 1 (CET 1) capital requirements consist of four main parts: Common Equity Tier 1 (CET 1) capital – requirement and relation as percentage of total risk-weighted exposure amount 2021 2020 Pillar 1 minimum requirement 4.5 4.5 Pillar 2 requirements (P2R) 1.2 1.2 Combined buffer requirement 6.6 6.6 Pillar 2 guidance (P2G) 1.5 Total requirement and P2G 13.8 12.6 Common Equity Tier 1 (CET 1) capital ratio 19.7 21.0 SEB’s CET1 capital ratio was at year-end 19.7 per cent 21.0), implying a buffer of 590 basis points above the regulatory requirement and P2G. The risk exposure amount increased to SEK 787bn 726) primarily as a result of growth in the corpo- rate credit portfolio and foreign exchange effects. Net profit was strong in 2021, however due to decisions and anticipation regarding future capital distribution, CET1 capital increased slightly to SEK 155bn 152). As part of the 2021 SREP, the Swedish FSA also introduced a Pillar 2 Guidance (P2G) of 0.45 per cent of the leverage ex- posure – on top of the minimum 3 per cent requirement for the leverage ratio. SEB’s leverage ratio was 5 per cent 5.1) at the end of 2021. The capital requirements for Swedish banks are higher than common EU levels, and Swedish banks are well capitalised compared to banks elsewhere in Europe, both from a risk-based and non-risk-based perspective. SEB’s strong capitalisation was confirmed in the EBA’s bi-annual EU-wide stress test. In the EBA’s adverse stress scenario, SEB’s CET1 capital ratio would decline from 21.0 per cent to 17.4 per cent, implying strong resilience in the stressed scenario. For information on the Board's capital-related financial targets, see p. 73. Finalisation of the Basel III framework In December 2017 the Basel Committee presented a frame- work for revisions to the Basel III framework (referred to as Basel IV) with the objective to reduce excessive variability of risk-weighted assets (RWA) among banks. For that purpose, the Capital adequacy Per cent Common Equity Tier 1 capital ratio Tier 1 capital ratio Total capital ratio CET1 requirement 0 5 10 15 20 25 2019 2020 2021 0200 400600 80 01 ,000 202 1 2020 20 19 Development of risk exposure amount (REA) SEK bn Credit risk Market risk Operational risk Credit value adjustment Investment in insurance business Other exposures Additional risk exposure amount 0510 15 20 25 Ag gregated EU level SEB EBA stress test 2021 – effect on Common Equity Tier 1 capital ratio Per cent Actual reported year-end 2020 Stressed outcome Committee introduced an output floor implying that risk- weighted assets calculated by applying internal models cannot in aggregate fall below 72.5 per cent of the risk-weighted assets calculated by the standardised approaches. On 27 October 2021 the European Commission released a proposal for im- plementation of Basel IV into EU legislation. The new rules are proposed to be implemented by 1 January 2025 with a five-year gradual phase-in of the output floor of 72.5 per cent until 1 January 2030. The removal of the internal model for oper- ational risk, together with restrictions on the use of internal models for credit risk and changed methods for market risk, is expected to lead to an increase in required capital for SEB. The proposal includes some improvements in relation to the output floor compared to the original Basel standard, making the rules more suitable for the European banking sector. SEB Annual and Sustainability Report 2021 — 91 Corporate governance “The trust that our shareholders, customers, and other stakeholders place in us forms the very foundation of our business. We do our utmost to nurture that trust in all parts of SEB’s business and in all countries where we operate. On behalf of the Board of Directors, I want to stress that SEB attaches great importance to having high standards of corporate governance, compliance and risk management. This includes our responsibility to counter money laundering and other financial crime, where we are continuously developing our abilities. We always strive to adhere to the changing regulatory landscape and our own internal standards to continue to earn the trust of all our stakeholders.” Marcus Wallenberg, Chair, Board of Directors To maintain the important societal function as a bank, it is of utmost importance for SEB that customers, shareholders, employees and other stakeholders have great confidence and trust in the bank’s operations. Professional employees who are guided by a high standard of business conduct are crucial, as is maintaining a sound risk culture. A robust corporate governance framework with clearly defined roles and responsibilities and internal control helps prevent conflicts of interest. Rules and regulations As a Swedish public limited liability financial institution with securities listed on Nasdaq Stockholm, SEB is subject to numerous rules and regulations. The external framework for corporate governance includes the following rules and regulations: • Companies Act • Annual Accounts Act • Nasdaq Stockholm Issuer Rules • Swedish Corporate Governance Code • Banking and Financing Business Act • Rules and guidelines issued by the Swedish Financial Supervisory Authority and other authorities. SEB also adheres to an internal framework that includes, among other things, the Articles of Association, which are adopted by the general meeting of shareholders. Policies and instructions that define the division of duties within the Group are tools for the Board of Directors (the Board) and the President and Chief Executive Officer (the President) in their governing and controlling roles. Such policies and instructions include, among others: • The Board’s Rules of Procedure and the Instructions for the board committees • Instructions for the President and the Group’s Corporate Governance • Group Credit Instruction and Risk Policy • Instruction for Handling of Conflicts of Interest • Policy on Anti-Money Laundering and Combating Financing of Terrorism 1) • Code of Conduct 1) • Remuneration Policy • Information Security Policy • Corporate Sustainability Policy 1) • Inclusion & Diversity Policy 1) • Policies on Suitability, Diversity and Composition of the Board, the Group Executive Committee (GEC) and other key function holders. 1) See sebgroup.com SEB’s ethical and sustainability endeavours are an integral part of the business and are regularly included on the Board’s agenda. SEB’s Code of Conduct describes the bank’s values, ethics and standards of business conduct and provides guidance on how employees are to abide by these values. Policies and instruc- tions for sustainability and group-wide thematic and sector policies addressing environmental, social and governance issues are also of vital importance. This Corporate Governance Report has been prepared in accordance with the Annual Accounts Act and the Swedish Corporate Governance Code (the Code). SEB strives to follow the Code where appropriate and has no deviations to report for 2021. More information about SEB’s corporate governance is available on sebgroup.com 92 — SEB Annual and Sustainability Report 2021 Distribution of shares by size of holding 31 December 2021 Size of holding No. of shareholders No. of shares Per cent 1500 176,271 30,059,472 1.4 5011,000 38,410 29,222,920 1.3 1,0015,000 42,861 94,104,210 4.3 5,00110,000 5,737 40,932,744 1.9 10,00120,000 2,276 31,913,381 1.5 20,00150,000 1,076 33,022,722 1.5 50,001100,000 287 20,369,123 0.9 100,001500,000 269 60,043,327 2.7 500,0011,000,000 53 37,055,072 1.7 1,000,001– 107 1,817,448,831 82.8 Total 267,347 2,194,171,802 100.0 Source: Euroclear and Holdings The largest shareholders 31 December 2021 No. of shares Of which Class C shares Share of capital, % Share of votes, % 2021 2020 Investor AB 456,198,927 4,000,372 20.8 20.8 20.8 Alecta 124,040,886 5.7 5.7 6.6 Trygg Foundation 108,441,911 4.9 5.0 5.2 AMF 89,098,313 4.1 4.1 3.7 Swedbank Robur Fonder 88,857,234 4.0 4.1 3.9 BlackRock 57,142,202 144 2.6 2.6 2.6 SEB Funds 44,675,056 2.0 2.1 2.1 Vanguard 44,063,409 244,317 2.0 2.0 1.9 SEB own shareholding 1) 37,754,605 1.7 1.7 1.5 Handelsbanken Funds 35,402,554 1.6 1.6 1.5 Nordea Funds 24,161,610 1.1 1.1 0.7 Capital Group 23,317,185 1.1 1.1 0.3 Fourth AP funds 22,938,845 1.0 1.1 1.3 Harding Loevner 21,743,961 1.0 1.0 0.0 Bank of Norway 19,427,461 29,372 0.9 0.9 0.6 1) See table Number of outstanding shares on p. 75. Source: Euroclear and Holdings. Different voting power of class A shares (voting power 1) compared to C shares (voting power 0.1) gives minor differences in share of votes vs. share of capital. The majority of the bank’s approximately 267 000 shareholders are private individuals with small holdings. The ten largest shareholders account for 50 per cent of the capital and votes. Shareholder structure Per cent Percentage holdings of equity on 31 December 2021 Swedish shareholders 73 Institutions and foundations 56 Private individuals 12 Other 4 Foreign shareholders 27 Source: Euroclear and Holdings Shareholders and general meetings of shareholders The shareholders exercise their influence at general meetings of shareholders by, among other things, electing directors of the Board and the external auditor. SEB has approximately 267,000 shareholders. SEB’s share cap- ital consists of two classes of shares – A shares and C shares. Each Class A share carries one vote and each Class C share carries one-tenth of a vote. The Annual General Meeting (AGM) of shareholders is held in Stockholm, in Swedish. All shareholders listed in the shareholder register who have duly notified their attendance have the right to participate at the AGM and to vote for the full number of their shares. Shareholders who cannot attend may appoint a repre- sentative. The 2021 AGM was held on 30 March at the bank’s head office in Stockholm. As a safety measure to prevent the spread of Covid19, the AGM was conducted without the physical presence of shareholders and members of the Board of Directors other than the Chair and the President. The shareholders were able to exercise their voting rights by post and submit questions in writing prior to the AGM in accordance with Section 22 of the Act 2020198) on Temporary Exemptions to Facilitate the Execution of General Meetings in Companies and Associations. A total of 934 shareholders, representing 61 per cent of the votes, were represented at the AGM. Central resolutions made at the AGM were: • approval of an ordinary dividend of SEK 4.10 per share • re-election of nine directors • re-election of Marcus Wallenberg as Chair of the Board • re-election of Ernst & Young AB as external auditor • approval of the Board’s Remuneration Report 2020 • adoption of three long-term equity programmes • issuance of a mandate to the Board concerning purchases and sales of own shares for SEB’s securities business, for the long- term equity programmes and for capital management purposes • authorisation for the Board to decide on the issuance of convertibles • amendment of the Articles of Association. An Extraordinary General Meeting (EGM) was held on 12 November 2021. The shareholders were able to exercise their voting rights by post and submit questions in writing prior to the EGM in accordance with the exemption, Section 22 of the Act 2020198), mentioned above. A total of 1,037 shareholders, representing 70 per cent of the votes, were represented at the EGM. The central resolution made at the EGM was the approval of a further ordinary dividend of SEK 4.10 per share. The minutes from the AGM and the EGM are available on sebgroup.com Report of the Directors — Corporate governance SEB Annual and Sustainability Report 2021 — 93 Nomination Committee The primary task of the Nomination Committee is to submit recommendations to the AGM for the Chair and directors of the Board as well as the external auditor. The Nomination Committee nominates the Chair, the directors of the Board and the external auditor and makes recommendations regarding directors’ fees and fees for committee work. Pursuant to a decision by the AGM, the Nomination Committee is to be composed of the Chair of the Board along with representa- tives of the bank’s four largest shareholders that are interested in appointing a member. One of the independent directors shall be appointed as an additional member of the Nomination Committee. The composition of the Nomination Committee meets the requirements laid out in the Code. The Nomination Committee has access to relevant information about SEB’s operations and financial and strategic position, provided by the Chair of the Board and the additional member. The Board’s composition shall adhere to applicable laws and regulations and to the Policy on Suitability, Diversity and Composition of the Board of Directors, adopted by the Board. An important principle is that the Board’s size and composition shall be such as to serve the bank in the best possible way. Therefore, as the starting point for its work, the Nomination Committee is tasked with assessing the degree to which the Board meets the demands that will be placed on the Board in view of the bank’s operations, organisation and future direction. The Board’s size and composition is discussed and reviewed in terms of suitable competence and experience in the finan- cial sector as well as in other sectors. In addition, the directors should have sufficient time to perform their duties and under- stand the bank’s business and its main risks. The Nomination Committee also reviews the evaluations of the Board’s directors and Chair. See p. 98. The Nomination Committee shall ensure diversity within the Board in terms of the directors’ educational and professional backgrounds, gender, age and geographical provenance. Furthermore, the Nomination Committee discusses succes sion matters with particular emphasis on continuity and long-term perspective in ensuring the Board’s competence and com- position. The Nomination Committee for the 2021 AGM was appointed in the autumn of 2020. No fee has been paid to the members of the Nomination Committee. The Nomination Committee’s proposals for decisions, including a motivated account as regards directors, are available on sebgroup.com. Nomination Committee for the 2021 AGM Member Representing Votes (%) 31 Aug. 2021 Petra Hedengran, chair Investor 20.8 Magnus Billing Alecta 6.6 Lars Heikensten Trygg Foundation 5.2 Johan Sidenmark AMF 3.8 Marcus Wallenberg SEB, Chair of the Board 36.4 Jesper Ovesen, additional member, appointed by the Board. Swedbank Robur Funds, which was the bank’s fourth largest shareholder, did not appoint a member of the Nomination Committee. Corporate governance structure SEB’s business operations are managed, controlled and followed up in accordance with policies and instructions established by the Board and the President. General Meeting of Shareholders (p.93) Board of Directors (p. 95) Board Committees Remuneration & HR Committee (p. 99) Audit & Compliance Committee (p. 99) Risk & Capital Committee (p. 100) Appoints Reports to Chief Risk Officer (p. 104) External Auditor (p. 104) Nomination Committee (p. 94) Head of Group Compliance (p. 104) Head of Group Risk (p. 104) Head of Group Internal Audit (p. 104) SEB’s organisation President and Chief Executive Officer President and Chief Executive Officer (p. 100) CEO Committees Group Executive Committee (p. 100) Asset & Liability Committee (p. 100) Group Risk Committee (p. 101) Group Executive Sustainability Committee (p. 101) Group Internal Control and Compliance Committee (p. 101) Head of Group Credits (p. 104) Divisions Large Corporates & Financial Institutions division (LC&FI) Corporate & Private Customers division (C&PC) Private Wealth Management & Family Office division (PWM&FO) Baltic division Life division Investment Management division Group Staff, Support and Control functions Report of the Directors — Corporate governance 94 — SEB Annual and Sustainability Report 2021 On the Board’s agenda in 2021 First quarter • Annual and Sustainability Report 2020 • Balance sheet, capital and dividend matters • CEO and GEC succession planning • Internal and external audit reports as well as Group Compliance report • Remuneration of the President, GEC and control functions • LC&FI division expansion of geographical scope to the Netherlands, Austria and Switzerland • Annual review of Instruction and Polices for the SEB Group, including adoption of new fossil fuel policy • Cybersecurity review • AGM notice and AGM proposals • Statutory board meeting Second quarter • Governance and organisational changes, including establishment of a Fraud and Crime Prevention (FCP) unit • SEB‘s long-term strategy • General Data Protection Regulation requirements • Governance of potential conflicts of interest within the Board • Internal Capital and Liquidity Adequacy Assessment (ICAAP and ILAAP) • Macroeconomic update • Visit from the Director General of the Swedish Financial Supervisory Authority Third quarter • Risk seminar • Update on the custody business area • Update on digital assets (currencies) • Update on sustainability work in SEB • Update on SEB’s long-term strategy • Capital matters Fourth quarter • Capital distribution: Extraordinary General Meeting (dividend) and share buyback • Business plan 20222024 • Board evaluation • Employee survey • Recovery and resolution plan • Update on FCP organisation • PWM&FO division strategic review • Update on national security regulation SEB’s quarterly report, reports and a summary of SEB’s risk position, asset quality, credit portfolio and liquidity position are on the Board’s agenda each quarter. Board of Directors The Board has overarching responsibility for the organisation, administration and operations of the SEB Group. The Board has adopted Rules of Procedure that regulate the Board’s role and ways of working as well as special instructions for the Board’s committees. The Board has the following duties, among others: • deciding on the objectives, strategy and framework of the business activities as well as the business plan • regularly following up and evaluating operations in relation to the objectives and guidelines established by the Board • ensuring that the business is organised in such a way that the accounting, treasury management and risks inherent in the business as well as financial conditions in other respects are controlled in a satisfactory manner, in accordance with external and internal rules • adopting policies and instructions for the business operations • deciding on major acquisitions and divestments as well as other major investments • appointing or dismissing of the President, members of GEC, the Chief Risk Officer (CRO), and the Head of Group Internal Audit, as well as setting the remuneration for these individuals • deciding on a framework for granting loans and other trans- actions with the directors of the Board and other persons in a managerial position in SEB and their related parties as well as deciding on such transactions. The Chair of the Board organises and leads the work of the Board and ensures among other things that the directors on a regular basis receive information and education on changes in rules concerning the bank’s operations and on responsibilities of directors of a listed financial company. Educational and special- isation seminars are held each year. New directors are offered educational seminars with information on, and discussions about, SEB’s various operations, including control functions. The directors are elected by the shareholders at the AGM for a one-year term. Since the 2021 AGM the Board shall consist of nine AGM-elected directors, without deputies, and of two di- rectors along with two deputies appointed by the trade unions, who serve as employee representatives. In order for a quorum to exist at a board meeting, more than half of the directors must be present. The President is the only AGM-elected director employed by the bank. The Nomination Committee has made a collective assessment of the directors’ independence in relation to the bank and the bank’s management as well as in relation to shareholders controlling 10 per cent or more of the shares or votes and has found that the composition of the Board meets the requirements of the Code. The Board’s work follows a yearly plan. In 2021 the Board held 23 meetings. The President attends all board meetings except when they address matters in which the President has an interest that may be in conflict with the interests of the bank, such as when the President’s work is evaluated. Other members of GEC participate whenever required. Directors’ fees The AGM sets the total fees for the directors of the Board and decides how the fees are to be distributed among the directors and the Board’s committees. Directors’ fees are paid on a running basis during the mandate period. Following a recommendation by the Nomination Com- mittee, the Board has adopted a policy that recommends that directors use 25 per cent of their fee to purchase and hold SEB shares up to an amount corresponding to one year’s fee. Neither the President nor the directors appointed by the trade unions receive any directors’ fee. SEB Annual and Sustainability Report 2021 — 95 Marcus Wallenberg Sven Nyman Jesper Ovesen Signhild Arnegård Hansen Anne-Catherine Berner Winnie Fok Lars Ottersgård Helena Saxon Johan Torgeby Position Chair since 2005 Vice Chair since 2017 Vice Chair since 2014 Director Director Director Director Director Director (President and CEO) Committee Vice Chair RCC, ACC, RemCo Member RCC Chair RCC, member ACC Chair RemCo Member RemCo Member ACC Chair ACC Year elected 2002 2013 2004 2010 2019 2013 2019 2016 2017 Born 1956 1959 1957 1960 1964 1956 1964 1970 1974 Education B.Sc. (Foreign Service) B.Sc. (Business and Econ.) B.Sc. (Econ.) and MBA B.Sc. (Human Resources) and journalism studies B.Sc. (Econ.) and MBA (Leadership) Bachelor of Commerce. Fellow of CPA Australia and of Institute of Chartered Accountants in England and Wales. Associate member of Hong Kong Institute of Certified Public Accountants. Technical College Exam (electrical engineering), Diploma in Management from The Open University Business School and numerous IBM internal training courses. M.Sc. (Business and Econ.) B.Sc. (Econ.) Other assignments Chair of Saab and FAM. Vice Chair of Investor, EQT and the Knut and Alice Wallenberg Foundation. Director of AstraZeneca Plc. Member of the International Advisory Council of Hong Kong Exchanges and Clearing Limited until May 2022. Director of Investor, Ferd Holding AS (Norway), Nobel Foundation’s Investment Committee, Stockholm School of Economics, Stockholm School of Economics Association and of Axel and Margaret Ax:son Johnson’s Foundation. Chair of SnackCo of America Corp. Chair of the Swedish- American Chamber of Commerce (USA). Director of SOS Children’s Villages Sweden and SACC New York. Director of the Royal Swedish Academy of Engineering Sciences (IVA). Director of Calefactio Investments HoldCo, Calefactio Investments, CV VC AG (Switzerland), Avesco AG (Switzerland) and Värmevärden/Adven (Sweden/ Finland). Chair of the board, and founder, of the Association for the Support of the New Children’s Hospital in Helsinki. Director of Geely Holding Group. Senior Advisor to WFAB. Head of Market Technology, Nasdaq Inc. Chair and CEO of Nasdaq Technology. Deputy Director in EKO Respecta. CFO of Investor. Director of Swedish Orphan Biovitrum. Director of Mölnlycke Holding, Swedish Banker’s Association, Institute of International Finance. Board member of Mentor Sweden, Council member of Finnish-Swedish Chamber of Commerce, Member of YPO Young Presidents’ Organisation, LUSEM Advisory Board Lund University and IIEB (Institut International d’Études Bancaires). Background Chair of Electrolux, International Chamber of Commerce (ICC) and LKAB. Director of EQT Holdings, Stora Enso and Temasek Holdings. Executive Vice President of Investor and CEO of Investor. Several assignments as chair and director of large public companies. Broad experience from the financial business field. Managerial positions within Investor. CEO and founder of RAM Rational Asset Management, Lancelot Asset Management and Arbitech. Several directorships. Price Waterhouse. Vice President and later CEO of Baltica Bank A/S. Vice President and Head of Finance of Novo Nordisk A/S. CEO of Kirkbi Group. CFO of Danske Bank A/S, LEGO Holding A/S and TDC A/S. Several directorships. President of the family-owned company Svenska LantChips. Chair of the Confederation of Swedish Enterprise. Vice Chair of Business Europe. Director of Business Sweden, Entrepreneurship and Small Business Research Institute (ESBRI). Several directorships. Member of Finnish Parliament and Minister of Transport and Communications in the Finnish government. Director of Ilmarinen and Soprano Oyi. Several other assignments as Chair and Director. Broad experience from the financial business field. Industrial advisor and senior advisor to Investor and Husqvarna. CEO and Senior Partner of EQT Partners Asia Ltd and CEO of New Asia Partners Ltd. Director of Volvo Cars Corporation and G4S plc. Various leading positions in Nasdaq. Head of Sales for Market Technology at OMX. Various management positions within IBM for the Nordics and Europe, Middle East & Africa. Financial analyst at Goldman Sachs and Investor, CFO at Syncron International and Hallvarsson and Halvarsson. Investment Manager at Investor. Robur Asset Management and Morgan Stanley. Co-head of Large Corporates & Financial Institutions division. Nationality Swedish Swedish Danish Swedish and American Swiss and Finnish British Swedish Swedish Swedish Own and closely related persons’ shareholdings 752,000 A shares 10,440 A shares and 10,200 C shares 25,000 A shares 5,387 A shares 4,600 A shares 3,000 A shares No shares 12,500 A shares 457,740 shares and share rights ) Independent in relation to bank/major shareholders Yes/No Yes/No Yes/Yes Yes/Yes Yes/Yes Yes/Yes Yes/Yes Yes/No No/Yes Attendance at board/ committee meetings 1) 20 of 20 / 43 of 43 20 of 20 / 24 of 24 23 of 23 / 35 of 35 23 of 23 / 10 of 10 23 of 23 / 10 of 10 22 of 22/ 8 of 9 22 of 22 20 of 20 / 9 of 9 23 of 23 Fee, board meetings, SEK 3,225,000 1,020, 000 1,020, 000 775,000 775,000 775,000 – 3) 775,000 – Fee, committee meetings, SEK 870,000 390,000 910,000 400,000 200,000 280,000 445,000 1) Includes only the meetings that the director could attend without conflict of interest. Board of Directors Report of the Directors — Corporate governance 96 — SEB Annual and Sustainability Report 2021 Marcus Wallenberg Sven Nyman Jesper Ovesen Signhild Arnegård Hansen Anne-Catherine Berner Winnie Fok Lars Ottersgård Helena Saxon Johan Torgeby Position Chair since 2005 Vice Chair since 2017 Vice Chair since 2014 Director Director Director Director Director Director (President and CEO) Committee Vice Chair RCC, ACC, RemCo Member RCC Chair RCC, member ACC Chair RemCo Member RemCo Member ACC Chair ACC Year elected 2002 2013 2004 2010 2019 2013 2019 2016 2017 Born 1956 1959 1957 1960 1964 1956 1964 1970 1974 Education B.Sc. (Foreign Service) B.Sc. (Business and Econ.) B.Sc. (Econ.) and MBA B.Sc. (Human Resources) and journalism studies B.Sc. (Econ.) and MBA (Leadership) Bachelor of Commerce. Fellow of CPA Australia and of Institute of Chartered Accountants in England and Wales. Associate member of Hong Kong Institute of Certified Public Accountants. Technical College Exam (electrical engineering), Diploma in Management from The Open University Business School and numerous IBM internal training courses. M.Sc. (Business and Econ.) B.Sc. (Econ.) Other assignments Chair of Saab and FAM. Vice Chair of Investor, EQT and the Knut and Alice Wallenberg Foundation. Director of AstraZeneca Plc. Member of the International Advisory Council of Hong Kong Exchanges and Clearing Limited until May 2022. Director of Investor, Ferd Holding AS (Norway), Nobel Foundation’s Investment Committee, Stockholm School of Economics, Stockholm School of Economics Association and of Axel and Margaret Ax:son Johnson’s Foundation. Chair of SnackCo of America Corp. Chair of the Swedish- American Chamber of Commerce (USA). Director of SOS Children’s Villages Sweden and SACC New York. Director of the Royal Swedish Academy of Engineering Sciences (IVA). Director of Calefactio Investments HoldCo, Calefactio Investments, CV VC AG (Switzerland), Avesco AG (Switzerland) and Värmevärden/Adven (Sweden/ Finland). Chair of the board, and founder, of the Association for the Support of the New Children’s Hospital in Helsinki. Director of Geely Holding Group. Senior Advisor to WFAB. Head of Market Technology, Nasdaq Inc. Chair and CEO of Nasdaq Technology. Deputy Director in EKO Respecta. CFO of Investor. Director of Swedish Orphan Biovitrum. Director of Mölnlycke Holding, Swedish Banker’s Association, Institute of International Finance. Board member of Mentor Sweden, Council member of Finnish-Swedish Chamber of Commerce, Member of YPO Young Presidents’ Organisation, LUSEM Advisory Board Lund University and IIEB (Institut International d’Études Bancaires). Background Chair of Electrolux, International Chamber of Commerce (ICC) and LKAB. Director of EQT Holdings, Stora Enso and Temasek Holdings. Executive Vice President of Investor and CEO of Investor. Several assignments as chair and director of large public companies. Broad experience from the financial business field. Managerial positions within Investor. CEO and founder of RAM Rational Asset Management, Lancelot Asset Management and Arbitech. Several directorships. Price Waterhouse. Vice President and later CEO of Baltica Bank A/S. Vice President and Head of Finance of Novo Nordisk A/S. CEO of Kirkbi Group. CFO of Danske Bank A/S, LEGO Holding A/S and TDC A/S. Several directorships. President of the family-owned company Svenska LantChips. Chair of the Confederation of Swedish Enterprise. Vice Chair of Business Europe. Director of Business Sweden, Entrepreneurship and Small Business Research Institute (ESBRI). Several directorships. Member of Finnish Parliament and Minister of Transport and Communications in the Finnish government. Director of Ilmarinen and Soprano Oyi. Several other assignments as Chair and Director. Broad experience from the financial business field. Industrial advisor and senior advisor to Investor and Husqvarna. CEO and Senior Partner of EQT Partners Asia Ltd and CEO of New Asia Partners Ltd. Director of Volvo Cars Corporation and G4S plc. Various leading positions in Nasdaq. Head of Sales for Market Technology at OMX. Various management positions within IBM for the Nordics and Europe, Middle East & Africa. Financial analyst at Goldman Sachs and Investor, CFO at Syncron International and Hallvarsson and Halvarsson. Investment Manager at Investor. Robur Asset Management and Morgan Stanley. Co-head of Large Corporates & Financial Institutions division. Nationality Swedish Swedish Danish Swedish and American Swiss and Finnish British Swedish Swedish Swedish Own and closely related persons’ shareholdings 752,000 A shares 10,440 A shares and 10,200 C shares 25,000 A shares 5,387 A shares 4,600 A shares 3,000 A shares No shares 12,500 A shares 457,740 shares and share rights ) Independent in relation to bank/major shareholders Yes/No Yes/No Yes/Yes Yes/Yes Yes/Yes Yes/Yes Yes/Yes Yes/No No/Yes Attendance at board/ committee meetings 1) 20 of 20 / 43 of 43 20 of 20 / 24 of 24 23 of 23 / 35 of 35 23 of 23 / 10 of 10 23 of 23 / 10 of 10 22 of 22/ 8 of 9 22 of 22 20 of 20 / 9 of 9 23 of 23 Fee, board meetings, SEK 3,225,000 1,020, 000 1,020, 000 775,000 775,000 775,000 – 3) 775,000 – Fee, committee meetings, SEK 870,000 390,000 910,000 400,000 200,000 280,000 445,000 2) of which 5,826 A shares, 195,005 share rights and 256,909 conditional share rights. 3) Lars Ottersgård has declined his director’s fee. SEB Annual and Sustainability Report 2021 — 97 Directors appointed by the trade unions Secretary to the Board of Directors and Group General Counsel Evaluation of the Board of Directors, the President and the Group Executive Committee The Board uses an annual self-assessment method, which among other things includes a questionnaire, followed by discussions within the Board. Through this process the activities and work methods of the Board, the Chair of the Board and the respective committees are evaluated. Among the issues examined are: • the extent to which the individual directors take an active part in board and committee discussions • whether directors contribute independent opinions • whether the meeting atmosphere is conducive to open discussions. The outcome of the evaluation is presented to and discussed by the Board and the Nomina- tion Committee. The evaluation process and its outcome contribute to further improvement of the Board’s work and help the Nomination Committee determine the appropriate size and composition of the Board. Marcus Wallenberg does not participate in the evaluation of the Chair’s work, which in 2021 was conducted by Vice Chair Jesper Ovesen. The Board evaluates the work of the President and GEC on a regular basis without participation of the President or any other member of GEC. Contact the Board of Directors Skandinaviska Enskilda Banken AB, Board Secretariat SE106 40 Stockholm, Sweden [email protected] Anna-Karin Glimström Charlotta Lindholm Annika Dahlberg Magnus Olsson Position Director Director Deputy director Deputy director Year elected 2016 2015 2016 2020 Born 1962 1959 1967 1963 Education University studies in mathematics, statistics and law. LLB University studies in working environment and labour law. B.Sc. (Econ.) Other assignments Chair of Financial Sector Union in SEB and Financial Sector Union western section in SEB, Director EB-SB Fastigheter and EB-SB Holding. Client executive at PWM & FO Banking Foundations. Chair of the Association of University Graduates at SEB. Director of the Foundation of Alma Detthows. Employed at Finansförbundet at SEB. First deputy Chair of Financial Sector Union in SEB and Financial Sector Union regional club Storstockholm in SEB. Director of SEB’s Aid and Education foundation. Business advisor SEB Lund. Background Office manager and various other positions in SEB. Various specialist and leader roles within Trygg-Hansa. Director of SEB’s Profit Sharing Foundation. Various client responsibility positions in several divisions and subsidiaries in SEB. Client executive at Private Banking Foundations. Employed at Fixed Income, Group Operations. Director of SEB’s Profit Sharing Foundation and Result Premium Foundation. Various positions at SEB, including Head of branch office, account manager Merchant Banking (MB), business manager MB, business advisor at branch offices. Nationality Swedish Swedish Swedish Swedish Own and closely related persons’ shareholdings No shares and 747 conditional share rights. 1,063 A shares and 747 conditional share rights. No shares and 747 conditional share rights. 3,000 A shares and 747 conditional share rights. Attendance at board meetings 21 of 23 23 of 23 18 of 18 17 of 18 Hans Ragnhäll Report of the Directors — Corporate governance 98 — SEB Annual and Sustainability Report 2021 Audit and Compliance Committee (ACC) ACC supports the Board in its work with qual- ity assurance of, and internal control over, the bank’s financial reporting and reporting to the supervisory authorities. ACC also mon- itors the effectiveness of internal controls regarding compliance and audit matters. Helena Saxon Chair of ACC Main focus in 2021 • Follow-up of processes for internal control and regulatory compliance, for example in the newly established Group Internal Control and Compliance Committee. When required, ACC prepares, for decision by the Board, a rec- ommendation for the appointment or dismissal of the Head of Group Internal Audit. The committee maintains regular contact with the bank’s external and internal auditors and discusses the coordination of their activities. The committee also ensures that any remarks and observations from the auditors are addressed, and evaluates the external auditor’s work and independence. When required, a recommendation from the President on appointment or dismissal of the Head of Group Compliance is subject to the committee’s approval. ACC held 9 meetings in 2021. It is primarily the Chief Financial Officer, the external auditor, the Head of Group Internal Audit and the Head of Group Compliance who submit reports for the committee’s consideration. In addition, the President and the CRO regularly participate in the meetings. See p. 105 for the Report on Internal Control over Financial Reporting. ACC members Helena Saxon (Chair), Marcus Wallenberg (Vice Chair), Jesper Ovesen and Winnie Fok. Board committees The Board’s overarching responsibility cannot be delegated. However, the Board has established committees to handle certain defined issues and to prepare such issues for decision by the Board. At present, there are three board committees: The Remunera- tion and Human Resources Committee (RemCo), the Audit and Compliance Committee (ACC), and the Risk and Capital Commit- tee (RCC). These committees report to the Board on a regular basis. An important principle is that as many independent directors as possible shall actively participate in the commit- tee work. Neither the President nor any other officer of the bank is a member of the committees. The Chair of the Board serves as vice chair of the three committees. The committees are not composed of the same group of directors that forms another committee, and the bank occasionally rotates chairs and directors of the committees, taking into account the specific experience, know-ledge and skills that are individually or collec- tively required for the committees. Remuneration and Human Resources Committee (RemCo) RemCo prepares, for decision by the Board, appointments of the President and GEC mem- bers. The committee also develops, monitors and evaluates SEB’s remuneration system, incentive models and risk adjustment, and evaluates SEB’s talent, learning and succes- sion planning activities. Signhild Arnegård Hansen Chair of RemCo Main focus in 2021 • Follow-up of SEB’s global talent management and succession planning for key executives • Follow-up of SEB’s work with inclusion and diversity • Evaluation of variable remuneration programmes • Monitor the progress of the SEB Campus competence platform. See the Remuneration chapter on p. 106. RemCo monitors and evaluates application of the guidelines established by the AGM for salary and other remuneration for the President and the members of GEC. An independent auditor’s review on adherence to SEB’s Remuneration Policy and applica- ble regulations is presented to the committee annually. RemCo reviews, in consultation with RCC, the bank’s Re- muneration Policy and ensures that the bank’s remuneration structure takes into account the risks and the cost of capital and liquidity. This review is based on, among other things, the risk analysis performed jointly by Group Risk and Group Compliance. In addition, the committee oversees the Group’s pension ob- ligations and, together with RCC, the measures taken to secure the Group’s pension obligations, including development of the bank’s pension foundations. RemCo held 10 meetings in 2021. It is primarily the President, together with the Head of Group HR, that submits reports for the Committee’s consideration. RemCo members Signhild Arnegård Hansen (Chair), Marcus Wallenberg (Vice Chair) and Anne-Catherine Berner. SEB Annual and Sustainability Report 2021 — 99 The President The President, who is also the Chief Executive Officer, is responsible for the day-to-day management of the activities of SEB in accordance with the Board’s directives. The President shall ensure that SEB is organised in such a way that there is an appropriate and transparent governance struc- ture with a clear division of functions and responsibilities that ensures efficient and sound governance of SEB. The President has overarching responsibility for SEB’s risk management in accordance with the Board’s policies and instructions as well as its intentions as stated in the Board’s risk tolerance statements. The Board has adopted an instruction for the President’s duties and role. The President reports to the Board and at each board meeting submits a report on, among other things, the performance of the business, based on the decisions made by the Board. The President appoints the heads of the divisions and the heads of the various staff and support functions that report directly to the President. The President’s committees The President has five main committees at his disposal for the purpose of managing the operations. The Group Executive Committee (GEC) To best safeguard the interests of the Group as a whole, the President consults with GEC on matters of major importance or of importance as to principles. GEC addresses, among other things, matters of common concern to several divisions, stra- tegic issues, issues in the areas of sustainability, IT and compli- ance, business plans and financial forecasts and reports. GEC held 34 meetings in 2021. GEC has 13 members apart from the President. The President has also appointed eight managers as additional members of GEC. They participate in GEC meetings from time to time to provide expertise and insight primarily in their respective areas of responsibility. Asset and Liability Committee (ALCO) ALCO, chaired by the President and with the Chief Financial Officer as vice chair, is a group-wide decision-making, monitor- ing and consultative body. ALCO, which held 8 meetings in 2021, handles the following matters, among others: • financial stability, particularly in the new regulatory framework • strategic capital and liquidity issues, including internal capital allocation and principles for internal pricing. Risk and Capital Committee (RCC) RCC supports the Board in its work on ensur- ing that SEB is organised and managed in such a way that risks inherent in the Group’s business are monitored and managed in accordance with the Board’s risk tolerance statement as well as with external and internal rules. RCC also monitors the Group’s capital and liquidity situation on a continuous basis. Jesper Ovesen Chair of RCC Main focus in 2021 • Follow-up of SEB’s capital and liquidity position in the light of the Covid19 pandemic and the forthcoming banking reform packages, and of the business plan and economic forecast to ensure the bank has an adequate capitalisation and liquidity position at every point in time • Review of the credit portfolio in the light of the Covid19 pandemic, focusing on business sectors in transition as well as sustainability policies, such as policies related to fossil fuels. RCC sets the principles and parameters for measuring and allocating risk and capital within the Group and oversees risk management systems and the risk tolerance and strategy for the short and long term. The committee prepares a recommen- dation for the appointment and dismissal of the CRO. It also decides on individual credit matters of major importance or of importance as to principles and assists RemCo in providing a risk- and capital-based view of the remuneration system. RCC held 26 meetings in 2021. The Group’s Chief Financial Officer has overall responsibility for informing and submitting proposals to RCC on matters related to capital and funding. The CRO has the same overall responsibil- ity for risk and credit matters. The President, the Chief Financial Officer and the CRO regularly participate in the meetings. The CRO function is described on p. 104. Information on risk, liquidity and capital management is provided on p. 86. RCC members Jesper Ovesen (Chair), Marcus Wallenberg (Vice Chair) and Sven Nyman. On GEC agenda in 2021 Non-recurring agenda items • Annual accounts • AGM preparations • Annual review of policies and instructions, including SEB’s Code of Conduct • Development of sustainability • Discussions on customer satisfaction, branding and image position as well as customer insight work • Strategic Initiatives status update • Employee survey 2021 – discussion of survey results and actions • Financial crime prevention programme • Money Laundering and Terrorist Financing Risk Assessment • Investor World update • Retail Sweden transformation • Corporate Banking update • Review of competence and leadership development • Google Cloud partnership Recurring agenda items • Discussion on capital requirements, asset quality and risk • Macroeconomic development • Media update • Review and discussions on IT, including investments, security, agile way of working and cloud services • Review of the bank’s business operations and home markets • Savings, Technology and Business Support & Operations quarterly updates • Review process for handling customer complaints • Quarterly reports • SEB’s long-term strategy and follow-up of the business plan • Chief Information Officer update Report of the Directors — Corporate governance 100 — SEB Annual and Sustainability Report 2021 SEB External Sustainability Advisory Board (SESAB) SEB’s need to understand the direction and speed of sustainability-related change, including future opportunities and challenges, is very high. To address this need SEB has established an advisory board – the SEB External Sustainability Advisory Board (SESAB). The purpose of SESAB is to provide the bank with strategic intelligence in matters concerning sustain- ability from individuals outside the banking industry, based on academic research, and when desired, complemented with industrial experience. SESAB is composed of external experts by invitation of the President. Divisions SEB’s business is organised in divisions with a number of business areas and business units. The Board regulates the activities of the Group through an instruc- tion for internal governance which establishes how the Group’s divisions, including the international activities conducted through branches and subsidiaries, are to be governed and organised. The head or co-heads of a division have overall responsibility for the activities in the division. Country Managers are appointed for countries outside Sweden in which SEB conducts business operations. Country Managers coordinate the Group’s business locally and reports to a specially designated member of GEC. Group Support functions and Group Staff functions The Group Support functions and Group Staff functions are cross-divisional functions established to leverage economies of scale and support to the business. The Group Support functions support the SEB Group through centralised and cross-divisional functions, established primarily to leverage economies of scale in various transactional, process- ing and IT services. The Group Support functions are divided into three units: Group Technology, Business Support & Operations and Sustainable Banking. The Group Staff functions are set up to add value and support the business, and to manage certain regulated areas such as finance, human resources and legal affairs. The Group Staff functions have global responsibility and support the organi- sation with services in the areas of financial control, human resources, legal affairs, communication and marketing as well as financial crime prevention. Group Risk Committee (GRC) GRC, chaired by the President and with the CRO as vice chair, is a group-wide decision-making committee that addresses all types of risk at the group level, including sustainability and reputation- al risks, in order to evaluate portfolios, products and customers from a comprehensive risk perspective. GRC held 67 meetings in 2021. GRC is tasked with: • making important credit decisions • ensuring that all risks inherent in the Group’s activities are identified, measured, monitored and reported in accordance with internal and external rules • supporting the President in ensuring that decisions regarding the Group’s long-term risk tolerance are adhered to in the business organisation • ensuring that the Board’s guidelines for risk management and risk control are implemented and that the necessary rules and policies for risk-taking in the Group are maintained and enforced. Group Executive Sustainability Committee (GESC) GESC, chaired by the President and with the Chief Sustainability Officer as vice chair, is a group-wide decision-making committee that addresses matters related to corporate sustainability activ- ities in SEB. GESC held 9 meetings in 2021. GESC decides on the following matters in the corporate sustainability area to secure the best interest of the Group: • matters that are to be presented to the Board • matters of major importance or of importance as to principles • matters of common concern to several divisions, Group Support functions or Group Staff functions • SEB’s sustainability-related policies • Sustainability KPIs and targets for the divisions. Group Internal Control and Compliance Committee (GICC) GICC is a newly established group-wide committee. GICC is a consultative forum for the President and is tasked with review- ing, assessing, and following up on reporting from Group Internal Audit and Group Compliance, and where relevant the CRO function, on issues regarding the effectiveness and appropri- ateness of the organisational structure, procedures, measures and methods in place to comply with the rules and regulations applicable to the regulated business. The President shall also decide on appropriate measures needed to remedy identified deficiencies in the reports from the control functions. GICC held 6 meetings in 2021. The three lines of defence in risk management The business units make up the first line of defence. The business units ensure that transactions are correctly priced and that the assumed risks are managed throughout the life of the transactions. Long-term customer relationships and a sound risk culture provide a solid foundation for risk-taking decisions. Initial risk assessments are made of both the customer and the proposed transaction. Larger transactions are reviewed by a credit committee. The business units are responsible for ensuring that the activities comply with applicable group-wide policies and instructions and are supported by a clear decision-making hierarchy. The risk and compliance functions make up the second line of defence. These units are independent from the business operations. The risk function is responsible for identifying, measuring, monitoring and reporting risks. Risks are measured both on detailed and aggregated levels. Internal measurement models have been developed for most of the credit portfolio as well as for market and non-financial risk, including regulatory compliance and the models have been approved by the Swedish FSA for calculating capital adequacy. Risks are controlled through limits at transactional, desk and portfolio levels. Asset quality and the risk profile are monitored continuously, such as through stress testing. The compliance function works proactively with quality assur- ance of SEB’s compliance and focuses on matters such as customer protection, conduct in the financial market, prevention of money laundering and the financing of terrorism, and regulatory requirements and controls. Internal Audit is the third line of defence. Risk management is regularly reviewed and evaluated by Internal Audit to ensure that it is adequate and effective. The internal auditors are in turn evaluated by the external auditor. Based on evaluations of the third line of defence, the processes in the first and second lines of defence are continuously strengthened. SEB’s governance framework, sound risk culture and business acumen constitute the cornerstones of effective risk management. SEB Annual and Sustainability Report 2021 — 101 Group Executive Committee (as from 1 January 2022) Mats Holmström Peter Kessiakoff Nina Korfu-Pedersen Ulrika Areskog Lilja Nicolas Moch Position Chief Risk Officer since 2021 Acting Chief Financial Officer since 2021 Head of Business Support & Operations since 2020 Head of Group Marketing and Communication since 2021 Chief Information Officer since 2018 GEC member since 2021 2021 2018 2021 2020 SEB employee since 1990 2016 2010 2021 2008 Born 1968 1986 1973 1975 1972 Education Higher bank degree (SEB) M.Sc (Business Admin) Master of Business and Economics M.Sc (Business Administra- tion and Economics) M.Sc.(Physics) Nationality Swedish Swedish Norwegian Swedish Swedish and French Own and closely related persons’ shareholdings 111,524 shares and share rights, of which 23,509 A shares, 198 C shares, 8,355 share rights and 79,462 conditional share rights. 45,412 shares and share rights, of which 241 A shares, 10,476 share rights and 34,695 conditional share rights. 74,977 shares and share rights, of which 1,278 A shares, 13, 838 share rights and 59,861 conditional share rights. No shares or share rights. 59,520 shares and share rights, of which 241 A shares, 15,181 share rights and 44,098 conditional share rights. Masih Yazdi was active in the position of Chief Financial Officer until 8 December 2021. He is currently on leave of absence. Johan Torgeby Mats Torstendahl Jonas Ahlström Jeanette Almberg Joachim Alpen Position President and CEO since 2017 Deputy President and CEO since 2021. Group Data Pri- vacy Senior Manager since 2018, Group AML Senior Manager since 2021 Co-head of the Large Corpo- rates & Financial Institutions division since 2021 Head of Group Human Resources since 2016 Executive Vice President. Co-head of the Large Corpo- rates & Financial Institutions division since 2014 GEC member since 2014 2009 2020 2016 2014 SEB employee since 2009 2009 2005 2008 2001 Born 1974 1961 1978 1965 1967 Education B.Sc. (Econ.) M.Sc. (Engineering Physics) M. Sc. (Business and Econ.) B.Sc. (Econ.) MBA, M.A. (International relations) Nationality Swedish Swedish Swedish Swedish Swedish Own and closely related persons’ shareholdings 457,740 shares and share rights, of which 5,826 A shares, 195,005 share rights and 256,909 conditional share rights. 356,201 shares and share rights, of which 104,218 A shares, 57,606 share rights and 194,377 conditional share rights. 86,080 shares and share rights, of which 3,290 A shares, 30,646 share rights and 52,144 conditional share rights. 135,041 shares and share rights, of which 11,135 A shares, 32,130 share rights and 91,776 conditional share rights. 308,532 shares and share rights, of which 38,266 A shares, 100,315 share rights and 169,951 conditional share rights. Report of the Directors — Corporate governance 102 — SEB Annual and Sustainability Report 2021 William Paus Jonas Söderberg Petra Ålund Niina Äikäs Position Executive Vice President. Head of Private Wealth Management & Family Office division since 2021 Head of Corporate & Private Customers division since 2021 Head of Group Techno- logy since 2019. Group Outsourcing Senior Manager since 2020 Head of Baltic division since 2021 GEC member since 2018 2021 2020 2021 SEB employee since 1992 1999 2017 2008 Born 1967 1976 1967 1968 Education M.Sc. (Econ.) B.Sc. (Int. Business Administration) M.Sc. (Int. Economics) M.Sc (Tech.) Nationality Norwegian Swedish Swedish Finnish and American Own and closely related persons’ shareholdings 260,103 shares and share rights, of which 52,900 A shares, 21,739 share rights, 11,648 phantom share rights and 173,816 conditional share rights. 83,418 shares and share rights, of which 31,136 A shares, 16,352 share rights and 35,930 conditional share rights. 40,203 shares and share rights, of which 5,586 A shares , 2,281 share rights and 32,336 conditional share rights. 79,488 shares and share rights, of which 17,968 A shares, 14,080 phantom share rights, 25,743 conditional share rights and 21,697 conditional phantom share rights. Additional members of the Group Executive Committee Country managers Johan Andersson Anders Engstrand Mark Luscombe Marcus Nystén John Turesson Position Country Manager SEB Germany since 2016 Country Manager SEB United Kingdom since 2020 Country manager SEB Denmark since 2021 Country Manager SEB Finland since 2010 Country Manager SEB Norway since 2018 SEB employee since 1980 1995 2010 1998 2006 Nationality Swedish Swedish British and Danish Finnish Swedish Heads of divisions Key functions Javiera Ragnartz David Teare Hans Beyer Position Head of Investment Mana- gement division since 2019 Head of Life division since 2019 Chief Sustainability Officer since 2020 SEB employee since 2019 2006 2002 Nationality Swedish Canadian and British Swedish GEC changes in 2021: Jonas Ahlström replaced William Paus, Niina Äikäs replaced Jonas Ahlström, Ulrika Areskog Lilja replaced Karin Lepasoon, Mats Holmström replaced Magnus Agustsson. Magnus Carlsson was Deputy President and CEO and member of GEC during 2021. The President appoints additional members of GEC. They participate in GEC meetings from time to time to provide expertise and insight primarily in their respective areas of responsibility. SEB Annual and Sustainability Report 2021 — 103 Group Control functions The Group Control functions are global control functions inde- pendent from the business activities. The three Group Control functions are i) the CRO function, ii) Group Compliance and iii) Group Internal Audit. The CRO function The CRO function is responsible for identifying, measuring, analysing and controlling SEB’s risks and is independent from the business. Mats Holmström Chief Risk Officer The Chief Risk Officer (CRO) is appointed by the Board and reports to the President. The CRO keeps the Board, RCC, ACC, GEC, ALCO, GESC and GRC regularly informed about risk matters. The CRO has global functional responsibility, and the activities of the CRO are governed by an instruction adopted by the Board. The CRO function is organised in three units: Group Risk, Group Credits and CRO Office. The main objective for Group Risk is to ensure that all risks in SEB’s activities are identified, measured, monitored and reported in accordance with external and internal rules. The unit also manages models for risk measurement. The CRO Office aggregates and analyses data across risk types and the Group’s credit portfolios and handles general matters surrounding risk governance and risk disclosure. Group Credits is responsible for the credit approval process, for certain individual credit decisions as well as for monitoring compliance with policies set by RCC and the Board. Its activities are regulated by the Group’s Credit Instruction, adopted by the Board. The chairs of the respective divisional credit committees have the right to veto credit decisions. Material exceptions to the Group’s Credit Policy must be escalated to a higher level in the decision-making hierarchy. The Head of Group Risk and the Heads of Group Credits are appointed by the President, upon recommendation by the CRO, and report to the CRO. For information about risk, liquidity and capital management, see p. 86. Group Compliance The Group Compliance function is responsible for informing, controlling and following up on compliance matters. Gent Jansson Head of Group Compliance Group Compliance is independent from the business organi- sation. The Group Compliance function advises the business and management to ensure that SEB’s business is carried out in compliance with regulatory requirements and thereby instil trust in the bank from customers, shareholders and the financial markets. Special areas of responsibility are: • customer protection • conduct in the financial market • prevention of money laundering and financing of terrorism • regulatory requirements and controls. The Head of Group Compliance, who is appointed by the Pres- ident after approval by ACC, reports regularly on compliance matters to the President, GEC and ACC, and annually to RCC and the Board. Based on an analysis of the Group’s risks in this area, the President adopts, after approval by ACC, an annual compli- ance plan. The Instruction for Group Compliance is adopted by the Board. Group Internal Audit Group Internal Audit is a group-wide control function commissioned by the Board to independently evaluate the Group’s activities. The Head of Group Internal Audit is appointed by the Board. Björn Rosenkvist Head of Group Internal Audit The main task of Group Internal Audit is to evaluate and give assurance to the Board and the President that governance, risk management and internal controls are adequate and effective. The work is done with a risk-based approach in accordance with the Institute of Internal Auditors’ methods. Each year ACC adopts a plan for the work of Internal Audit. The Head of Internal Audit reports the findings of completed audits, actions taken and the status of previously reported find- ings to ACC and also provides reports to RCC and the Board. The President and GEC are regularly informed about internal audit matters. Group Internal Audit’s work is evaluated in a quality assessment, at least every fifth year, by an independent party. Group Internal Audit coordinates its work covering the bank’s financial reporting with the bank’s external auditor. The bank’s external auditor relies to some extent on the work of Group Internal Audit in its assignment to review the Group’s financial reporting. This requires that the external auditor evaluates Group Internal Audit’s work. The conclusion of this evaluation is reported to ACC and Group Internal Audit. External Audit Auditor Born 1965. Lead Audit Partner since 2019. Authorised Public Accountant, member of FAR since 1992 and FAR Certified Financial Institution Auditor in Sweden. Hamish Mabon Auditor, Ernst & Young Other major assignments Skanska, Essity and ASSA ABLOY Previous major assignments Vattenfall, Hexagon, If P&C Insurance, SCA and Husqvarna Information about the auditor According to SEB’s Articles of Association, the bank shall have at least one and not more than two auditors with at most an equal number of deputies. A registered auditing firm may also be appointed auditor. Ernst & Young AB was elected the bank’s auditor in 2021 for the period up to and including the 2022 AGM. The fees charged by the auditors for the auditing of the 2020 and 2021 financial statements and for other assignments invoiced during these periods are shown in note 9. Report of the Directors — Corporate governance 104 — SEB Annual and Sustainability Report 2021 1. Perform risk assessment To identify and understand which risks that are relevant and material for the reporting process, financial results and balance sheets are analysed at SEB Group and unit levels. The outcome is used to determine which units, processes and systems are to be covered by the ICFR process in the coming year. 2. Identify risks and controls People with expertise in the divisions and finance department evaluate if existing controls are effective, if new risks have been identified and if new controls need to be implemented to miti- gate the identified material risks more effectively. The controls are communicated to involved parties within the bank in order to clarify expectations and responsibilities. The framework consists of group-wide controls as well as controls covering business processes and IT – such as analysis of the balance sheet and income statement, account reconciliations and controls of system access rights. 3. Plan Every year a plan is prepared based on the risk assessments and identified controls. The plan clarifies who is responsible for evaluating the respective controls within each unit, what type of evaluation should be conducted and how the results are to be reported. At this stage the plan is coordinated with the audit plans of internal and external audit. 4. Evaluate controls The controls are evaluated on a continuous basis throughout the year by the control owners through self-assessments. In this way the bank’s weaknesses can be identified, compensating controls can be implemented and improvements can be made. Furthermore, reporting is done quarterly by financial managers to give an assurance of the reported figures from each unit. The evaluation describes material financial reporting risks and com- ments on material deviations compared with previous quarters. Internal Control over Financial Reporting (ICFR) is a well- estab lished process designed to provide reasonable assurance regarding the reliability of financial reporting and reduce the risk for misstatements. ICFR is based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and is applied by SEB in a yearly cycle. 5. Report The result of the evaluations of controls are analysed to assess the risk for misstatements in the financial reporting. Monitoring reports are submitted on a quarterly basis to the CFO in connec- tion with the quarterly external financial reporting. Reporting is also done quarterly to Group Internal Audit and yearly to the Audit and Compliance Committee (ACC). The consolidated ICFR report includes a description of resid- ual risk, an assessment of identified control gaps and whether they are compensated by other controls as well as progress within the remediation activities. The report contributes to transparency within SEB and enables prioritisation of improve- ment activities based on residual risk. 6. Independent review In addition to this process, Group Internal Audit performs independent reviews of the ICFR framework. Focus area 2021 In addition to the ongoing work during 2021, the following main area was in focus within the internal control framework: • Implementation of new controls to secure compliance with the European Single Electronic Format, ESEF. Q3 1. Perform risk assessment — 4. Evaluate controls 5. Report Q4 2. Identify risks & controls — 4. Evaluate controls 5. Report Q1 3. Plan — 4. Evaluate controls 5. Report Q2 — 4. Evaluate controls 5. Report ICFR is an integrated part of daily operations 6. Group Internal Audit performs independent reviews Internal control over financial reporting SEB Annual and Sustainability Report 2021 — 105 SEB aims to attract and retain ambitious employees who are ea- ger to continuously develop, embrace new ways of working and contribute to the bank’s long-term success. Remuneration is part of the total offering. The overall ambition is to promote long- term commitment to creating sustainable value for customers and shareholders. Remuneration policy SEB’s remuneration principles and governance structure are laid out in the Remuneration Policy. The policy stipulates that remu- neration shall be aligned with the bank’s strategy, goals, values and long-term interests and ensure that conflicts of interest are avoided. This shall build value for both SEB and the shareholders while promoting the best interest of the customers, encourage high performance and risk-taking that is aligned with the level of risk tolerance set by the Board of Directors, and sound and responsible behaviour based on SEB’s values. An employee’s remuneration shall reflect the complexity, responsibility and leadership qualities required of the role as well as the individual’s own performance. SEB regularly evaluates em- ployee performance and development based on transparent and individual financial and non-financial goals, among other things. Employees in control functions shall be remunerated in a man- ner that is independent from the business areas they oversee, commensurate with their key roles, and be based on goals that are compatible with their functions. The policy lays out the principles for identification and remuneration of employees in positions with a material impact on the Group’s risk profile (Identified Staff). This also applies for employees who can impact the risk profiles of mutual funds, who provide investment advice, or who have a material impact on what services and products are offered. In 2021, a total of 917 positions 923) were categorised as Identified Staff. The policy also sets the requirements for all remuneration de- cisions, both in general and at the individual level. All decisions are to be approved at least at a level corresponding to the remu- neration-setting managers’ manager (grandparent principle). Remuneration structure The bank’s remuneration structure consists mainly of base salary, variable remuneration, and pension and other benefits. All Employee Programmes (AEP) 2021 1) 2020 2) Number of participants 15,570 15,540 Outcome in relation to maximum amount 3) , % 66.7 44.7 Shares allotted, thousands 2,445 2,388 Market value per 31 December, SEK m 308 202 Total outcome per participant 4) , SEK 50,000 33,500 Payout year: 1) 2025 2) 2024 3) SEK 75,000 in Sweden 4) in Sweden. SEB Restricted Share Programmes and Share Deferral Programmes 2021 2020 Restricted Share Programme Share Deferral Programme Total Restricted Share Programme Share Deferral Programme Total Number of participants 441 1,062 1,503 437 922 1,359 Shares allotted, thousands 926 3,063 3,989 1,350 4,182 5,532 Market value, 31 December, SEK m 117 385 502 114 353 467 Staff costs, 2021 SEK m Base salary 9,124 Equity-based programmes 414 Individual cash-based variable remuneration 458 All Employee Programme 550 Social charges 2,848 Pensions 1,489 Other staff costs 489 Total 15,372 Remuneration Base salary The base salary is the foundation of an employee’s remuner- ation. It shall be market aligned and reflect the requirements on the position and the employee’s long-term performance. SEB conducts annual equal pay reviews to identify and close potential gaps in terms of gender-neutral pay. The outcome of the review is published internally. Variable remuneration All variable remuneration is based on SEB’s risk-adjusted performance and is adapted to applicable rules governing the maximum share of an employee’s base salary, the deferred portion of remuneration, shares and fund units, and the right to withhold and reduce remuneration that has not yet been paid. For Identified Staff, variable remuneration may not exceed 100 per cent of their base salary. The models for individual variable remuneration are based on financial and non-financial key performance indicators at group, unit and individual level, including an evaluation of the employ- ees’ conduct. Non-financial goals take into account factors such as customer satisfaction, compliance and sustainability perfor- mance related to, for example, the bank’s own environmental impact and integration of sustainability risks into the business model. In 2021, SEB established new sustainability ambitions and goals for 2022 which will be part of the criteria for potential allocation of the programmes, as applicable. At the individual level, key parameters include compliance with rules and policies for risk-taking in the Group, SEB’s Code of Conduct and the requirements on internal controls in the respective business area. Performance is evaluated over several years. Collective profit-sharing The largest variable remuneration programme is the SEB All Employee Programme 2021 (AEP), which covers essentially all employees. The programme’s targets are linked to SEB’s busi- ness plan and consist of the financial targets for return on equity and the bank’s cost development, which are also communicated externally, and the non-financial target for customer satisfac- tion. The outcome for 2021 was determined to be 66.7 per cent 44.7) of the maximum amount, which in Sweden is SEK 75,000. The higher outcome compared with last year reflects the Report of the Directors — Corporate governance 106 — SEB Annual and Sustainability Report 2021 Remuneration policy and remuneration structure Equity-based programmes Remuneration guidelines for the President and CEO as well as GEC Remuneration of the President and CEO as well as GEC Group Risk and Group Compliance – provide risk analysis. Risk and Capital Committee (RCC) – reviews to verify that the remuneration structure takes into account SEB’s risks, long-term earnings capacity and cost of liquidity and capital. RemCo – evaluates and recommends policy. Board of Directors – annually reviews and adopts policy. RemCo – prepares. Board of Directors – proposes. Annual General Meeting – decides on the equity-based programmes. RemCo – evaluates on a continuous basis throughout the year. External auditor – issues a statement to the Board, prior to the AGM, assuring that SEB has adhered to the guidelines that applied during the year. Board of Directors – proposes. Annual General Meeting – adopts the guidelines. Head of Group HR and, for GEC, also the President and CEO – ensure to RemCo, that remuneration is compe- titive and market aligned. External analyses are also performed yearly. RemCo – evaluates and recommends. Board of Directors – decides on remuneration to the President and CEO as well as to GEC. Remuneration in SEB in 2021 SEK thousands Base salary Cash-based variable remuneration Expensed amount equity based programmes Benefits PensionsTotal President and CEO Johan Torgeby 1) 12,500 4,308 181 16,989 4,104 Other ordinary members of GEC 2) 78,301 17,762 2,111 98,174 20,803 Total 90,801 0 22,070 2,292 115,163 24,907 SEB excluding GEC 9,032,808 735,574 664,778 59,984 10,493,143 1,464,163 SEB Total 9,123,609 735,574 686,848 62,276 10,608,306 1,489,070 1) Johan Torgeby did not exercise any share rights in 2021. 2) The number and composition of members may differ somewhat during the year. At the end of the year, the number of members was 14. During the year Other ordinary members of GEC have exercised rights to a value of SEK 38,407,139. For information on remuneration see RemCo p. 99 and note 8. For AGM information see sebgroup.com. Governance model neration. Approximately 7 per cent of the employees – such as those in investment banking – receive variable remuneration with a cash component, but only in cases where it entails low or no residual risk for SEB. Variable remuneration above a certain level is always partly deferred and revocable. In 2021, individual cash-based variable remuneration accounted for approximately 4 per cent 3) of SEB’s total staff costs. Remuneration of the President and members of the Group Executive Committee Remuneration of the President and CEO as well as members of the Group Executive Committee (GEC) shall be in line with the guidelines set by the Annual General Meeting (AGM) and con- sists of base salary, equity-based remuneration (the SEB Share Deferral Programme), pension and other benefits. No cash- based variable remuneration is paid to members of GEC, nor are they eligible for the SEB All Employee Programme. The pension plans are defined-contribution based, except for a defined-benefit component provided under collective agreements. For termination of employment initiated by the bank, a maxi- mum of 12 months’ severance pay is payable, after the agreed notice period of maximum 12 months. SEB has the right to deduct income earned from other employment from any severance pay. Annual General Meeting approval The guidelines for salary and other remuneration of the Presi- dent and CEO as well as GEC are adopted by the Annual General Meeting which also adopts the remuneration report. Refer to sebgroup.com for the 2021 remuneration report. stronger financial result, an excellent customer satisfaction development and a cost level close to the set target. Also, the employees extraordinary efforts in supporting the customers and each other under severe conditions has been taken into account. Individual variable remuneration Senior managers, other key employees and employees in certain business units where it is standard market practice, are offered individual variable remuneration. The ambition is that part of the remuneration is deferred and paid out in SEB shares. Equity- based remuneration is a mean to attract and retain employees with key competence. It also provides an incentive for employees to be shareholders of SEB which promotes long-term commit- ment that is aligned with the shareholders’ interests. In addition, financial industry regulations require that a portion of variable remuneration is paid out in the form of shares or fund units. SEB has two individual equity-based programmes – the SEB Share Deferral Programme 2021 for members of the Group Executive Committee, certain other senior managers and a number of other key employees, and the SEB Restricted Share Programme 2021, for employees in certain business units. For regulatory reasons, the latter programme also exists in a form where the outcome is linked to the performance of mutual funds. Both programmes include scope for risk adjustment for current and future risks. The final outcome may subsequently be reduced or cancelled entirely in accordance with applicable rules, such as taking into account the bank’s earnings and the capital and liquidity required for its operations. Approximately 12 per cent of employees are offered individual variable remu- SEB Annual and Sustainability Report 2021 — 107 108 — SEB Annual and Sustainability Report 2021 Note Page The SEB Group Income statement 109 Statement of comprehensive income 110 Balance sheet 111 Statement of changes in equity 112 Cash flow statement 113 Parent company Income statement 114 Statement of comprehensive income 114 Balance sheet 115 Statement of changes in equity 116 Cash flow statement 117 Notes to the financial statements Corporate information 118 1 Accounting policies 118 2 Operating segments 127 3 Geographical information 129 Income statement 4 Net interest income 130 5 Net fee and commission income 131 6 Net financial income 132 7 Net other income 133 8 Staff costs 134 8a Remuneration 134 8b Pensions 135 8c Remuneration to the Board and the Group Executive Committee 138 8d Share-based payments 140 8e Number of employees 142 9 Other expenses 143 10 Depreciation, amortisation and impairment of tangible and intangible assets 143 11 Gains less losses from tangible and intangible assets 143 12 Net expected credit losses 144 13 Items affecting comparability 144 14 Appropriations 144 15 Taxes 145 16 Earnings per share 146 Note Page Balance sheet 17 Cash and cash balances at central banks 147 18 Loans 147 19 Debt securities 154 20 Equity instruments 155 21 Derivatives and hedge accounting 155 22 Investments in subsidiaries, associates and joint ventures 161 23 Intangible assets 163 24 Properties and equipment 164 25 Other assets 164 26 Prepaid expenses and accrued income 165 27 Deposits 165 28 Liabilities to policyholders 165 29 Debt securities issued 166 30 Short positions 166 31 Other liabilities 166 32 Accrued expenses and prepaid income 166 33 Provisions 167 34 Subordinated liabilities 167 35 Untaxed reserves 168 36 Fair value measurement of assets and liabilities 168 37 Financial assets and liabilities by class 172 38 Assets and liabilities distributed by main currencies 174 39 Current and non-current assets and liabilities 175 Other notes 40 Risk disclosures 175 40a Credit risk 176 40b Market risk 180 40c Non-financial risk 182 40d Business risk 182 40e Insurance risk 182 40f Liquidity risk 183 40g IBOR Reform 188 41 Capital adequacy 189 42 Life insurance operations 192 43 Assets in unit-linked operations 193 44 Interest in unconsolidated structured entities 193 45 Related parties 194 46 Financial assets and liabilities subject to offsetting or netting arrangements 195 47 Pledged assets 196 48 Obligations 197 49 Leases 198 50 Events after the balance sheet date 198 The SEB Group – Five year summary 199 Parent company – Five year summary 200 Proposal for the distribution of profit 201 Signatures of the Board of Directors and the President 202 Auditor’s report 203 Financial statements Contents SEB Annual and Sustainability Report 2021 — 109 Financial statements—Income statement Income statement SEB Group SEKm Note Interest income ) 33,225 37,578 Interest expense ) 6,904 12,435 Net interest income 4 26,321 25,143 Fee and commission income 26,129 22,933 Fee and commission expense 4,987 4,870 Net fee and commission income 5 21,142 18,063 Net financial income 6,992 6,275 Dividends 1 0 Profit and loss from investments in associates and joint ventures 33 68 Gains less losses from investment securities 13 33 Other operating income 112 202 Net other income 7 159 236 Total operating income 54,614 49,717 Staff costs 8 15,372 14,976 Other expenses 9 5,763 5,864 Depreciation, amortisation and impairment of tangible and intangible assets 10 2,110 1,906 Total operating expenses 23,245 22,747 Profit before credit losses 31,368 26,970 Gains less losses from tangible and intangible assets 11 5 7 Net expected credit losses 12 510 6,118 Operating profit before items affecting comparability 30,864 20,846 Items affecting comparability 13 1,000 Operating profit 30,864 19,846 Income tax expense 15 5,441 4,100 NET PROFIT 25,423 15,746 Attributable to shareholders in Skandinaviska Enskilda Banken AB (publ) 25,423 15,746 Basic earnings per share, SEK 16 11.75 7.28 Diluted earnings per share, SEK 16 11.67 7.23 1) Of which interest income calculated using the effective interest method SEK 27,752m 30,966). 2) Of which interest expense calculated using the effective interest method SEK 5,675m 11,615). 110 — SEB Annual and Sustainability Report 2021 Financial statements—Statement of comprehensive income Statement of comprehensive income SEB Group SEKm NET PROFIT 25,423 15,746 Valuation gains (losses) during the year 36 72 Income tax on valuation gains (losses) during the year 7 10 Cash flow hedges 29 62 Translation of foreign operations 397 534 Taxes on translation effects 282 537 Translation of foreign operations 680 1,070 Items that may be reclassified subsequently to profit or loss 708 1,132 Own credit risk adjustment (OCA), net of tax 1) 14 70 Remeasurement of pension obligations, including special salary tax 3,745 188 Valuation gains (losses) on plan assets during the year 13,964 2,487 Deferred tax on pensions 3,648 460 Defined benefit plans 14,061 1,839 Items that will not be reclassified to profit or loss 14,075 1,769 OTHER COMPREHENSIVE INCOME 14,783 637 TOTAL COMPREHENSIVE INCOME 40,206 16,383 1)Own credit risk adjustment from financial liabilities FVTPL. Attributable to shareholders in Skandinaviska Enskilda Banken AB (publ) 40,206 16,383 The method used to hedge currency risks related to investments in foreign sub- sidiaries creates a tax expense (tax income) in the parent company. Fair value changes on the hedging instruments impact the taxable result contrary to the currency revaluation of the foreign operations. In the group this tax effect is reported in Other comprehensive income. SEB Annual and Sustainability Report 2021 — 111 Financial statements—Balance sheet Balance sheet SEB Group SEKm Note Dec Dec Cash and cash balances at central banks 17 439,344 323,776 Loans to central banks 18 4,454 3,633 Loans to credit institutions 18 60,009 50,791 Loans to the public 18 1,846,362 1,770,161 Debt securities 19 205,950 265,433 Equity instruments 20 120,742 82,240 Financial assets for which the customers bear the investment risk 422,497 330,950 Derivatives 21 126,051 164,909 Fair value changes of hedged items in a portfolio hedge of interest rate risk 496 Investments in subsidiaries, associates and joint ventures 22 1,510 1,272 Intangible assets 23 7,466 7,808 Properties and equipment 24 1,212 1,286 Right-of-use assets 49 5,079 5,141 Current tax assets 15 15,359 6,070 Deferred tax assets 15 675 444 Retirement benefit assets 8b 23,804 7,287 Other assets 25 21,001 16,494 Prepaid expenses and accrued income 26 2,714 2,242 TOTAL ASSETS 3,304,230 3,040,432 Deposits from central banks and credit institutions 27 75,206 111,309 Deposits and borrowing from the public 27 1,597,449 1,371,227 Financial liabilities for which the customers bear the investment risk 28 424,226 332,392 Liabilities to policyholders 28 34,623 29,624 Debt securities issued 29 730,106 749,502 Short positions 30 34,569 30,409 Derivatives 21 118,173 161,561 Other financial liabilities 5,721 744 Fair value changes of hedged items in a portfolio hedge 702 Current tax liabilities 15 1,384 993 Deferred tax liabilities 15 10,354 7,212 Other liabilities 31 42,886 34,616 Accrued expenses and prepaid income 32 5,848 5,208 Provisions 33 761 990 Retirement benefit liabilities 8b 445 414 Subordinated liabilities 34 28,549 32,287 Total liabilities 3,111,002 2,868,489 Share capital 21,942 21,942 Other reserves 18,996 4,040 Retained earnings 152,290 145,961 Shareholders' equity 193,228 171,943 Total equity 193,228 171,943 TOTAL LIABILITIES AND EQUITY 3,304,230 3,040,432 112 — SEB Annual and Sustainability Report 2021 Financial statements—Statement of changes in equity SEB Group SEKm Share capital ) Other reserves Retained earnings Total equity ) OCA ) Cash flow hedges Translation of foreign operations Defined benefit plans Opening balance 21,942 236 47 1,241 5,737 145,788 17 1,9 43 Net profit 25,423 25 ,42 3 Other comprehensive income (net of tax) 14 29 680 14,061 14 ,78 3 Total comprehensive income 14 29 680 14,061 25,423 40, 206 Dividend to shareholders 1) 17,740 1 7, 7 4 0 Equity-based programmes 2) 195 195 Change in holding of own shares 2) 1,376 1 , 3 76 CLOSING BALANCE 21,942 223 18 561 19,798 152,290 193 , 2 28 2020 Opening balance 6) 21,942 166 15 170 3,898 130,182 155 ,70 0 Net profit 15,746 15 ,74 6 Other comprehensive income (net of tax) 70 62 1,070 1,839 637 Total comprehensive income 70 62 1,070 1,839 15,746 16,383 Equity-based programmes 2) 142 142 Change in holding of own shares 2) 2 2 CLOSING BALANCE 6 21,942 236 47 1,241 5,737 145,788 17 1,9 43 1) No dividend was paid in 2020 for 2019. Dividend paid in 2021 for 2020 comprise of ordinary dividend of SEK 4.10 per share decided by the Annual General Meeting and a further ordi- nary dividend of SEK 4.10 per share decided by the Extraordinary General Meeting in November 2021. Proposed dividend for 2021 is SEK 6.00. Further information can be found on page 76. Dividend to shareholders is reported excluding dividend on own shares. 2) During 2020, SEB repurchased 10.9 million Class A shares. As at 31 December 2020 SEB, owned 32.2 million Class A shares with a market value of SEK 2,722m. During 2021 SEB has purchased 2,909,266 shares for the long-term equity programmes and 7,517,408 shares have been sold/distributed. During 2021 SEB has purchased 10,171,296 shares for capital purposes. Thus, at 31 December 2021 SEB owned 37,774,605 Class A shares with a market value of SEK 4,754m. Acquisition cost SEK 361m 78), for the purchase of own shares for long-term equity programmes is deducted from shareholders’ equity, at the year-end the value of SEK 2,458m 2,820) was deducted. 3) 2,170,019,294 Class A shares 2,170,019,294); 24,152,508 Class C shares 24,152,508), both classes with a nominal value of SEK 10 per share. 4) Information about capital requirements can be found in note 41 Capital adequacy. 5) Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in own credit risk. 6) Opening balance 2020 restated following adjustment of OCA. Statement of changes in equity SEB Annual and Sustainability Report 2021 — 113 Financial statements—Cash flow statement SEB Group SEKm Interest received 33,406 38,630 Interest paid 7,885 13,906 Commission received 26,129 22,933 Commission paid 4,987 4,870 Net received from financial transactions 8,831 19,621 Other income 1 237 Paid expenses 23,694 23,588 Taxes paid 14,338 4,392 Cash flow from the income statement 199 34,664 Increase (–)/decrease (+) in trading portfolios 35,465 18,792 Increase (+)/decrease (–) in issued securities 17,662 109,525 Increase (–)/decrease (+) in lending to credit institutions and central banks 11,136 8,169 Increase (–)/decrease (+) in lending to the public 80,296 58,177 Increase (+)/decrease (–) in liabilities to credit institutions 36,104 23,332 Increase (+)/decrease (–) in deposits and borrowings from the public 226,218 209,908 Increase (–)/decrease (+) in insurance portfolios 287 644 Change in other assets 18,293 469 Change in other liabilities 32,012 545 Cash flow from operating activities 130,291 190,316 Sales of shares and bonds 28 20 Sales of intangible and tangible fixed assets 7 4 Dividends received 1 0 Investments in shares and bonds 238 275 Investments in intangible and tangible assets 644 307 Cash flow from investing activities 846 56 Issue of subordinated liabilities 5,571 Repayment of subordinated loans 10,057 10,257 Dividend paid 17,740 Cash flow from financing activities 22,227 10,257 NET CHANGE IN CASH AND CASH EQUIVALENTS 107,218 180,116 Cash and cash equivalents at beginning of year 331,247 159,335 Change in exchange rates on cash and cash equivalents 7,251 8,203 Net changes in cash and cash equivalents 107,218 180,116 CASH AND CASH EQUIVALENTS AT END OF PERIOD 1 2 445,716 331,247 1) Cash and cash equivalents Cash 2,157 2,155 Cash balances at central banks 437,187 321,621 On demand deposits with credit institutions 6,372 7,471 TOTAL 445,716 331,247 2) Of which SEK 7,261m 4,991) not available for use by the group due to local central bank regulations. Cash outflow from leasing, where SEB is lessee, amounts to SEK 963m 949). Reconciliation of liabilities from financing activities Opening balance 32,287 44,639 Cash flows 4,487 10,257 Non-cash flow, currency exchange 1,432 2,427 Non-cash flow, fair value changes 549 438 Non-cash flow, interest accruals 135 106 TOTAL LIABILITIES FROM FINANCING ACTIVITIES 28,549 32,287 Cash flow statement 114 — SEB Annual and Sustainability Report 2021 Financial statements—Income statement–Statement of comprehensive income Income statement Parent company SEKm Note Interest income 27,737 31,460 Leasing income 5,268 5,365 Interest expense 5,758 11,118 Net interest income 4 27,247 25,707 Dividends received 2,596 3,121 Fee and commission income 15,553 13,734 Fee and commission expense 3,210 3,036 Net fee and commission income 5 12,343 10,698 Net financial income 6 4,882 5,297 Other income 7 1,330 411 Total operating income 48,397 45,234 Staff costs 8 10,830 11,168 Other expenses 9 5,377 6,204 Administrative expenses 16,207 17,372 Depreciation, amortisation and impairment of tangible and intangible assets 10 5,644 5,683 Total operating expenses 21,851 23,055 Profit before credit losses 26,547 22,179 Net expected credit losses 12 744 5,550 Impairment of financial assets 1,911 220 Operating profit 23,892 16,409 Appropriations 14 3,839 2,390 Income tax expense 15 5,332 4,636 Other taxes 15 352 451 NET PROFIT 22,751 14,614 Statement of comprehensive income Parent company SEKm NET PROFIT 22,751 14,614 Valuation gains (losses) during the year 36 72 Income tax on valuation gains (losses) during the year 7 10 Cash flow hedges 29 62 Translation of foreign operations 98 158 Translation of foreign operations 98 158 Items that may be reclassified subsequently to profit or loss 127 220 OTHER COMPREHENSIVE INCOME 127 220 TOTAL COMPREHENSIVE INCOME 22,878 14,394 The method used to hedge currency risks related to investments in foreign sub- sidiaries creates a tax expense (tax income) in the parent company. Fair value changes on the hedging instruments impact the taxable result contrary to the currency revaluation of the foreign operations. In the group this tax effect is reported in Other comprehensive income. SEB Annual and Sustainability Report 2021 — 115 Financial statements—Balance sheet Balance sheet Parent company SEKm Note Dec Dec Cash and cash balances at central banks 17 371,466 294,391 Loans to central banks 18 4,127 3,537 Loans to credit institutions 18 70,207 67,490 Loans to the public 18 1,641,332 1,569,310 Debt securities 19 178,441 239,928 Equity instruments 20 96,149 63,825 Derivatives 21 121,326 159,380 Fair value changes of hedged items in a portfolio hedge of interest rate risk 0 496 Investments in subsidiaries, associates and joint ventures 22 51,231 47,285 Intangible assets 23 1,714 1,776 Properties and equipment 24 26,126 28,045 Current tax assets 15 1,915 2,516 Deferred tax assets 15 403 185 Other assets 25 20,580 16,418 Prepaid expenses and accrued income 26 2,818 2,527 TOTAL ASSETS 2,587,834 2,497,110 Deposits from central banks and credit institutions 27 85,276 147,831 Deposits and borrowing from the public 27 1,404,490 1,198,833 Debt securities issued 29 730,028 749,415 Short positions 30 34,569 30,409 Derivatives 21 113,497 157,529 Other financial liabilities 6,422 744 Current tax liabilities 15 801 376 Deferred tax liabilities 15 0 0 Other liabilities 31 25,610 23,601 Accrued expenses and prepaid income 32 3,941 3,399 Provisions 33 636 640 Subordinated liabilities 34 27,649 31,837 Total liabilities 2,432,921 2,344,614 Untaxed reserves 35 17,137 18,628 Share capital 21,942 21,942 Statutory reserve 12,260 12,260 Development cost reserve 1,565 1,474 Fair value reserve 353 480 Retained earnings 79,612 84,058 Net profit 22,751 14,614 Total equity 137,776 133,868 TOTAL LIABILITIES AND EQUITY 2,587,834 2,497,110 116 — SEB Annual and Sustainability Report 2021 Financial statements—Statement of changes in equity Statement of changes in equity Parent company SEKm Restricted equity Non-restricted equity ) Total Equity Share capital ) Statutory reserve Development cost reserve Cash flow hedges ) Translation of foreign operations ) Retained earnings Opening balance 21,942 12,260 1,474 47 432 98,671 133,868 Net profit 22,751 22,751 Other comprehensive income (net of tax) 29 98 127 Total comprehensive income 29 98 22,751 22,878 Dividend to shareholders 1) 17,740 17,740 Equity-based programmes 2) 132 132 Change in holding of own shares 2) 1,376 1,376 Other changes 91 75 16 CLOSING BALANCE 21,942 12,260 1,565 19 335 102,363 137,776 2020 Opening balance 21,942 12,260 1,391 15 274 83,202 118,535 Net profit 14,614 14,614 Other comprehensive income (net of tax) 62 158 220 Total comprehensive income 62 158 14,614 14,394 Equity-based programmes 2) 211 211 Change in holding of own shares 2) 2 2 Other changes 83 1,064 1,147 CLOSING BALANCE 21,942 12,260 1,474 47 432 98,671 133,868 1) No dividend was paid in 2020 for 2019. Dividend paid in 2021 for 2020 comprise of ordinary dividend of SEK 4.10 per share decided by the Annual General Meeting and a further ordinary dividend of SEK 4.10 per share decided by the Extraordinary General Meeting in November 2021. Proposed dividend for 2021 is SEK 6.00. Further information can be found on page 76. Dividend to shareholders is reported excluding dividend on own shares. 2) During 2020, SEB repurchased 10.9 million Class A shares. As at 31 December 2020, SEB owned 32.2 million Class A shares with a market value of SEK 2,722m. During 2021 SEB has purchased 2,909,266 shares for the long-term equity programmes and 7,517,408 shares have been sold/distributed. During 2021 SEB has purchased 10,171,296 shares for capital purposes. Thus, at 31 December 2021 SEB owned 37,774,605 Class A shares with a market value of SEK 4,754m. Acquisition cost SEK 361m 78) for the purchase of own shares for long-term equity programmes is deducted from shareholders’ equity, at the year-end the value of SEK 2,458m 2,820) was deducted. 3) 2,170,019,294 Class A shares 2,170,019,294); 24,152,508 Class C shares 24,152,508), both classes with a nominal value of SEK 10 per share. 4) The closing balance is equivalent to Distributable items according to Regulation (EU) No 5752013 (CRR). 5) Fair value fund. SEB Annual and Sustainability Report 2021 — 117 Financial statements—Cash flow statement Cash flow statement Parent company SEKm Interest received 30,526 36,112 Interest paid 4,116 10,843 Commission received 15,397 13,592 Commission paid 3,121 2,914 Net received from financial transactions 10,182 17,030 Other income 2,086 197 Paid expenses 16,089 16,702 Taxes paid 3,161 3,544 Cash flow from the profit and loss statement 7,167 32,534 Increase (–)/decrease (+) in trading portfolios 44,689 18,440 Increase (+)/decrease (–) in issued securities 17,425 108,922 Increase (–)/decrease (+) in lending to credit institutions 5,620 2,913 Increase (–)/decrease (+) in lending to the public 74,918 24,680 Increase (+)/decrease (–) in liabilities to credit institutions 62,558 21,003 Increase (+)/decrease (–) in deposits and borrowings from the public 205,629 225,058 Change in other assets 6,157 3,160 Change in other liabilities 4,046 928 Cash flow from operating activities 94,854 176,595 Dividends received 2,403 3,091 Investments/divestments in shares and bonds 3,946 3,357 Investments in intangible and tangible assets 563 673 Cash flow from investment activities 2,106 5,774 Issue of subordinated liabilities 4,961 Repayment of subordinated liabilities 10,124 10,742 Dividend paid 17,740 Cash flow from financing activities 22,904 10,742 NET CHANGE IN CASH AND CASH EQUIVALENTS 69,845 171,627 Cash and cash equivalents at beginning of year 300,673 135,598 Change in exchange rates on cash and cash equivalents 6,439 6,552 Net changes in cash and cash equivalents 69,845 171,627 CASH AND CASH EQUIVALENTS AT END OF PERIOD 1 2 376,957 300,673 1) Cash and cash equivalents Cash 2 11 Cash balances at central banks 371,465 294,380 On demand deposits with credit institutions 5,491 6,282 TOTAL 376,957 300,673 2) Of which SEK 5,083m 3,317) not available for use by the parent company due to local central bank regulations. Reconciliation of liabilities from financing activities Opening balance 31,837 44,189 Cash flows 5,164 10,742 Non-cash flow, currency exchange 1,659 1,942 Non-cash flow, fair value changes 550 438 Non-cash flow, interest accruals 134 107 TOTAL LIABILITIES FROM FINANCING ACTIVITIES 27,649 31,837 Financial statements—Notes 118 — SEB Annual and Sustainability Report 2021 Notes to the financial statements SEKm, unless otherwise stated. 1 Accounting policies Significant accounting policies for the group Statement of compliance The group’s consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) and interpretations of these standards as adopted by the EU. The accounting also follows the Annual Accounts Act for Credit Institutions and Securities Companies ) and the regulation and general guidelines issued by the Swedish Financial Supervi- sory Authority, Annual Reports in Credit Institutions and Securities Companies (FFFS ). In addition to this the Supplementary Accounting Rules for groups RFR and the additional UFR statements issued by the Swedish Finan- cial Reporting Board have been applied. Basis of preparation The consolidated accounts are based on amortised cost, except for the fair value measurement of financial assets at fair value through other comprehen- sive income, financial assets and liabilities measured at fair value through profit or loss including derivatives and investment properties measured at fair value. The carrying amount of financial assets and liabilities subject to hedge account- ing at fair value has been adjusted for changes in fair value attributable to the hedged risk. The financial statements are presented in million Swedish kronor (SEKm) unless indicated otherwise. Consolidation Subsidiaries The consolidated accounts combine the financial statements of the parent company and its subsidiaries. Subsidiaries are companies, over which the group has control. The group controls an entity when it has power over an investee, is exposed to, or has rights to, variable returns from its involvement and has the ability to use its power to affect the amount of the returns. Control is deemed to exist when the parent company holds, directly or indirectly, more than per cent of the voting rights, unless there is evidence that another investor has the practical ability to unilaterally direct the relevant activities of the entity. Companies in which the parent company or its subsidiaries hold more than per cent of the votes but are unable to exercise control due to contractual or legal reasons, are not included in the consolidated accounts. The group also assesses if control exists when it holds less than per cent of the voting rights. This may arise if the group has contractual arrangements with other vote holders. The size and dispersion of holdings of other vote hold- Corporate information The SEB Group provides corporate, retail, investment and private banking ser- vices. The group also provides asset management and life insurance services. Skandinaviska Enskilda Banken AB (publ) is the parent company of the group. The parent company is a Swedish limited liability company with its regis- tered office in Stockholm, Sweden. The parent company is included in the Large Cap segment of the NASDAQ Stockholm stock exchange. The consolidated accounts for the financial year were approved for publication by the Board of Directors on February and will be presented for adoption at the Annual General Meeting. Exchange rates used for converting main currencies in the group consolidation Income statement Balance sheet Change, % Change, % DKK 1.364 1.407 3 1.377 1.352 2 EUR 10.145 10.487 3 10.241 10.057 2 NOK 0.998 0.979 2 1.027 0.955 8 USD 8.582 9.204 7 9.036 8.186 10 ers may also indicate that the group has the practical ability to direct the rele- vant activities of the investee. When voting rights are not relevant in deciding who has power over an entity, such as interests in some funds or special purpose entities (SPE), all facts and circumstances are considered in determining if the group controls the entity. In the assessment whether to consolidate SPEs and other entities, an analysis is made to identify which party has power over the activities which most affects the returns of the entity and if that party is significantly exposed or have signifi- cant rights to the returns from that entity. The financial statements of the parent company and the consolidated sub- sidiaries refer to the same period and have been drawn up according to the accounting policies applicable to the group. A subsidiary is included in the con- solidated accounts from the time of acquisition, being the date when the parent company gains control over the subsidiary. The subsidiary is included in the con- solidated accounts until the date when control over the company ceases to exist. Business combination are accounted for using the acquisition method. The acquisition value is measured as the fair value of the assets given, equity instru- ments issued and liabilities incurred or assumed. The identifiable assets acquired, the liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on acquisition date, irrespective of any non-controlling interest. The excess of the consideration transferred for the acquisition over the fair value of the group’s share of the identifiable acquired net assets is recorded as goodwill. If the con- sideration transferred is less than the fair value of the net assets of the acquired subsidiary, the difference is recognised directly against profit or loss. Goodwill is allocated between the cash-generating units or groups of units which are expected to generate cash flows. The cash-generating units to which goodwill is allocated correspond to the lowest level within the group in which goodwill is monitored for internal management purposes. Intra-group transactions, balance sheet items and unrealised gains and losses on transactions between group companies are eliminated. The non-con- trolling interest of the profit or loss in subsidiaries is included in the reported net profit in the consolidated income statement, while the non-controlling share of net assets is included in equity in the consolidated balance sheet. Associated companies and joint ventures The consolidated accounts also include associated companies and joint ven- tures that are companies in which the group has significant influence or joint Mandatory information Name of reporting entity Skandinaviska Enskilda Banken AB (publ) Domicile of entity Stockholm Legal form of entity Public limited company Country of incorporation Sweden Address of entity’s registered office Kungsträdgårdsgatan 8, SE106 40 Stockholm, Sweden -106 40 Stockholm, Sweden Principal place of business Sweden Description of nature of entity’s operations and principal activities Bank and Insurance Name of parent entity Skandinaviska Enskilda Banken AB (publ) Name of ultimate parent of group Skandinaviska Enskilda Banken AB (publ) SEB Annual and Sustainability Report 2021 — 119 control, but not sole control. Significant influence means that the group can par- ticipate in the financial and operating policy decisions of the company, whilst not determining or controlling such financial and operating policies. A signifi- cant influence is generally deemed to exist if the group, directly or indirectly, holds between and per cent of the voting rights of an entity. A joint ven- ture is an arrangement in which the group has joint control, whereby the group has rights to the net assets of the arrangement rather than rights to its assets and obligations for its liabilities. According to the main principle, associated companies and joint ventures are consolidated in accordance with the equity method. This means that the holding is initially reported at its acquisition cost. Associated companies and joint ven- tures are subsequently carried at a value that corresponds to the group’s share of the net assets. However, the group has chosen to designate investments in associates held by the group’s venture capital organisation at fair value through profit or loss on the basis that these are managed and evaluated based on fair value. Segment reporting An operating segment is identified on the basis of internal reports about compo- nents of the group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their perfor- mance. The business divisions are identified as separate operating segments, considering size and regulatory environment. Investment Management & Group functions consists of Investment Management, business support, treasury, staff units and German run-off operations. In the context of defining the segments the President and Chief Executive Officer (CEO) is the group’s chief operating decision maker. Foreign currency translation Foreign currency transactions are translated into the appropriate functional currency using the exchange rates prevailing at the dates of the transactions. On subsequent balance sheet dates monetary items in foreign currency are translated using the closing rate. Non-monetary items, which are measured in terms of historical cost in foreign currency, are translated using the exchange rate on the date of the transaction. Non-monetary items, which are measured at fair value in a foreign currency, are translated applying the exchange rate on the date on which the fair value is determined. Gains and losses arising as a result of exchange rate differences on settle- ment or translation of monetary items are recognised in profit or loss. Transla- tion differences on non-monetary items, classified as financial assets or finan- cial liabilities at fair value through profit or loss, are included in the change in fair value of those items. Translation differences from non-monetary items, e.g. financial assets at fair value through other comprehensive income, are recog- nised in other comprehensive income. Exchange rate differences referring to monetary items comprising part of a net investment in a foreign operation are reported in other comprehensive income. The income statements and balance sheets of group entities, with a func- tional currency other than the group’s presentation currency, are translated to SEK in the consolidated accounts. Assets and liabilities in foreign group entities are translated at the closing rate and income and expenses in the income state- ment are translated at the average exchange rate for the year. The exchange rate differences are recognised as a separate component of other comprehen- sive income. Goodwill arising in conjunction with acquisitions of foreign group entities, as well as adjustments to the fair value of assets and liabilities made in conjunction with acquisitions are included in the assets and liabilities of the foreign entity in question and are translated at the closing rate. Financial assets and liabilities Financial assets are recognised on the balance sheet when the group becomes a party to the contractual provisions of the instrument and are measured at fair value on initial recognition. Transaction costs are included in the fair value on initial recognition except for financial assets at fair value through profit or loss where transaction costs are expensed in profit or loss. Financial assets are derecognised when the rights to receive cash flows have expired, the group has transferred substantially all risks and rewards and upon substantial modifica- tion. Transfers of financial assets with retention of all or substantially all risks and rewards include for example repurchase transactions and securities lend- ing transactions. Financial assets at fair value are recognised on the balance sheet on trade date, with exception of loans and reversed repos which are rec- ognised on settlement date. Financial assets measured at amortised cost are recognised on settlement date. Financial liabilities are measured at fair value on initial recognition. In the case of financial liabilities measured at fair value through profit or loss, transac- tion costs directly attributable to the acquisition or the issuance of the financial liability are recognised in profit or loss. For other financial liabilities direct trans- action cost are recognised as a deduction from the fair value. Financial liabilities are derecognised when extinguished, that is, when the obligation is discharged, cancelled or expired. Classification of financial assets and liabilities The group classifies and subsequently measures its financial assets in the fol- lowing categories: financial instruments at fair value through profit or loss; fair value through other comprehensive income and amortised cost. The classifica- tion will depend on if the financial asset is a debt instrument, an equity instru- ment or a derivative. Debt instruments (Loans and debt securities) The classification is based on a combination of assessing the business model for managing the financial assets and whether the contractual cash flow charac- teristics consist of solely payments of principal and interest (‘SPPI’). The busi- ness model assessment is performed for homogenous portfolios identified based on how the business is managed in the divisions of the group. The assess- ment is based on reasonable scenarios taking into consideration how the port- folio is evaluated and reported to management; the risks affecting the perfor- mance of the portfolio and how these risks are managed; how managers are compensated; and the frequency, value and timing of sales including the rea- sons for the sales. In determining if the cash flows consist solely of principal and interest, the principal is defined as the fair value of the debt instrument at initial recognition, which can change over the life if there are repayments or capitali- sation of interest. Interest cash flows are consistent with components with a basic lending arrangement including consideration for time value of money, credit risk, liquidity risk as well as administrative costs and profit margin. If there are contractual features introducing an exposure to other risks or volatil- ity, it is not considered to consist of solely payments of principal and interest. Debt instruments are presented in the balance sheet items; Cash and cash bal- ances at central banks, Loans to credit institutions, Loans to the public and Debt securities, and include instruments in the following measurement categories. Fair value through profit or loss: Debt instruments are classified in this cate- gory if not meeting the criteria for amortised cost or fair value through other comprehensive income. This is the case if the business model is held for trading; where financial assets are considered held for trading if they are held with the intention to be sold in the short-term and for the purpose of generating profits. Debt instruments are mandatorily measured at fair value through profit or loss if the assets are managed and evaluated on a fair value basis or the assets are held with an intention to sell alternatively if the cash flows do not consist of solely payments of principal and interest. Debt instruments that would other- wise be classified as fair value through other comprehensive income or amor- tised cost are also included in this category if, upon initial recognition, desig- nated at fair value through profit or loss (fair value option). The fair value option can be applied only in situations where such designation reduces measurement inconsistencies. Fair value through other comprehensive income: Debt instruments are classi- fied in this category if both of the following criteria are met (a) the business model objective is to both hold assets to collect contractual cash flows and to sell the assets (b) the contractual cash flow characteristics consist of solely payments of principal and interest. The assets are measured at fair value and gains and losses arising from changes in fair value are reported in other compre- hensive income and accumulated in equity. The cumulative gain or loss is reclas- sified from equity to profit or loss upon derecognition of the debt instrument. Interest calculated by applying the effective interest method on interest-bear- ing financial assets and expected credit losses are recognised in profit or loss. Amortised cost: Debt instruments are classified in this category if both of the following criteria are met (a) the business model objective is to hold assets to collect contractual cash flows and (b) the contractual cash flow characteristics consist of solely payments of principal and interest. The gross carrying amount of these assets is measured using the effective interest method and adjusted for expected credit losses. Equity instruments Equity instruments are classified as financial assets at fair value through profit or loss. An irrevocable election can be made on initial recognition to classify equity instruments (not held for trading) at fair value through other comprehen- sive income. This election has not been applied in the group. Derivatives Derivatives are classified as fair value through profit or loss (held for trading) unless designated as hedging instruments. If designated as hedging instru- ments, the principles for hedge accounting are applied. Financial liabilities Financial liabilities at fair value through profit or loss: Financial liabilities at fair value through profit or loss are either classified as held for trading or desig- nated as fair value through profit or loss on initial recognition (fair value option). Changes in fair value are recognised in profit or loss within Net financial income, with the exception of changes in fair value due to changes in the group’s own credit risk. Such changes are presented in other comprehensive income, with no subsequent reclassification to the income statement. The fair value option can be applied for classification of financial liabilities if meeting either of the follow- Financial statements—Notes 120 — SEB Annual and Sustainability Report 2021 ing criteria; the contracts include one or more embedded derivatives, the instru- ments are managed and evaluated on a fair value basis or in situations where such designation reduces measurement inconsistencies. Liabilities to policy- holders and some debt securities are included in this category. Financial liabili- ties held for trading are primarily short positions in interest-bearing securities, equity instruments and derivatives not designated as hedging instruments. Other financial liabilities: The category other financial liabilities primarily include the group’s short-term and long-term borrowings. After initial recogni- tion other financial liabilities are measured at amortised cost, using the effec- tive interest method. The balance sheet items Deposits from central banks and credit institutions, Deposits and borrowings from the public and Debt securities issued are included in this category. Embedded derivatives Some combined contracts contain both a derivative and a non-derivative com- ponent. In such cases, the derivative component is termed an embedded deriv- ative. If the host contract is a financial asset in scope of IFRS Financial Instru- ments, the contract is assessed for classification in its entirety and the embed- ded derivative is not separated. For other hybrid instruments (i.e. the host contract is not a financial asset in scope of IFRS ) where the economic charac- teristics and risks of the embedded derivatives are not closely related to those of the host contract, the embedded derivative is bifurcated and reported at fair value with gains and losses being recognised in the income statement. This does not apply if the host contract is carried at fair value through profit or loss. Certain combined instruments are classified as financial liabilities at fair value through profit or loss according to the fair value option. The designation implies that the entire combined instrument is measured at fair value through profit and loss. Offsetting financial transactions Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legal right to offset transactions and an intention to settle net or realise the asset and settle the liability simultaneously. Repurchase agreements Securities may be lent or sold subject to a commitment to repurchase them (a ‘repo’) at a fixed price and at a predetermined date. Such securities are retained on the balance sheet and in addition included separately as collateral pledged for own liabilities when cash consideration is received. Depending on the coun- terparty, payment received is recognised under Deposits by credit institutions or as Deposits and borrowing from the public. Similarly, where the group borrows or purchases securities subject to a com- mitment to resell them (a ‘reverse repo’), the securities are not included in the balance sheet. Payments made are recognised as Loans to credit institutions or as Loans to the public. The difference between sale and repurchase price is accrued over the life of the agreements using the effective interest method. Securities borrowing and lending Securities borrowing and lending transactions are entered into on a collateral- ised basis. Fair values of securities received or delivered are monitored on a daily basis to require or provide additional collateral. Cash collateral delivered is derecognised from the balance sheet and a corresponding receivable is rec- ognised. Cash collateral received is recognised in the balance sheet and a corre- sponding obligation to return it, is recognised. Securities lent remain on the bal- ance sheet and are in addition reported as pledged assets. Borrowed securities are not recognised as assets. When borrowed securities are sold (short posi- tion), an amount corresponding to the fair value of the securities is booked as a liability. Securities received in a borrowing or lending transaction are disclosed as obligations. Modification The group may renegotiate loans and modify contractual terms. If the new terms are substantially different from the original terms, the group derecog- nises the original financial asset and recognises a new asset. The group also assesses whether the new financial asset is credit-impaired at initial recogni- tion. If the terms are not substantially different, the modification does not result in derecognition and the group recalculates the gross carrying amount based on the new cash flows using the original effective interest rate of the financial asset and recognises a modification gain or loss. Fair value measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly market between market participants at the measurement date. The fair value of financial instruments quoted in an active market is based on quoted market prices. If the asset or liability measured at fair value has a bid price and an ask price, the price within the bid-ask spread that is most repre- sentative of fair value in the circumstances is used. The fair value of financial instruments that are not quoted in an active market is determined by applying various valuation techniques with maximum use of observable inputs. The valuation techniques used are for example discounted cash flows, option pricing models, valuations with reference to recent transac- tions in the same instrument and valuations with reference to other financial instruments that are substantially the same. When valuing financial liabilities at fair value the group’s own credit standing is reflected. Any differences between the transaction price and the fair value calculated using a valuation technique with unobservable inputs, the Day profit, is amor- tised over the life of the transaction. Day profit is then recognised in profit or loss either when realised through settlement or when inputs used to calculate fair value are based on observable prices or rates. Fair value is generally measured for individual financial instruments. In addi- tion, portfolio adjustments are made to cover market risks and the credit risk of each of the counterparties on groups of financial assets and liabilities on the basis of the net exposure to these risks. When assets and liabilities have offset- ting market risks, mid-market prices are used for establishing fair value of the risk positions that offset each other. To reflect counterparty risk and own credit risk in OTC derivatives, adjustments are made based on the net exposure towards each counterpart. Impairment of financial assets Measurement The impairment requirements are based on an expected credit loss (ECL) model. The guiding principle of the ECL model is to reflect the general pattern of deterio- ration or improvement in the credit quality of financial instruments. All financial assets measured at amortised cost and fair value through other comprehensive income, as well as lease receivables, financial guarantees contracts, contract assets and certain loan commitments are in scope for expected credit loss. ECLs on financial assets measured at amortised cost and lease receivables are presented as allowances, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the gross carrying amount. ECLs on loan commitments and financial guarantee contracts are pre- sented as provisions, i.e., as a liability, in the balance sheet. Adjustment to the loss allowance and provision due to changes in ECLs is recognised in the income statement as Net expected credit losses. The assessment of credit risk, and the estimation of ECL, shall be unbiased and probability-weighted, and shall incorporate all available information which is relevant to the assessment, including information about past events, current conditions and reasonable and supportable forecasts of future events and eco- nomic conditions at the reporting date. SEB uses both models and expert credit judgement (ECJ) for calculating ECLs. The ECL model has a three-stage approach based on changes in the credit risk. A -month ECL (Stage ) applies to all items, unless there is a significant increase in credit risk since initial recognition. For items where there is a signifi- cant increase in credit risk (Stage ) or in default (Stage ), lifetime ECL applies. Significant increase in credit risk At the end of each reporting period the group performs an assessment of whether credit risk has increased significantly since initial recognition. The assessment of whether there has been a significant change in credit risk is based on quantitative and qualitative indicators. Both historic and forward- looking information is used in the assessment. For arrangements with an initial origination date as at January or later, the primary indicator is changes in lifetime probability of default (PD) by comparing the scenario-weighted annualised lifetime PD at the reporting date with the scenario-weighted annualised lifetime PD at initial recognition. For arrangements with an initial origination date prior to January changes in SEB’s internal risk classifications since initial origination are used as the primary indicator. Regardless of the quantitative indicator, a significant increase in credit risk is triggered if the following back-stop indicators occur: • payments are past due days but < days, or • financial assets have been classified as watch-listed, or • financial assets are forborne (where due to the customer’s financial difficulties the contractual terms of the loans have been revised and concessions given). Back-stop indicators normally overlap with the quantitative indicator of signifi- cant increase in credit risk. In case there has been a significant increase in credit risk since initial recogni- tion, an allowance for lifetime ECL shall be recognised and the financial instru- ment is transferred to Stage . The approach is symmetrical, meaning that in subsequent reporting periods, if the credit quality of the financial instrument improves such that there is no longer a significant increase in credit risk since initial recognition, the financial assets moves back to Stage . Definition of default Financial instruments in default are in Stage . SEB applies a definition of default for accounting purposes that is consistent with how it is defined in SEB Annual and Sustainability Report 2021 — 121 the capital requirements regulation, which includes financial assets past due more than days. All financial assets in Stage are considered to be credit- impaired. Modelling The ECL is calculated as a function of the probability of default (PD), the expo- sure at default (EAD) and the loss given default (LGD), as well as the timing of the loss. The group’s IFRS methodology for ECL measurement is based on existing internal rating-based risk models (IRB) to the extent allowed under IFRS . As the objectives of these frameworks differ, the manner in which the expected credit losses are calculated also differs and appropriate adjustments are made to the IRB parameters to meet IFRS requirements. Adjustments include the conversion of through-the-cycle and downturn parameters used in IRB risk models to point-in-time parameters used under IFRS that consider forward-looking information. PD represents the likelihood that a loan will not be repaid and will go into default in either a -month or lifetime horizon. The expected PD for each indi- vidual instrument incorporates a consideration of past events, current market conditions and reasonable and supportable information about future economic conditions. SEB uses IFRS specific PD models. The models are calibrated based on a combination of geography, assets class and product type. EAD rep- resents an estimate of the outstanding amount of credit exposure at the time a default may occur. For off-balance sheet amounts, EAD includes an estimate of any further amounts to be drawn at the time of default. For IFRS , EAD models are adjusted for a -month or lifetime horizon. LGD is the amount that may not be recovered in the event of default. LGD takes into consideration the amount and quality of any collateral held as well as the probability of cure, whereby the borrower repays all his past due obligations on the defaulted loan and recom- mences contractual repayments. SEB uses existing LGD models adjusted to meet IFRS requirements. When measuring ECL, SEB uses the maximum contractual period during which SEB is exposed to risk. All contractual terms are considered when determining the expected life, including prepayment options and extension and rollover options. For revolving facilities, such as credit cards, and retail mortgage facilities the expected life is modelled based on historical behaviour. The residual behav- ioural expected life for such facilities is based on historically observed survival curve and it is affected by the time since origination of the arrangement. Forward-looking information The group uses internally developed macroeconomic forecasts as the basis for the forward-looking information incorporated in the ECL measurement. In order to ensure an unbiased estimation of credit losses under IFRS , at least three scenarios are used. One of the scenarios is the base case scenario, representing the most likely outcome, which is also applied in the financial planning and budgeting process, while other case scenarios represent more positive or nega- tive outcomes. The forward-looking scenarios are prepared by SEB Macro & FICC Research. The scenarios are approved by the Group Risk Committee. A scenario consists of a qualitative description of the macroeconomic development and a quantita- tive part, with forecasts of key macroeconomic variables for three subsequent years, as well as the likelihood of occurrence (scenario-weight). The scenarios are reviewed and updated on a quarterly basis. In case of significant changes in the macroeconomic environment and outlook, the scenarios will be updated more frequently. The scenario variables are benchmarked to various external sources of similar forward-looking scenarios, e.g. from OECD, IMF, EU, national central banks, ECB, and governments/Ministries of Finance. Expert Credit Judgement (ECJ) The group uses both models and expert credit judgement (ECJ) to determine ECLs. The degree of judgement that is required to estimate ECL depends on the model outcome, materiality and the availability of detailed information. The model provides guidance and transparency as to how economic events could affect the impairment of financial assets. Model overlay may be applied to the modelled outcome to incorporate an estimated impact of factors not captured by the model. Such judgemental adjustment to the model-generated ECLs may be applied to significant exposures at a counterparty level. The overlays are decided by the relevant credit committee using the model ECLs as guidance. In addition, there may be a need for overlays at a portfolio level, which is decided by the Group Risk Committee. Hedge accounting Derivatives are used to hedge interest rate, exchange rate and equity expo- sures. Where derivatives are held for risk management purposes and when transactions meet the required criteria, the group applies fair value hedge accounting, cash flow hedge accounting or hedging of a net investment in a for- eign operation as appropriate to the risks being hedged. The group documents and designates, at inception, the relationship between the hedged item and the hedging instrument as well as the risk objective and hedge strategy. The group also documents its assessment, both at inception and on an ongoing basis, whether the derivatives used are both prospectively, and retrospectively highly effective in offsetting the hedged risk. As part of the prospective test the group also assesses and documents that the likelihood of forecasted transactions to take place is highly probable. More information regarding hedge accounting can be found in note 21 Derivatives and hedge accounting. Hedge accounting is applied when derivatives are used to reduce risks such as interest rate risks and currency risks in financial instruments. Furthermore, hedge accounting can be applied to liabilities hedging currency risk in net investments in subsidiaries. The group applies different hedge accounting models depending on the purpose of the hedge: • Hedges of fair value of recognised assets or liabilities (fair value hedge); • Hedges of the fair value of the interest rate risk of a portfolio (portfolio hedge); • Hedges of highly probable future cash flows attributable to recognised assets or liabilities (cash flow hedge); • Hedges of a net investment in a foreign operation (net investment hedge). The group discontinues hedge accounting when: • The derivative has ceased to be highly effective as a hedging instrument, • The derivative expires, is sold, terminated, or exercised, • The hedged item matures, is sold or repaid, or • The forecast transaction is no longer deemed highly probable. Fair value hedge Fair value hedges are used to protect the group against undesirable exposures to changes in the market prices of recognised assets or liabilities. Changes in fair value of derivatives that qualify and are designated as hedging instruments are recorded in the income statement, together with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk as Net other income. Where the group hedges the fair value of interest rate exposure in a portfolio including financial assets or financial liabilities, so called portfolio hedging of interest rate risk, the gains or losses attributable to the hedged item are reported as a separate item under assets or as a separate item under liabilities in the balance sheet. When hedge relationships are discontinued, any adjustment to the carrying amount of the hedged item is amortised to profit or loss over the period to matu- rity of the hedged item. Cash flow hedge Cash flow hedging is applied for the hedging of exposure to variations in future interest payments on assets or liabilities with variable interest rates. The por- tion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income. The ineffective portion of the gain or loss on the hedging instrument is recognised in profit or loss as Net other income. Gains or losses on hedging instruments that have been accumulated in equity are recognised in profit or loss in the same period as interest income and inter- est expense from the hedged asset or liability. When cash flow hedges are discontinued but future cash flows still are expected to occur, accumulated gains or losses from the hedging instrument will remain as a separate item in equity until the hedged future cash flows occur. Accumulated gains or losses are subsequently reported in profit or loss in Net interest income in the same period in which the previously hedged interest flows are recognised in profit or loss. Net investment hedge Hedge of a net investment is applied to protect the group from translation dif- ferences due to net investments in foreign subsidiaries. Foreign currency loans constitute the major portion of hedging instruments in these transactions. The translation differences arising on the hedging instruments are recognised in other comprehensive income and accumulated in equity as translation of for- eign operations, to the extent the hedge is effective. Any ineffective part is rec- ognised as Net financial income. When a foreign operation is partially disposed of or sold, exchange differences accumulated in equity are recognised in the income statement as part of the gain or loss on the sale. Operating income Interest income and interest expense The effective interest method is applied to recognise interest income and inter- est expenses in profit or loss for financial assets and financial liabilities meas- ured at amortised cost. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating interest income and interest expenses. The effective interest rate is the rate that discounts esti- mated future cash payments or receipts through the expected life of the finan- cial instrument to the net carrying amount of the financial instrument. The cal- culation of the effective interest rate includes transaction costs, fees and points to be received and paid that are an integral part of the effective interest rate. Financial statements—Notes 122 — SEB Annual and Sustainability Report 2021 Net fee and commission income The recognition of revenue from contracts with customers is reported as fee and commission income. The group recognises revenue when it transfers con- trol over a service to a customer. Fees that are included in the calculation of the effective interest rate of a financial instrument measured at amortised cost, such as loan origination fees, are allocated over the expected tenor of the instrument applying the effective interest method and presented in Net interest income. Fee and commission income is recognised to depict the transfer of promised services to the customers in an amount that reflects the consideration to which SEB expects to be entitled in exchange for the service. The major types of fees are described below. Fee and commission income for asset custody and asset management to customers is recognised as revenue over the period in which the services are provided. Performance based fees are recognised when it is highly probable that a significant reversal of recognised revenue will not occur, which is when the performance criteria are fulfilled. Fee and commission income from loan syndications in which SEB acts as arranger are recognised as income when the syndication is completed and the group has retained no part of the loan or retained a part of the loan at the same effective interest rate as other participants. Brokerage fees, commission and fees from negotiating a transaction for a third party, such as arrangement of acquisitions or purchase or sale of a business, are recognised on completion of the transaction. Expenses that are directly related to the generation of fee and commission income are recognised as fee and commission expense. Net financial income Gains and losses arising from changes in fair value of financial assets and liabili- ties measured at fair value through profit or loss are reported under the item Net financial income. For financial liabilities designated at fair value through profit or loss the change in fair value relating to change in own credit risk is accounted for in other comprehensive income. Dividend income Dividends are recognised when the entity’s right to receive payment is established. Seized assets Seized assets are assets taken over to protect a claim. SEB may refrain from a loan receivable and instead seize the asset that served as collateral for the loan. Seized assets may consist of financial assets, properties and other tangi- ble assets. Seized asset are recognised on the same line item in the balance sheet as similar assets that have been acquired otherwise. At inception seized assets are measured at fair value. The fair value at initial recognition becomes the acquisition value. Subsequently seized assets are measured according to type of asset with the exception of impairment of tangible seized assets that is reported as Gains less losses from tangible and intangible assets rather than as Depreciation, amortisation and impairment of tangible and intangible assets. The purpose is to better reflect the similar character of impairment of assets that are taken over to protect claims on counterparties and credit losses. Tangible assets Tangible assets, with the exception of investment properties held in insurance operations, are measured at cost and are depreciated according to plan on a straight-line basis over the estimated useful life of the asset. The maximum depreciation period for buildings is years. The depreciation period for other tangible assets is between and years. Tangible assets are tested for impairment whenever there is an indication of impairment. Leasing Lessee Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and the finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the group’s incremental borrowing rate. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. The lease payments include fixed pay- ments less any lease incentives receivable and variable lease payments that depend on an index or a rate. The group has elected not to recognise right-of-use assets and lease liabili- ties for short-term leases that have a lease term of months or less and leases for low-value assets. The group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Lessor A finance lease is a lease that transfers, from the lessor to the lessee, substan- tially all risks and rewards incidental to the ownership of an asset. In the group, essentially all leasing contracts in which the group is the lessor are classified as finance leases. Finance leases are reported as lending, which implies that the leasing income is reported within Net interest income. Investment properties Investments in properties held in order to receive rental income and/or for capi- tal appreciation are reported as investment properties. The recognition and measurement of such properties differs, depending upon the entity owning the property. Investment properties held in the insurance operations, used to match liabilities providing a yield directly associated with the fair values of specified assets, including the investment properties themselves, are accounted for using the fair value model. Holdings of investment properties in the banking opera- tions are measured at cost less accumulated depreciation. Intangible assets Goodwill is measured, after initial recognition, at cost, less any accumulated impairment losses. In order to test goodwill from business combinations for impairment, it is allocated upon acquisition to the cash generating unit or units that are expected to benefit from the acquisition. Each group represents the lowest level at which goodwill is monitored for internal management purposes and it is never larger than an operating segment. Goodwill and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. An impairment loss is rec- ognised in profit or loss whenever the carrying amount, with respect to a cash- generating unit or a group of cash-generating units to which the goodwill is attributed, exceeds the recoverable amount. Impairment losses attributable to goodwill are not reversed, regardless of whether the cause of the impairment has ceased to exist. Intangible assets acquired in a business combination are identified and rec- ognised separately from goodwill where they satisfy the definition of an intan- gible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are measured on the same basis as intangible assets acquired separately. Other intangible assets are measured at cost, including directly attributable borrowing costs, less accumulated amortisation and any impairment losses. Development expenditures on an individual project are recognised as an intan- gible asset, provided that future economic benefits are probable, costs can be measured reliably and the product and process is technically and commercially feasible. Research costs are expensed as incurred. The guidance in IAS Intangible Assets is applied to cloud computing arrangements if the group receives a resource it can control, assuming it is not accounting for the intangi- ble asset as a lease. If the cloud computing arrangement does not provide the group with an intangible asset for the software (and does not contain a lease), then the right to access the underlying software in the cloud computing arrangement is generally a service contract where the fees paid is expensed as the service is received. Intangible assets with finite useful lives, i.e. all intangible assets except good- will, are amortised on a straight-line basis over their useful lives and tested for impairment annually and whenever events or changes in circumstances indi- cate that the carrying amount may not be recoverable. An impairment loss is recognised if the carrying amount exceeds the recoverable amount of the asset. Internally generated intangible assets, such as software development, are amortised over a period of between and years. Provisions Provisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic benefit will be necessary to settle the obligation, and it can be reliably estimated. Provi- sions are determined by discounting the expected future cash flows at pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A provision for restructuring is recognised when the group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced pub- licly. Future operating losses are not provided for. Provisions are made for undrawn loan commitments and similar facilities if it is probable that the facility will be drawn by a debtor in financial difficulties. ECLs on loan commitments and financial guarantee contracts are presented as provisions. Provisions and changes in provisions are recognised in the income statement as Net credit losses. Provisions are evaluated at each balance sheet date and are adjusted as necessary. Financial guarantees Financial guarantees are contracts that require the group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instru- SEB Annual and Sustainability Report 2021 — 123 ment. Financial guarantee liabilities are initially recognised at their fair value (which most often equals the premium received) and subsequently at the higher of the amount determined in accordance with the expected credit loss model under IFRS Financial Instruments and the amount initially recognised less, where appropriate, the cumulative amount of income recognised. The con- tractual amounts according to financial guarantees are not recognised in the balance sheet but disclosed as obligations. Employee benefits Pensions There are both defined contribution and defined benefit pension plans within the group, of which most have plan assets. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will get on retirement depending on factors such as age, years of service and compensa- tion. A defined contribution plan is a pension plan where the group pays a con- tribution to separate entities and has no further obligation once the contribution is paid. The pension commitments of the group with respect to defined benefit plans are covered by the pension funds of the group or through insurance solutions. The defined benefit obligation is calculated quarterly by independent actuar- ies using the Projected Unit Credit Method. The assumptions upon which the calculations are based are found in note 8b addressing Staff costs. All changes in the net defined benefit liability (asset) are recognised as they occur, as follows: (i) service cost and net interest in the income statement; and (ii) remeasurements of both defined benefit obligations and plan assets in other comprehensive income. Pension costs for defined contribution pension plans are recognised as an expense during the period the employees carry out the service to which the payment relates. Share-based payments The group operates a number of share-based incentive programmes, under which it awards SEB equity instruments to its employees. Equity-settled share- based incentive programmes entitle employees to receive SEB equity instru- ments. Cash-settled share-based incentive programmes entitle employees to receive cash based on the price or value of equity instruments of SEB. Fair value of these rights is determined by using appropriate valuation models, taking into account the terms and conditions of the award and the group’s estimate of the number of rights that will eventually vest, which is reassessed at each reporting date. Social security charges are accounted for over the vesting period and the provision for social security charges is reassessed on each reporting date to ensure that the provision is based on the rights’ fair value at the reporting date. The cost of equity-settled share-based incentive programmes is measured by reference to the fair value of equity instruments on the date they are granted and recognised as an expense on a straight-line basis over the vesting period with a corresponding increase in equity. The vesting period is the period that the employees have to remain in service in SEB in order for their rights to vest. For cash-settled share-based incentive programmes, the services acquired and lia- bility incurred are measured at the fair value of the liability and recognised as an expense over the vesting period, during which the employees render service. Until settlement, the fair value of the liability is remeasured, with changes in fair value recognised in the income statement. Short-term cash-based remuneration The group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. Taxe s The group’s tax for the period consists of current and deferred tax. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be paid to or from tax authorities using the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Current tax is calculated based on the taxable results for the period. Deferred tax arises due to temporary differences between the tax bases of assets and liabilities and their carrying amounts. Current tax and deferred tax are generally recognised in profit or loss. How- ever, tax that relates to items recognised in other comprehensive income is also reported directly in other comprehensive income. Examples of such items are gains or losses on hedging instruments in cash flow hedges. Deferred tax assets are recognised in the balance sheet to the extent that it is probable that future taxable profits will be available against which they can be utilised. The group’s deferred tax assets and tax liabilities have been calcu- lated at the tax rate of . per cent in Sweden, and at each respective coun- try’s tax rate for foreign companies. Insurance and investment contracts Insurance contracts are contracts under which the group accepts significant insurance risk – defined as a transfer of an absolute risk of minimum percent of the underlying value – from the policyholder by agreeing to compensate the policyholder or other beneficiaries on the occurrence of a defined insured event. Investment contracts are financial instruments that do not meet the defi- nition of an insurance contract, as they do not transfer significant insurance risk from the policyholder to the group. Insurance contracts Insurance contracts are classified as short-term (non-life) or long-term (life). Short-term insurance comprises sickness, disability, health care, and rehabilita- tion insurance. Long-term insurance comprises mainly traditional life insurance. In the group accounts short-term and long-term insurance are presented aggre- gated as Insurance contracts. Measurement of short-term insurance contracts (non-life) The provision for unearned premiums is intended to cover the anticipated cost of claims and operating expenses arising during the remaining policy period of the insurance contracts in force. The provision for unearned premiums is usually strictly proportional over the period of the insurance contracts. If premiums are judged to be insufficient to cover the anticipated cost for claims and operating expenses, the provision for unearned premiums is strengthened with a provi- sion for unexpired risks. For anticipated future claims that have been incurred but not yet paid, provi- sion for claims outstanding is recognised. The provision is intended to cover the anticipated future payment of all claims incurred, including claims incurred but not reported (IBNR provisions). This provision should also cover all costs for claims settlement. The provision for claims outstanding is not discounted, with the exception of provisions for sickness annuities, which are discounted using standard actuarial methods. Measurement of long-term insurance contracts (life) For long-term life insurance contracts, a liability for contractual benefits that are expected to be incurred in the future is recorded when the premiums are recognised. The liability equals the sum of the discounted value of expected benefit payments and future administration expenses, less any outstanding future contractual premium payments. Liabilities for long-term life insurance are discounted using standard actuarial methods. Liability adequacy test Swedish actuarial procedures involve performing liability adequacy tests on insurance liabilities. This is to ensure that the carrying amount of the liabilities is sufficient in the light of estimated future cash flows. The carrying amount of a liability is the value of the liability itself less any related intangible asset or asset for deferred acquisition costs. The current best estimates of future con- tractual cash flows, as well as claims handling and administration costs, are used in performing these liability adequacy tests. These cash flows are dis- counted and compared to the carrying amount of the liability. Any deficit is immediately recognised in profit or loss. Revenue recognition Premiums for insurance contracts are recognised as revenue when they are paid by the policyholders. For contracts where insurance risk premiums received during a period are intended to cover insurance claims arising in that period those premiums are recognised as revenue proportionally during the period of coverage. Recognition of expenses Costs for insurance contracts are recognised as an expense when incurred, with the exception of commissions that are capitalised as deferred acquisition costs. These costs are amortised as the related revenue is recognised. The asset is tested for impairment every period, ensuring that the economic future benefits expected to arise from the contracts exceed its face amount. Reinsurance Contracts with re-insurers, whereby compensation for losses is received by the group, are classified as ceded reinsurance. For ceded reinsurance, the benefits to which the group is entitled under the terms of the reinsurance contract are reported as the re-insurers’ share of insurance provisions. Amounts recoverable from re-insurers are measured consistently with the amounts associated with the reinsurance contracts and in accordance with the terms of each reinsurance contract. Investment contracts The majority of the group’s unit linked insurance is classified as investment con- tracts where no significant insurance risk is transferred from the policyholder to the group. A minor part of the group’s unit linked insurance business is classified as insurance contracts. Measurement Investment contracts are financial commitments whose fair value is dependent on the fair value of the underlying financial assets. The underlying assets are Financial statements—Notes 124 — SEB Annual and Sustainability Report 2021 mandatorily measured at fair value through profit or loss and the related liabili- ties are designated at fair value through profit or loss (fair value option). The choice to use the fair value option for the liabilities has been made for the pur- pose of eliminating the measurement inconsistency that would occur if differ- ent bases for measurement would have been used for assets and liabilities. The fair value of the unit linked financial liabilities is determined using the fair value of the financial assets linked to the financial liabilities attributed to the policy- holder on the balance sheet date. However, if the liability is subject to a surren- der option, the fair value of the financial liability is never less than the amount payable on surrender. Any differences between assets and liabilities are due to premiums paid that have not yet been invested in funds. Changes in the value of unit linked insurance does not affect SEB as they belong to the policyholders. Revenue recognition Amounts received from and paid to policyholders are reported in the balance sheet as deposits or withdrawals. Fees charged for managing investment con- tracts are recognised as revenue. The revenue for these management services is evenly distributed over the tenor of the contracts. Recognition of expenses Incremental costs of obtaining investment contracts with customers are deferred if they are expected to be recovered. Incremental costs are costs to obtain a contract with a customer that would not have been incurred if the con- tract had not been obtained. These costs are up-front acquisition costs in the form of sales commissions paid for obtaining investment contracts. They are expected to be recovered from the fee income earned from the investment con- tracts. The asset is tested for impairment during each period to ensure that the future economic benefits expected to arise from the contract exceed the carry- ing amount of the asset. All other costs, such as commissions to brokers paid during the tenor of the investment contracts or commission to own staff acting as sales agents or ongoing administration cost, are recognised in the period in which they arise. Contracts with discretionary participation features (DPF) Some traditional pension saving contracts include a discretionary participation feature. This feature entitles the policyholder to receive, as a supplement to guaranteed benefits, additional benefits or bonuses. All contracts that include a discretionary participation feature are reported as insurance contracts. The amounts referring to the guaranteed element and to the discretionary partici- pation feature are reported as liabilities to policyholders. Changed accounting principles Changes in accounting policies implemented 2021 The group adopted Interest Rate Benchmark Reform (IBOR) – Phase . The amendments to IFRS , IAS , IFRS , IFRS and IFRS address issues that might affect financial reporting as a result of the IBOR reform, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative bench- mark rate. In accordance with the amendments, changes made to a financial instrument that relate directly to the interest rate benchmark reform and that are economically equivalent, do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require the effec- tive interest rate to be updated to reflect the change in the interest rate bench- mark without adjusting the carrying amount. In addition, hedge accounting will not be discontinued solely because of the replacement of the interest rate benchmark if the hedge meets other hedge accounting criteria. Note g describes the IBOR reform in more detail. Changes in IFRSs not yet applied IFRS Insurance Contracts was published in May . This standard should be applied as from January . IFRS establishes principles for the recogni- tion, measurement, presentation and disclosure of issued insurance contracts. It also requires similar principles to be applied to held reinsurance contracts and issued investment contracts with discretionary participation features. IFRS replaces IFRS Insurance Contracts. SEB is currently evaluating the impact of the change to the financial statements of the group. Amendments to IFRS Business Combinations are intended to replace a ref- erence to the latest Framework for the Preparation and Presentation of Finan- cial Statements without significantly changing its requirements. The amend- ments are effective for annual reporting periods beginning on or after January . Amendments to IAS Provisions, Contingent Liabilities and Contingent assets, Onerous Contracts – Costs of Fulfilling a Contract specify which costs an entity includes in determining the cost of fulfilling a contract for the purpose of assessing whether the contract is onerous. The amendments apply for annual reporting periods beginning on or after January . The IASB has issued amendments to IAS Presentation of Financial Statements to specify the require- ments for classifying liabilities as current or non-current. The amendments are effective for annual reporting periods beginning on or after January . As part of its annual improvements to IFRS standards process the IASB issued amendment to IFRS Financial Instruments – Fees in the ’ per cent’ test for derecognition of financial liabilities. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or mod- ified financial liability are substantially different from the terms of the original financial liability. The amendment is effective for annual reporting periods beginning on or after January . Definition of Accounting Estimates – Amendments to IAS Accounting Policies, Changes in Accounting Estimates and Errors, effective for annual periods beginning on January . The Board issued amendments to IAS , in which it introduces a new definition of ‘account- ing estimates’. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Disclosure of Accounting Policies – Amendments to IAS Presentation of Financial Statements and IFRS Practice Statement : Making Materiality Judge- ments effective for annual periods beginning on January . The amend- ments provide guidance and examples to help entities apply materiality judge- ments to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. Deferred Tax related to Assets and Liabilities arising from a Single Transac- tion – Amendments to IAS Income Taxes effective for annual periods begin- ning on January . The IASB issued amendments to IAS , which narrow the scope of the initial recognition exception under IAS , so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences. None of the amendments effective after have yet to be endorsed by the EU. Significant accounting policies of the parent company Skandinaviska Enskilda Banken (SEB) AB is a public limited liability company with corporate number and with registered office in Stockholm, Sweden. The financial statements of the parent company are prepared in accordance with the Annual Accounts Act for Credit Institutions and Securities Companies ), the regulation and general guidelines issued by the Swedish Financial Supervisory Authority, Annual Reports in Credit Institutions and Secu- rities Companies (FFFS ) and statements from the Swedish Financial Reporting Board, RFR and the additional UFR statements. In accordance with the Financial Supervisory Authority’s regulation, the par- ent company applies statutory IFRS. This means that the International Financial Reporting Standards (IFRS) and interpretations of these standards as adopted by the EU have been applied to the extent that is possible within the framework of Swedish legislation and considering the close tie between financial reporting and taxation. The accounting principles of the parent company differ, in certain aspects, from the accounting principles applied by the group. The essential dif- ferences are described below. Changed accounting policies The changed group accounting policies and future accounting developments also apply to the parent company. In all other material aspects, the accounting policies, basis for preparation and presentation for the parent company are unchanged in comparison with the annual report for . Presentation format The presentation format for the balance sheet and the profit and loss account according to the Annual Accounts Act for Credit Institutions and Securities Com- panies is not in conformity with IFRS. Credit institutions and securities compa- nies applying IFRS as adopted by the EU in their consolidated financial state- ments have the option to deviate from the presentation format for the balance sheet as stipulated by law, but may not deviate from the stipulated profit and loss account. Holdings in subsidiaries and associated companies Shares and participating interests in subsidiaries and associated companies are measured at cost less any impairment. Dividends on shares in subsidiaries and associated companies are recognised as income in profit or loss. Merger of sub- sidiaries through absorption are accounted for at consolidated values. The merger effect is reported in equity. Financial assets and liabilities The group’s accounting policies in regard to financial assets and liabilities also applies to the parent company, with the exception of financial liabilities desig- nated as fair value through profit or loss where the change in fair value relating to change in own credit risk is accounted for in profit or loss. Leasing IFRS Leases is not applied in the parent company. When the parent company is acting as a lessee, it recognises leasing fees as costs on a straight-line basis over the lease period (i.e., like an operating lease). When the parent company acts as a lessor, it reports all leasing agreements as operational leases. SEB Annual and Sustainability Report 2021 — 125 Pensions The parent company does not apply the provisions of IAS Employee Benefits concerning accounting for defined benefit plans. Instead, pension costs are calculated on an actuarial basis in the parent company in accordance with the provisions of the Act on Safeguarding Pension Obligations and the Swedish Financial Supervisory Authority’s regulations. This is a requirement by the Swedish tax regulation. In Sweden, actuarial pension commitments are guaran- teed by a pension foundation. The recognised net cost of pensions is calculated as pensions paid and pen- sion premiums less any compensation from the pension foundation. The net pension cost for the year is reported under Staff costs in the parent company’s profit and loss account. Excess amounts as a result of the value of the plan assets exceeding the estimated pension obligations are not recognised as an asset in the parent company’s balance sheet. Deficits are recognised as a liability. Goodwill and other intangible assets In accordance with IAS , goodwill is not amortised in the consolidated financial statements. In the parent company financial statements, goodwill is amortised as any other intangible asset on a straight-line basis. Taxe s In the parent company, untaxed reserves are recognised as a separate item in the balance sheet. Untaxed reserves comprise accelerated depreciation under tax regulations, including the deferred tax component. In the consolidated financial statements, untaxed reserves are reported in retained earnings and deferred tax liability. Appropriations The net of group contributions received and paid is reported in the parent company as appropriations. Critical judgements in applying the accounting policies Applying the group’s accounting policies requires in some cases the use of esti- mates and assumptions that have a material impact on the amounts reported in the financial statements. The estimates are based on expert judgements and assumptions that management believes are true and fair. The management con- tinuously evaluates these judgements and estimates. The most significant assumptions and estimates are associated with the areas described below: Consolidation of mutual life insurance companies and funds Within the life insurance operations of the SEB Group, Gamla Livförsäkrings AB SEB Trygg Liv operates as a mutual life insurance company. The entity is not consolidated, as the judgement of the group is that it does not have control of the entity. Control is seen to imply the power to govern the financial and operat- ing policies of an entity in order to affect the amount of its returns from the entity. Life insurance entities operated as mutual life insurance companies can- not pay dividends which is why the group deems that it cannot obtain benefits. In Gamla Livförsäkrings AB SEB Trygg Liv there are specific policies specifying the composition of the board, which implies that the SEB Group is not able to govern the financial and operating policies of the entity. In the assessment whether to consolidate funds, an assessment is made whether the group is considered to be an agent or a principal. The group is con- sidered a principal, and hence controls the fund, when it is the fund manager, cannot be removed without cause, has significant right to returns from the fund by holding units and earning fee income and has the practical ability to influence its return by using its power. Funds managed by the group in which entities within the group owns more than per cent are analysed further for consoli- dation. The policyholders in SEB’s unit-linked company choose to invest in a variety of funds. The insurance company providing unit-linked products invests in the funds chosen by the customers. By doing so SEB might, in some cases, hold more than per cent of the funds, which it holds on behalf of the customers for whom it acts as investment manager. Due to the legislation regarding fund operations, SEB considers that it does not have the power to govern the finan- cial and operating policies of such investment funds to obtain benefits. This applies irrespective of whether the funds held on behalf of customers are greater or less than per cent of a fund. It is the policyholders who carry the investment risk, not SEB. Consequently, the policyholders are entitled to all of the returns generated by the funds. SEB only charges fees, on market condi- tions, for managing the funds. SEB has come to the conclusion that these funds which it manages should not be consolidated. However, the shares that the group holds in such funds on behalf of its customers are recognised in the bal- ance sheet. Fair value measurement of financial instruments The objective of the fair value measurement is to arrive at the price at which an orderly transaction would take place between market participants at the meas- urement date under current market conditions. The best evidence of fair value is a quoted price for the instrument being measured in an actively traded market. Where the market for a financial instrument is not active, fair value is calculated using an established valuation technique. These valuation techniques involve a degree of estimation, the extent of which depends on the instrument’s complex- ity and the availability of market-based data. When valuing financial liabilities at fair value own credit standing is reflected. Given the uncertainty and subjec- tive nature of valuing financial instruments at fair value, it is possible that the outcomes in the next financial year could differ from the assumptions used. For some of the group’s financial assets and liabilities, especially for certain derivatives, quoted prices are not available, and valuation models are used to estimate fair value. As part of the fair value measurement, valuation adjust- ments are made when valuing derivative financial instruments, to incorporate counterparty and own credit risk. The methodologies for estimating valuation adjustments are continuously revised as a result of changing market practices in response to regulatory and accounting policy changes, as well as general market developments. The group has an established control environment for the determination of fair values of financial instruments that includes a review, independently from the business, of valuation models and prices. If the validation principles are not adhered to, the Head of Group Finance shall be informed. Exceptions with mate- rial and principal importance require approval from the Valuation Committee and the SEB ARC (Accounting Policy and Financial Reporting Committee). For disclosure purposes, fair values are classified in a fair value hierarchy according to the level of observability of the inputs, see note 36. Impairment of financial assets and goodwill Financial assets When calculating expected credit loss (ECL) there are a number of key con- cepts that require a high level of judgement. Estimating expected credit loss is, by its very nature, uncertain and the accuracy of these estimates depends on many factors, e.g. macro-economic forecasts and involves complex modelling and judgements. At the end of each reporting period the group performs an assessment of whether credit risk has increased significantly since initial recognition by con- sidering the change in the risk of default occurring over the remaining life of the financial instrument, using key risk indicators that are used in the group’s exist- ing risk management processes. Another area requiring significant judgement is the incorporation of forward- looking information and macro-economic scenarios. IFRS requires an unbiased and probability-weighted estimate of credit losses by evaluating a range of pos- sible outcomes that incorporates forecasts of future economic conditions. SEB uses internally developed macro-economic forecasts as the basis for the for- ward-looking information in the ECL measurement. SEB uses both models and expert credit judgement (ECJ) in order to determine ECLs. The objective of applying ECJ is to incorporate the estimated impact of factors not captured in the modelled ECL. The degree of judgement that is required to estimate expected credit losses depends on the outcome from calculations, materiality and the availability of detailed information. The models, assessment and assumptions are regularly reviewed by the risk organisation of the group and approved by the Group Risk Committee. Note 18 describes Loans and expected credit losses (ECL) in more detail. Goodwill Judgement is involved in determining the cash-generating units. The annual impairment test of goodwill is based on the value in use with forecasted cash flows for five years. The cash flows beyond five years are determined based on sustainable growth. The estimation of future cash flows and the calculation of the rate used to discount those cash flows involves a number of judgmental areas: the prepara- tion of cash flow forecasts for periods that are beyond the normal requirements of management reporting and the assessment of the discount rate appropriate to the business. Note 23 describes intangible assets in more detail. Calculation of insurance liabilities Calculation of the group’s insurance liabilities is based on a number of estimates and assumptions, both financial and actuarial, such as interest rates, mortality, health, expenses, inflation and taxes. One of the important financial assump- tions is the interest rate used for discounting future cash flows. Assumption on interest rates is based on regulations from each local Finan- cial Supervisory Authority (FSA). All other assumptions are based on internally acquired experience. Financial statements—Notes 126 — SEB Annual and Sustainability Report 2021 Assets recognised from the costs to obtain or fulfil a contract, deferred acquisition costs SEB recognises as an asset, costs to obtain contracts that would not have incurred if the contract had not been obtained, mainly sales commissions to obtain insurance and investment contracts. The amortisation period for the asset is based on assumptions about average lifetime of the contracts including assumptions about surrenders and lapses. Fair value of investment property Investment properties in the insurance operations are fair valued with the assistance of external expertise. The valuation method applied means that the related expected cash flows are discounted to present value. The assumptions concerning expected cash flows are based on assumptions on future rents, vacancy levels, operating and maintenance costs, yield requirement and mar- ket interest. Assumptions are in line with the assessments that the market can be expected to make under current market conditions. The yield requirement is based on local analysis of comparable property purchases. Valuation of deferred tax assets Deferred tax assets that are relying on future profitability can be recognised only to the extent they can be offset against future taxable income and the valuation of deferred tax assets is influenced by management’s assessment of SEB’s future profitability, future taxable profits and future reversals of existing taxable temporary differences. The expected outcome of uncertain tax posi- tions is determined as the single most likely outcome. Provisions and Contingent Liabilities Judgement is applied in determining whether a present obligation exists, and in estimating the probability, timing and amount of any outflow of resources. In cases where the probability of an outflow of resources or a negative outcome is assessed as not probable (less likely than not), no provision is recognised and a contingent liability is disclosed. Assessments of claims in civil lawsuits, tax and regulatory matters, typically require a higher degree of judgement than other types of cases due to the inherent uncertainty and complexity of the matters. Actuarial calculations of defined benefit plans The calculation of the group’s expense and obligations for defined benefit plans is based on actuarial, demographic and financial assumptions that have a signif- icant impact on the recognised amounts. One of the important financial assump- tions is the interest rate used for discounting future cash flows. The estimation of the discount rate is subject to uncertainty whether corporate bond markets are deep enough, of high quality and also in connection to the extrapolation of yield curves to relevant maturities. The discount rate is based on high quality corporate bonds in a deep market, in Sweden covered bonds. The covered bonds in Sweden are at least AAA-rated and the maturity is in line with the estimated maturity of obligations for post-employment benefits. The discount rate for the defined benefit obligation is revised quarterly and other assump- tions are revised each year or when a significant change has occurred. Note 8b describing staff costs contains a list of the most critical assumptions used when calculating the defined benefit obligation. SEB Annual and Sustainability Report 2021 — 127 2 Operating segments Group business segments Income statement, Large Corporates & Financial Institutions Corporate & Private Customers Baltic Life Investment Management & Group functions Eliminations Total Interest income 11,613 15,562 3,144 1 5,916 3,011 33,225 Interest expense 633 3,907 162 28 5,136 2,963 6,904 Net interest income 10,980 11,654 2,982 27 780 48 26,321 Fee and commission income 12,751 6,748 2,321 3,954 7,898 7,543 26,129 Fee and commission expense 5,004 1,229 626 1,101 4,531 7,504 4,987 Net fee and commission income 7,747 5,519 1,695 2,853 3,367 39 21,142 Net financial income 3,749 529 345 1,044 1,348 23 6,992 Net other income 1) 23 23 8 48 62 5 159 Total operating income 22,499 17,726 5,030 3,918 5,556 115 54,614 of which internally generated 11,950 466 528 694 9,831 430 Staff costs 4,244 3,429 882 874 5,944 1 15,372 Other expenses 5,355 4,437 1,105 679 5,697 115 5,763 Depreciation, amortisation and impairment of tangible and intangible assets 64 274 30 20 1,723 2,110 Total operating expenses 9,663 8,139 2,017 1,573 1,970 115 23,245 Gains less losses on disposals of tangible and intangible assets 1 0 4 0 0 5 Net expected credit losses 660 70 216 0 7 3 510 Operating profit before items affecting comparability 12,177 9,518 3,233 2,346 3,594 3 30,864 Items affecting comparability OPERATING PROFIT 12,177 9,518 3,233 2,346 3,594 3 30,864 Business equity, SEK bn 64.7 47.1 12.3 5.3 Return on business equity, % 14.5 15.6 22.3 41.4 Risk exposure amount, SEK bn 396 244 86 60 787 Lending to the public 2) , SEK bn 673 932 157 2 1,765 Deposits from the public 2) , SEK bn 732 605 200 52 1,590 Income statement, 2020 Interest income 16,897 17,490 3,377 2 17,092 17,281 37,578 Interest expense 5,838 5,153 264 34 18,257 17,110 12,435 Net interest income 11,060 12,337 3,113 31 1,165 170 25,143 Fee and commission income 10,899 6,113 2,246 3,517 6,530 6,372 22,933 Fee and commission expense 4,427 1,197 662 1,063 3,873 6,352 4,870 Net fee and commission income 6,472 4,915 1,584 2,454 2,657 19 18,063 Net financial income 4,226 379 325 660 684 2 6,275 Net other income 1) 87 30 2 5 120 4 236 Total operating income 21,845 17,661 5,019 3,088 2,295 191 49,717 of which internally generated 496 390 18 1,039 745 205 Staff costs 4,238 3,444 880 867 5,562 15 14,976 Other expenses 5,250 4,138 1,105 733 5,185 176 5,864 Depreciation, amortisation and impairment of tangible and intangible assets 68 69 32 21 1,717 1,906 Total operating expenses 9,555 7,651 2,017 1,621 2,094 191 22,747 Gains less losses on disposals of tangible and intangible assets 1 2 9 7 Net expected credit losses 4,865 827 425 1 4 2 6,118 Operating profit before items affecting comparability 7,425 9,182 2,579 1,468 189 2 20,846 Items affecting comparability 1,000 1,000 OPERATING PROFIT 7,425 9,182 2,579 1,468 811 2 19,846 Business equity, SEK bn 70.3 46.6 13.1 5.3 Return on business equity, % 8.1 15.1 16.8 25.5 Risk exposure amount, SEK bn 366 227 80 52 725 Lending to the public 2) , SEK bn 645 857 149 8 1,658 Deposits from the public 2) , SEK bn 641 529 175 18 1,364 1) Profit and loss from associated companies accounted for under the equity method are recognised in Net other income at an amount of SEK 33m 68). The aggregated investments are SEK 669m 548). 2) Excluding repos. Financial statements — Notes 128 — SEB Annual and Sustainability Report 2021 Note 2 continued Operating segments Balance sheet Large Corporates & Financial Institutions Corporate & Private Customers Baltic Life Investment Management & Group functions Eliminations Total Assets 1,828,562 1,040,882 229,349 480,475 2,729,865 3,004,901 3,304,230 Liabilities 1,747,168 979,800 212,690 473,194 2,703,054 3,004,901 3,111,002 Investments 20 44 93 142 713 1,013 2020 Assets 1,929,449 944,384 211,915 382,346 2,634,212 3,061,874 3,040,432 Liabilities 1,851,066 888,360 197,307 376,149 2,617,487 3,061,874 2,868,489 Investments 64 70 204 77 752 1,039 Parent company business segments Large Corporates & Financial Institutions Corporate & Private Customers Baltic Life Investment Management & Group functions Eliminations Total Gross income 28,663 20,412 35 2 8,253 57,366 Assets 1,753,705 973,011 28 100 2,820,421 2,959,433 2,587,834 Investments 10 44 687 742 2020 Gross income 32,410 21,629 24 4 5,322 59,388 Assets 1,852,153 884,273 7 142 1,507,104 1,746,569 2,497,110 Investments 67 27 730 689 Business segment The Business segments are presented on a management reporting basis. The different divisions assist different groups of customers. The customers’ demands decide the type of products that are offered. Large Corporates & Financial Institutions offers wholesale and investment banking services to large corporates and institutions. Corporate & Private Customers offers products and private banking services mainly to retail customers (private customers and small and medium-sized corporates). Division Baltic offers products mainly to retail customers (private customers and small and medium-sized corporates) and private banking services in the Baltic countries. Division Life offers life, sickness, healthcare and pension insurance. Investment Management performs asset management. Group functions consists of business support units, treas- ury and staff units and German run-off operations. Eliminations of internal transactions between the business segments are reported separately. Gross income by product for external customers Group Parent company Core banking 37,431 40,024 28,656 30,857 Capital market 13,290 12,968 12,692 12,404 Asset management 10,176 8,149 2,352 1,935 Life insurance and pension 3,231 2,240 Other 2,378 3,640 13,667 14,192 TOTAL 66,505 67,022 57,366 59,388 Core banking consists of loan, leasing, card and payment related products. Capital market consists of trading and issues on financial markets. Asset man- agement consists of advisory, custody and fund management. Life insurance and pension consists of unit-linked and traditional life insurance products. Other consists of income from treasury operations and other activities. SEB Annual and Sustainability Report 2021 — 129 3 Geographical information Group by country Gross Income ) Operating profit ) Income tax expense ) Assets Investments Gross Income ) Operating profit ) Income tax expense ) Assets Investments Sweden 45,732 19,289 3,108 2,904,959 721 49,953 12,572 2,462 2,725,758 730 Norway 3,787 1,699 416 184,938 2 1,944 928 2 170,086 4 Denmark 1,535 1,405 300 168,234 1 1,569 1,185 142 184,951 2 Finland 1,623 1,311 254 209,980 8 1,665 1,051 201 178,452 14 Estonia 2,128 1,250 160 78,417 71 2,139 1,099 244 71,208 70 Latvia 1,439 738 19 46,717 29 1,434 415 15 43,524 23 Lithuania 2,666 1,554 310 114,945 101 2,746 1,305 242 104,398 134 Germany 2,276 1,546 392 82,738 0 2,418 1,390 410 54,837 1 United Kingdom 2,089 939 246 131,297 0 1,534 393 106 95,005 1 United States 4) 962 262 27 154,268 0 2,905 222 11 194,390 0 Ireland 594 243 37 126,269 64 526 147 16 86,604 40 Luxembourg 1,191 234 49 53,677 0 1,666 516 113 43,353 1 China 432 101 47 19,090 3 463 117 65 20,273 2 Singapore 623 138 25 23,522 1 709 147 26 22,361 0 Russia 374 93 27 6,663 10 440 89 24 7,862 3 Poland 121 46 7 8,521 0 126 46 11 7,122 12 Hong Kong 118 6 14 3,519 204 70 7 4,178 Ukraine 57 10 3 998 1 53 6 2 910 1 Netherlands 2 Group eliminations 1,241 1 0 1,014,523 0 5,470 5 0 974,839 3 TOTAL 66,505 30,864 5,441 3,304,230 1,013 67,022 19,846 4,100 3,040,432 1,039 1) Gross income in the group is defined as the sum of Interest income, Fee and commission income, Net financial income and Net other income according to IFRS. The basis for the income allocation is SEB’s presence in each country, with the exception of when the local companies / branches serve as sales offices and receive commission payments and the transaction is booked in the central unit. 2) Before tax. 3) For more information about tax see note 15 and Sustainability notes pages 220221. 4) Including Cayman Islands, where the parent company is represented by a branch office which is a United States tax resident entity, why tax expense related to Cayman income is reported in US. Parent company by country Gross Income ) Assets Investments Gross Income ) Assets Investments Sweden 45,406 2,161,786 642 48,310 2,068,937 648 Norway 2,927 74,119 2 333 87,075 4 Denmark 1,256 96,238 1 1,689 107,461 2 Finland 1,737 88,790 7 1,517 124,268 14 Other countries 6,040 166,901 90 7,539 109,369 25 TOTAL 57,366 2,587,834 742 59,388 2,497,110 689 1) Gross income in the parent company is defined as the sum of Interest income, Leasing income, Dividends, Fee and commission income, Net Financial income and Other income. The basis for the income allocation is SEB’s presence in each country, with the exception of when the local companies / branches serve as sales offices and receive commission payments and the transaction is booked in the central unit. Transfer pricing The internal transfer pricing objective in the SEB Group is to measure net inter- est income, to transfer interest rate risk and liquidity and to manage liquidity. The internal price is based on SEB’s actual or implied market-based cost of funds for a specific interest and liquidity term. Transactions between Business segments are conducted at arm’s length. Financial statements — Notes 130 — SEB Annual and Sustainability Report 2021 4 Net interest income Group Parent company Average balance Interest Interest rate Average balance Interest Interest rate Loans to credit institutions and central banks 577,207 489 0.08% 560,946 577 0.10% Loans to the public 1,690,939 28,178 1.67% 1,510,663 23,333 1.54% Debt securities 10,178 63 0.62% 12,178 96 0.79% Total interest earning assets AmC 2,278,324 27,752 1.22% 2,083,788 22,852 1.10% Debt securities 378,782 2,774 0.73% 336,137 2,718 0.81% Loans 124,081 286 0.23% 124,145 286 0.23% Total interest earning assets at FVTPL 502,863 2,488 0.49% 460,282 2,432 0.53% Total interest earning assets 2,781,187 30,239 1.09% 2,544,069 25,284 0.99% Derivatives and other assets 683,987 2,986 308,348 2,454 TOTAL ASSETS 3,465,174 33,225 2,852,417 27,738 Deposits from credit institutions 156,670 145 0.09% 193,821 60 0.03% Deposits and borrowing from the public 1,611,704 229 0.01% 1,432,190 53 0.00% Debt securities issued 775,160 4,368 0.56% 775,157 4,368 0.56% Subordinated liabilities 27,667 932 3.37% 26,904 932 3.46% Total interest bearing liabilities AmC 2,571,201 5,675 0.22% 2,428,072 5,308 0.22% Deposits 35,724 166 0.46% 33,058 268 0.81% Debt securities short position 31,220 617 1.98% 31,220 617 1.98% Debt securities issued 12,033 597 4.96% 11,956 597 4.99% Total interest bearing liabilities at FVTPL 78,977 1,049 1.33% 76,234 946 1.24% Total interest bearing liabilities 2,650,178 6,723 0.25% 2,504,307 6,254 0.25% Derivatives and other liabilities 631,517 181 212,827 495 Equity 183,479 135,283 TOTAL LIABILITIES AND EQUITY 3,465,174 6,904 2,852,417 5,758 NET INTEREST INCOME 26,321 21,979 NET YIELD ON INTEREST EARNING ASSETS 0.95% 0.86% 2020 Loans to credit institutions and central banks 344,589 25 0.01% 348,897 77 0.02% Loans to the public 1,676,301 30,829 1.84% 1,482,945 25,492 1.72% Debt securities 13,526 163 1.20% 16,876 198 1.17% Total interest earning assets AmC 2,034,415 30,966 1.52% 1,848,718 25,613 1.39% Debt securities 294,556 3,199 1.09% 265,344 3,136 1.18% Loans 204,177 15 0.01% 204,342 15 0.01% Total interest earning assets at FVTPL 498,733 3,184 0.64% 469,686 3,122 0.66% Total interest earning assets 2,533,148 34,150 1.35% 2,318,404 28,735 1.24% Derivatives and other assets 601,263 3,429 296,773 2,726 TOTAL ASSETS 3,134,411 37,578 2,615,177 31,461 Deposits from credit institutions 153,196 513 0.34% 183,466 628 0.34% Deposits and borrowing from the public 1,336,139 1,240 0.09% 1,173,390 851 0.07% Debt securities issued 811,491 8,513 1.05% 811,473 8,513 1.05% Subordinated liabilities 38,925 1,348 3.46% 38,475 1,348 3.50% Total interest bearing liabilities AmC 2,339,752 11,615 0.50% 2,206,803 11,339 0.51% Deposits 30,635 44 0.14% 26,214 204 0.78% Debt securities short position 21,224 624 2.94% 21,224 624 2.94% Debt securities issued 14,599 800 5.48% 14,475 800 5.53% Total interest bearing liabilities at FVTPL 66,457 1,381 2.08% 61,913 1,221 1.97% Total interest bearing liabilities 2,406,210 12,996 0.54% 2,268,716 12,560 0.55% Derivatives and other liabilities 565,982 560 4,766,065 1,442 Equity 162,219 117,828 TOTAL LIABILITIES AND EQUITY 3,134,411 12,435 2,615,177 11,118 NET INTEREST INCOME 25,143 20,342 NET YIELD ON INTEREST EARNING ASSETS 0.99% 0.88% Net interest income Parent company Interest income 27,738 31,461 Income from leases 1) 5,268 5,365 Interest expense 5,758 11,118 Depreciation of leased equipment 1) 4,783 4,814 TOTAL 22,464 20,893 1) In the group Net income from leases is classified as interest income. In the parent company depreciation of leased equipment is reported as Depreciation, amortisation and impairment of tangible and intangible assets. SEB Annual and Sustainability Report 2021 — 131 5 Net fee and commission income Group Parent company Issue of securities 1,398 776 1,752 1,177 Secondary market 1,663 1,592 1,194 1,210 Custody and mutual funds 2) 10,004 8,177 4,323 3,611 Securities commissions 2) 13,064 10,545 7,268 5,998 Payments 2,215 2,145 1,804 1,740 Card fees 3,170 2,994 546 578 Payment commissions 5,384 5,139 2,350 2,318 Life insurance commissions 1,672 1,578 Advisory 556 335 596 351 Lending 3,200 3,004 3,079 2,873 Deposits 300 310 18 47 Guarantees 633 627 600 596 Derivatives 352 420 427 507 Other 2) 968 974 1,214 1,045 Other commissions 2) 6,009 5,670 5,935 5,419 Fee and commission income 26,129 22,933 15,553 13,734 Securities commissions 1,985 1,834 1,648 1,454 Payment commissions 1,872 1,866 859 744 Life insurance commissions 465 494 Other commissions 664 675 703 837 Fee and commission expense 4,987 4,870 3,210 3,036 Securities commissions, net 2) 11,079 8,712 5,621 4,544 Payment commissions, net 3,512 3,273 1,491 1,574 Life insurance commissions, net 1,207 1,084 Other commissions, net 2) 5,344 4,994 5,232 4,581 TOTAL 21,142 18,063 12,343 10,698 Fee and commission income by segment Group, Large Corporates & Financial Institutions Corporate & Private Customers Baltic Life Investment Management & Group functions ) Eliminations Total Issue of securities and advisory 1,907 47 0 0 0 1,954 Secondary market and derivatives 1,647 373 43 0 32 17 2,014 Custody and mutual funds 4,326 2,107 216 238 7,615 4,500 10,004 Payments, cards, lending, deposits, guarantees and other 4,871 4,220 2,062 210 315 1,194 10,485 Life insurance commissions 3,505 1,833 1,672 TOTAL 12,751 6,748 2,321 3,954 7,898 7,543 26,129 Group, 2020 Issue of securities and advisory 1,072 39 0 0 0 1,111 Secondary market and derivatives 1,602 385 36 1 11 0 2,012 Custody and mutual funds 2) 3,482 1,771 184 210 6,177 3,647 8,177 Payments, cards, lending, deposits, guarantees and other 2) 4,743 3,918 2,026 197 364 1,193 10,054 Life insurance commissions 3,110 1,532 1,578 TOTAL 10,899 6,113 2,246 3,517 6,530 6,372 22,933 1) Group functions consists of business support units, treasury and staff units and German run-off operations. 2) SEK 201m has been reclassified from Other commission income to Custody and mutual funds for full year 2020. Comparative numbers have been adjusted. Fee and commission income is disaggregated in major types of service tied to primary geographical markets and operating segments. Revenue from Issue of securities, Advisory, Secondary market, Derivatives, Payments, cards, lending and deposits are mainly recognised at a point in time. Revenue from Custody, Mutual funds and Life insurance commissions are mainly recognised over time. Financial statements — Notes 132 — SEB Annual and Sustainability Report 2021 6 Net financial income Group Parent company Equity instruments and related derivatives 2,387 1,197 1,762 1,120 Debt instruments and related derivatives 685 244 3,513 3,430 Currency and related derivatives 3,488 3,864 3,608 3,503 Other life insurance income, net 1,622 661 Other 180 309 3,025 2,756 TOTAL 6,992 6,275 4,882 5,297 Gains (losses) on financial assets and liabilities held for trading are presented on different rows based on type of underlying financial instrument. Changes in the treasury result are due to changes in interest rates and credit spreads. The net effect from trading operations is fairly stable over time, but shows volatility between rows. There were effects from structured products offered to the pub- lic in the amounts of approximately SEK m () in equity related deriva- tives and a corresponding effect in debt securities of SEK m ). Group Parent company Derivatives – counterparty risk 284 315 313 104 Derivatives – own credit standing 16 104 54 247 TOTAL 300 211 259 144 Group, FVHFT FVMPL FVDPL Other Total Equity instruments and related derivatives 1,135 1,252 2,387 Debt instruments and related derivatives 1,392 1,000 1,077 685 Currency and related derivatives 3,725 238 3,488 Other life insurance income, net 2 68 1,552 1,622 Other 180 180 TOTAL 6,434 252 1,009 1,315 6,992 Group, 2020 Equity instruments and related derivatives 658 538 1,197 Debt instruments and related derivatives 2,907 1,328 1,823 244 Currency and related derivatives 3,756 107 3,864 Other life insurance income, net 661 661 Other 309 309 TOTAL 1,817 1,866 1,823 769 6,275 Parent company, FVHFT FVMPL FVDPL Other Total Equity instruments and related derivatives 1,080 681 1,762 Debt instruments and related derivatives 1,317 1,021 1,175 3,513 Currency and related derivatives 3,608 3,608 Other 2,926 99 3,025 TOTAL 6,298 241 1,175 4,882 Parent company, 2020 Equity instruments and related derivatives 659 461 1,120 Debt instruments and related derivatives 97 1,625 1,708 3,430 Currency and related derivatives 3,503 3,503 Other 2,683 73 2,756 TOTAL 1,576 2,013 1,708 5,297 SEB Annual and Sustainability Report 2021 — 133 7 Net other income Group Parent company Dividends 1) 1 0 Profit and loss from investments in associates and joint ventures 33 68 Gains less losses from investment securities 13 33 323 214 Gains less losses from tangible assets 2 16 16 Gains less losses from divestment of shares 0 Other operating income 112 203 991 609 TOTAL 159 236 1,330 411 1) Reported separately in the Income Statement for parent company. Dividends Equity instruments 1 0 193 30 Dividends from subsidiaries 2,403 3,091 TOTAL 1 0 2,596 3,121 Gains less losses from investment securities Equity instruments 334 0 Loans 17 Buy back liabilities 1) 11 18 Other gains 1 Gains 29 18 334 0 Buy back liabilities 1) 16 51 10 214 Losses 16 51 10 214 TOTAL 13 33 323 214 1) Liabilities at amortised cost (AmC) are realised as preparation activities related to the wind down of DSK Hyp AG (former SEB AG) and active liability management. Other operating income Fair value adjustment in hedge accounting 24 27 24 27 Operating result from non-life insurance, run off 3 90 Other income 134 141 1,015 636 TOTAL 112 203 991 609 Fair value adjustment in hedge accounting Fair value changes of the hedged items attributable to the hedged risk 6,841 2,594 6,841 2,594 Fair value changes of the hedging derivatives 6,863 2,584 6,863 2,584 Fair value hedges 22 11 22 11 Fair value changes of the hedging derivatives 1 3 1 3 Cash-flow hedges – ineffectiveness 1 3 1 3 Fair value changes of the hedged items 1,198 917 1,198 917 Fair value changes of the hedging derivatives 1,197 936 1,197 936 Fair value portfolio hedge of interest rate risk – ineffectiveness 1 19 1 19 TOTAL 24 27 24 27 Financial statements—Notes 134 — SEB Annual and Sustainability Report 2021 8 Staff costs Group Parent company Base salary 9,124 8,969 7,013 6,807 Cash-based variable remuneration 736 681 577 574 Long-term equity-based remuneration 687 581 540 457 Salaries and other compensations 10,546 10,231 8,131 7,838 Social charges 2,848 2,512 2,286 1,977 Defined benefit retirement plans 1) 523 536 Defined contribution retirement plans 1) 966 986 27 774 Benefits and redundancies 2) 88 263 77 231 Education and other staff related costs 401 448 309 349 TOTAL 15,372 14,976 10,830 11,168 1) Pension costs in the group are accounted for according to IAS 19 Employee benefits. Pension costs in the parent company are calculated in accordance with the Act on Safeguarding Pensions Obligations and the Swedish Financial Supervisory Authority’s regulations. Non-recurring costs of SEK 108m 122m) for early retirement have been charged to the pension funds of the bank. 2) Includes costs for redundancies of SEK 26m 197) for the group and SEK 25m 182) for the parent company. 8a Remuneration Salaries and other compensations SEB Group Base salary Cash-based variable remuneration Long-term equity-based remuneration Total Executives 1) 91 75 22 18 113 94 Others 9,033 8,894 736 681 665 563 10,433 10,138 TOTAL 9,124 8,969 736 681 687 581 10,546 10,231 Salaries and other compensations Parent company Base salary Cash-based variable remuneration Long-term equity-based remuneration Total Executives 1) 91 75 22 18 113 94 Others 6,922 6,732 577 574 518 439 8,018 7,744 TOTAL 7,013 6,807 577 574 540 457 8,131 7,838 1) Comprises President and ordinary members of GEC. Loans to Executives Group Parent company Managing Directors and Deputy Managing Directors 1) 160 141 72 67 Boards of Directors 2) 316 270 78 70 TOTAL 476 411 150 137 1) Comprises current President and Deputy President in the parent company and Managing Directors and Deputy Managing Directors in subsidiaries. Total number of executives was 34 36) of which 7 7) female. 2) Comprises current Board members and their substitutes in the parent company and subsidiaries. Total number of persons was 104 112) of which 37 38) female. Pension commitments to Executives Pension disbursements made 104 96 84 74 Change in commitments 31 25 14 9 Commitments at year-end 1,273 1,369 748 794 The above commitments are covered by the bank’s pensions funds or through bank-owned endowment assurance schemes. They include active and retired Presidents and vice Presidents in the parent company and Managing directors and Deputy Managing directors in subsidiaries, in total persons ). SEB Annual and Sustainability Report 2021 — 135 8b Pensions Retirement benefit obligations The group has established pension schemes in the countries where business is performed. There are both defined benefit plans and defined contribution plans. The major pension schemes are final salary defined benefit plans and are funded. The defined benefit plan in Sweden is closed to new employees and a defined contribution plan was established during . In Germany a major part was transferred from SEB in . The defined contribution plans follow the local regulations in each country. Multiemployer defined benefit plans exist for employees in some parts of the group. These plans are accounted for as defined contribution plans since sufficient information of SEB’s share of the liability/asset and cost is not available. Defined benefit plans The major defined benefit plans exist in Sweden and Germany and cover most employees in these countries. Independent actuarial calculations according to the Projected Unit Credit Method (PUCM) are performed quarterly to decide the value of the defined benefit obligation. The benefits covered include retire- ment benefits, disability, death and survivor pensions according to the respec- tive countries’ collective agreements. The plan assets are kept separate in spe- cific pension foundations. In case of a deficit in the pension obligation according to local rules SEB is obliged to meet this with contribution to the foundation or insure a deficit. The asset allocation is determined to meet the various risks in the pension obligations and is decided by the board/trustees in the pension foundations. The assets are booked at market value. The pension and interest costs are presented in Staff costs. Defined contribution plans Defined contribution plans exist both in Sweden and abroad. In Sweden a smaller part of the closed collective retirement agreement is defined contribu- tion based. Over a certain salary level the employees could also choose to leave the defined benefit plan and replace it by a defined contribution plan. The cur- rent plan for new employees is fully contribution based. Most other countries have defined contribution plans except for the Baltic countries where the com- pany to a limited extent contributes to the employees retirement. The defined contribution plans are not recognised in the balance sheet but accounted for as an expense among Staff costs. DEFINED BENEFIT PLANS IN SEB GROUP Net amount recognised in the Balance sheet Sweden ) Foreign ) Group ) Sweden ) Foreign ) Group ) Defined benefit obligation at the beginning of the year 31,228 928 32,156 30,872 1,005 31,876 Curtailment, acquisitions and reclassification 2) 36 57 Service costs 574 6 580 578 12 590 Interest costs 280 5 285 339 3 341 Benefits paid 801 801 796 8 804 Change in exchange rates 6 6 Remeasurements of pension obligation 3,755 10 3,745 235 47 188 Defined benefit obligation at the end of the year 27,526 944 28,470 31,228 928 32,156 Fair value of plan assets at the beginning of the year 38,515 514 39,029 36,417 645 37,062 Curtailment, acquisitions and reclassification 2) 156 156 Calculated interest on plan assets 343 0 343 396 396 Benefits paid/contributions 1,488 15 1,503 768 8 760 Change in exchange rates 4 4 Valuation gains (losses) on plan assets 13,960 4 13,964 2,470 17 2,487 Fair value of plan assets at the end of the year 51,331 499 51,830 38,515 514 39,029 Change in the net assets or net liabilities Defined benefit obligation at the beginning of the year 7,287 414 6,873 5,545 359 5,186 Curtailment, acquisitions and reclassification 120 120 Total expense in staff costs 511 12 523 520 15 536 Pension paid 801 801 796 8 804 Benefits paid/contributions 1,488 15 1,503 768 768 Change in exchange rates 2 2 9 9 Remeasurements 17,716 7 17,709 2,235 64 2,299 NET AMOUNT RECOGNISED IN THE BALANCE SHEET 23,804 445 23,359 7,287 414 6,873 1) The net defined benefit obligation is recognised in the balance sheet either as an asset or liability depending on the situation for each legal entity. 2) Pension obligations and plan assets under the defined benefit plan in DSK Hyp AG (former SEB AG), have been transferred to Versicherungsverein des Bankgewerbes a.G (BVV). In 2021 a contribution of SEK 5m 6) was paid to the German pension foundation. Contribution to the foundations cannot be ruled out in 2022 due to uncertainty in interest rate levels. Financial statements—Notes 136 — SEB Annual and Sustainability Report 2021 Note 8b continuedPensions Principal actuarial assumptions used Sweden Foreign Sweden Foreign Discount rate 1.6% 1.3% 0.9% 1.2% Inflation rate 1.5% 1.8% 1.5% 1.8% Expected rate of salary increase 3.0% 2.0% 3.0% 2.0% Expected rate of increase in the income basis amount 2.8% 2.8% The discount rate is based set on high-quality corporate bonds in a deep mar- ket, in Sweden covered bonds which are at least AAA-rated. An extrapolation of the maturity of the covered bonds is made based on swaps. This extrapolated maturity is in line with the estimated maturity of obligations for post-employ- ment benefits. Life expectancy assumptions in Sweden are established by the Actuarial Research Board (FTN) and are based on DUS for white-collar work- ers. In Germany the Heubeck Sterbetafeln is used. Weighted average duration for the obligation is years in Sweden and years in Germany. A decrease of the discount rate for Sweden of . per cent would imply an increase of the Swedish pension obligation by SEK ,m while the same change in the inflation assumption for Sweden would have the opposite effect and decrease the obligation by SEK ,m. An increase of the discount rate by same ratio would reduce the obligation with SEK ,m and an increased inflation rate of . per cent gives an increased obligation of SEK ,m. A decrease in assumption for expected salary increase in Sweden of . per cent would have a positive effect on the obligation by SEK m an increase would have a negative effect of SEK m. The obligation in Germany would increase with SEK m if the discount rate was reduced by . per cent. An increase by the same percentage would decrease the obligation by SEK m. If the inflation assumption for Germany increases by . per cent the pension obligation would increase by SEK m and corresponding decrease would be SEK m at a lower inflation assumption. A change in expected salary increases in Germany by . per cent would with a higher rate give an increase of the obligation with SEK m and with a lower rate reduce the obligation with SEK m. Allocation of plan assets Sweden Foreign Group Sweden Foreign Group Cash and cash equivalents 1,266 499 1,764 1,529 312 1,841 Equity instruments with a quoted market price in an active market 35,615 35,615 25,832 25,832 Equity instruments not listed in an active market 8,554 8,554 5,227 5,227 Debt instruments with a quoted market price in an active market 202 202 Debt instruments not listed in an active market 2,859 2,859 2,999 2,999 Properties 3,037 3,037 2,929 2,929 TOTAL 51,331 499 51,830 38,515 514 39,029 The pension plan assets include SEB shares with a fair value of SEK ,m ,). Buildings in Sweden are occupied by SEB. Amounts recognised in Income statement Sweden Foreign Group Sweden Foreign Group Service costs 574 6 581 578 12 590 Interest costs 280 5 286 339 3 341 Calculated interest on plan assets 343 0 343 396 396 INCLUDED IN STAFF COSTS 511 12 523 520 15 536 Amounts recognised in Other comprehensive income Remeasurements of pension obligation 3,755 10 3,745 235 47 188 where of experience adjustments 146 8 138 523 6 516 where of due to changes in financial assumptions 3,609 2 3,607 758 53 705 Valuation gains (losses) on plan assets 13,960 4 13,964 2,470 17 2,487 Deferred tax pensions 3,648 0 3,648 461 1 460 INCLUDED IN OTHER COMPREHENSIVE INCOME 14,068 7 14,061 1,774 66 1,839 DEFINED CONTRIBUTION PLANS IN SEB GROUP Net amount recognised in Income statement Sweden Foreign Group Sweden Foreign Group Expense in Staff costs including special salary tax 729 237 966 758 228 986 SEB Annual and Sustainability Report 2021 — 137 Note 8b continuedPensions DEFINED BENEFIT PLANS IN THE PARENT COMPANY Net amount recognised in the Balance sheet Parent company Defined benefit obligation at the beginning of the year 28,094 26,490 Imputed pensions premium 199 202 Interest costs and other changes 1,191 2,048 Early retirement 108 122 Pension disbursements 772 768 DEFINED BENEFIT OBLIGATION AT THE END OF THE YEAR 26,437 28,094 Fair value of plan assets at the beginning of the year 37,109 35,113 Return on assets 13,872 2,764 Benefits paid 1,488 768 FAIR VALUE OF PLAN ASSETS AT THE END OF THE YEAR 49,493 37,109 The above defined benefit obligation is calculated according to tryggandelagen. The parent company consequently adopts the discount rate set by the Swedish FSA before year-end. The obligation is fully covered by assets in the pension foundation and is not included in the balance sheet. The assets in the foundation are mainly equity related SEK ,m ,) and to a smaller extent interest earning SEK ,m ,). The assets include SEB shares at a market value of SEK ,m ,) and buildings occu- pied by the company valued at SEK ,m ,). The return on assets was per cent ) after pension compensation. Amounts recognised in Income statement Parent company Pension disbursements 772 768 Compensation from pension foundations 1,488 768 TOTAL 716 0 Principal actuarial assumptions used Gross interest rate 0.2% 0.1% Interest rate after tax 0.2% 0.1% The actuarial calculations are based on salaries and pensions on the balance sheet date. DEFINED CONTRIBUTION PLANS IN THE PARENT COMPANY Net amount recognised in Income statement Parent company Expense in Staff costs including special salary tax 27 774 Pension foundations Pension commitments Market value of asset SEB-Stiftelsen, Skandinaviska Enskilda Bankens Pensionsstiftelse 26,437 28,094 49,493 37,109 SEB Kort AB:s Pensionsstiftelse 1,100 1,151 1,838 1,406 TOTAL 27,537 29,245 51,331 38,515 Financial statements—Notes 138 — SEB Annual and Sustainability Report 2021 8c Remuneration to the Board and the Group Executive Committee Guidelines for remuneration The guidelines for remuneration to the President and the other members of the Group Executive Committee (GEC) were prepared by the Board of Directors and its Remuneration and Human Resources Committee and approved by the Annual General Meeting . The remuneration structure for the President and the other members of the GEC is in accordance with the remuneration policy for the bank. No member of the GEC has been entitled to cash based variable remuneration since . Thus, the remuneration is based upon three main components; base pay, equity- based remuneration and pensions and other benefits. Other benefits may con- sist of e.g. company car, health promoting support and domestic services. For more information, see page . Identified staff The President and the other members of the GEC are considered employees who have a material impact on SEB’s risk profile according to the Swedish Financial Supervisory Authority regulations (FFFS ). Remuneration to the Board 1) , SEK Base pay Directors’ fee Benefits ) Total Base pay Directors’ fee Benefits ) Total Chairman of the Board, Marcus Wallenberg 4,095,000 4,095,000 3,935,000 3,935,000 Vice chairman of the Board, Sven Nyman 1,410,000 1,410,000 1,355,000 1,355,000 Vice chairman of the Board, Jesper Ovesen 1,930,000 1,930,000 1,845,000 1,845,000 Signhild Arnegård Hansen 1,175,000 1,175,000 1,127,500 1,127,500 Anne-Catherine Berner 975,000 975,000 935,000 935,000 Winnie Fok 1,055,000 1,055,000 1,005,000 1,005,000 Lars Ottersgård 3) 0 0 Helena Saxon 1,220,000 1,220,000 1,165,000 1,165,000 President and CEO, Johan Torgeby 12,500,000 180,728 12,680,728 12,500,000 385,067 12,885,067 TOTAL 12,500,000 11,860,000 180,728 24,540,728 12,500,000 11,367,500 385,067 24,252,567 1) The number of Board members decided by the AGM in 2021 is nine (nine) of which five (five) are men and four (four) women. 2) Includes benefits such as company car and holiday pay. 3) Lars Ottersgård has declined his director’s fee. Remuneration to the Group Executive Committee, SEK 1) Base pay 78,300,985 62,839,817 Benefits 2) 2,110,538 1,702,888 TOTAL 80,411,523 64,542,705 1) GEC excluding the President and CEO. The members partly differ between the years but in average fourteen (twelve) members are included. At the end of the year the number of members were fourteen (thirteen) of which nine (eight) were men and five (five) women. Additional members are not included. 2) Includes benefits such as company car. Long-term equity-based programmes Under the Share Deferral Programme members of the GEC may be granted an individual number of conditional share rights based on the fulfilment of pre- determined group, business unit and individual targets as outlined in SEB’s busi- ness plan. The targets are set on an annual basis as a mix of the financial targets Return on Equity/Return on Business Equity and cost development and the non- financial targets customer satisfaction and sustainability among others. For GEC the initial allotment may not exceed per cent of the base pay. Ownership of per cent of the share rights are transferred to the partici- pant after a qualification period of three years, per cent after a qualification period of five years. After each respective qualification period there is an addi- tional holding period of one year after which the share rights can be exercised. Each share right carries the right to receive one Class A share in the bank. There is normally a requirement for vesting that the participant remains with SEB dur- ing the first three years, but some exemption apply. A further requirement for vesting for GEC members is that they hold shares in SEB equivalent to one year salary net of taxes, acquired no later than on a pro-rata basis during the initial three year vesting period. GEC is not participating in the SMP nor the All Employee Pro- gramme (AEP) except for outstanding rights earned before being member of GEC. Long-term equity-based programmes (expensed amounts for ongoing programmes), SEK President and CEO, Johan Torgeby 4,308,094 3,662,898 Other members of the Group Executive committee 1) 17,762,202 14,819,988 TOTAL 22,070,296 18,482,886 1) GEC excluding the President and CEO. The members partly differ between the years but in average fourteen (twelve) members are included. At the end of the year the number of members were fourteen (thirteen). Additional members are not included. Some of the GEC members have previously received rights in the All Employee Programme. The corresponding calculated costs and number of outstanding rights/ shares are not included in the tables. SEB Annual and Sustainability Report 2021 — 139 Note 8c continuedRemuneration to the Board and the Group Executive Committee Number outstanding by 20211231 Number outstanding First day of exercise President and CEO Johan Torgeby Other members of the GEC Total 2012: Share matching rights 26,275 26,275 2015 2013: Share matching rights 40,563 40,563 2016 2014: Share matching rights 20,790 20,790 2017 2013: Share rights 222 222 20172019 1) 2014: Conditional share rights/Share rights 5,315 5,315 20182020 1) 2015: Conditional share rights/Share rights 13,750 31,417 45,167 20192021 1) 2016: Conditional share rights/Share rights 46,920 122,776 169,696 20202022 1) 2017: Conditional share rights 35,588 120,673 156,261 20212023 1) 2018: Conditional share rights 57,826 265,949 323,775 20222024 1) 2019: Conditional share rights 71,813 291,215 363,028 20232025 1) 2020: Conditional share rights 75,251 304,839 380,090 20242026 1) 2021: Conditional share rights 63,138 247,560 310,698 20252027 1) 1) The qualification period ends after three or five years respectively and are followed by a holding period of one year. During the year the President and CEO has exercised rights to a value of SEK 0 0). The corresponding value for the GEC excluding the President is SEK 38,407,139 7,485,759). Pension and severance pay The pension agreement of the President is contribution-based and inviolable. The pension contribution is a fixed amount. Termination of employment by the bank is subject to a maximum -month period of notice and entitles to a severance pay of months’ salary. As regards pension benefits and severance pay the following is applicable to the members of the GEC excluding the President. The pension plans are inviola- ble and defined contribution-based except for a portion in the collective agree- ment for some GEC members employed in the bank before May . Termination of employment by the bank is subject to a maximum -month period of notice and entitles to a severance pay of months’ salary. Pension costs (service costs and interest costs and defined contribution premiums), SEK President and CEO, Johan Torgeby 4,104,268 4,071,351 Other members of the Group Executive committee 1) 20,802,945 18,893,127 TOTAL 24,907,213 22,964,479 1) GEC excluding the President and CEO. The members partly differ between the years but in average fourteen (twelve) members are included. At the end of the year the number of members were fourteen (thirteen). For information about related parties see note 45. Financial statements—Notes 140 — SEB Annual and Sustainability Report 2021 8d Share-based payments Long-term equity-based programmes Restricted share programme All employee programme Share deferral programme Share matching programme ) Outstanding at the beginning of the year 3,054,979 10,231,276 20,049,853 295,516 Granted 2) 1,349,842 2,960,672 7,230,535 6,950 Forfeited 347,758 684,363 4,093,315 Exercised 3) 1,080,878 2,368,433 5,006,697 214,838 Expired 3,967 18,000 OUTSTANDING AT THE END OF THE YEAR 2,972,218 10,139,153 18,162,376 87,628 of which exercisable 40,203 2,266,457 87,628 2020 Outstanding at the beginning of the year 2,497,099 10,890,298 21,619,894 800,241 Granted 2) 1,704,136 2,387,512 8,704,718 Forfeited 383,252 424,145 4,817,089 Exercised 3) 745,016 2,622,389 5,450,676 465,654 Expired 17,988 6,994 39,071 OUTSTANDING AT THE END OF THE YEAR 3,054,979 10,231,276 20,049,853 295,516 of which exercisable 2,622,920 295,516 1) Numbers include investments done by participants, as well as allocated matching share rights. 2) Including compensation for dividend. 3) Weighted average share price for SMP and SDP at exercise SEK 108.98 84.33). Total Long-term equity-based programmes Original no of holders ) No of issued (maximum outcome) No of outstanding ) No of outstanding ) A share per option/ share Validity First date of exercise 2012: Share matching programme 1) 432 7,024,168 26,275 25,309 4 20122019 2015 2) 2013: Share matching programme 1) 213 3,485,088 40,563 108,545 4 20132020 2016 2) 2014: Share matching programme 1) 96 1,300,288 20,790 161,662 4 20142021 2017 2) 2012: Share deferral programme – equity settled 86 1,199,504 15,962 1 20122021 20152017 3) 2013: Share deferral programme – equity settled 263 1,361,861 47,037 173,334 1 20132022 20162018 3) 2014: Share deferral programme – equity settled 622 1,909,849 169,201 620,647 1 20142023 20172019 3) 2015: Share deferral programme – equity settled 816 2,603,843 451,545 1,048,976 1 20152024 20182020 3) 2015: Share deferral programme – cash settled 513 1,717,150 153,926 20152021 20182020 3) 2016: Share deferral programme – equity settled 874 3,593,155 1,102,262 1,601,304 1 20162025 20192021 3) 2016: Share deferral programme – cash settled 500 2,017,622 204,992 199,032 20162022 20192021 3) 2017: Share deferral programme – equity settled 1) 1,373 4,439,824 1,629,690 4,289,603 1 20172026 20202022 3) 2017: Share deferral programme – cash settled 75 206,125 29,589 212,529 20172023 20202022 3) 2018: Share deferral programme – equity settled 1) 788 3,785,769 3,549,121 3,486,743 1 20182027 20212023 3) 2018: Share deferral programme – cash settled 14 97,770 100,310 97,770 20182024 20212023 3) 2019: Share deferral programme – equity settled 1) 861 4,023,585 3,702,061 3,862,029 20192028 20222023 3) 2019: Share deferral programme – cash settled 16 109,028 98,577 105,587 20192025 20222022 3) 2020: Share deferral programme – equity settled 1) 901 4,053,085 3,894,174 4,053,085 20202029 20232025 3) 2020: Share deferral programme – cash settled 21 129,326 121,271 129,326 20202026 20232025 3) 2021: Share deferral programme – equity settled 1) 1,040 2,974,455 2,974,455 20212027 20242026 3) 2021: Share deferral programme – cash settled 22 88,091 88,091 20212030 20242026 3) 2018: Restricted Share programme – equity settled 411 1,378,367 326,550 612,677 1 20182022 20192022 3) 2018: Restricted Share programme – cash settled 28 71,555 15,680 31,358 20182022 20192022 3) 2019: Restricted Share programme – equity settled 413 1,420,596 692,729 1,012,553 20192023 20202022 3) 2019: Restricted Share programme – cash settled 29 73,375 31,898 48,543 20192023 20202022 3) 2020: Restricted Share programme – equity settled 408 1,274,946 931,825 1,274,946 20202024 20212023 3) 2020: Restricted Share programme – cash settled 29 74,902 47,782 74,902 20202024 20212023 3) 2021: Restricted Share programme – equity settled 416 878,843 878,843 20212025 20222023 3) 2021: Restricted Share programme – cash settled 25 46,911 46,911 20212025 20222023 3) 2017: All employee programme – equity settled 7,954 1,613,740 1,441,981 1 20172020 2021 2017: All employee programme – cash settled 6,867 924,166 744,200 20172020 2021 2018: All employee programme – equity settled 8,086 1,969,746 1,745,006 1,780,403 1 20182021 2022 2018: All employee programme – cash settled 6,863 1,186,810 991,375 1,046,189 20182021 2022 2019: All employee programme – equity settled 8,137 1,832,363 1,648,425 1,704,156 1 20192022 2023 2019: All employee programme – cash settled 7,159 1,246,304 1,041,404 1,126,835 20192022 2023 2020: All employee programme – equity settled 8,346 1,534,896 1,477,867 1,534,896 1 20202023 2024 2020: All employee programme – cash settled 7,192 852,616 790,336 852,616 20202023 2024 2021: All employee programme – equity settled 8,269 1,547,775 1,547,775 20212024 2025 2021: All employee programme – cash settled 7,302 896,965 896,965 20212024 2025 TOTAL 64,944,462 31,361,375 33,631,624 1) The exercise period for GEC members is extended during the period that they are GEC members. 2) As soon as practically possible following the end of the performance period, the establishing of the outcome of number of Matching Shares and the allocation of the A shares and, if applicable, the Matching Shares. 3) As soon as possible following the end of the performance period the outcome is established. For the equity-settled programmes the ownership of the performance shares is transferred upon registration, but the shares are withheld for one additional year. Cash-settled programmes are paid out in connection with the following payroll run. 4) In total approximately 2,000 individuals 2,000) participated in any of the programmes, All Employee Programme excluded. 5) Including additional deferral rights for dividend compensation. SEB Annual and Sustainability Report 2021 — 141 Note 8d continuedShare-based payments Long-term equity-based programmes The Annual General meeting decided on three Long-term equity-based pro- grammes, one Share Deferral Programme, one Restricted Share Programme and one All Employee Programme. The first Share Deferral Programme was introduced in for the Group Executive Committee and certain other executive managers and key employees with critical competences. The participants are granted an individual number of conditional share rights based on pre-determined group, division/business unit and individual target levels, both financial (Return on Equity/Return on Business Equity and cost development) and non-financial (customer satisfaction and parameters such as compliance, employee commitment, SEB’s corporate sus- tainability and risk management), set on an annual basis. For GEC members and other senior executives per cent of the share rights ownership is transferred after a qualification period of three years and per cent after a qualification period of five years. For Identified staff per cent of the share rights has a qualification period of three years and per cent has a qualification period of four years. For other participants the qualification period is three years. The requirement for vesting is normally that the participant remains with SEB during the first three years and for GEC members and their direct reports that the participant holds shares in SEB equal to a predetermined amount, acquired no later than on a pro-rata basis during the initial three year period. After each respective qualification period there is an additional holding period of one year after which the share rights can be exercised, normally dur- ing a period of three years. Each share right carries the right to receive one Class A share in the bank. In countries mainly outside Europe the participants receives so called phantom shares that gives the right to receive cash adjusted for the share price development during the qualification period and thereafter the total shareholder return of the SEB A share at the end of the holding period. In the programs starting from and programmes the holders are only compensated for dividends after the qualification period, in the previous programmes the holders are compensated for dividends to the shareholders during the full period. Thus, the number of share rights will be recalculated, after the Annual General Meeting each year, taking the dividend into account depending on programme. The share rights are not securities that can be sold, pledged or transferred to others. However, an estimated value per share right has been calculated for to SEK ) for a qualification period of three years and SEK ) for a qualification period of five years (based upon an average closing price of one SEB Class A share at the time of grant). In a Restricted Share Programme was introduced in order to ensure a competitive and attractive remuneration model within certain business units and to comply with new regulations implemented. The participants are selected employees on the level below senior executives. They are granted an individual number of conditional / share rights based on the fulfilment of pre-determined group, business unit and individual targets as outlined in SEB’s business plan, set on an annual basis as a mix of financial and non-financial targets. The ownership of the share rights are transferred to the participants during a three or four year period in either three or four annual instalments. The share rights are subject to restrictions in terms of e.g. certain regulatory and employ- ment requirements during the period between initial allotment and the transfer of the ownership. After the transfer of ownership there is an additional holding period of one year before the share rights can be exercised. Each share right car- ries the right to receive one SEB Class A share. The share rights are not securities that can be sold, pledged or transferred to others. However, an estimated value per share right has been calculated for to SEK ) for the first install- ment to SEK ) for the remaining instalments (based upon an average clos- ing price of one SEB Class A share at the time of grant). In an All Employee Programme was introduced for most employees, where per cent of the outcome is paid in cash and per cent is deferred for three years and paid in SEB A shares. Deferrals will normally only be obtained under the condition that the employee remains with SEB. In Sweden the deferred part is paid out in SEB A shares, adjusted for dividends. In all other countries the deferred part is paid out in cash adjusted for total shareholder return of the SEB A share. The initial outcome is capped at a maximum amount, which was adjusted in , for each geography and is based on the fulfilment of pre-deter- mined group targets outlined in SEB’s business plan, both financial (Return on Equity and cost development) and non-financial (customer satisfaction). The outcome in year’s programme was per cent ) of the maximum amount. In Sweden the maximum amount is SEK ,. Previously allotted programmes Between and a Share Matching Programme for a number of selected senior executives and other key employees has been run. The programmes are based on performance, have a vesting period of three years and are settled with SEB Class A shares. All programmes require own investment. The invest- ment amount is pre-determined and capped for each participant. After three years, if still employed, the participant receives one Class A share/share rights for each invested share/share right and a conditional number of performance based matching shares for each invested share / share right. From the set- tlement is in the form of share rights with an exercise period of four years. The programme was closed in with per cent matching. Further details of the outstanding programmes are found in the table above. Financial statements—Notes 142 — SEB Annual and Sustainability Report 2021 8e Number of employees Average number of employees Group Parent company Men Women Total Men Women Total Sweden 4,268 4,172 8,440 3,719 3,428 7,147 Norway 219 150 369 186 115 301 Denmark 209 118 327 163 77 240 Finland 149 123 272 126 108 234 Estonia 299 839 1,138 Latvia 542 1,290 1,832 330 549 879 Lithuania 1,017 1,918 2,935 592 763 1,355 Germany 142 99 241 121 87 208 United Kingdom 59 40 99 59 40 99 Poland 54 66 120 54 66 120 Ukraine 16 36 52 China 14 26 40 14 26 40 Ireland 47 48 95 Luxembourg 84 75 159 81 67 148 Russia 21 66 87 Singapore 26 64 90 26 64 90 United States 21 11 32 18 8 26 Hong Kong 8 11 19 8 11 19 TOTAL 7,194 9,153 16,347 5,497 5,409 10,906 2020 Sweden 4,035 4,203 8,238 3,549 3,410 6,959 Norway 226 149 375 194 109 303 Denmark 207 121 328 166 78 244 Finland 151 121 272 131 103 234 Estonia 294 850 1,144 Latvia 490 1,227 1,717 276 471 747 Lithuania 996 1,872 2,868 558 682 1,240 Germany 162 116 278 133 93 226 United Kingdom 64 40 104 64 40 104 Poland 26 35 61 26 35 61 Ukraine 17 34 51 China 15 26 41 15 26 41 Ireland 48 58 106 Luxembourg 93 85 178 41 34 75 Russia 19 70 89 Singapore 27 66 93 25 68 93 United States 27 13 40 19 14 33 Hong Kong 11 13 24 11 13 24 TOTAL 6,908 9,099 16,007 5,208 5,174 10,382 SEB Annual and Sustainability Report 2021 — 143 9 Other expenses Group Parent company Costs for premises 1) 682 709 1,294 1,293 IT costs 3,374 3,361 2,483 2,825 Travel and entertainment 85 126 59 107 Consultants 688 687 535 553 Marketing 268 279 143 148 Information services 710 736 637 656 Other operating costs 2) 44 33 226 622 TOTAL 5,763 5,864 5,377 6,204 1) Of which rental costs including leasing cost for premises 1,003 975 2) Net after deduction for capitalised costs, see also note 23. Fees and expense allowances to appointed auditors and audit firms 1) Group Parent company Audit assignment 26 26 15 12 Audit related services 8 4 3 3 Tax advisory 0 0 Other services 3 2 1 Ernst & Young 38 32 19 15 1) The parent company includes the foreign branches. Audit assignment is defined as the audit of annual financial statements, the administration of the Board of Directors and the President, quarterly reviews, other tasks resting upon the auditor as well as consulting and other assistance, which have been initiated by the findings in performing audit work or implemen- tation of such tasks. The audit related services include regulatory reporting and services in connection with issuing of certificates and opinions. Tax advisory include general expatriate services and other tax services work. Other services include consultation on financial accounting, services related to mergers and acquisitions activities, operational effectiveness and assessments of internal control. 10 Depreciation, amortisation and impairment of tangible and intangible assets Group Parent company Depreciation of tangible assets 378 354 293 265 Depreciation of equipment leased to clients 4,783 4,814 Depreciation of right-of-use assets 844 848 0 Amortisation of intangible assets 681 613 550 500 Impairment of tangible assets 0 Impairment of goodwill 179 Impairment of right-of-use assets 8 11 Reversal of impairment on intangible assets 25 Retirement and disposal on intangible assets 20 105 18 104 TOTAL 2,110 1,906 5,644 5,683 11 Gains less losses from tangible and intangible assets Group Properties and equipment 7 4 Gains 7 4 Properties and equipment 2 11 Losses 2 11 TOTAL 5 7 Financial statements — Notes 144 — SEB Annual and Sustainability Report 2021 12 Net expected credit losses Group Parent company Impairment gains or losses – Stage 1 105 452 138 201 Impairment gains or losses – Stage 2 233 293 146 230 Impairment gains or losses – Stage 3 185 5,166 407 4,932 Impairment gains or losses 523 5,911 690 5,364 Write-offs and recoveries Total write-offs 2,624 2,757 2,170 2,281 Reversals of allowances for write-offs 2,395 2,364 2,040 2,030 Write-offs not previously provided for 229 393 130 250 Recovered from previous write-offs 242 187 76 64 Net write-offs 13 206 54 186 NET EXPECTED CREDIT LOSSES 510 6,118 744 5,550 Net ECL level, % 0.02 0.26 0.03 0.26 13 Items affecting comparability Group Other expense 1,000 Total operating expense 1,000 Items affecting comparability 1,000 Income tax on items affecting comparability Items affecting comparability after tax 1,000 The table shows the rows in which the Items affecting comparability would have been reported if not presented as an item affecting comparability. Items affecting comparability 2020 The Swedish Financial Supervisory Authority (FSA) finalised its review of SEB’s governance and control of measures against money laundering in SEB’s Baltic banks. The Swedish FSA decided to issue SEB a remark, which is a lower degree of an administrative sanction that is issued when a breach has not been deemed to be serious. The Swedish FSA also decided to issue SEB an administrative fine of SEK ,m, which corresponds to about per cent of the maximum amount the Swedish FSA can impose in this case. 14 Appropriations Parent company Group contribution 2,349 1,105 Accelerated tax depreciation 1,490 1,285 TOTAL 3,839 2,390 SEB Annual and Sustainability Report 2021 — 145 15 Taxes Major components of tax expense Group Parent company Current tax 6,255 4,836 5,332 4,636 Deferred tax 786 456 225 172 Tax for current year 5,470 4,380 5,108 4,463 Current tax for previous years 29 280 127 278 INCOME TAX EXPENSE 5,441 4,100 4,980 4,185 In the parent company, other taxes amounts to SEK 352m 451) and includes deferred tax of SEK 225m 172) and current tax for previous years of SEK 127m 278). Relationship between tax expenses and accounting profit Net profit 25,423 15,746 22,751 14,614 Income tax expense 5,441 4,100 4,981 4,185 Accounting profit before tax 30,864 19,846 27,732 18,799 Current tax at Swedish statutory rate of 20.6 per cent 21.4) 6,357 4,246 5,713 4,023 Tax effect relating to other tax rates in other jurisdictions 61 181 Tax effect relating to not tax deductible expenses 319 1,350 604 1,304 Tax effect relating to non-taxable income 1,040 911 984 692 Tax effect relating to a previously recognised tax loss, tax credit or temporary difference 558 339 Tax effect relating to a previously unrecognised tax loss, tax credit or temporary difference 6 Current tax 6,255 4,836 5,333 4,636 Tax effect relating to origin and reversal of tax losses, tax credits and temporary differences 558 339 Tax effect relating to changes in tax rates or the imposition of new taxes 7 13 Tax effect relating to a previously unrecognised tax loss, tax credit or temporary difference 234 104 225 172 Deferred tax 786 456 225 172 Current tax for previous years 29 280 127 278 INCOME TAX EXPENSE 1 5,441 4,100 4,981 4,185 1) Total income tax expense in the SEB Group was SEK 5,441m 4,100). The effective tax rate for the year was 17.6 per cent 20.7). Excluding Items affecting comparability, the effec- tive tax rate was 17.6 per cent 19.7). Deferred tax income and expense recognised in income statement Accelerated tax depreciation 251 341 Pension plan assets, net 246 118 Tax losses carry forwards 4 5 Other temporary differences 292 8 225 172 TOTAL 786 456 225 172 Current tax assets Group Parent company Other 15,359 6,070 1,915 2,516 Recognised in profit and loss 15,359 6,070 1,915 2,516 TOTAL 15,359 6,070 1,915 2,516 Deferred tax assets Tax losses carry forwards 7 11 Pension plan assets, net 1 Other temporary differences 1) 663 424 398 172 Recognised in profit and loss 670 436 398 172 Unrealised result in cash flow hedges 5 7 5 13 Recognised in Shareholders’ equity 5 7 5 13 TOTAL 675 444 403 185 1) Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Tax losses carried forward in the SEB Group for which the tax assets are not recognised in the balance sheet amount to SEK ,m ,) gross. These are not recognised due to the uncertainty in the possibility to use them. This includes losses where the amount can only be used for trade tax. The potential tax asset not recognised is SEK ,m ,). All losses carried forward recognized and unrecognized are without time restrictions however all losses carried forward but SEK m have conditions that there are no change of control. Financial statements — Notes 146 — SEB Annual and Sustainability Report 2021 Note 15 continued Taxes Current tax liabilities Group Parent company Other 1,384 993 801 376 Recognised in profit and loss 1,384 993 801 376 TOTAL 1,384 993 801 376 Deferred tax liabilities Accelerated tax depreciation 5,352 5,603 Pension plan assets and obligations, net 588 342 Other temporary differences 1) 98 106 Recognised in profit and loss 4,862 5,367 Pension plan assets and obligations, net 5,308 1,774 Unrealised result in cash flow hedges 184 71 Other 37 36 Recognised in Shareholders’ equity 5,492 1,845 37 36 TOTAL 10,354 7,212 37 36 1) Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Taxable temporary differences give rise to deferred tax assets and liabilities. In Estonia is advance income tax payments on profits at a rate of per cent are made quarterly. The income tax paid in advance can be netted against tax paya- ble on dividend distributions, where the tax rate is between and per cent. No deferred tax liability is recognised related to possible future tax costs on dividends from Estonia. Since no income tax is paid in Latvia unless profit is distributed. No deferred tax liability is recognised related to possible future tax costs on dividends from Latvia. The tax rate applicable to dividends in Lat- via is per cent. 16 Earnings per share Group Net profit attributable to shareholders in Skandinaviska Enskilda Banken AB (publ), SEK m 25,423 15,746 Weighted average number of shares outstanding, millions 2,164 2,163 Basic earnings per share, SEK 11.75 7.28 Net profit attributable to shareholders in Skandinaviska Enskilda Banken AB (publ), SEK m 25,423 15,746 Weighted average number of diluted shares, millions 2,179 2,177 Diluted earnings per share, SEK 11.67 7.23 Dilution 1) Weighted average number of shares outstanding, millions 2,164 2,163 Adjustment for diluted weighted average number of additional Class A shares, millions 15 14 Weighted average number of diluted shares, millions 2,179 2,177 1) Calculated dilution based on the estimated economic value of the long-term incentive programmes. SEB Annual and Sustainability Report 2021 — 147 17 Cash and cash balances at central banks Group Parent company Cash 2,157 2,155 2 11 Cash balances at central banks 437,187 321,621 371,465 294,380 TOTAL 439,344 323,776 371,466 294,391 18 Loans Group Parent company Lending 3,973 404 3,646 308 Reverse repos 481 3,229 481 3,229 Loans to central banks 4,454 3,633 4,127 3,537 Lending 29,670 27,776 45,437 50,430 Collateral margins 24,433 12,762 23,882 12,202 Reverse repos 5,906 10,253 888 4,858 Loans to credit institutions 60,009 50,791 70,207 67,490 Lending 1,721,532 1,599,492 1,516,326 1,398,079 Collateral margins 43,555 58,759 43,731 59,322 Reverse repos 81,274 111,910 81,274 111,910 Loans to the public 1,846,362 1,770,161 1,641,332 1,569,310 TOTAL 1,910,824 1,824,586 1,715,665 1,640,337 Loans by measurement category Group Parent company FVHFT FVMPL AmC Total FVHFT FVMPL AmC Total Loans to central banks 481 3,973 4,454 481 3,646 4,127 Loans to credit institutions 888 59,121 60,009 888 69,319 70,207 Loans to the public 81,274 2,459 1,762,628 1,846,362 81,274 2,459 1,557,598 1,641,332 TOTAL 82,643 2,459 1,825,722 1,910,824 82,643 2,459 1,630,563 1,715,665 2020 Loans to central banks 3,229 404 3,633 3,229 308 3,537 Loans to credit institutions 4,858 45,933 50,791 4,858 62,632 67,490 Loans to the public 111,910 127 1,658,124 1,770,161 111,910 127 1,457,273 1,569,310 TOTAL 119,997 127 1,704,461 1,824,586 119,997 127 1,520,213 1,640,337 Financial statements — Notes 148 — SEB Annual and Sustainability Report 2021 Note 18 continued Loans Exposure and expected credit loss (ECL) allowances by stage The table shows gross carrying amounts for exposures on balance measured at amortised cost and nominal amounts for exposures off-balance divided by stage as a mean to put ECL allowances in context to total exposure. For trade receivables a simplified approach based on past-due information is used to cal- culate loss allowances. Group, 2021 Stage 1 12-month ECL) Gross carrying amounts/ Nominal amounts ECL allowances Carrying amounts/ Net amounts ECL coverage ratio, % Debt securities 8,544 1 8,543 Loans 1) 1,772,979 984 1,771,995 Financial assets 1,781,523 985 1,780,538 Financial guarantees and Loan commitments 830,403 375 830,028 Total 2,611,926 1,358 2,610,566 0.05 Stage 2 (lifetime ECL) 2) Loans 1) 62,127 1,456 60,671 Financial assets 62,127 1,456 60,671 Financial guarantees and Loan commitments 15,873 198 15,675 Total 78,000 1,654 76,346 2.12 Stage 3 (credit impaired/lifetime ECL) 3) Loans 1) 9,827 5,707 4,119 Financial assets 9,827 5,707 4,119 Financial guarantees and Loan commitments 170 67 103 Total 9,997 5,774 4,223 57.76 Total Stage 13 Debt securities 8,544 1 8,543 Loans 1) 1,844,932 8,147 1,836,785 Financial assets 1,853,477 8,148 1,845,329 Financial guarantees and Loan commitments 846,446 640 845,806 TOTAL 2,699,923 8,786 2,691,135 0.33 1) Including trade and client receivables presented as other assets. 2) Whereof gross carrying amounts SEK 1,858m and ECL allowances SEK 1m under Lifetime ECLs -simplified approach for trade receivables. 3) Whereof gross carrying amounts SEK 1,818m and ECL allowances SEK 1,296m for Purchased or Originated Credit Impaired loans. Stage 3 loans / Total loans – gross, % 0.53 Stage 3 loans / Total loans – net, % 0.22 Group, 2020 Stage 1 12-month ECL) Gross carrying amounts/ Nominal amounts ECL allowances Carrying amounts/ Net amounts ECL coverage ratio, % Debt securities 12,191 0 12,191 Loans 1) 1,641,422 972 1,640,449 Financial assets 1,653,613 972 1,652,640 Financial guarantees and Loan commitments 740,472 260 740,213 Total 2,394,086 1,232 2,392,852 0.05 Stage 2 (lifetime ECL) 2) Loans 1) 61,745 1,208 60,537 Financial assets 61,745 1,208 60,537 Financial guarantees and Loan commitments 16,375 176 16,199 Total 78,120 1,384 76,736 1.77 Stage 3 (credit impaired/lifetime ECL) 3) Loans 1) 14,890 7,331 7,559 Financial assets 14,890 7,331 7,559 Financial guarantees and Loan commitments 700 218 482 Total 15,590 7,549 8,042 48.42 Total Stage 13 Debt securities 12,191 0 12,191 Loans 1) 1,718,057 9,512 1,708,545 Financial assets 1,730,249 9,512 1,720,736 Financial guarantees and Loan commitments 757,547 653 756,895 TOTAL 2,487,796 10,165 2,477,630 0.41 1) Excluding demand deposits credit institutions and including trade and client receivables presented as other assets. 2) Whereof gross carrying amounts SEK 1,327m and ECL allowances SEK 2m under Lifetime ECLs -simplified approach for trade receivables. 3) Whereof gross carrying amounts SEK 2,274m and ECL allowances SEK 1,392m for Purchased or Originated Credit Impaired loans. Stage 3 loans / Total loans – gross, % 0.87 Stage 3 loans / Total loans – net, % 0.44 SEB Annual and Sustainability Report 2021 — 149 Note 18 continued Loans Parent company, 2021 Stage -month ECL) Gross carrying amounts/ Nominal amounts ECL allowances Carrying amounts/ Net amounts ECL coverage ratio, % Debt securities 9,945 1 9,944 Loans 1) 1,581,242 720 1,580,522 Financial assets 1,591,187 721 1,590,466 Financial guarantees and Loan commitments 780,396 304 780,092 Total 2,371,583 1,024 2,370,558 0.04 Stage 2 (lifetime ECL) 2) Loans 1) 57,331 1,068 56,263 Financial assets 57,331 1,068 56,263 Financial guarantees and Loan commitments 12,824 164 12,660 Total 70,156 1,233 68,923 1.76 Stage 3 (credit impaired/lifetime ECL) 3) Loans 1) 8,056 4,931 3,125 Financial assets 8,056 4,931 3,125 Financial guarantees and Loan commitments 153 61 92 Total 8,209 4,992 3,217 60.81 Total Stage 13 Debt securities 9,945 1 9,944 Loans 1) 1,646,629 6,719 1,639,911 Financial assets 1,656,574 6,719 1,649,855 Financial guarantees and Loan commitments 793,373 529 792,844 TOTAL 2,449,947 7,249 2,442,698 0.30 1) Including trade and client receivables presented as other assets. 2) Whereof gross carrying amounts SEK 1,289m and ECL allowances SEK 1m under Lifetime ECLs -simplified approach for trade receivables. 3) Whereof gross carrying amounts SEK 1,818m and ECL allowances SEK 1,296m for Purchased or originated credit impaired loans. Stage 3 loans / Total loans, gross, % 0.49 Stage 3 loans / Total loans, net, % 0.19 Parent company, 2020 Stage -month ECL) Gross carrying amounts/ Nominal amounts ECL allowances Carrying amounts/ Net amounts ECL coverage ratio, % Debt securities 15,542 0 15,541 Loans 1) 1,464,246 693 1,463,553 Financial assets 1,479,788 693 1,479,094 Financial guarantees and Loan commitments 697,137 179 696,957 Total 2,176,925 873 2,176,052 0.04 Stage 2 (lifetime ECL) 2) Loans 1) 56,039 904 55,136 Financial assets 56,039 904 55,136 Financial guarantees and Loan commitments 13,186 154 13,032 Total 69,225 1,058 68,167 1.53 Stage 3 (credit impaired/lifetime ECL) 3) Loans 1) 11,881 6,027 5,854 Financial assets 11,881 6,027 5,854 Financial guarantees and Loan commitments 462 192 270 Total 12,343 6,219 6,124 50.38 Total Stage 13 Debt securities 15,542 0 15,541 Loans 1) 1,532,167 7,624 1,524,543 Financial assets 1,547,708 7,624 1,540,084 Financial guarantees and Loan commitments 710,784 525 710,259 TOTAL 2,258,493 8,149 2,250,344 0.36 1) Excluding demand deposits credit institutions and including trade and client receivables presented as other assets. 2) Whereof gross carrying amounts SEK 1,409m and ECL allowances SEK 3m under Lifetime ECLs -simplified approach for trade receivables. 3) Whereof gross carrying amounts SEK 2,196m and ECL allowances SEK 1,337m for Purchased or originated credit impaired loans. Stage 3 loans / Total loans, gross, % 0.78 Stage 3 loans / Total loans, net, % 0.38 Financial statements — Notes 150 — SEB Annual and Sustainability Report 2021 Note 18 continued Loans Loans and expected credit loss (ECL) allowances by industry The table shows gross carrying amounts for loans measured at amortised cost and ECL allowances as a mean to put ECL allowances in context to overall lending. Group, Gross carrying amounts ECL allowances Net carrying amount Stage -month ECL) Stage (lifetime ECL) Stage (credit impaired/ lifetime ECL) Total Stage -month ECL) Stage (lifetime ECL) Stage (credit impaired/ lifetime ECL) Total Total Banks 89,669 2,044 5 91,718 5 2 1 8 91,709 Finance and insurance 128,994 2,191 88 131,273 61 26 6 93 131,180 Wholesale and retail 78,198 1,762 192 80,152 91 43 81 214 79,938 Transportation 29,423 1,258 211 30,892 30 39 50 119 30,773 Shipping 43,719 4,460 1,507 49,686 22 42 965 1,029 48,657 Business and household services 153,028 7,258 1,556 161,842 175 189 901 1,264 160,578 Construction 11,286 815 307 12,407 24 101 171 295 12,112 Manufacturing 93,694 5,245 1,444 100,384 82 186 961 1,229 99,155 Agriculture, forestry and fishing 27,860 655 80 28,595 22 9 27 58 28,538 Mining, oil and gas extraction 10,475 1,834 2,182 14,491 20 344 1,538 1,903 12,589 Electricity, gas and water supply 52,965 409 189 53,562 24 30 90 144 53,418 Other 48,662 1,087 100 49,850 36 47 37 120 49,730 Corporates 678,305 26,975 7,856 713,136 587 1,054 4,827 6,468 706,668 Commercial real estate management 154,671 2,519 173 157,364 70 40 65 175 157,189 Residential real estate management 134,485 1,400 31 135,915 45 2 2 49 135,866 Real Estate Management 289,156 3,919 204 293,279 115 42 67 224 293,055 Housing co-operative associations 61,885 6,536 2 68,423 0 0 1 2 68,421 Public Administration 14,102 239 1 14,342 1 4 1 5 14,337 Household mortgages 599,193 18,767 796 618,756 79 140 241 460 618,296 Other 40,669 3,648 962 45,279 196 214 569 979 44,300 Households 639,862 22,414 1,759 664,035 275 354 810 1,439 662,596 TOTAL 1,772,979 62,127 9,827 1,844,932 984 1,456 5,707 8,147 1,836,787 Including trade and client receivables presented as other assets. Group, 2020 Banks 86,112 1,917 14 88,043 6 2 4 12 88,031 Finance and insurance 109,335 653 25 110,014 43 4 7 54 109,959 Wholesale and retail 69,523 2,215 459 72,196 99 65 198 362 71,835 Transportation 28,916 1,671 227 30,814 36 49 74 159 30,656 Shipping 42,697 2,895 1,480 47,073 10 20 530 560 46,513 Business and household services 132,841 6,834 1,559 141,234 167 237 759 1,164 140,070 Construction 10,736 706 356 11,799 20 35 188 243 11,555 Manufacturing 83,313 3,381 2,779 89,473 89 98 1,372 1,559 87,914 Agriculture, forestry and fishing 22,558 916 117 23,591 19 13 29 61 23,530 Mining, oil and gas extraction 16,797 1,498 4,963 23,258 8 205 2,873 3,086 20,172 Electricity, gas and water supply 45,216 608 175 46,000 21 26 85 131 45,869 Other 44,592 3,034 232 47,859 33 34 93 161 47,698 Corporates 606,524 24,412 12,373 643,310 546 785 6,209 7,539 635,771 Commercial real estate management 158,927 3,343 410 162,680 72 49 127 248 162,432 Residential real estate management 125,844 1,528 27 127,399 36 6 0 42 127,357 Real Estate Management 284,771 4,871 437 290,079 108 55 127 290 289,789 Housing co-operative associations 55,884 6,615 3 62,501 0 0 2 2 62,498 Public Administration 14,989 72 1 15,061 1 4 1 5 15,056 Household mortgages 554,967 20,445 971 576,383 86 154 307 547 575,836 Other 38,176 3,414 1,090 42,680 226 209 682 1,117 41,563 Households 593,143 23,859 2,062 619,063 313 363 988 1,664 617,399 TOTAL 1,641,422 61,745 14,890 1,718,057 972 1,208 7,331 9,512 1,708,545 Excluding demand deposits credit institutions and including trade and client receivables presented as other assets. SEB Annual and Sustainability Report 2021 — 151 Note 18 continued Loans Stage 3 loans (credit-impaired) and collaterals by sector The table shows gross carrying amounts and ECL allowances for credit-impaired loans (Stage ) and the collaterals received for these assets. Group, Gross carrying amounts ECL allowances Carrying amounts Collaterals received Banks 5 1 4 0 Corporates 7,856 4,827 3,028 4,216 Real Estate Management 204 67 137 161 Household co-operative associations 2 1 1 2 Public Administration 1 1 1 1 Households 1,759 810 949 696 TOTAL 9,827 5,707 4,119 5,076 Group, 2020 Banks 14 4 10 1 Corporates 12,373 6,209 6,164 5,501 Real Estate Management 437 127 310 404 Household co-operative associations 3 2 1 2 Public Administration 1 1 0 Households 2,062 988 1,074 853 TOTAL 14,890 7,331 7,559 6,761 Exposure by risk classification category The table shows gross carrying amounts for exposures on balance and nominal amounts for exposures off-balance by stage and risk classification category. The risk classification categories are further explained in Note . Group, Stage -month ECL) Stage (lifetime ECL) Stage (credit impaired/ lifetime ECL) ) Total Investment grade 2,018,878 20,570 2,039,449 Standard monitoring 585,675 39,970 625,645 Watch list 7,372 17,460 24,832 Default 9,997 99,965 TOTAL 2,611,926 78,000 9,997 2,699,923 Group, 2020 Investment grade 1,803,559 19,177 1,822,736 Standard monitoring 584,778 42,071 626,850 Watch list 5,748 16,872 22,620 Default 15,590 15,590 TOTAL 2,394,086 78,120 15,590 2,487,796 1) Whereof gross carrying amounts SEK 1,818m 2,274) and ECL allowances SEK 1,296m 1,392) for Purchased or Originated Credit Impaired loans. Movements in allowances for expected credit loss (ECL) allowances Reconciliation of movements of allowance accounts for on balance exposures (Loans and Debt securities measured at amortised cost) and off balance exposures (Financial guarantees and Loan commitments). Loans and Debt securities Group Parent company Stage -month ECL) Stage (lifetime ECL) Stage (credit impaired/ lifetime ECL) Total Stage -month ECL) Stage (lifetime ECL) Stage (credit impaired/ lifetime ECL) Total Opening balance 973 1,208 7,331 9,512 693 904 6,027 7,624 New and derecognised financial assets, net 355 91 351 87 357 25 228 103 Changes due to change in credit risk 361 299 759 697 339 160 781 603 Changes due to modifications 2 6 0 8 5 0 5 Changes due to methodology change 1 1 56 55 0 0 0 0 Decreases in ECL allowances due to write-offs 2,395 2,395 2,040 2,040 Change in exchange rates 15 32 419 466 10 24 391 425 TOTAL 984 1,456 5,707 8,147 721 1,068 4,931 6,719 Financial guarantees and Loan commitments Opening balance 260 176 218 653 179 154 192 525 New and derecognised financial assets, net 68 43 113 88 76 44 98 66 Changes due to change in credit risk 41 59 54 47 44 49 48 45 Changes due to modifications 1 1 1 1 Changes due to methodology change 0 0 1 0 0 0 Change in exchange rates 6 6 16 28 4 5 16 25 TOTAL 375 198 67 640 304 164 61 529 Total Loans, Debt securities, Financial guarantees and Loan commitments Opening balance 1,232 1,384 7,549 10,165 873 1,058 6,219 8,149 New and derecognised financial assets, net 423 134 464 175 433 69 327 37 Changes due to change in credit risk 320 359 706 744 294 209 733 648 Changes due to modifications 2 7 0 9 5 0 5 Changes due to methodology change 1 2 56 55 1 0 0 1 Decreases in ECL allowances due to write-offs 2,395 2,395 2,040 2,040 Change in exchange rates 21 37 435 494 14 29 407 450 TOTAL 1,358 1,654 5,774 8,786 1,024 1,233 4,992 7,249 Financial statements — Notes 152 — SEB Annual and Sustainability Report 2021 Note 18 continued Loans Loans and Debt securities Group Parent company Stage -month ECL) Stage (lifetime ECL) Stage (credit impaired/ lifetime ECL) Total Stage -month ECL) Stage (lifetime ECL) Stage (credit impaired/ lifetime ECL) Total Opening balance 644 1,058 5,211 6,913 542 832 3,722 5,095 New and derecognised financial assets, net 300 287 846 860 300 209 777 868 Changes due to change in credit risk 99 428 4,224 4,751 99 393 4,079 4,373 Changes due to modifications 2 39 1 41 37 37 Changes due to methodology change 35 51 2 14 31 67 11 109 Decreases in ECL allowances due to write-offs 2,364 2,364 2,030 2,030 Change in exchange rates 37 82 585 704 18 82 510 610 TOTAL 972 1,208 7,331 9,512 693 904 6,027 7,624 Financial guarantees and Loan commitments Opening balance 189 127 138 454 160 91 120 370 New and derecognised financial assets, net 77 50 173 147 75 48 119 92 Changes due to change in credit risk 42 102 271 415 10 123 206 319 Changes due to methodology change 33 9 23 33 33 Change in exchange rates 15 12 18 45 12 12 15 39 TOTAL 260 176 218 653 179 154 192 525 Total Loans, Debt securities, Financial guarantees and Loan commitments Opening balance 832 1,185 5,349 7,367 701 922 3,842 5,465 New and derecognised financial assets, net 377 337 673 713 375 257 658 775 Changes due to change in credit risk 141 530 4,495 5,166 110 517 4,285 4,692 Changes due to modifications 2 39 1 41 37 37 Changes due to methodology change 68 61 2 9 64 66 11 141 Decreases in ECL allowances due to write-offs 2,364 2,364 2,030 2,030 Change in exchange rates 52 94 603 750 30 95 525 649 TOTAL 1,232 1,384 7,549 10,165 873 1,058 6,219 8,149 Development of exposures and ECL allowances In Stage gross exposures and ECL allowances increased reflecting an increase in corporate lending and growth in Swedish household mortgages. Gross exposure volumes in Stage were fairly stable, while there was an increase in ECL allowances in Stage due to changes in credit risk within the stage. In Stage , volumes and ECL allowances were impacted by write-offs against reserves, migration to Stage , and repayments. In all stages there was an increasing effect from the weaker Swedish krona on both gross exposures and ECL allowances. Measurement of ECL allowances SEB uses models and expert credit judgement (ECJ) for calculating ECL allow- ances. The degree of judgement depends on model outcome, materiality and information available and ECJ may be applied to incorporate factors not cap- tured by the models. Following the pandemic outbreak in Q , ECJ was used to estimate model overlays in the Corporate & Private Customers and Baltic divisions to capture potential negative effects on the asset quality in the SME portfolios arising from the uncertain economic outlook in light of the Covid- -pandemic and in the Large Corporate & Financial Institutions division to cap- ture the challenges facing the oil industry. The model overlays were determined through top-down scenario analysis, including various scenarios of risk migra- tion of complete portfolios, combined with bottom-up individual customer anal- ysis of larger corporate customers and analysis and stress tests of sectors spe- cifically exposed to the economic distress. The model overlays are reevaluated quarterly in connection with assessment of net ECLs and, at year end , they were maintained at SEK . billion, on the back of the continued uncertainty around the pandemic development as a fourth wave of the coronavirus has escalated in many markets resulting in renewed restrictions and a prolongation or reintroduction of various government support measures which may delay any potential negative effects of the pandemic. SEK . billion of the model overlays relate to the Corporate & Private Customers and Baltic divisions and SEK . billion to the Large Corporate & Financial Institutions division. Key macroeconomic variable assumptions for calculating ECL allowances Macroeconomic forecasts made by SEB’s economic research department are used as the basis for the forward-looking information incorporated in the ECL measurement. In order to ensure an unbiased estimation under IFRS , at least three scenarios are used with different probability weightings. The base case scenario represents the most likely outcome and is also applied in the financial planning and budgeting process, while the other scenarios represent more posi- tive and negative outcomes respectively. The probability weightings assigned to each scenario are determined using a combination of statistical analysis and expert judgment. The scenarios and their probability weightings are reviewed every quarter, or more frequently when appropriate due to rapid or significant changes in the economic environment. In , the scenarios have been reviewed and updated to reflect the chang- ing economic outlook as a result of the development of Covid pandemic. No changes have been made to the method used for incorporating forward-looking information in the modelling. The three scenarios – base, positive and negative scenarios – are based on different assumptions around how rapidly economies will reopen following the pandemic as well as effects of inflation and monetary policies. The base scenario assumes a balanced economic recovery despite new Covid waves. The table below sets out the key macroeconomic assumptions of the latest base case scenario which was used for estimating ECL allowances as at December . A further description of the scenarios is available in SEB’s Nordic Outlook from November . Base case scenario assumptions Global GDP growth 4.4% 3.5% 3.2% OECD GDP growth 3.9% 2.4% 2.0% Sweden GDP growth 3.6% 2.5% 2.0% Household consumption expenditure growth 3.7% 2.2% 1.8% Interest rate (STIBOR) 0.10% 0.15% 0.65% Residential real estate price growth 5.0% 2.0% 2.0% Baltic countries GDP growth 3.6% – 5.0% 3.0% – 4.2% 3.0% Household consumption expenditure growth 3.6% – 5.8% 3.3% – 4.7% 3.0% – 4.0% Inflation rate 2.7% – 5.4% 2.0% – 2.3% 2.0% – 2.1% Nominal wage growth 7.5% – 8.7% 6.5% – 7.5% 5.0% – 6.0% Unemployment rate 5.8% – 6.6% 5.2% – 6.2% 5.0% – 6.0% The positive scenario assumes a combination of pent-up consumption needs and a high level of household savings represents upside potential. A robust increase in consumption may also lead to a positive spiral that drives broad- based capital spending. Ensuring that such a scenario is sustainable requires a highly favourable labour supply trend, but above all that new investments actu- ally lead to clear productivity improvements. The negative scenario reflects the risk of inflation and failures related to central bank exit strategies. If labour market shortages do not ease, wages may surge − showing that current macro SEB Annual and Sustainability Report 2021 — 153 forecasts and financial market pricing are based on an overly positive view of the supply side. Central banks could then choose to tighten their policies, trig- gering major stock market and home price declines. If they did not act, inflation expectations would instead take off, losing touch with inflation targets. In the estimation of ECL allowances as at December , the probabilities of the three scenarios were per cent per cent as at year-end ) for the base scenario, per cent ) for the positive scenario and per cent ) for the negative scenario. The most significant assumptions affecting the ECL allowance of the non-retail and retail portfolios, respectively, are as follows: Non-retail portfolios (i) GDP impact on companies' performance (ii) Real estate price growth impact on collateral valuations Retail portfolios (i) Household consumption expenditure growth impact on borrowers' ability to meet their contractual obligations (ii) Residential real estate price growth impact on mortgage collateral values (iii) Unemployment rate impact on borrowers' ability to meet their contractual obligations (iv) Interest rates impact on borrowers' ability to meet their contractual obligations (v) Inflation rate impact on borrowers' ability to meet their contractual obligations (vi) Nominal wage growth impact on borrowers' ability to meet their contractual obligations Sensitivity analysis of macroeconomic assumptions In general, a worsening of the economic development or an increase in the proba- bility of the negative scenario occurring is expected to increase the number of loans migrating from Stage to Stage and increase the estimated ECL allow- ances. On the other hand, an improvement in the economic development or an increase in the probability of the positive scenario occurring is expected to have the opposite, positive impact. Should the positive and negative scenarios be assigned per cent probabil- ity of occurring, the model calculated ECL allowances would decrease by per cent and increase by per cent, respectively compared to the weighted scenario. ECL allowances resulting from scenario Difference from the probability weighted ECL allowances, % Group Negative scenario 9,180 4% Positive scenario 8,555 3% Large Corporates & Financial Institutions Negative scenario 2,154 7% Positive scenario 1,927 5% Corporate & Private Customers Negative scenario 5,891 4% Positive scenario 5,576 2% Baltic Negative scenario 1,102 5% Positive scenario 1,015 3% Determination of significant increase in credit risk (SICR) For arrangements with initial origination date as at January or later, the primary indicator is changes in lifetime probability of default (PD) by comparing the scenario weighted annualised lifetime PD at the reporting date with the sce- nario weighted annualised lifetime PD at initial recognition. For arrangements with an initial origination date prior to January changes in SEB internal risk classification since initial origination are used as the primary indicator. Quantitative measures for triggering significant increase in credit risk (SICR) For arrangements originated prior to January For arrangements originated on or after January Watch list 1) 1) Investment grade 27 grades Annualised lifetime PD increase by 200% and ≥ 50 basis points Standard monitoring 12 grades 1) Placement of a financial asset on watch list automatically classifies it as a significant increase in credit risk and places it in Stage 2. Regardless of the quantitative indicator, a significant increase in credit risk is triggered if the following back-stop indicators occur: – payments are past due days but days, or – financial assets are forborne (where due to the customer’s financial diffi culties the contractual terms of the loans have been revised and concessions given). Back stop indicators normally overlap with the quantitative indicator of significant increase in credit risk. Sensitivity analysis of significant increase in credit risk (SICR) trigger assumptions The sensitivity of ECL to changes in the quantitative triggering approach is analysed regularly, including tests of the following alternative triggers: – recognising as Stage SICR all exposures that have a worsened risk grade of notch or more; – reduction of Stage SICR triggering thresholds to bp increase in annualised lifetime PD. Total ECL as at December would increase by . per cent when recog- nising all exposures which have been downgraded by one notch or more com- pared to the grade at origination as Stage . The impact on total ECL as at December from reduction of the Stage SICR trigger threshold to bps is below . per cent. The sensitivities are minor due to the fact that backstop indicators capture a large portion of exposures in Stage regardless of the changes in the quantitative trigger measures. In addi- tion, the impact of severe adverse macroeconomic developments on the loan portfolio is tested as part of the regular ICAAP process, described in more detail in note Capital adequacy. Past due loans Group Parent company ≤ 30 days 10,715 11,672 8,759 10,425 30 ≤ 90 days 1,458 2,628 1,342 2,497 > 90 days 1,213 1,827 704 794 TOTAL 13,386 16,127 10,805 13,716 Forborne loans Group Parent company Total forborne loans 11,539 13,305 9,142 10,714 of which performing 1) 3,988 1,924 2,322 824 1) According to EBA definition. Financial statements—Notes 154 — SEB Annual and Sustainability Report 2021 19 Debt securities Group, 2021 Debt securities by issuers Swedish government Swedish municipalities Swedish mortgage institutions Other Swedish issuers Foreign government Other foreign issuers Total Eligible debt securities 1) Held for trading 6,480 63 4,297 3,061 13,901 Fair value through profit or loss mandatorily 5,780 3,097 2,134 45,874 18,190 3,079 78,154 Fair value through profit or loss designated 1,333 5,831 646 108 7,917 Total 13,592 3,161 7,965 45,874 23,133 6,247 99,972 Other debt securities Held for trading 11,784 9,518 18,222 39,524 Fair value through profit or loss mandatorily 204 12,629 3,726 6,395 34,051 57,005 Fair value through profit or loss designated 50 1 60 145 257 Amortised cost 8,543 8,543 Total 254 24,414 13,304 6,395 60,962 105,329 Accrued interest 649 TOTAL 13,846 3,161 32,380 59,178 29,528 67,209 205,950 Group, 2020 Eligible debt securities 1) Held for trading 14,286 225 6,036 7,338 27,885 Fair value through profit or loss mandatorily 7,182 3,352 1,775 24,644 17,534 5,069 59,556 Fair value through profit or loss designated 1,247 5,348 835 85 7,515 Amortised cost 3,020 3,020 Total 22,716 3,576 7,123 24,644 27,425 12,492 97,976 Other debt securities Held for trading 9,244 42,525 6,740 28,697 87,207 Fair value through profit or loss mandatorily 264 6,911 19,152 5,257 589 37,744 69,917 Fair value through profit or loss designated 51 12 24 203 290 Total 314 16,155 61,689 12,021 589 75,746 166,515 Accrued interest 943 TOTAL 23,030 19,731 68,812 36,665 28,014 88,238 265,433 1) Eligible papers are considered as such only if they, according to national legislation, are accepted by the Central bank in the country in which SEB is located. Parent company, 2021 Debt securities by issuers Swedish government Swedish municipalities Swedish mortgage institutions Other Swedish issuers Foreign government Other foreign issuers Total Eligible debt securities 1) Held for trading 6,480 63 4,172 3,028 13,743 Fair value through profit or loss mandatorily 4,214 3,097 45,874 4,454 3,073 60,712 Total 10,694 3,161 45,874 8,626 6,101 74,455 Other debt securities Held for trading 11,784 9,518 18,222 39,524 Fair value through profit or loss mandatorily 11,695 2,581 5,637 34,022 53,935 Amortised cost 1,400 8,544 9,943 Total 23,479 13,499 5,637 60,787 103,402 Accrued interest 583 TOTAL 10,694 3,161 23,479 59,373 14,262 66,889 178,441 Parent company, 2020 Eligible debt securities 1) Held for trading 14,286 225 5,925 7,338 27,774 Fair value through profit or loss mandatorily 5,749 3,352 24,544 5,389 2,785 41,819 Amortised cost 3,350 3,020 6,370 Total 20,035 3,576 27,894 14,334 10,123 75,963 Other debt securities Held for trading 9,244 42,525 6,740 28,697 87,207 Fair value through profit or loss mandatorily 6,911 18,193 3,971 37,716 66,791 Amortised cost 9,101 9,101 Total 16,155 60,719 10,711 75,514 163,099 Accrued interest 866 TOTAL 20,035 19,731 60,719 38,606 14,334 85,637 239,928 1) Eligible papers are considered as such only if they, according to national legislation, are accepted by the Central bank in the country in which SEB is located. SEB Annual and Sustainability Report 2021 — 155 20 Equity instruments Group Parent company Fair value through profit or loss held for trading 89,284 58,448 89,284 58,448 Fair value through profit or loss mandatorily 31,458 23,792 6,865 5,377 TOTAL 120,742 82,240 96,149 63,825 21 Derivatives and hedge accounting Group Parent company Interest-related 57,983 89,152 53,157 84,079 Currency-related 36,180 58,217 36,281 57,762 Equity-related 4,283 3,497 4,283 3,497 Other 27,605 14,043 27,605 14,043 Positive replacement values 126,051 164,909 121,326 159,380 Interest-related 49,910 66,288 45,596 62,357 Currency-related 26,902 71,530 26,541 71,429 Equity-related 8,085 8,957 8,085 8,957 Other 33,276 14,786 33,276 14,786 Negative replacement values 118,173 161,561 113,497 157,529 Group, Positive replacement values Negative replacement values Nominal amount Book value Nominal amount Book value Options 176,634 1,082 159,785 1,588 Futures 2,278,354 190 1,967,964 107 Swaps 7,609,998 56,712 7,784,997 48,216 Interest-related 10,064,986 57,983 9,912,747 49,910 of which exchange traded 64,056 30 53,116 38 Options 64,129 586 56,244 566 Futures 532,990 10,283 490,216 7,026 Swaps 1,933,495 25,311 1,842,751 19,309 Currency-related 2,530,614 36,180 2,389,211 26,902 of which exchange traded 2 2 Options 29,165 1,603 20,994 3,605 Futures 10,930 215 12,744 246 Swaps 43,320 2,465 55,685 4,234 Equity-related 83,415 4,283 89,423 8,085 of which exchange traded 34,082 898 22,862 2,934 Options 44,194 4,403 47,381 4,181 Futures 130,995 22,563 128,414 28,511 Swaps 18,832 639 25,545 584 Other 194,022 27,605 201,340 33,276 of which exchange traded 70,813 3,006 35,745 3,674 TOTAL 12,873,037 126,051 12,592,721 118,173 of which exchange traded 168,951 3,936 111,722 6,647 Group, 2020 Options 124,401 1,528 118,026 2,026 Futures 3,975,887 51 7,635,281 89 Swaps 6,563,615 87,573 6,202,231 64,172 Interest-related 10,663,903 89,152 13,955,539 66,288 of which exchange traded 2,649,309 15 6,104,201 12 Options 131,638 827 67,607 824 Futures 381,732 19,569 526,060 23,666 Swaps 1,356,850 37,820 1,526,853 47,040 Currency-related 1,870,219 58,217 2,120,521 71,530 of which exchange traded 3 3 Options 5,466 787 5,278 2,926 Futures 10,919 1,698 10,772 1,555 Swaps 21,381 1,013 45,530 4,477 Equity-related 37,766 3,497 61,581 8,957 of which exchange traded 8,642 900 2,485 2,724 Options 40,216 4,411 43,121 4,323 Futures 120,978 9,073 119,594 9,133 Swaps 19,710 559 28,998 1,330 Other 180,904 14,043 191,712 14,786 of which exchange traded 65,038 1,190 33,364 1,800 TOTAL 12,752,792 164,909 16,329,353 161,561 of which exchange traded 2,722,989 2,109 6,140,050 4,539 Financial statements—Notes 156 — SEB Annual and Sustainability Report 2021 Note 21 continuedDerivatives and hedge accounting Parent company, Positive replacement values Negative replacement values Nominal amount Book value Nominal amount Book value Options 186,371 1,108 162,785 1,636 Futures 2,278,354 190 1,967,005 107 Swaps 7,607,498 51,859 7,546,097 43,853 Interest-related 10,072,223 53,157 9,675,887 45,596 of which exchange traded 64,056 30 53,116 38 Options 64,089 540 56,195 529 Futures 533,086 10,272 490,193 6,690 Swaps 1,939,458 25,470 1,843,472 19,321 Currency-related 2,536,633 36,281 2,389,861 26,541 of which exchange traded 2 2 Options 29,165 1,603 20,994 3,605 Futures 10,930 215 12,744 246 Swaps 43,320 2,465 55,685 4,234 Equity-related 83,415 4,283 89,423 8,085 of which exchange traded 34,082 898 22,862 2,934 Options 44,210 4,403 47,381 4,181 Futures 130,995 22,563 128,414 28,511 Swaps 18,832 639 25,545 584 Other 194,037 27,605 201,340 33,276 of which exchange traded 70,813 3,006 35,745 3,674 TOTAL 12,886,308 121,326 12,356,510 113,497 of which exchange traded 168,951 3,906 111,722 6,610 Parent company, 2020 Options 124,394 1,528 118,033 2,026 Futures 3,975,887 51 7,635,281 89 Swaps 6,506,783 82,500 6,076,600 60,242 Interest-related 10,607,063 84,079 13,829,915 62,357 of which exchange traded 2,649,309 15 6,104,201 12 Options 131,628 783 67,710 786 Futures 380,607 19,533 525,903 23,688 Swaps 1,359,785 37,445 1,529,220 46,956 Currency-related 1,872,020 57,762 2,122,833 71,429 of which exchange traded 3 3 Options 5,466 786 5,278 2,925 Futures 10,919 1,698 10,772 1,555 Swaps 21,381 1,013 45,530 4,477 Equity-related 37,766 3,497 61,581 8,957 of which exchange traded 8,642 900 2,485 2,724 Options 40,231 4,411 43,121 4,323 Futures 120,978 9,073 119,594 9,133 Swaps 19,710 559 28,998 1,330 Other 180,919 14,043 191,712 14,786 of which exchange traded 65,038 1,190 33,364 1,800 TOTAL 12,697,768 159,380 16,206,041 157,529 of which exchange traded 2,722,989 2,109 6,140,050 4,539 Hedge accounting Accounting policy As the International Accounting Standards Board issued the new accounting standard IFRS they provided entities with an accounting policy choice between applying the hedge accounting requirements in IFRS or continuing to apply the existing hedge accounting requirements in IAS for all hedge accounting. SEB has decided to continue to apply hedge accounting require- ments in IAS . IBOR Reform (Interest Rate Benchmark Reform) The group elected to early adopt the Amendments to IFRS , IAS and IFRS Interest Rate Benchmark Reform (IBOR) – Phase as at . The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by the IBOR reform. The reliefs have the effect that the IBOR reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness should continue to be recorded in the income statement. SEB’s hedged accounting risk exposure is affected by the interest rate bench- mark reform in USD LIBOR. The group has analysed market expectations when determining the fair value of the hedging instrument and present value of esti- mated cash flows of the hedged item. SEB Annual and Sustainability Report 2021 — 157 The table below indicates the nominal amount and interest rate risk of hedging items that will be affected by the IBOR reform. Risk figures are expressed as one basis point’s parallel shift of the interest rate curve. Fair value hedges of interest rate risk Notional Asset Liability USD LIBOR USD .bn USD .m For more information about the group’s project to lead the transition to alterna- tive benchmark rates and the Interest Rate Benchmark Reform (IBOR) – Phase , see note g. Risk management strategy The Board of Directors defines how much market risk is acceptable by setting the overall market risk limits and general instructions. The market risk tolerance and limits are defined for the trading book, banking book and defined benefit plans. The Group Risk Committee delegates the market risk mandate to the divisions and the treasury function, which in turn further allocate the limits internally. The treasury function has overall responsibility for managing these risks, which are consolidated centrally. Risk category and designated risk exposure Interest rate risk is the designated risk exposure for fair value and cash flow hedge accounting. Interest rate risk in the banking book arises from changes in market interest rates as a result of mismatches in interest terms and interest rate periods on the balance sheet. Fair value hedges and portfolio hedges The group holds a portfolio of long-term fixed rate mortgages and long-term fixed rate issued debt securities of which are exposed to fluctuations in fair value due to movements in market interest rates. The interest rate risk compo- nent is determined as the change in fair value of the long-term fixed rate mort- gages and issued debt securities arising solely from changes in discounting rates such as applicable IBOR rates. The group hedges a portion of its existing interest rate risk from these financial assets and financial liabilities against changes in fair value. For this purpose the group are entering pay fixed/receive floating interest rate swaps for hedging of long-term fixed rate mortgages and receive fixed/pay floating interest swaps for hedging of long-term fixed rate issued debt securities thus resulting in fixed interest rates on the hedged item being swapped to floating interest rates. The hedges are executed item by item for long-term fixed rate issued debt securities and by aggregation of items grouped by maturity for long-term fixed rate mortgages. Sources of hedge ineffectiveness The effectiveness of the hedge strategy is assessed by the degree to which changes in fair value of the hedged item that are attributable to the changes in benchmark rate used for discounting are offset by changes in fair value of the hedging instrument. Possible sources of hedge ineffectiveness are as follows: (i) the discounted cash flow from floating rate payments from the hedging instru- ment does not have an equivalent cash flow from the long-term fixed mort- gages or issued debt securities thus give rise to hedge inefficiencies; (ii) deviations in critical factors between the hedged item and the fixed rate leg in the hedging instrument (‘proxy bond’) will give rise to hedge inefficiencies; (iii) different benchmark rates used for discounting of the hedged item and the hedging instrument. For example the use of either secured or unsecured bench- mark rate depending on the collaterialised characteristics of hedging instru- ment while unsecured benchmark rates are applied for the hedged item; (iv) funding value adjustments which impacts the fair value of hedging instru- ments for which central counterparty clearing is not applied. Equivalent fair value adjustment is not applicable for the hedged item; (v) the effects of the forthcoming reform to USD LIBOR, because it might take effect at a different time and have a different impact on the hedged item and the hedging instrument. Further details of these reforms are set out in noteg. Cash flow hedges The group holds a portfolio of lending and deposits with floating interest rates of which are exposed to fluctuations in cash flow due to movements in market interest rates. The interest rate risk component is determined as the variability in cash flows from floating rate lending and floating rate deposits arising solely from changes in applicable benchmark rates. The group hedges a portion of its existing exposure from these financial assets and financial liabilities against variability in cash flows. For this purpose the group are entering interest rate swaps where the net exposures of lending and deposits with floating rates are swapped to fixed interest. Group either pays or receives the fixed leg of the interest rate swap depending on whether volumes on floating rate lending out- weighs floating rate deposits or vice versa. Interest flows from deposits and lending with floating interest rates are expected to be amortised to profit or loss during the period to . Sources of hedge ineffectiveness The effectiveness of the hedge strategy is assessed by the degree to which changes in present value of the hedged expected future cash flows that are attributable to the changes in benchmark rate used for estimating future cash flows are offset by changes in fair value of the hedging instrument. Possible sources of hedge ineffectiveness are as follows: (i) deviations in critical factors between the hedged item (‘hypothetical deriva- tive’) and the floating rate leg in the hedging instrument will give rise to hedge inefficiencies; (ii) funding value adjustments which impacts the fair value of hedging instruments for which central counterparty clearing is not applied. Equivalent fair value adjustment is not applicable for the hedged item. Net investment hedges The group hedges the currency translation risk of net investments in foreign operations through currency borrowings. Borrowing in foreign currency at an amount of SEK ,m ,) were designated as hedges of net invest- ments in foreign operations. Ineffectiveness in the hedges has been reported in Net financial income (note ). Financial statements—Notes 158 — SEB Annual and Sustainability Report 2021 Note 21 continuedDerivatives and hedge accounting Hedging instruments Group, Positive replacement values Negative replacement values Nominal amount Book value Change in value Nominal amount Book value Change in value Derivatives 172,736 633 1,834 227,068 124 5,029 Fair value hedges of interest rate risk 172,736 633 1,834 227,068 124 5,029 Derivatives 248,600 108 190 0 0 1,007 Portfolio fair value hedges of interest rate risk 248,600 108 190 0 0 1,007 Derivatives 6,305 232 39 3,619 325 4 Portfolio cash flow hedges of interest rate risk 6,305 232 39 3,619 325 4 TOTAL 427,642 973 1,605 230,687 449 4,026 Group, 2020 Derivatives 226,507 2,958 1,713 219,129 13 871 Fair value hedges of interest rate risk 226,507 2,958 1,713 219,129 13 871 Derivatives 208,000 29 139 14,500 1 797 Portfolio fair value hedges of interest rate risk 208,000 29 139 14,500 1 797 Derivatives 7,485 356 73 6,139 731 4 Portfolio cash flow hedges of interest rate risk 7,485 356 73 6,139 731 4 TOTAL 441,992 3,343 1,500 239,768 745 78 Fair value hedges of interest rate risk Group, Book value hedged item The accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount The change in value of the hedged item used as the basis for recognizing hedge ineffectiveness for the period Hedge ineffectiveness recognized in profit or loss Income Statement Net other Income 22 Balance sheet Debt securities issued 395,575 1,244 6,841 Fair value hedges of interest rate risk 395,575 1,244 6,841 22 Income Statement Net other Income 1 Balance sheet Loans to the public 370,524 Fair value changes of hedged items in a portfolio hedge 702 1,198 Portfolio fair value hedges of interest rate risk 370,524 702 1,198 1 TOTAL 766,099 542 5,643 23 Group, 2020 Income Statement Net other Income 11 Balance sheet Debt securities issued 457,131 7,142 2,594 Fair value hedges of interest rate risk 457,131 7,142 2,594 11 Income Statement Net other Income 19 Balance sheet Loans to the public 320,618 Fair value changes of hedged items in a portfolio hedge 496 917 Portfolio fair value hedges of interest rate risk 320,618 496 917 19 TOTAL 777,749 7,639 1,678 30 SEB Annual and Sustainability Report 2021 — 159 Note 21 continuedDerivatives and hedge accounting Portfolio cash flow hedges of interest rate risk Group, The change in value of the hedged item used as the basis for recognizing hedge ineffectiveness for the period The balances in the cash flow reserve Hedging gains/losses of the reporting period that were recognized in other comprehen- sive income Hedge ineffectiveness recognized in profit or loss The amount reclassified from cash flow reserve for which hedge accounting had previously been used Continuing hedges Discontinued hedges Income Statement Net other Income 1 1 Statement of comprehensive income Cash flow hedges 36 Balance sheet Loans to the public and deposits and borrowing from the public 36 Equity Cash flow hedges 129 110 TOTAL 36 129 110 36 1 1 Group, 2020 Income Statement Net other Income 3 17 Statement of comprehensive income Cash flow hedges 72 Balance sheet Loans to the public and deposits and borrowing from the public 72 Equity Cash flow hedges 156 109 TOTAL 72 156 109 72 3 17 Hedging instruments Parent company, Positive replacement values Negative replacement values Nominal amount Book value Change in value Nominal amount Book value Change in value Derivatives 172,736 633 1,834 227,068 124 5,029 Fair value hedges of interest rate risk 172,736 633 1,834 227,068 124 5,029 Derivatives 248,600 108 190 1,007 Portfolio fair value hedges of interest rate risk 248,600 108 190 0 0 1,007 Derivatives 6,305 232 39 3,619 325 4 Portfolio cash flow hedges of interest rate risk 6,305 232 39 3,619 325 4 TOTAL 427,642 973 1,605 230,687 449 4,026 Parent company, 2020 Derivatives 226,507 2,958 1,713 219,129 13 871 Fair value hedges of interest rate risk 226,507 2,958 1,713 219,129 13 871 Derivatives 208,000 29 139 14,500 1 797 Portfolio fair value hedges of interest rate risk 208,000 29 139 14,500 1 797 Derivatives 7,485 356 73 6,139 731 4 Portfolio cash flow hedges of interest rate risk 7,485 356 73 6,139 731 4 TOTAL 441,992 3,343 1,500 239,768 745 78 Financial statements—Notes 160 — SEB Annual and Sustainability Report 2021 Note 21 continuedDerivatives and hedge accounting Fair value hedges of interest rate risk Parent company, Book value The accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount The change in value of the hedged item used as the basis for recognizing hedge ineffectiveness for the period Hedge ineffec tiveness recognized in profit or loss Income Statement Net other Income 22 Balance sheet Debt securities issued 395,575 1,244 6,841 Fair value hedges of interest rate risk 395,575 1,244 6,841 22 Income Statement Net other Income 1 Balance sheet Loans to the public 370,524 Fair value changes of hedged items in a portfolio hedge 702 1,198 Portfolio fair value hedges of interest rate risk 370,524 702 1,198 1 TOTAL 766,099 542 5,643 23 Parent company, 2020 Income Statement Net other Income 11 Balance sheet Debt securities issued 457,131 7,142 2,594 Fair value hedges of interest rate risk 457,131 7,142 2,594 11 Income Statement Net other Income 19 Balance sheet Loans to the public 320,618 Fair value changes of hedged items in a portfolio hedge 496 917 Portfolio fair value hedges of interest rate risk 320,618 496 917 19 TOTAL 777,749 7,639 1,678 30 Portfolio cash flow hedges of interest rate risk Parent company, The change in value of the hedged item used as the basis for recog nizing hedge ineffectiveness for the period The balances in the cash flow reserve Hedging gains/losses of the reporting period that were recognized in other comprehen- sive income Hedge ineffectiveness recognized in profit or loss The amount reclassified from cash flow reserve for which hedge accounting had previously been used Continuing hedges Discontinued hedges Income Statement Net other Income 1 1 Statement of comprehensive income Cash flow hedges 36 Balance sheet Loans to the public and deposits and borrowing from the public 36 Equity Cash flow hedges 129 110 TOTAL 36 129 110 36 1 1 Parent company, 2020 Income Statement Net other Income 3 17 Statement of comprehensive income Cash flow hedges 72 Balance sheet Loans to the public and deposits and borrowing from the public 72 Equity Cash flow hedges 156 109 TOTAL 72 156 109 72 3 17 SEB Annual and Sustainability Report 2021 — 161 22 Investments in subsidiaries, associates and joint ventures Group Parent company Shares in Swedish subsidiaries 14,641 14,641 Shares in foreign subsidiaries 1) 139 137 35,425 31,715 Investments in associates and joint ventures, strategic investments 669 548 463 343 Investments in associates, venture capital holdings 702 586 702 544 TOTAL 1,510 1,272 51,231 47,243 of which holdings in credit institutions 34,153 30,627 1) Some dormant subsidiaries in the group are consolidated using the equity method. During the parent company recognised an impairment of SEK ,m for the investment in the subsidiary DSK Hyp AG. Swedish subsidiaries Country Book value Dividend Ownership, % Book value Dividend Ownership, % Aktiv Placering AB, Stockholm Sweden 38 100 38 100 Enskilda Kapitalförvaltning SEB AB, Stockholm Sweden 0 100 0 100 Försäkringsaktiebolaget Skandinaviska Enskilda Captive, Stockholm Sweden 100 100 100 100 IFA DBB AB, Stockholm Sweden 330 100 330 100 Parkeringshuset Lasarettet HGB KB, Stockholm Sweden 0 99 0 99 Repono Holding AB, Stockholm Sweden 3,227 100 3,227 100 SEB Förvaltnings AB, Stockholm Sweden 5 100 5 100 SEB Internal Supplier AB, Stockholm Sweden 12 100 12 100 SEB Investment Management AB, Stockholm Sweden 541 100 541 400 100 SEB Kort Bank AB, Stockholm Sweden 3,760 277 100 3,760 602 100 SEB Life and Pension Holding AB, Stockholm Sweden 6,424 600 100 6,424 1,000 100 SEB Strategic Investments AB, Stockholm Sweden 204 100 204 100 Skandinaviska Kreditaktiebolaget, Stockholm Sweden 0 100 0 100 TOTAL 14,641 877 14,641 2,002 Foreign subsidiaries DSK Hyp AG, (former SEB AG), Frankfurt am Main Germany 18,246 100 15,533 100 SEB Bank JSC, St Petersburg Russia 829 100 458 100 SEB Banka, AS, Riga Latvia 1,833 199 100 1,753 100 SEB bankas, AB, Vilnius Lithuania 6,731 477 100 6,560 100 SEB Corporate Bank, PJSC, Kiev Ukraine 138 100 138 100 SEB do Brasil Representacões LTDA, Sao Paulo Brazil 0 1 100 0 1 100 SEB Leasing Oy, Helsinki Finland 4,540 61 100 4,423 100 SEB Njord AS, Oslo Norway 0 100 0 100 SEB Pank, AS, Tallinn Estonia 2,617 788 100 2,425 1,010 100 SEB Securities Inc, New York USA 46 100 30 100 Skandinaviska Enskilda Ltd, London Great Britain 446 100 395 78 100 TOTAL 35,425 1,526 31,715 1,089 Information about the corporate registration numbers and numbers of shares of the subsidiaries is available upon request. For more information on subsidiaries, directly owned or indirectly owned (via subsidiaries) by Skandinaviska Enskilda Banken AB (publ), during the financial year and/or at end of the financial year, see Sustainability notes pages . Significant restrictions on the ability to use assets and settle liabilities of the group Skandinaviska Enskilda Banken AB (Publ) can obtain distributions of capital, use assets and settle liabilities of members of the group within the limitation of some regulatory, statutory and contractual restrictions. These restrictions are: Regulatory requirements Regulated subsidiaries are subject to prudential regulatory capital require- ments in the countries in which they are regulated. These subsidiaries are required to maintain a certain level of own funds in relation to their exposures, restricting their ability to distribute cash or other assets to the parent company. To meet these requirements the subsidiaries hold capital instruments and other forms of subordinated liabilities. Statutory requirements Subsidiaries are required to have a certain level of solvency and are restricted to make distributions of capital and profits leading to a solvency below that level. Contractual requirements The group pledges some of its financial assets as collateral for financing and liquidity purposes. Encumbered assets can’t be transferred within the group. Such assets are described further in the note Pledged assets. Financial statements—Notes 162 — SEB Annual and Sustainability Report 2021 Note 22 continuedInvestments in subsidiaries, associates and joint ventures Investments in associates and joint ventures – Strategic investments Assets ) Liabilities ) Revenues ) Profit or loss ) Book value Ownership, % Bankomat AB, Stockholm 3,314 2,900 623 5 66 20 BGC Holding AB, Stockholm 964 144 955 125 104 33 Cinder Invest AB, Stockholm 47 6 0 21 79 18 Finansiell ID-Teknik BID AB, Stockholm 105 34 274 23 7 18 Getswish AB, Stockholm 114 28 189 0 19 20 Invidem AB (former Nordic KYC Utility AB), Stockholm 94 30 1 168 73 17 P27 Nordic Payments AB 400 31 0 162 113 17 USE Intressenter AB, Stockholm 1 0 0 0 0 28 Parent company holdings 463 Holdings of subsidiaries 119 Group adjustments 87 GROUP HOLDINGS 669 1) Retrieved from respective Annual report 2020. Investments in associates – Venture capital holdings Book value Ownership, % Book value Ownership, % Airsonett AB, Ängelholm 45 30 29 33 Apica AB, Stockholm 138 30 83 31 Avidicare Holding AB, Ängelholm 14 33 19 33 Cparta Cyber Defense AB, Stockholm 97 49 42 49 C-Green Technologies AB, Solna 20 0 Corpower Ocean AB, Stockholm 20 3 Enginzyme AB, Solna 10 3 InDex Pharmaceuticals Holding AB, Stockholm 23 2 60 15 Leasify AB, Stockholm 6 22 14 21 Now Interact Nordic AB, Stockholm 8 11 8 11 NuEvolution AB, Stockholm 0 20 0 20 OssDsign AB, Uppsala 57 12 44 12 Scandinova Systems AB, Uppsala 65 22 65 22 Scibase Holding AB, Stockholm 0 4 0 4 Senion AB, Linköping 24 39 TSS Holding AB, Stockholm 198 42 198 42 Parent company holdings 702 586 GROUP HOLDINGS 702 586 Information about the corporate registration numbers and numbers of shares of the associates is available upon request. Strategic investments in associates in the group are accounted for using the equity method. Investments in associates held by the venture capital organisation of the group have, in accordance with IAS , been designated as at fair value through profit and loss. Some entities, in which the bank have an ownership of less than per cent, has been classified as investments in associates. The reason is that the bank is represented in the board of directors and participates in the policy making processes of those entities. All financial assets within the group’s venture capital business are managed and its performance is evaluated on a fair value basis in accordance with documented risk management and investment strategies. Fair values for investments listed in an active market are based on quoted market prices. If the market for a financial instrument is not active, fair value is established by using valuation techniques based on discounted cash flow analysis, valuation with reference to financial instruments that is substantially the same, and valuation with reference to observable market transactions in the same financial instrument. SEB Annual and Sustainability Report 2021 — 163 23 Intangible assets Group Parent company Goodwill ) Deferred acquisition costs Internally developed IT-systems Other intangible assets Total Goodwill ) Internally developed IT-systems Other intangible assets Total Opening balance 4,699 6,022 6,035 2,875 19,631 1,377 5,420 862 7,659 Additions from acquisitions and capitalisations 98 582 4 684 505 0 505 Reclassifications 2 2 Retirements and disposals 179 89 283 551 84 90 174 Change in exchange rates 62 54 10 6 132 3 2 5 Acquisition value 4,582 6,174 6,538 2,600 19,894 1,377 5,843 775 7,995 Opening balance 5,157 4,106 2,559 11,823 1,377 3,737 769 5,883 Current year’s amortisations 231 581 101 912 506 43 550 Reclassifications 1 1 Retirements and disposals 80 272 352 77 79 157 Change in exchange rates 40 5 1 46 2 2 4 Accumulated depreciations 5,427 4,612 2,389 12,428 1,377 4,168 735 6,280 TOTAL 4,582 747 1,926 212 7,466 0 1,675 40 1,714 1) Goodwill has an indefinite useful life. All other intangible assets have a definite useful life. Amortisation methods are described in note 1. 2020 Opening balance 4,792 6,042 5,551 3,316 19,701 1,377 5,029 846 7,252 Additions from acquisitions and capitalisations 74 612 5 690 509 509 Reclassifications and mergers 6 6 20 20 Retirements and disposals 115 380 495 115 115 Change in exchange rates 93 94 20 59 266 4 4 8 Acquisition value 4,699 6,022 6,035 2,875 19,631 1,377 5,420 862 7,659 Opening balance 4,991 3,653 2,872 11,515 1,377 3,308 692 5,377 Current year’s amortisations 236 502 110 849 452 48 500 Impairments reversed 25 25 Reclassifications and mergers 6 6 8 32 23 Retirements and disposals 9 380 389 11 11 Change in exchange rates 69 9 49 127 4 3 7 Accumulated depreciations 5,157 4,106 2,559 11,823 1,377 3,737 769 5,883 TOTAL 4,699 865 1,929 316 7,808 0 1,683 93 1,776 Goodwill The Cash Generating Units (CGU) structure is aligned with the business unit (BU) combined with geography to reflect the importance of steering and measuring the customer-oriented organisation. CGUs Acquisition year Opening balance Change in exchange rates Closing balance Change in exchange rates Impairment Closing balance Card, Norway & Denmark ) Life Sweden 19961997 , , , Investment Management Sweden 19971998 1,504 1,504 1,504 TOTAL 4,792 4,699 4,582 1) The CGU:s are presented together since both acquisitions are related to the Eurocard business. Impairment test 2021 Result of impairment test The yearly impairment test for was performed in the fourth quarter. The impairment test did not result in any indication of impairment for the CGUs Card Denmark, Life Sweden and Investment Management Sweden. For the CGU Card Norway, the recoverable amount was SEK ,m which was less than the car- rying amount SEK ,m. Hence an impairment loss of SEK m has been rec- ognised in segment Corporate & Private Customers and allocated as a reduction of the carrying amount of the goodwill. After the reduction, the carrying amount of the goodwill for this CGU is SEK m. Earnings before amortisations has decreased compared to previous estimates. The main explanatory factor was the delayed recovery of corporate card fees in the wake of the Covid pan- demic. The earnings before amortisation is deemed to recover by the mid of the new projection period. Estimates and assumptions used: future cash flows The impairment test on goodwill is based on value in use and builds on the busi- ness plan for and projected cash flows for . The long- term growth is based on expectation on inflation . per cent. The allocated capital is derived from the group’s internal capital allocation model that has been aligned with the regulatory capital requirements including the manage- ment buffer. The cash flows in the business plan start with the assumptions from the most recent Nordic Outlook published. The main assumptions are; GDP change in Sweden from . per cent to . per cent over three years and other Nordic countries excluding Sweden from . per cent to . per cent; inflation in Sweden . per cent to . per cent and in Other Nordic countries from . per cent to . per cent. The Swedish repo rate is assumed to be . per cent at the end of . Estimates and assumptions used: Cost of Equity (CoE) – discount rate The discount rate used is . per cent post-tax for SEB Group and is determined based on information from external sources and applied to all CGUs. Sensitivities An increase of one percentage of the discount rate (CoE), a decrease of the average growth rates by one percentage point for earnings before amortisa- tions during the projection period and a decrease of one percentage point of the long term growth was applied in the sensitivity analysis. The sensitivity analysis carried out did not result in any indication of impairment for the CGUs Card Den- mark, Life Sweden and Investment Management Sweden. Financial statements—Notes 164 — SEB Annual and Sustainability Report 2021 Note 23 continuedIntangible assets Impairment test 2020 Result of impairment test The yearly impairment test for was performed in the fourth quarter. The impairment test did not result in any indication of impairment. Estimates and assumptions used: future cash flows The impairment test on goodwill is based on value in use and builds on the busi- ness plan for and projected cash flows for . The long- term growth is based on expectations on inflation . per cent. The allocated capital is derived from the group’s internal capital allocation model that has been aligned with the regulatory capital requirements including the manage- ment buffer. The cash flows in the business plan starts with the assumptions from the most recent Nordic Outlook published. The main assumptions are; GDP growth in Sweden from . per cent to . per cent over three years and other Nordic countries excluding Sweden from . per cent to . per cent; inflation in Sweden . per cent to . per cent and in Other Nordic countries from . per cent to . per cent. The repo rate in Sweden is assumed to be . per cent end of . Estimates and assumptions used: Cost of Equity (CoE) – discount rate The discount rate used is . per cent post-tax for SEB Group and is deter- mined based on information from external sources and applied on all CGUs. Sensitivities An increase of one percentage of the discount rate (CoE), a decrease of the average growth rates by one percentage point for earnings before amortisa- tions during the projection period and a decrease of one percentage point of the long term growth was applied in the sensitivity analysis. With these changes in key assumptions, the carrying amount for the CGU Card Norway would exceed the recoverable amount. Earnings before amortisations in the beginning of the projection period has decreased compared to previous estimates. The main explanatory factor was card fees which decreased significantly with the lower customer activity levels in the wake of the Covid pandemic. The caution among customers is expected to ease after vaccine rollout why the earnings before amortisation is deemed to recover by the mid of the projection period. The recoverable amount for the CGU Card Norway exceeds the carrying amount by SEK m. The recoverable amount would be equal to the carrying amount should the discount rate (CoE) applied be . per cent or the annual growth rate applied be per cent. 24 Properties and equipment Group Parent company Equipment Properties for own operations Total Equipment Equipment leased to clients ) Properties for own operations Total Opening balance 3,036 22 3,059 2,296 42,180 2 44,479 Additions from acquisitions and capitalisations 304 1 305 237 6,237 1 6,473 Reclassifications 12 0 12 Retirements and disposals 186 0 187 58 8,755 8,813 Change in exchange rates 48 2 50 50 0 50 Acquisition value 3,189 26 3,215 2,525 39,662 2 42,190 Opening balance 1,765 9 1,773 1,250 15,183 0 16,434 Current year’s depreciations 377 0 378 293 4,783 5,076 Current year’s impairments 0 0 Reclassifications 0 0 0 Retirements and disposals 179 0 179 53 5,105 5,158 Change in exchange rates 30 1 31 36 325 0 288 Accumulated depreciations 1,993 10 2,003 1,527 14,537 0 16,064 TOTAL 1,196 16 1,212 999 25,125 2 26,126 2020 Opening balance 3,042 30 3,072 2,029 44,910 2 46,941 Additions from acquisitions and capitalisations 341 1 342 183 5,042 1 5,226 Reclassifications and mergers 20 0 20 169 169 Retirements and disposals 224 1 225 13 7,772 7,785 Change in exchange rates 104 7 111 72 0 72 Acquisition value 3,036 22 3,059 2,296 42,180 2 44,479 Opening balance 1,692 12 1,704 981 15,736 16,717 Current year’s depreciations 352 1 354 265 4,814 5,079 Reclassifications and mergers 1 0 1 63 63 Retirements and disposals 207 1 208 9 5,947 5,956 Change in exchange rates 72 3 75 50 580 530 Accumulated depreciations 1,765 9 1,773 1,250 15,183 16,434 TOTAL 1,272 14 1,286 1,046 26,997 2 28,045 1) Equipment leased to clients are recognised as financial leases and presented as loans in the group. See note 49. 25 Other assets Group Parent company Trade receivables 1,838 1,342 1,289 1,409 Client receivables 12,105 9,764 11,432 9,204 Other assets 7,057 5,388 7,859 5,806 TOTAL 21,001 16,494 20,580 16,418 SEB Annual and Sustainability Report 2021 — 165 26 Prepaid expenses and accrued income Group Parent company Prepaid expenses 2,193 1,764 2,168 1,925 Accrued income 492 462 364 336 Other 29 16 286 266 TOTAL 2,714 2,242 2,818 2,527 27 Deposits Group Parent company Deposits 14,399 47,134 14,398 47,134 Deposits from central banks 14,399 47,135 14,398 47,134 Deposits 57,545 48,290 68,759 85,707 Margins of safety 1,439 14,225 1,341 13,386 Repos 1,824 1,604 778 1,604 Registered bonds 1) 56 Deposits from credit institutions 60,808 64,174 70,878 100,697 General governments 20,276 16,976 10,996 8,014 Financial corporations 368,304 284,796 374,576 290,241 Non-financial corporations 672,616 604,743 597,941 535,887 Households 439,281 382,852 325,425 286,121 Margins of safety 87,854 71,281 87,839 71,297 Repos 7,713 7,272 7,713 7,272 Registered bonds 1) 1,406 3,307 Deposits and borrowings from the public 1,597,449 1,371,227 1,404,490 1,198,833 TOTAL 1,672,655 1,482,536 1,489,766 1,346,663 1) Of which SEK 1,406m 3,362) at Fair Value Through Profit or Loss Designated (FVDPL) for the group. The group’s contractual liability is SEK 1,250m 2,922). Difference between carrying amount and the amount the company is contractually obligated to pay to holders of registered bonds at maturity are, for the group SEK 156m 441). The accumulated impact from reflecting the group’s own credit standing in the fair value measurement amounts to SEK 11m 162), of which SEK 173m (8) relates to 2021. For registered bonds at Fair Value Through Profit or Loss Designated (FVDPL) change in fair value attributable to change in credit risk is determined, by first determining the changes due to market conditions which give rise to market risk, and then deducting those changes from the total change in fair value of the registered bonds. Market conditions which give rise to market risk include changes in the benchmark interest rate. The company believes that this approach most faithfully represents the amount of change in fair value due to own credit risk, as the changes in factors contrib- uting to the fair value of the registered bonds other than changes in the bench- mark interest rate are not deemed to be significant. 28 Liabilities to policyholders Financial liabilities for which the customers bear the investment risk, investment contracts ) Group Opening balance 332,392 317,574 Change in investment contract provisions 2) 89,016 16,692 Change in exchange rates 2,818 1,874 TOTAL 424,226 332,392 1) Insurance provisions where the policyholders are carrying the risk. The liabilities and the underlying assets are reported at fair value mandatory through profit or loss. 2) The net of premiums received during the year, return on investment funds less payments to the policyholders and deduction of fees and policyholders’ tax. Liabilities to policyholders, insurance contracts Group Opening balance 29,624 26,547 Change in other insurance contract provisions 1) 4,959 3,168 Change in exchange rates 39 90 TOTAL 34,623 29,624 1) The net of premiums received during the year, allocated return on investment funds less payments to the policyholders and deduction of fees and policyholders’ tax. Financial statements—Notes 166 — SEB Annual and Sustainability Report 2021 29 Debt securities issued Group Parent company Senior bonds 1) 120,516 151,118 120,439 151,042 Senior non-preferred bonds 30,250 20,500 30,250 20,500 Covered bonds 291,478 333,756 291,478 333,756 Commercial Papers/Certificates of Deposits 287,861 244,128 287,861 244,117 TOTAL 730,106 749,502 730,028 749,415 1) Of which SEK 10,453m 13,618) at Fair Value Through Profit or Loss Designated (FVDPL) for the group and 10,376m 13,542) at Fair Value Through Profit or Loss Designated (FVDPL) for the parent company. The group’s contractual liability is SEK 9,946m 13,848) and for the parent company SEK 9,870m 13,773). Difference between carrying amount and the amount the company is contractually obligated to pay to holders of issued securities at maturity are, for the group SEK 506m (231) and for the parent company SEK 506m (232). The accumulated impact from reflecting the group’s own credit standing in the fair value measurement amounts to SEK 80m 110), of which SEK 30m relates to 2021 97). The correspon- ding amount for the parent company is SEK 80m 110), of which SEK 30m relates to 2021 97). For issued securities at Fair Value Through Profit or Loss Designated (FVDPL) change in fair value attributable to change in credit risk is determined, by first determining the changes due to market conditions which give rise to market risk, and then deducting those changes from the total change in fair value of the issued securities. Market conditions which give rise to market risk include changes in the benchmark interest rate. Fair value movements on the embed- ded derivatives are excluded from the assessment of market risk fair value changes. The company believes that this approach most faithfully represents the amount of change in fair value due to own credit risk, as the changes in factors contributing to the fair value of the issued securities other than changes in the benchmark interest rate are not deemed to be significant. 30 Short positions Group Parent company Equity instruments 14,405 10,873 14,405 10,873 Debt securities 20,164 19,536 20,164 19,536 TOTAL 34,569 30,409 34,569 30,409 31 Other liabilities Group Parent company Trade payables 1,944 1,530 970 870 Client payables 6,701 11,599 5,119 10,488 Lease liabilities 5,527 5,639 Other liabilities 28,714 15,848 19,521 12,244 TOTAL 42,886 34,616 25,610 23,601 32 Accrued expenses and prepaid income Group Parent company Accrued expenses 5,048 4,289 3,792 3,232 Prepaid income 774 884 129 137 Other 25 35 21 30 TOTAL 5,848 5,208 3,941 3,399 SEB Annual and Sustainability Report 2021 — 167 33 Provisions Group Parent company Other restructuring and redundancy reserves 53 124 48 59 Provisions for Financial guarantees and Loan commitments (note 18) 640 653 529 525 Other provisions 68 213 59 56 TOTAL 761 990 636 640 Other restructuring and redundancy reserves Opening balance 124 142 59 37 Additions 10 51 10 51 Unused amounts reversed 18 Other movements 63 67 21 29 Change in exchange rates 1 2 TOTAL 53 124 48 59 The main part of the reserve will cover redundancy costs to be used within three years. Other provisions Opening balance 213 499 56 Additions 5 8 Amounts used 3 2 Unused amounts reversed 147 294 Other movements 1 2 4 56 Change in exchange rates 1 TOTAL 68 213 59 56 Other provisions mainly consist of costs for re-organisation within the group to be used within four years and unsettled claims covering all operating segments. 34 Subordinated liabilities Group Parent company Debenture loans 14,726 19,056 13,826 18,606 Debenture loans, perpetual 13,555 12,279 13,555 12,279 Change in the value due to hedge accounting at fair value 145 695 145 695 Accrued interest 123 257 123 257 TOTAL 28,549 32,287 27,649 31,837 Debenture loans Currency Original nom. amount Book value Rate of interest, % 20142026 EUR 1,000 5,121 2.500 20162028 EUR 850 8,705 0.750 Total parent company 13,826 Debenture loans issued by other subsidiaries 900 TOTAL 14,726 Debenture loans, perpetual Currency Original nom. amount Book value Rate of interest, % 2017 USD 600 5,422 5.625 2019 USD 900 8,133 5.125 TOTAL 13,555 Financial statements—Notes 168 — SEB Annual and Sustainability Report 2021 35 Untaxed reserves 1) Parent company Depreciation in excess of plan on office equipment/leased assets 17,100 18,590 TOTAL 17,100 18,590 1) In the balance sheet of the group untaxed reserves are reclassified partly as deferred tax liability and partly as restricted equity. Parent company Excess depreciation Total Opening balance 19,875 19,875 Reversals 1,285 1,285 Closing balance 2020 18,590 18,590 Reversals 1,490 1,490 Closing balance 2021 17,100 17,100 36 Fair value measurement of assets and liabilities Assets Group Parent company Quoted prices in active markets (Level ) Valuation tech nique using observ able inputs (Level ) Valuation technique using non- observable inputs (Level ) Total Quoted prices in active markets (Level ) Valuation tech nique using observ able inputs (Level ) Valuation technique using non- observable inputs (Level ) Total Loans 85,032 70 85,102 85,032 70 85,102 Debt securities 95,783 101,575 49 197,407 69,627 98,821 49 168,497 Equity instruments 100,548 558 19,635 120,742 90,372 448 5,329 96,149 Financial assets for which the customers bear the investment risk 404,178 10,545 7,774 422,497 Derivatives – Interest related 189 56,518 303 57,010 189 51,692 303 52,184 Derivatives – Equity related 896 3,385 2 4,283 896 3,385 2 4,283 Derivatives – Currency related 29 36,151 36,180 30 36,251 36,281 Derivatives – Credit related 639 639 639 639 Derivatives – Commodities related 26,966 26,966 26,966 26,966 Derivatives – Hedge accounting 973 973 973 973 Investment in associates 1) 80 622 702 80 622 702 TOTAL 601,704 322,341 28,456 952,501 161,194 304,207 6,375 471,775 Liabilities Deposits 10,169 10,169 8,491 8,491 Financial liabilities for which the customers bear the investment risk 405,907 10,545 7,774 424,226 Liabilities to policyholders 33,634 988 34,623 Debt securities issued 10,453 10,453 10,376 10,376 Short positions debt securities 499 19,665 20,164 499 19,665 20,164 Short positions equity instruments 14,388 18 14,405 14,388 18 14,405 Derivatives – Interest related 106 49,027 329 49,461 105 44,713 329 45,147 Derivatives – Equity related 728 7,357 8,085 728 7,357 8,085 Derivatives – Currency related 38 26,864 26,902 39 26,501 26,541 Derivatives – Credit related 584 584 584 584 Derivatives – Commodities related 32,692 32,692 32,692 32,692 Derivatives – Hedge accounting 449 449 449 449 Other financial liabilities 4 5,717 5,721 4 5,717 5,721 TOTAL 455,304 174,527 8,103 637,934 15,763 156,562 329 172,653 1) Venture capital activities designated at fair value through profit and loss. SEB Annual and Sustainability Report 2021 — 169 Note 36 continuedFair value measurement of assets and liabilities Assets Group Parent company Quoted prices in active markets (Level ) Valuation tech nique using observ able inputs (Level ) Valuation technique using non- observable inputs (Level ) Total Quoted prices in active markets (Level ) Valuation tech nique using observ able inputs (Level ) Valuation technique using non- observable inputs (Level ) Total Loans 120,124 120,124 120,124 120,124 Debt securities 100,088 153,154 253,242 74,205 150,182 224,387 Equity instruments 65,762 3,117 13,360 82,240 58,120 2,930 2,775 63,825 Financial assets for which the customers bear the investment risk 324,650 5,835 465 330,950 Derivatives – Interest related 47 85,337 425 85,810 47 80,293 425 80,765 Derivatives – Equity related 900 2,597 3,497 899 2,597 3,496 Derivatives – Currency related 56 58,161 58,217 56 57,705 57,761 Derivatives – Credit related 558 558 558 558 Derivatives – Commodities related 13,485 13,485 13,485 13,485 Derivatives – Hedge accounting 3,343 3,343 3,326 3,326 Investment in associates 1) 60 526 586 60 526 586 TOTAL 491,563 445,711 14,776 952,051 133,387 431,200 3,726 568,313 Liabilities Deposits 12,238 12,238 8,876 8,876 Financial liabilities for which the customers bear the investment risk 326,166 5,773 453 332,392 Liabilities to policyholders 28,511 1,113 29,624 Debt securities issued 13,618 13,618 13,542 13,542 Short positions debt securities 13,300 6,236 19,536 13,300 6,236 19,536 Short positions equity instruments 10,873 10,873 10,873 10,873 Derivatives – Interest related 84 65,052 406 65,543 84 61,124 406 61,614 Derivatives – Equity related 673 8,284 8,957 672 8,283 8,955 Derivatives – Currency related 49 71,481 71,530 51 71,379 71,430 Derivatives – Credit related 1,328 1,328 1,328 1,328 Derivatives – Commodities related 13,458 13,458 13,458 13,458 Derivatives – Hedge accounting 745 745 744 744 Other financial liabilities 123 621 744 123 621 744 TOTAL 379,779 199,949 859 580,586 25,103 185,591 406 211,100 1) Venture capital activities designated at fair value through profit and loss. Fair value measurement The objective of the fair value measurement is to arrive at the price at which an orderly transaction would take place between market participants at the meas- urement date under current market conditions. The group has an established control environment for the determination of fair values of financial instruments that includes a review, independent from the business, of valuation models and prices. If the validation principles are not adhered to, the Head of Group Finance shall be informed. Exceptions of material and principal importance require approval from the GRMC (Group Risk Meas- urement Committee) and the ARC (Accounting Reporting Committee). In order to arrive at the fair value of a financial instrument SEB uses different methods; quoted prices in active markets, valuation techniques incorporating observable data and valuation techniques based on internal models. For disclo- sure purposes, financial instruments carried at fair value are classified in a fair value hierarchy according to the level of market observability of the inputs. Group Risk classifies and continuously reviews the classification of financial instruments in the fair value hierarchy. The valuation process is the same for financial instruments in all levels. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. The objective is to arrive at a price at which a transaction without modification or repackaging would occur in the principal market for the instrument to which SEB has immedi- ate access. Fair value is generally measured for individual financial instruments, in addi- tion portfolio adjustments are made to cover the credit risk. To reflect counter- party risk and own credit risk in OTC derivatives, adjustments are made based on the net exposure towards each counterpart. These adjustments are calcu- lated on a counterparty level based on estimates of exposure at default, proba- bility of default and recovery rates. Probability of default and recovery rate information is generally sourced from the CDS markets. For counterparties where this information is not available, or considered unreliable due to the nature of the exposure, alternative approaches are taken where the probability of default is based on generic credit indices for specific industry and/or rating. The impact from these adjustments are shown in note . When valuing financial liabilities at fair value own credit standing is reflected. Fair values of financial assets and liabilities by class can be found in note . In order to arrive at the fair value of investment properties a market partici- pant’s ability to generate economic benefit by using the asset in its highest and best use are taken into account. The highest and best use takes into account the use of the asset that is physically possible, legally permissible and financially feasible. The current use of the investment properties in SEB is in accordance with the highest and best use. The valuation of investment properties is described in the accounting policies in note . The valuation of the investment properties is performed semi-annually, they are presented and approved by the board in each real estate company. The valuation principles used in all entities are in accordance with regulations provided by the local Financial Supervisory Authorities (FSA) which is in accordance with international valuation principles and in accordance with IFRS. The fair value of the unit linked financial liabilities is determined using the fair value of the financial assets linked to the financial liabilities attributed to the policyholder on the balance sheet date. However, if the liability is subject to a surrender option, the fair value of the financial liability is never less than the amount payable on surrender. Any differences between assets and liabilities are due to premiums paid that have not yet been invested in funds. Changes inthe value of unit linked insurance does not affect SEB as they belong to the policyholders. Financial statements—Notes 170 — SEB Annual and Sustainability Report 2021 Note 36 continuedFair value measurement of assets and liabilities Level 1: Quoted market prices Valuations in Level are determined by reference to unadjusted quoted market prices for identical instruments in active markets where the quoted prices are readily available and the prices represent actual and regularly occurring mar- ket transactions on an arm’s length basis. Examples of Level financial instruments are listed equity securities, debt securities, and exchange-traded derivatives. Instruments traded in an active market for which one or more market participants provide a binding price quo- tation on the balance sheet date are also examples of Level financial instru- ments. Level 2: Valuation techniques with observable inputs In Level valuation techniques, all significant inputs to the valuation models are observable either directly or indirectly. Level valuation techniques include using discounted cash flows, option pricing models, recent transactions and the price of another instrument that is substantially the same. Examples of observable inputs are foreign currency exchange rates, binding securities price quotations, market interest rates (STIBOR, LIBOR, etc.), volatili- ties implied from observable option prices for the same term and actual trans- actions with one or more external counterparts executed by SEB. An input can transfer from being observable to being unobservable during the holding period due to e.g. illiquidity of the instrument. Examples of Level financial instruments are most OTC derivatives such as options and interest rate swaps based on the LIBOR swap rate or a foreign- denominated yield curve. Other examples are instruments for which SEB recently entered into transactions with third parties and instruments for which SEB interpolates between observable variables. Level 3: Valuation techniques with significant unobservable inputs Level valuation techniques incorporate significant inputs that are unobserva- ble. These techniques are generally based on extrapolating from observable inputs for similar instruments, analysing historical data or other analytical tech- niques. Examples of Level financial instruments are more complex OTC deriva- tives, long term options for which the volatility is extrapolated or derivatives that depend on an unobservable correlation. Other examples are instruments for which there is currently no active market or binding quotes, such as unlisted equity instruments and private equity holdings. If the fair value of financial instruments includes more than one unobserva- ble input, the unobservable inputs are aggregated in order to determine the classification of the entire instrument. The level in the fair value hierarchy within which a financial instrument is classified is determined on the basis of the lowest level of input that is significant to the fair value in its entirety. Significant transfers and reclassifications between levels Transfers between levels may occur when there are indications that market conditions have changed, e.g. a change in liquidity. The Valuation/Pricing com- mittee of each relevant division decides on material shifts between levels. At the end of Q some improvements in the classification methodology was imple- mented and lead to a transfer within Equity instruments from Level and Level into Level in the amount of SEK .bn. The largest open market risk within Level financial instruments remains in the traditional life insurance invest- ment portfolios within the insurance business. Changes in level 3 Group, Assets Opening balance Gain/loss in Income statement ) ) Purchases Sales Settlements Transfers into Level Transfers out of Level Change in exchange rates Closing balance Loans 23 92 1 70 Debt securities 0 10 39 49 Equity instruments 13,360 3,797 3,994 2,096 498 19 101 19,635 Financial assets for which the customers bear the investment risk 465 60 4,215 28 6,373 3,267 76 7,774 Derivatives – Interest related 425 56 45 111 303 Derivatives – Equity related 2 2 Investment in associates 1) 526 67 120 91 622 TOTAL 14,776 3,725 8,478 2,215 111 6,910 3,286 179 28,456 Liabilities Financial liabilities for which the customers bear the investment risk 453 58 4,208 25 6,384 3,265 77 7,774 Derivatives – Interest related 406 13 45 110 1 329 TOTAL 859 71 4,208 20 110 6,384 3,265 78 8,103 Group, 2020 Assets Opening balance Gain/loss in Income statement ) ) Purchases Sales Settlements Transfers into Level Transfers out of Level Change in exchange rates Closing balance Debt securities 5 5 0 Equity instruments 13,050 912 3,128 1,782 7 116 13,360 Financial assets for which the customers bear the investment risk 631 153 7 10 165 158 17 465 Derivatives – Interest related 478 250 65 132 425 Investment in associates 1) 381 67 78 526 TOTAL 14,544 1,248 3,278 1,797 132 165 165 133 14,776 Liabilities Financial liabilities for which the customers bear the investment risk 625 154 8 165 158 17 453 Short positions equity instruments 41 53 11 1 0 Derivatives – Interest related 342 102 104 69 3 406 TOTAL 1,008 105 104 72 3 165 158 16 859 1) Fair value gains and losses recognised in the income statement are included in Net financial income and Net other income. 2) Gains/losses recognised in the income statement relating to instruments held as at 31 December are SEK 3,723m 1,044). SEB Annual and Sustainability Report 2021 — 171 Note 36 continuedFair value measurement of assets and liabilities Changes in level 3 Parent company, Assets Opening balance Gain/loss in Income statement ) ) Purchases Sales Settlements Transfers into Level Transfers out of Level Change in exchange rates Closing balance Loans 23 92 1 70 Debt securities 10 39 49 Equity instruments 2,762 1,040 869 84 643 99 5,329 Derivatives – Interest related 425 56 45 111 303 Derivatives – Equity related 2 2 Investment in associates 1) 526 67 120 91 622 TOTAL 3,713 1,028 1,138 175 111 682 0 100 6,375 Liabilities Derivatives – Interest related 406 13 45 109 329 TOTAL 406 13 45 109 329 Parent company, 2020 Assets Opening balance Gain/loss in Income statement ) ) Purchases Sales Settlements Transfers into Level Transfers out of Level Change in exchange rates Closing balance Equity instruments 2,806 9 152 72 7 108 2,762 Derivatives – Interest related 478 250 65 132 425 Investment in associates 1) 381 67 78 526 TOTAL 3,665 192 295 72 132 7 108 3,713 Liabilities Short positions equity instruments 41 52 11 0 Derivatives – Interest related 342 102 104 69 3 406 TOTAL 383 50 104 80 3 406 1) Fair value gains and losses recognised in the income statement are included in Net financial income and Net other income. 2) Gains/losses recognised in the income statement relating to instruments held as at 31 December are SEK 968m (142). Sensitivity of Level 3 financial instruments to unobservable inputs The table below illustrates the potential Profit or Loss impact of the relative uncertainty in the fair value of assets and liabilities that for their valuation are dependent on unobservable inputs. The sensitivity to unobservable inputs is assessed by altering the assumptions to the valuation techniques, illustrated below by changes in index-linked swap spreads, implied volatilities, credit spreads or comparator multiples. It is unlikely that all unobservable inputs would be simultaneously at the extremes of their ranges of reasonably possible alternatives. There have been no significant changes during . The largest open market risk within Level financial instruments is found within the insur- ance business. Group Assets Liabilities Net Sensitivity Assets Liabilities Net Sensitivity Derivative instruments 1) 4) 303 325 22 36 427 406 21 55 Debt instrument 3) 119 119 6 Equity instruments 2) 5) 6) 4,137 4,137 680 2,251 2,251 419 Investments in associates 2) 1,814 1,814 363 1,034 1,034 207 Insurance holdings – Financial instruments 3) 4) 6) 7) 14,176 14,176 1,847 10,367 10,367 1,230 1) Volatility valuation inputs for Bermudan swaptions are unobservable. Volatilities used for ordinary swaptions are adjusted further in order to reflect the additional uncertainty associa- ted with the valuation of Bermudan style swaptions. The sensitivity is calculated from shift in implied volatilities and aggregated from each currency and maturity bucket. 2) Valuation is estimated in a range of reasonable outcomes. Sensitivity analysis is based on 20 per cent shift in market values. 3) Sensitivity for debt securities is generally quantified as shift in market values of 5 per cent except for credit opportunity 10 per cent and for distressed debt and structured credits 15 per cent. 4)Shift in implied volatility by 10 per cent. 5) Sensitivity analysis is based on a shift in market values of hedge funds 5 per cent, private equity of 20 per cent, structured credits 15 per cent. 6) Sensitivity from a shift of investment properties/real estate funds market values of 10 per cent and infrastructure/infrastructure funds market values of 20 per cent. 7) The sensitivity show changes in the value of the insurance holdings which do not at all times affect the P/L of the group since any surplus in the traditional life portfolios are consumed first. Financial statements—Notes 172 — SEB Annual and Sustainability Report 2021 37 Financial assets and liabilities by class Group, Assets Book value Fair value FVHFT FVMPL FVDPL Hedge instru- ments AmC Total Quoted prices in active markets (Level ) Valuation technique using observable inputs (Level ) Valuation technique using non-observa- ble inputs (Level) Total Loans 1) 82,643 2,459 2,262,909 2,348,011 24,663 91,611 2,230,006 2,346,280 Debt securities 53,687 135,513 8,207 8,543 205,950 95,783 109,217 920 205,919 Equity instruments 89,284 31,458 120,742 100,548 558 19,635 120,742 Financial assets for which the customers bear the investment risk 422,497 422,497 404,178 10,545 7,774 422,497 Derivatives 125,078 973 126,051 1,115 124,632 305 126,051 Other 16,282 16,282 2,157 14,126 16,282 Financial assets 350,692 591,927 8,207 973 2,287,735 3,239,534 628,443 336,563 2,272,766 3,237,772 Other assets (non-financial) 64,696 TOTAL 350,692 591,927 8,207 973 2,287,735 3,304,230 Liabilities Deposits 8,491 1,678 1,662,486 1,672,655 310 16,554 1,656,239 1,673,103 Financial liabilities for which the customers bear the instru- ments investment risk 424,226 424,226 405,907 10,545 7,774 424,226 Debt securities issued 10,453 748,202 758,655 764,955 900 765,856 Short positions debt securities 20,164 20,164 499 19,665 20,164 Short positions equity instruments 14,405 14,405 14,388 18 14,405 Derivatives 117,724 449 118,173 872 116,973 329 118,173 Other 5,721 702 14,539 20,961 194 5,823 14,946 20,962 Financial liabilities 166,505 437,059 449 2,425,227 3,029,240 422,170 934,532 1,680,188 3,036,890 Liabilities to policyholders 34,623 Other liabilities (non-financial) 47,140 Total equity 193,228 TOTAL 166,505 437,059 449 2,425,227 3,304,230 1) Includes Cash balances at central banks SEK 437,187m. Group, Assets Book value Fair value FVHFT FVMPL FVDPL Hedge instru- ments AmC Total Quoted prices in active markets (Level ) Valuation technique using observable inputs (Level ) Valuation technique using non-observa- ble inputs (Level) Total Loans 1) 119,997 127 2,026,082 2,146,206 17,280 127,740 2,012,705 2,157,725 Debt securities 115,522 129,880 7,840 12,191 265,433 100,607 164,648 0 265,254 Equity instruments 58,448 23,792 82,240 65,762 3,117 13,360 82,240 Financial assets for which the customers bear the investment risk 330,950 330,950 324,650 5,835 465 330,950 Derivatives 161,566 3,343 164,909 1,003 163,481 425 164,909 Other 496 13,479 13,975 2,155 11,820 13,975 Financial assets 455,533 484,749 8,336 3,343 2,051,751 3,003,712 511,457 464,821 2,038,775 3,015,052 Other assets (non-financial) 36,720 TOTAL 455,533 484,749 8,336 3,343 2,051,751 3,040,432 Liabilities Deposits 8,876 3,362 1,470,297 1,482,536 410 20,352 1,462,539 1,483,301 Financial liabilities for which the customers bear the instru- ments investment risk 332,392 332,392 326,166 5,773 453 332,392 Debt securities issued 0 13,618 768,172 781,789 0 794,016 461 794,477 Short positions debt securities 19,536 19,536 13,300 6,236 0 19,536 Short positions equity instruments 10,873 10,873 10,873 0 0 10,873 Derivatives 160,816 745 161,561 806 160,349 406 161,561 Other 744 19,084 19,828 204 782 18,889 19,875 Financial liabilities 200,845 349,372 745 2,257,553 2,808,515 351,759 987,509 1,482,748 2,822,015 Liabilities to policyholders 29,624 Other liabilities (non-financial) 30,349 Total equity 171,943 TOTAL 200,845 349,372 745 2,257,553 3,040,432 1) Includes Cash balances at central banks SEK 321,621m. SEB Annual and Sustainability Report 2021 — 173 Note 37 continuedFinancial assets and liabilities by class Parent company, Assets Book value FVHFT FVMPL FVDPL Hedge instruments AmC Total Loans 1) 82,643 2,459 2,002,028 2,087,130 Debt securities 53,527 114,970 9,944 178,441 Equity instruments 89,284 6,865 50,066 146,215 Derivatives 120,353 973 121,326 Other 13,904 13,904 Financial assets 345,806 124,294 973 2,075,942 2,547,015 Other assets (non-financial) 40,818 TOTAL 345,806 124,294 973 2,075,942 2,587,834 Liabilities Deposits 8,491 1,481,275 1,489,766 Debt securities issued 10,376 747,301 757,677 Derivatives 113,048 449 113,497 Other 40,290 7,142 47,432 Financial liabilities 161,829 10,376 449 2,235,718 2,408,371 Other liabilities (non-financial) 24,549 Total equity and untaxed reserves 154,913 TOTAL 161,829 10,376 449 2,235,718 2,587,834 1) Includes Cash balances at central banks SEK 371,465m. Parent company, Assets Book value FVHFT FVMPL FVDPL Hedge instruments AmC Total Loans 1) 119,997 127 1,814,593 1,934,717 Debt securities 115,411 108,976 15,541 239,928 Equity instruments 58,448 5,377 46,356 110,181 Derivatives 156,037 3,343 159,380 Other 12,049 12,049 Financial assets 449,893 114,480 3,343 1,888,539 2,456,255 Other assets (non-financial) 40,854 TOTAL 449,893 114,480 3,343 1,888,539 2,497,110 Liabilities Deposits 8,876 1,337,788 1,346,664 Debt securities issued 13,542 767,710 781,252 Derivatives 156,784 745 157,529 Other 31,153 11,589 42,742 Financial liabilities 196,813 13,542 745 2,117,087 2,328,187 Other liabilities (non-financial) 16,427 Total equity and untaxed reserves 152,496 TOTAL 196,813 13,542 745 2,117,087 2,497,110 1) Includes Cash balances at central banks SEK 294,380m. SEB has classified its financial instruments by class taking into account the characteristics of the instruments: Loans and deposits includes financial assets and liabilities with fixed or determinable payments that are not quoted in an active market. Loans are further specified in note and f. Equity instruments includes shares, rights issues and similar contractual rights of other entities. Debt instruments includes contractual rights to receive or obligations to deliver cash on a predetermined date. These are further specified in note and f. Derivatives includes options, futures, swaps and other derived products held for trading and hedging purposes. These are further specified in note . Investment contracts include those assets and liabilities in the Life insurance operations where the policyholder is carrying the risk of the contractual agree- ment (is not qualified as an insurance contract under IFRS ). The Life insurance operations are further specified in note . Insurance contracts includes those assets and liabilities in the Life insurance operations where SEB is carrying the insurance risk of a contractual agreement (is qualified as an insurance contract under IFRS ). The Life insurance opera- tions are further specified in note . Other includes other financial assets and liabilities recognised in accordance with IFRS , i.e. Trade and client receivables and payables. Financial statements—Notes 174 — SEB Annual and Sustainability Report 2021 38 Assets and liabilities distributed by main currencies Group, SEK EUR USD GBP DKK NOK Other Total Cash and cash balances and loans to central banks 196,067 149,112 85,308 1,517 2,396 2,847 6,550 443,798 Loans to credit institutions 7,053 14,596 25,560 1,209 1,074 1,140 9,377 60,009 Loans to the public 1,093,327 395,385 148,026 43,181 83,785 64,038 18,620 1,846,362 Other financial assets 602,696 108,254 96,253 35,863 13,283 29,399 3,618 889,366 Other assets 19,994 40,275 2,386 305 1,103 295 339 64,696 TOTAL ASSETS 1,919,137 707,623 357,533 82,074 101,642 97,719 38,502 3,304,230 Deposits from central banks 16 2,750 6,529 5,103 14,399 Deposits from credit institutions 21,867 12,238 11,691 221 7,925 3,415 3,452 60,808 Deposits and borrowing from the public 791,024 408,979 223,630 54,551 24,780 69,416 25,069 1,597,449 Other financial liabilities 738,501 226,670 336,757 72,438 9,953 6,465 424 1,391,208 Other liabilities 14,794 12,628 4,980 4,348 2,795 6,550 1,045 47,140 Total equity 193,228 193,228 TOTAL LIABILITIES AND EQUITY 1,759,430 663,265 583,587 131,558 45,451 85,846 35,093 3,304,230 Group, 2020 Cash and cash balances and loans to central banks 124,990 150,428 38,839 158 981 5,436 6,578 327,409 Loans to credit institutions 5,389 8,948 18,483 1,788 761 1,758 13,664 50,791 Loans to the public 1,035,355 400,450 130,015 30,436 82,110 72,222 19,572 1,770,161 Other financial assets 575,781 104,405 78,415 24,417 27,017 41,134 4,182 855,351 Other assets 1,644 30,920 2,150 294 1,073 286 353 36,720 TOTAL ASSETS 1,743,159 695,152 267,902 57,093 111,943 120,836 44,348 3,040,432 Deposits from central banks 35,010 215 7,181 4,729 47,135 Deposits from credit institutions 17,182 12,650 8,695 78 9,307 14,495 1,767 64,174 Deposits and borrowing from the public 705,202 361,933 156,297 48,652 34,575 37,624 26,943 1,371,227 Other financial liabilities 677,198 270,450 315,430 25,493 16,270 13,074 2,425 1,320,341 Other liabilities 41,166 16,271 2,332 815 2,625 1,123 1,280 65,612 Total equity 171,943 171,943 TOTAL LIABILITIES AND EQUITY 1,647,701 661,519 489,935 75,039 62,778 66,317 37,144 3,040,432 Parent company, SEK EUR USD GBP DKK NOK Other Total Cash and cash balances at central banks 196,058 81,147 85,279 1,257 2,384 2,337 3,004 371,466 Loans to credit institutions 12,490 20,726 25,102 1,117 3,339 4,506 7,053 74,334 Loans to the public 1,068,408 225,807 147,521 43,108 81,060 58,385 17,042 1,641,332 Other financial assets 198,657 83,163 95,708 36,186 13,284 29,397 3,491 459,885 Other assets 6,432 27,693 2,368 248 1,002 2,626 447 40,817 TOTAL ASSETS 1,482,045 438,536 355,977 81,917 101,070 97,251 31,038 2,587,834 Deposits from central banks 16 2,750 6,529 5,103 14,398 Deposits from credit institutions 24,774 13,825 16,870 444 8,112 3,712 3,142 70,878 Deposits and borrowing from the public 800,121 217,452 218,374 54,750 24,710 69,246 19,836 1,404,490 Other financial liabilities 316,104 177,839 336,410 72,097 9,648 6,231 276 918,606 Other liabilities 6,905 3,117 4,891 173 2,316 6,138 1,010 24,549 Shareholders’ equity and untaxed reserves 154,913 154,913 TOTAL LIABILITIES AND EQUITY 1,302,833 414,983 583,075 127,464 44,786 85,327 29,367 2,587,834 Parent company, 2020 Cash and cash balances at central banks 124,967 121,632 38,801 967 2,179 5,846 294,391 Loans to credit institutions 9,050 25,571 17,954 1,258 2,384 7,429 7,380 71,027 Loans to the public 1,009,456 234,629 129,334 30,392 79,860 67,108 18,532 1,569,310 Other financial assets 266,466 80,256 77,584 24,810 27,012 41,135 4,267 521,530 Other assets 11,206 23,145 2,281 421 961 2,435 404 40,852 TOTAL ASSETS 1,421,144 485,232 265,954 56,881 111,184 120,285 36,429 2,497,110 Deposits from central banks 35,010 214 7,181 4,729 47,134 Deposits from credit institutions 19,605 41,125 12,779 808 9,402 14,823 2,153 100,697 Deposits and borrowing from the public 713,942 194,462 150,807 48,720 34,491 37,313 19,098 1,198,833 Other financial liabilities 378,402 230,522 315,398 25,471 16,273 13,064 2,394 981,523 Other liabilities 8,365 2,507 2,197 618 1,847 550 344 16,427 Shareholders’ equity and untaxed reserves 152,496 152,496 TOTAL LIABILITIES AND EQUITY 1,307,820 468,830 488,361 75,617 62,013 65,750 28,719 2,497,110 SEB Annual and Sustainability Report 2021 — 175 39 Current and non-current assets and liabilities Group Assets Current assets Non-current assets Total Current assets Non-current assets Total Cash and cash balances at central banks 439,344 439,344 323,776 323,776 Loans to central banks 4,454 4,454 3,633 3,633 Loans to credit institutions 55,031 4,977 60,009 46,213 4,579 50,791 Loans to the public 616,003 1,230,359 1,846,362 618,518 1,151,643 1,770,161 Debt securities 205,950 205,950 265,433 265,433 Equity instruments 120,742 120,742 82,240 82,240 Financial assets for which the customers bear the investment risk 422,497 422,497 330,950 330,950 Derivatives 126,051 126,051 164,909 164,909 Fair value changes of hedged items in a portfolio hedge of interest rate risk 496 496 Investments in subsidiaries, associates and joint ventures 1,510 1,510 1,272 1,272 Intangible assets 912 6,554 7,466 849 6,960 7,808 Properties and equipment 378 834 1,212 354 932 1,286 Right-of-use assets 844 4,235 5,079 5,141 5,141 Current tax assets 15,359 15,359 6,070 6,070 Deferred tax assets 675 675 444 444 Retirement benefit assets 23,804 23,804 7,287 7,287 Other assets 21,001 21,001 16,494 16,494 Prepaid expenses and accrued income 2,714 2,714 2,242 2,242 TOTAL 2,055,085 1,249,145 3,304,230 1,874,603 1,165,829 3,040,432 Liabilities Current liabilities Non-current liabilities Total Current liabilities Non-current liabilities Total Deposits from central banks and credit institutions 73,119 2,087 75,206 73,699 37,610 111,309 Deposits and borrowing from the public 1,591,808 5,641 1,597,449 1,361,872 9,355 1,371,227 Financial liabilities for which the customers bear the investment risk 19,343 404,883 424,226 16,812 315,580 332,392 Liabilities to policyholders 2,598 32,025 34,623 2,127 27,497 29,624 Debt securities issued 399,882 330,224 730,106 381,744 367,758 749,502 Short positions 34,569 34,569 30,409 30,409 Derivatives 118,173 118,173 161,561 161,561 Other financial liabilities 5,721 5,721 744 744 Fair value changes of hedged items in a portfolio hedge 702 702 Current tax liabilities 1,384 1,384 993 993 Deferred tax liabilities 10,354 10,354 7,212 7,212 Other liabilities 38,297 4,589 42,886 34,616 34,616 Accrued expenses and prepaid income 5,848 5,848 5,208 5,208 Provisions 761 761 990 990 Retirement benefit liabilities 445 445 414 414 Subordinated liabilities 5,500 23,048 28,549 10,375 21,912 32,287 TOTAL 2,296,944 814,059 3,111,002 2,080,160 788,329 2,868,489 Assets and liabilities are classified as current assets and current liabilities when they are cash or cash equivalents, are hold for trading purposes, are expected to be sold, settled or consumed in normal business, and are expected to be realised within twelve months. All other assets and liabilities are classified as non-current. 40 Risk disclosures SEB defines risk as the possibility of a negative deviation from an expected financial outcome. SEB’s profitability is directly dependent upon its ability to assess, manage and price the risks encountered, while maintaining an adequate capital and liquidity position to meet unforeseen events. The Board of Directors is responsible for setting the maximum acceptable levels of risks to be taken by the bank. The risk tolerance statements of the Board convey the direction and level of risk, funding structure, and necessary liquidity and capital buffers. SEB’s main risk is credit risk. Other risks that the group is exposed to include market risk, non-financial risks, business risk, insurance and pension risk, and liquidity risk. In order to cover the risks, SEB holds a capital buffer and liquidity reserves in case of unforeseen events. SEB strives to continuously identify and manage risks in its operations, both existing and emerging risks, in a designated risk management process. The aggregate risk profile of SEB is regularly moni- tored and reported to the Group Risk Committee (GRC) and the Board. In the annual capital adequacy process, the capital need of the group is evaluated based on the risk profile and future business strategy, taking into consideration the financial stability requirements of the regulators, debt investors, business counterparties and shareholders’ required rate of return. Further information about SEB’s risk, liquidity and capital management is available on pages , notes and and in SEB’s report under Pillar: Capital Adequacy and Risk Management Report (available on www.sebgroup.com). For more information about climate-related matters related to risk, see Sustainability report pages . Financial statements—Notes 176 — SEB Annual and Sustainability Report 2021 40a Credit risk Definition Credit risk is the risk of loss due to the failure of an obligor to fulfil its obligations towards SEB. The definition also comprises counterparty risk derived from the trading operations, country risk, settlement risk, and credit concentration risk. Credit risk is the main risk in SEB and arises in the lending and commitments to customers, including corporates, financial institutions, public sector entities, and private individuals. This is referred to as the credit portfolio. SEB’s total credit exposure consists of the credit portfolio as well as debt instruments. Risk management Credit policies and approval process The main principle in SEB’s general credit policy is that all lending is based on credit analysis and is proportionate to the customer’s cash flow and ability to repay. The customer shall be known to the bank and the purpose of the loan shall be fully understood. The business units take full responsibility of the credit risk until repayment. A credit approval is based on an evaluation of the customer’s creditworthi- ness and the type of credit. Relevant factors include the customer’s current and anticipated financial position and protection provided by covenants and collat- eral. A credit approval takes the proposed transaction into account as well as the customer’s total business with the bank. The credit decision also includes a risk classification of the customer based on this analysis. The process differs depending on the type of customer (e.g., retail, corporate or institutional), risk level, as well as size and type of transaction. For larger corporate customers, independent and professional credit analysis is particularly important, and the decisions are mostly taken by a credit committee. For private individuals and small businesses, the credit approval is often based on credit scoring models. Every credit decision of significance requires approval from an independent credit officers, one with chairman status. Credit decision-making is based on a hierarchical structure, with the Group Risk Committee (GRC) being the highest credit granting body, subject to limited exceptions. Below the GRC, there are divisional credit committees and, in turn, local credit committees depending on the location of the customer, with small approval authorities for certain bank officers. The approval mandates for each level are set on a risk-adjusted basis using both quantitative and qualitative criteria. SEB’s credit policies reflect the group’s approach to sustainability as described in the Corporate Sustainability Policy, the Environmental Policy, the Human Rights Policy, and the Credit Policy on Corporate Sustainability. Position statements on climate change, child labour, and access to fresh water, as well as a number of industry sector policies, including Forestry, Fossil fuel, Mining and metals, Renewable energy and Shipping, are considered in the credit grant- ing process and are also used in customer dialogues. Environmental, social and governance risks (so-called ESG risks) shall be considered in the credit analysis. Risk mitigation In order to reduce the credit risk, a number of credit risk mitigation techniques are used. The method used depends on its suitability for the product and the customer in question, its legal enforceability, and on SEB’s experience and capacity to manage and control the particular technique. The most important credit risk mitigation techniques are collateral pledges, guarantees, and netting agreements. The most common types of pledges are real estate, floating charges, and financial securities. For large corporate customers, credit risk is often mitigated using covenants. In the trading operations, daily margin arrangements are frequently used to mitigate net open counterparty exposures at any point in time. Limits and monitoring To manage the credit risk for individual customers or customer groups, a limit is established that reflects the maximum exposure that SEB is willing to accept. Limits are also established for total exposure in countries in certain risk classes, certain customer segments and for settlement risks in the trading operations. SEB continuously reviews the quality of its credit exposures. All limits and risk classes are reviewed at least annually by a credit approval body (a credit committee consisting of at least two bank officers as authorised by the group’s Credit Instruction, adopted by the Board). Weak or impaired exposures are subject to more frequent reviews. The objective is to identify credit exposures with an elevated risk of loss at an early stage and to work together with the customer towards a solution that enables the customer to meet its financial obligations and SEB to avoid or limit credit losses. In its core markets, SEB maintains local restructuring teams that are engaged in problem exposures. These are supported by a global restructuring function with overall responsibility for managing problem exposures. Allowances are made for expected credit losses of financial assets in scope of the accounting standard IFRS Financial Instruments. The guiding principle of the expected credit loss model is to reflect the general pattern of deteriora- tion or improvement in the credit quality of the assets. For a description of the methodology to estimate the expected credit loss allowance, refer to note and note . Loans where the contractual terms have been amended in favour of the cus- tomer due to financial difficulties are referred to as forborne loans. Forbear- ance measures range from amortisation holidays (the most common measure) to refinancing with new terms and debt forgiveness. If changes in contractual terms are significant, the loan is also considered impaired. A relevant credit approval body shall approve the forbearance measures as well as the classification of the loan as being forborne or not. Credit portfolio analysis and stress tests The risk organisation regularly reviews and assesses the aggregate credit port- folio based on industry, geography, risk class, product type, size, and other parameters. Risk concentrations in geographic and industry sectors as well as in large single names are thoroughly analysed, both in respect of direct and indi- rect exposures and in the form of collateral, guarantees, and credit derivatives. As at year-end, the largest corporate exposures (including real estate man- agement) corresponded to per cent of the capital base ). Stress tests of the credit portfolio, including reverse stress tests, are performed regularly as a part of SEB’s annual internal capital adequacy assessment process. Specific analyses and stress tests of certain sectors or sub-portfolios are performed as required. Risk measurement Credit risk is measured for all exposures, both in the banking book and the trad- ing book. An internal ratings-based (IRB) risk classification system approved by the regulator is used for the majority of the bank’s portfolios and reflects the risk of default on payment obligations. As at December , per cent of the credit risk-weighted exposure amount was covered by the IRB approach. For significant corporate portfolios, the risk classification system contains specific rating tools and PD (probability of default) scales. Larger and mid-sized counterparties are measured on a risk class scale of , while small- and medium-sized enterprises (SMEs) are measured on a scale of . Defaulted counterparties are given the highest risk class, and the three risk classes prior to default are defined as “watch list”. For each risk class scale, SEB makes indi- vidual one-year through-the-cycle probability of default estimates, which are based on more than years of internal and external data. For private individuals and small businesses, SEB uses credit scoring systems to estimate PD for the customer. To achieve greater accuracy, SEB uses differ- ent credit scoring models for different regions and product segments, as both data accessibility and customer characteristics normally vary by country and product. The exposure weighted PD of the total credit portfolio was . per cent at year-end .). The risk distribution of the non-retail and household portfolios is shown on page . Counterparty credit risk in derivative contracts SEB enters into derivative contracts primarily to support customers in the man- agement of their financial exposures. SEB also uses derivatives to protect cash flows and fair values of financial assets and liabilities in its own book from mar- ket fluctuations. Counterparty credit risk in derivative contracts is the risk of a counterparty not living up to its contractual obligations where SEB has a claim on the counter- party. The claim on the counterparty corresponds to a net positive exposure in favour of SEB. Since the market value of a derivative fluctuates during the term to maturity, the uncertainty of future market conditions must be taken into account. The potential future exposure (PFE) is calculated by applying an add- on to current market value. The add-on is generated either through simulation (internal model method) or by applying a standard add-on which is set by a fixed value depending on product type and time to maturity which reflects potential market movements for the specific contract (standardised method). SEB’s simulation-based approach for calculating potential future exposure (internal model method) is approved by the Swedish FSA for external capital reporting of counterparty credit risk of repos, interest rate derivatives and FX derivatives in the parent company. Counterparty credit risk in derivative contracts is reduced through the use of close-out netting agreements where all positive and negative market values under an agreement can be netted at the counterparty level and through collat- eral arrangements. Counterparty credit risk in derivative contracts affects the profit and loss through credit/debit valuation adjustments (CVA/DVA) reflecting the credit risk associated with derivative positions. These adjustments depend on market risk factors such as interest rate, foreign exchange rates and credit spreads. There is also a regulatory capital requirement for credit valuation adjustments under Basel III. SEB Annual and Sustainability Report 2021 — 177 Note 40a continuedCredit risk Credit exposure by industry Total credit exposure comprises the group’s credit portfolio (lending, contingent liabilities and counterparty risks arising from derivative, repo and collateral margin contracts) and debt instruments. Counterparty risks are reported based on exposure-at-default calculations. Exposures are presented before allow- ances. Debt instruments comprise all interest-bearing instruments at nominal amounts. Debt instruments in the Life and Investment Management divisions are excluded. Group Lending Contingent liabilities Derivatives, repos and collateral margins Total Banks 25,218 23,813 27,628 22,762 49,582 38,474 102,428 85,049 Finance and insurance 122,150 98,381 76,612 59,502 39,951 39,043 238,712 196,925 Wholesale and retail 81,025 72,671 54,982 70,331 1,876 2,335 137,882 145,337 Transportation 32,923 32,795 41,084 22,588 1,858 3,868 75,865 59,251 Shipping 49,722 47,208 11,826 9,925 1,324 2,247 62,872 59,379 Business and household services 160,882 138,906 163,545 112,480 4,820 5,414 329,247 256,799 Construction 12,366 11,894 24,307 22,669 517 551 37,190 35,113 Manufacturing 104,413 91,875 177,434 190,238 9,936 6,993 291,783 289,106 Agriculture, forestry and fishing 29,275 24,469 9,511 9,322 282 106 39,067 33,896 Mining, oil and gas extraction 14,784 23,627 31,675 24,359 3,119 1,458 49,578 49,444 Electricity, gas and water supply 64,594 54,909 62,727 56,297 33,449 17,737 160,771 128,943 Other 24,222 29,113 25,029 23,965 501 963 49,752 54,041 Corporates 696,355 625,846 678,732 601,676 97,633 80,713 1,472,720 1,308,236 Commercial real estate management 156,405 163,234 28,844 26,846 2,524 5,495 187,774 195,575 Residential real estate management 135,792 127,391 12,972 9,977 2,794 5,695 151,557 143,063 Real Estate Management 292,197 290,625 41,816 36,824 5,318 11,190 339,330 338,638 Housing co-operative associations 68,419 62,490 5,903 3,380 0 1 74,323 65,870 Public Administration 15,053 15,939 24,744 24,141 43,663 41,864 83,460 81,943 Household mortgage 618,756 576,383 51,499 52,575 670,255 628,958 Other 43,350 41,683 42,419 40,850 24 63 85,794 82,596 Households 662,106 618,066 93,918 93,426 24 63 756,049 711,554 Credit portfolio 1,759,347 1,636,777 872,742 782,208 196,220 172,304 2,828,309 2,591,289 Debt instruments 176,703 240,898 TOTAL 3,005,012 2,832,187 Credit portfolio by industry and geography The total credit portfolio comprises the group’s lending, contingent liabilities and counterparty risks arising from derivatives, repos and collateral margin contracts. Counterparty risks are reported based on exposure-at-default calcu- lations. Exposures are presented before allowances. Group, Sweden Other Nordic countries Baltic countries Germany, UK Other Total Banks 75,747 12,511 878 3,652 9,641 102,428 Finance and insurance 168,377 21,131 800 40,302 8,102 238,712 Wholesale and retail 48,839 38,271 24,287 19,729 6,756 137,882 Transportation 20,228 36,984 10,268 7,923 462 75,865 Shipping 11,306 25,242 887 17,284 8,154 62,872 Business and household services 185,546 52,988 7,934 76,149 6,630 329,247 Construction 20,183 4,177 4,160 5,494 3,176 37,190 Manufacturing 115,383 89,088 14,963 57,135 15,214 291,783 Agriculture, forestry and fishing 24,593 6,248 7,882 92 252 39,067 Mining, oil and gas extraction 7,459 40,681 337 822 280 49,578 Electricity, gas and water supply 51,218 63,420 12,984 32,895 253 160,771 Other 30,635 1,383 721 16,515 499 49,752 Corporates 683,767 379,613 85,223 274,341 49,777 1,472,720 Commercial real estate management 120,954 39,012 23,950 3,814 43 187,774 Residential real estate management 147,466 1,698 2,310 83 151,557 Real Estate Management 268,419 40,710 23,950 6,124 127 339,330 Housing co-operative associations 74,170 152 74,323 Public Administration 68,506 4,581 5,400 2,017 2,955 83,460 Household mortgage 594,206 786 69,682 5,580 670,255 Other 48,121 25,270 9,150 3,252 85,794 Households 642,328 26,057 78,832 8,832 756,049 TOTAL 1,812,937 463,623 194,283 286,134 71,332 2,828,309 Financial statements—Notes 178 — SEB Annual and Sustainability Report 2021 Note 40a continuedCredit risk Group, Sweden Other Nordic countries Baltic countries Germany, UK Other Total Banks 56,582 12,906 1,904 5,491 8,165 85,049 Finance and insurance 143,207 18,064 685 27,398 7,571 196,925 Wholesale and retail 53,384 32,249 23,690 28,398 7,616 145,337 Transportation 20,134 18,539 10,524 9,642 411 59,251 Shipping 13,882 21,113 964 17,904 5,516 59,379 Business and household services 121,525 57,989 8,168 62,155 6,964 256,799 Construction 19,588 3,964 3,675 5,004 2,883 35,113 Manufacturing 107,312 94,036 13,936 57,423 16,399 289,106 Agriculture, forestry and fishing 21,766 3,795 7,807 92 436 33,896 Mining, oil and gas extraction 5,905 40,106 677 2,581 176 49,444 Electricity, gas and water supply 31,912 55,144 14,356 27,262 269 128,943 Other 34,308 1,013 717 17,204 799 54,041 Corporates 572,922 346,012 85,199 255,063 49,041 1,308,236 Commercial real estate management 123,052 38,595 24,055 8,841 1,032 195,575 Residential real estate management 138,168 2,092 2,742 61 143,063 Real Estate Management 261,220 40,687 24,055 11,584 1,092 338,638 Housing co-operative associations 65,721 150 65,870 Public Administration 66,015 5,880 4,320 2,817 2,912 81,943 Household mortgage 560,197 877 63,291 4,593 628,958 Other 46,431 24,617 8,762 2,786 82,596 Households 606,628 25,494 72,054 7,378 711,554 TOTAL 1,629,087 431,129 187,532 274,954 68,588 2,591,289 Credit portfolio by PD range Group, Category Probability of Default (PD) range S&P/Moody’s ) Total, excluding households Households Banks Corporates Real estate management Housing Co-ops Public Admin. Total Households ) PD range Investment grade 0 < 0.01% AAA/Aaa 6.8% 0.7% 0.1% 0.0% 78.5% 4.2% 0.01 < 0.03% AA/Aa 55.2% 10.4% 4.8% 0.1% 14.5% 11.1% 0 < 0.2% 65.7% 0.03 < 0.12% A/A 25.8% 31.6% 7.3% 9.7% 5.4% 24.8% 0.2 < 0.4% 20.4% 0.12 < 0.46% BBB/Baa 7.1% 37.3% 55.7% 84.5% 1.0% 39.7% 0.4 < 0.6% 0.3% Standard monitoring 0.46 < 1.74% BB/Ba 1.5% 14.8% 30.3% 5.6% 0.6% 16.1% 0.6 < 1% 7.1% 1.74 < 7% B/B 1.0% 3.8% 1.6% 0.1% 0.1% 2.9% 1 < 5% 4.8% Watch list 7 < 9% B/B 2.0% 0.2% 0.1% 0.0% 0.0% 0.3% 5 < 10% 0.6% 9 < 22% CCC/Caa 0.7% 0.5% 0.1% 0.0% 0.0% 0.4% 10 < 30% 0.2% 22 < 100% C/C 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 30 < 50% 0.2% Default 100% D 0.0% 0.7% 0.1% 0.0% 0.0% 0.5% 50 < 100% 0.7% TOTAL 100% 100% 100% 100% 100% 100% TOTAL 100% Group, 2020 Investment grade 0 < 0.01% AAA/Aaa 3.9% 0.6% 0.1% 0.0% 78.9% 4.1% 0.01 < 0.03% AA/Aa 44.3% 10.1% 6.0% 0.1% 13.3% 10.5% 0 < 0.2% 64.0% 0.03 < 0.12% A/A 32.9% 33.1% 8.8% 8.1% 6.9% 26.6% 0.2 < 0.4% 21.2% 0.12 < 0.46% BBB/Baa 8.3% 34.7% 53.8% 87.0% 0.4% 37.5% 0.4 < 0.6% 0.3% Standard monitoring 0.46 < 1.74% BB/Ba 5.7% 15.8% 29.5% 4.7% 0.5% 16.8% 0.6 < 1% 7.3% 1.74 < 7% B/B 2.0% 3.8% 1.5% 0.0% 0.1% 3.0% 1 < 5% 5.3% Watch list 7 < 9% B/B 1.5% 0.4% 0.1% 0.0% 0.0% 0.4% 5 < 10% 0.8% 9 < 22% CCC/Caa 1.6% 0.3% 0.1% 0.0% 0.0% 0.3% 10 < 30% 0.6% 22 < 100% C/C 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 30 < 50% 0.3% Default 100% D 0.0% 1.0% 0.1% 0.0% 0.0% 0.7% 50 < 100% 0.3% TOTAL 100% 100% 100% 100% 100% 100% TOTAL 100% 1) Estimated link between internal PDs and external ratings based on comparison of historical default outcomes. 2) Household exposure based on the internal ratings based (IRB) method reported as exposure in the event of a default (EAD – exposure at default). SEB Annual and Sustainability Report 2021 — 179 Note 40a continuedCredit risk Credit portfolio protected by guarantees, credit derivatives and collaterals 1) Group Parent company Credit portfolio Protection via guarantees and credit derivatives Protection via pledged collaterals Of which, financial collaterals Credit portfolio Protection via guarantees and credit derivatives Protection via pledged collaterals Of which, financial collaterals Banks 102,428 1,934 11,242 5,256 100,587 1,934 11,240 5,255 Corporates, Real estate management and Housing co-operative associations 1,886,373 25,252 476,725 35,451 1,739,226 24,559 426,295 34,839 Public Administration 83,460 1,437 0 75,363 505 Households 756,049 23 605,884 11,568 629,915 537,098 11,401 TOTAL 2,828,309 27,209 1,095,288 52,275 2,545,091 26,493 975,138 51,495 2020 Banks 85,049 1,726 7,974 2,503 81,149 1,726 7,972 2,502 Corporates, Real estate management and Housing co-operative associations 1,712,744 23,872 431,462 26,218 1,566,791 22,660 378,842 25,671 Public Administration 81,943 1,042 1 74,997 589 Households 711,554 18 555,497 11,197 592,977 492,475 11,014 TOTAL 2,591,289 25,616 995,974 39,919 2,315,914 24,386 879,879 39,187 1) Only risk mitigation arrangements eligible in capital adequacy reporting are represented in the tables above. Debt instruments At year-end , SEB’s credit exposure in the bond portfolio amounted to SEK bn ). The exposure comprises all interest-bearing instruments at nominal amounts including certain credit derivatives and futures. Distribution by geography Central & local governments Corporates Covered bonds Asset-backed securities Financials Total Sweden 38.4% 26.7% 0.3% 0.4% 10.8% 20.7% 0.0% 0.1% 49.6% 47.8% Germany 8.1% 10.2% 0.0% 0.0% 0.2% 0.1% 0.2% 0.0% 8.4% 10.3% Luxembourg 3.4% 3.0% 4.8% 3.8% 8.3% 6.8% Denmark 1.2% 3.0% 0.1% 0.0% 6.6% 6.8% 0.1% 0.0% 7.9% 9.8% Norway 3.2% 2.5% 0.2% 0.4% 2.9% 3.5% 0.5% 1.2% 6.8% 7.6% Finland 2.6% 1.7% 0.0% 0.0% 2.9% 6.8% 0.2% 0.1% 5.7% 8.6% US 4.3% 3.8% 0.0% 0.1% 4.4% 3.8% Baltics 2.4% 1.1% 2.4% 1.1% Europe. other 1.9% 1.7% 1.9% 1.7% Rest of world 3.9% 2.3% 0.0% 0.0% 0.7% 0.2% 4.5% 2.4% TOTAL 69.5% 55.9% 0.6% 0.8% 23.3% 37.9% 4.8% 3.8% 1.8% 1.6% 100.0% 100.0% Distribution by rating AAA 55.3% 43.8% 0.0% 0.0% 22.8% 37.8% 4.1% 3.1% 0.3% 0.0% 82.5% 84.7% AA 7.6% 5.9% 0.0% 0.0% 0.6% 0.4% 8.2% 6.3% A 2.4% 1.1% 0.0% 0.1% 0.8% 0.7% 0.1% 0.1% 3.3% 2.0% BBB 0.2% 0.2% 0.2% 0.0% 0.3% 0.2% BB/B 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% CCC/CC No issue rating 1) 4.1% 5.1% 0.4% 0.5% 0.4% 0.1% 0.6% 1.0% 5.6% 6.8% TOTAL 69.5% 55.9% 0.6% 0.8% 23.3% 37.9% 4.8% 3.8% 1.8% 1.6% 100.0% 100.0% 1) Mainly German local governments (Bundesländer). Financial statements—Notes 180 — SEB Annual and Sustainability Report 2021 40b Market risk Definition Market risk is the risk of losses in balance sheet positions and obligations, aris- ing from adverse movements in market prices. Market risk can arise from changes in interest rates, foreign exchange rates, credit spreads, CVA, commod- ity and equity prices, implied volatilities, inflation and market liquidity. A clear distinction is made between market risks related to trading activities, i.e. trad- ing book risks, and structural market and net interest income risks, i.e. banking book risks. Whereas positions in the trading book are held with a trading intent and under a daily mark-to-market regime, positions in the banking book do not have a trading intent and are typically held at amortised cost. Risk management Market risk in the trading book arises from SEB’s customer-driven trading activi- ties. The trading activities are carried out by the Large Corporates & Financial Institutions division in its capacity as market maker in foreign exchange, equity and debt capital markets. Market risk also arises in the form of interest rate risk in the banking book as a result of balance sheet mismatches in currencies, interest terms and interest rate periods. The treasury function has the overall responsibility for managing these risks, which are consolidated centrally. The treasury function also man ages a liquidity portfolio which is part of SEB’s liquidity reserve. Market risk in the liquidity portfolio arises from credit spread risk and interest rate risk in pledgeable and highly liquid bonds. For capital adequacy purposes, the assets in this portfolio are, as at January , categorised as assets in the banking book. However, from a risk management perspective, they are monitored together with trading-related market risk. Market risk also arises in the group’s traditional life insurance operations and the defined benefit plans for employees due to mismatches between the mar- ket value of assets and liabilities. Market risk in the pension obligations and the life insurance business are not included in the market risk figures below. Refer to note e for information on market risk in the life insurance business. The Board of Directors defines the level of accepted market risk by setting the overall market risk limits. Limits are established for the trading book, banking book and the defined benefit plans. The Group Risk Committee (GRC) delegates the market risk mandate to the divisions and the treasury function, which in turn further allocate the limits internally. The trading book risks are managed at the different trading locations within a comprehensive set of limits including VaR, stop- loss, different sensitivities and stress tests. The risk organisation measures the market risk taken by the various units within the group on a daily basis. Moreover, the risk organisation independently verifies the valuation of positions held at fair value and calculates the capital buffer for prudent valuation. The risk control function is present in the trading rooms and monitors limit compliance and market prices at closing as well as val- uation standards and the introduction of new products. Market risks are reported to the GRC and the Board’s Risk and Capital Committee (RCC) at least on a monthly basis. SEB is exposed to the following market risk types: Risk type Defined as the risk of loss or reduced income due to Source Interest rate risk Changes in interest rates Inherent in all banking business Credit spread risk A change in the creditworthiness of an issuer of, for instance, a bond or a credit derivative Primarily present in the bank’s bond holdings Foreign exchange risk Variations in the exchange rates Foreign exchange trading and the bank’s operations in various markets Equity price risk Variations in equity prices Market making and customer activity in equities and equity derivatives Commodity price risk Variations in commodity prices Customer-driven activities in commodities Volatility risk Changes in implied volatility Market making and customer activity of options across all asset classes Inflation risk Change in inflation Bond holdings, value of assets on balance sheet Market liquidity risk Bid-ask spread widenings Sale of assets or closing of positions Credit value adjustment ) Variations in the counterparty credit risk based on the expected future exposure OTC derivative contracts 1) Credit value adjustment is fundamentally credit risk, but the exposure is calculated using market risk drivers (interest rate, currency, etc.). Risk measurement When assessing the market risk exposure, SEB uses measures that capture losses under both normal and stressed market conditions. Market risks under normal market circumstances are measured using Value at Risk (VaR) and Expected Shortfall (ES) as well as specific measures that are relevant for the various risk types. These measures are complemented by stress tests and sce- nario analyses, in which potential losses under extreme market conditions are estimated. Since no method can cover all risks at all times, several approaches are used where the results are assessed based on judgment and experience. Value at Risk and Stressed Value at Risk VaR expresses the maximum potential loss that could arise during a certain time period with a given degree of probability. SEB uses a historical simulation VaR model with a ten-day time horizon and per cent confidence interval to measure, limit and report VaR. The model aggregates market risk exposure for all risk types and covers a wide range of risk factors in all asset classes. SEB also uses a stressed VaR measure, where VaR is calculated for the current port- folio using market data from a historic, turbulent time period covering the Lehman Brothers’ default. The VaR model is validated using so-called back-test- ing analysis. A limitation of SEB’s VaR model is that it uses historical data to estimate potential market changes. As such, it may not predict all outcomes, especially in a rapidly changing market. In addition, VaR does not take into account any actions to reduce risk as the model assumes that the portfolio is unchanged. SEB’s VaR and stressed VaR models have been approved by the Swedish FSA for calculation of regulatory capital requirements for all the general market risks in the bank’s trading book in the parent bank. Value at Risk Trading Book %, ten days) Dec Average Average Min Max Commodities risk 36 173 67 57 34 Credit spread risk 27 214 27 80 76 Equity price risk 7 87 12 25 23 Foreign exchange rate risk 4 150 11 20 45 Interest rate risk 45 281 121 102 196 Volatilities risk 7 28 15 14 26 Diversification 338 77 146 137 191 TOTAL 66 480 106 160 210 Banking Book 99%, ten days) Credit spread risk 3 77 3 21 160 Equity price risk 31 82 39 45 96 Foreign exchange rate risk 0 45 1 8 1 Interest rate risk 72 246 139 116 259 Diversification 113 1 51 46 71 TOTAL 85 316 131 144 444 SEB Annual and Sustainability Report 2021 — 181 Note 40b continuedMarket risk Expected Shortfall Expected Shortfall (ES) is the expected loss given a pre-defined time horizon, conditional that the loss is greater than the VaR for a specific confidence level. Thus, while VaR only shows the loss at a specific confidence level, ES takes the whole loss distribution into account and calculates the expected loss of all of the worst outcomes. SEB currently uses ES to calculate economic capital for market risk in the trading book. Scenario analyses and stress tests Scenario analyses and stress tests are a key part of the risk management framework, complementing the VaR measure. In particular, they test portfolios using scenarios other than those available in the VaR simulation window and cover longer time horizons. SEB stresses its portfolios by applying extreme movements in market factors that have been observed in the past (historical scenarios) as well as extreme movements that could potentially happen in the future (hypothetical or forward-looking scenarios). Reverse stress tests are also applied on the total trading portfolio as well as for individual divisions and business units, to identify scenarios that would lead to a given significant loss, for instance, the breach of a stop-loss limit. This type of analysis provides man- agement with a view on the potential impact that large market movements in individual risk factors, as well as broader market scenarios, could have on a port folio. The risk tolerance framework includes limits on different stress test scenarios. Specific risk measures VaR and stress tests are complemented by specific risk measures including Delta % for interest risk, and Single and Aggregated FX for currency risk. In addition, all units that manage risk for financial instruments valued at mar- ket are limited by a stop-loss limit. The stop-loss limit indicates the maximum loss a unit can incur before mitigating actions are taken. CVA/DVA sensitivities The credit and debit valuation adjustments (CVA/DVA) are sensitive to market movements, in particular to movements in interest rates, credit spreads and for- eign exchange rates. In order to monitor this sensitivity, SEB stresses these asset classes on a reg- ular basis and calculates the impact on the valuation adjustments. This is done by comparing the original CVA/DVA numbers with the stressed CVA/DVA num- bers where the current rates and credit spreads have been moved up basis points and where SEK has appreciated per cent to all other currencies com- pared with the current level. CVA DVA Total Interest rates + 100bp 146 81 228 Credit spreads + 100bp 964 752 212 SEK + 5% 17 9 8 2020 Interest rates + 100bp 281 60 341 Credit spreads + 100bp 1,088 551 536 SEK + 5% 16 7 9 Interest rate risk Interest rate risk refers to the risk that the value of the group’s assets, liabilities and interest-related derivatives will be negatively affected by changes in inter- est rates or other relevant risk factors. The majority of the group’s interest rate risks is structural and arise within the banking operations when there is a mismatch between the interest fixing periods of assets and liabilities, including derivatives. The table below shows the sensitivity to a basis point change in the inter- est rates on the banking and trading book by currency and in different buckets of maturity. This is calculated as the value change for a shift of basis point and then scaled up to reflect a basis point move. Interest rate sensitivity in trading book per time buckets < months months years years years years Total EUR 54 174 247 78 1 154 SEK 32 399 684 260 35 514 USD 71 49 79 28 11 58 Other 43 457 794 234 351 118 TOTAL 93 633 1 152 131 327 535 2020 EUR 10 23 294 1,252 414 233 SEK 20 154 415 154 100 922 USD 48 47 78 60 2 103 Other 41 25 121 1,183 356 264 TOTAL 59 155 510 144 542 44 1,056 Interest rate sensitivity in banking book per time buckets 1) < months months years years years years Total EUR 11 297 191 107 0 623 SEK 302 357 553 188 9 1,582 USD 26 360 6 2 42 471 Other 26 169 24 28 1 248 TOTAL 366 463 775 321 52 1,982 2020 EUR 8 331 101 125 1 565 SEK 289 649 301 209 29 1,627 USD 33 283 32 8 74 440 Other 10 56 13 22 0 103 TOTAL 340 753 384 348 131 101 1,855 1) By currency SEK m100 basis points. Financial statements—Notes 182 — SEB Annual and Sustainability Report 2021 40c Non-financial risk Definition Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems (e.g. breakdown of IT systems, mistakes, fraud, other deficiencies in internal control) or from external events (natural disasters, external crime, etc.). The definition includes conduct, compliance, legal and financial reporting, information-, cyber- and physical security, and venture execution risks, but excludes strategic and reputational risk. Risk management Non-financial risk – also referred to as operational risk – is inherent in all of the group’s operations. The responsibility to manage non-financial risks rests with all managers throughout the group. Through an effective internal control envi- ronment and by ensuring structured and consistent usage of risk mitigating tools and processes, SEB aims at maintaining a sound risk culture with low non- financial risks and low loss levels. All employees are required to escalate and register risk-related events or inci- dents so that risks can be properly identified, managed, monitored and reported. SEB uses a group-wide IT application to capture risk events, loss levels and other non-financial risk data for analysis and benchmarking against peers. SEB regularly conducts training and education in key areas, including manda- tory training for all staff in information security, fraud prevention, anti-money laundering, know-your-customer procedures, GDPR and SEB’s Code of Conduct. In addition, SEB has a formal external whistle-blower procedure that encourages employees to report improprieties and unethical or illegal conduct. All new or changed products, processes and/or systems as well as reorganisa- tions are evaluated in a group-common New Product Approval process (NPA) with the aim of identifying potential non-financial risks, and to ensure that proac- tive measures are taken to protect SEB from entering into unintended risk-taking. All business units with significant risks embedded in their operations shall regularly complete Risk and Control Self-Assessments (RCSA) according to a group-wide methodology. Such assessments are designed to identify and manage significant non-financial risks embedded in SEB’s various business and support processes, from an end-to-end perspective. The business units’ participation in the RCSAs is comprehensive throughout the organisation. The RCSA framework is used to analyse SEB’s non-financial risk profile and to achieve non-financial excellence and high performance. Global connectivity, increased usage of cloud services, third party vendors and outsourcing are megatrends in the banking industry that at the same time increase the risk of cybercrime. SEB proactively works with threat scenarios, threat intelligence and risk management to minimise this risk. To protect SEB’s intellectual property, customer data and other sensitive information from unau- thorized access by cyber criminals, activities to identify, protect against, detect, respond to, and recover from cybercrime are developed continuously. Security updates, system upgrades and security tests are performed on a regular basis. Using zero-trust and least privilege access principles along with technical safeguards provide additional protection and the visibility needed to manage and monitor every device, user, applications and network. Just as important is to foster a sound risk culture and to raise security awareness, not only among the employees, but also among SEB’s customers. This is done through trainings, information, and regular communication. In addition, SEB has adopted a cyber risk policy. SEB has implemented a model risk framework to capture risks embedded in models and processes across the bank. In order to ensure that the bank can continue to provide its services to soci- ety throughout periods of major disruption, SEB has a structured process for identifying critical activities, and for maintaining updated, annually tested and communicated business continuity plans throughout the group. The risk organisation – second line of defense – is responsible for ensuring that SEB’s non-financial risks are identified, managed, monitored, and reported and for making sure that these risks are addressed in accordance with external and internal regulations. Significant incidents and the group’s overall non-finan- cial risk exposure, both at group and at divisional or site level, are analysed and reported monthly to the Group Executive Committee (GEC), the Group Risk Committee (GRC) and the Board’s Risk and Capital Committee (RCC), as well as to local/divisional management. In , net losses from non-financial incidents amounted to SEK m ,). Risk measurement SEB uses the Advanced Measurement Approach (AMA) to calculate the regula- tory capital requirement for operational risk. 40d Business risk Definition Business risk is the risk of lower revenues due to reduced volumes, price pres- sure or competition. Business risk includes venture decision risk related to undertakings such as acquisitions, large IT projects, transformations, outsourc- ing, etc. Strategic risk is close in nature to business risk however with the focus on large- scale or structural risk factors. Reputational risk is the risk arising from negative perception of SEB, or the industry in general. Risk management Business, strategic -and reputational risks are inherent in doing business. The regulatory framework for banking and financial institutions is extensive and in constant development, hence significantly impacting the industry. At the same time, the digitalisation of the banking industry is accelerating and new types of competitors are emerging. In addition to this, corporate sustainability is becom- ing an even more important part of a company’s reputation. SEB carries out dif- ferent activities to mitigate, measure, and control these risks, e.g. though regu- larly performed strategic business reviews, conduction of proactive cost man- agement, execution of an agile step-by-step IT development approach, establishment of an ambitious corporate sustainability agenda and continuous active dialogues regarding regulatory matters. 40e Insurance risk Definition Insurance risk in SEB consists of all risks related to the group’s insurance opera- tions. SEB’s main life insurance operations consist of unit-linked insurance and traditional life insurance. The key risks include market risk and underwriting risk. Market risk in the insurance business is the risk of losses on traditional life insurance policies with guaranteed benefits due to changes in fair value of assets and liabilities. Such changes in fair value can be caused by changes in for example interest rates, credit spreads, equity prices, exchange rates and implied volatilities. Underwriting risk pertains to the risk of loss or of negative changes in the value of insurance liabilities (technical provisions) due to inadequate pricing and/or provisioning assumptions. It includes factors such as average mortality, longevity, disability/morbidity (including risks that result from fluctuation in the timing and amount of claim settlements), catastrophe risk (e.g., extreme or irregular events), expense risk and lapse risk (i.e., policyholder behaviour risk). Risk management and measurement In unit-linked insurance, the market risk is borne by the policyholder, while the underwriting risk is limited. However, there is an indirect exposure to market risk through the policyholders’ investments since a significant part of the future income stream of the life insurance business is based on assets under manage- ment. The profitability for existing and new business is closely monitored. Market risk in the traditional life insurance products with guaranteed returns is mitigated through standard market risk hedging schemes and monitored through asset/liability management (ALM) risk measures and stress tests. This is supplemented by market risk tools such as VaR and scenario analysis. In the traditional products, the difference between asset values and the guaranteed obligations constitutes a buffer which is intended to cover SEB’s market risk. Underwriting risks are controlled through the use of actuarial analysis and stress tests of the existing insurance portfolio. Mortality and disability/morbid- ity risks are reinsured for large individual claims or for several claims attributa- ble to the same event. Underwriting risk parameters are validated annually. Pol- icyholders within certain traditional life insurance products are free to transfer their policies from SEB. The utilisation of this option has been very low histori- cally. Nevertheless, to safeguard against unplanned cash outflows, sufficient liquid investments are maintained. Regular cash flow analysis is conducted to mitigate this risk. The risk organisation is responsible for measuring and controlling the risks inherent in SEB’s life insurance operations. Measurement and monitoring of ALM risk measures, VaR, scenario analysis and stress tests are performed on a regular basis for each insurance company. In addition, the risk organisation has the role of an independent risk management function in the respective insur- ance companies from a Solvency II perspective. Key risks are reported regularly to the Group Risk Committee, the Board’s Risk and Capital Committee and to the boards of each insurance company. Solvency II, effective as at January , is a harmonised regulatory frame- work with respect to governance, internal control and capital requirements across insurance companies in the EU. Solvency II calculations are performed at least monthly, and the required reporting is submitted to the financial supervi- sors on a quarterly basis. Calculations show that SEB’s life companies are ade- quately capitalised and resilient to different stressed scenarios. SEB Annual and Sustainability Report 2021 — 183 40f Liquidity risk Definition Liquidity risk is the risk that the group is unable to refinance its existing assets or is unable to meet the demand for additional liquidity. Liquidity risk also entails the risk that the group is forced to borrow at unfavourable rates or is forced to sell assets at a loss in order to meet its payment commitments. Liquidity management and risk measurement The Board of Directors has established a comprehensive framework for manag- ing the bank’s liquidity requirements both in the short- and long-term. The aim of SEB’s liquidity risk management is to ensure that the group has a controlled liquidity risk situation, with adequate volumes of liquid assets in all relevant cur- rencies to timely meet its liquidity requirements in all foreseeable circum- stances, without incurring substantial cost. The liquidity risk is managed through the limits set by the Board and further allocated by the Group Risk Committee. Liquidity limits are set for the group, branches and specific legal entities, as well as for exposures in certain curren- cies. The treasury function has the overall responsibility for liquidity manage- ment and funding, supported by local treasury centers in the group’s major mar- kets. The risk function regularly measures and reports limit utilisation based on different market conditions and liquidity stress tests to the Group Risk Commit- tee and the Board’s Risk and Capital Committee. While liquidity management is an ongoing process, an internal evaluation of the liquidity need is performed annually to identify potential gaps relative to SEB’s long-term liquidity targets and to ensure that liquidity management is sufficient. Liquidity management and the structuring of the balance sheet from a liquid- ity point of view are built on three basic perspectives: (i) the structural liquidity perspective, in which stable funding is put in relation to illiquid assets; (ii) the bank’s tolerance for short-term stress in the form of a shutdown of the wholesale and interbank funding markets (wholesale funding depend- ence); and, (iii) the bank’s tolerance to a severe stress scenario where, in addition to a shutdown of the funding market, the bank experiences a severe outflow of deposits. Structural liquidity risk In order to maintain a sound structural liquidity position, the structure of the lia- bility side should be based on the composition of assets. The more long-term lending and other illiquid assets, the more stable funding is required. This risk is measured by the regulatory defined Net Stable Funding Ratio (NSFR). In this ratio, the amount of available stable funding is put in relation to the amount of required stable funding. In SEB, the same risk is measured as the Core Gap ratio, i.e. a ratio between stable funding (over year maturity) and illiquid assets (over year maturity). The difference between NSFR and the internal Core Gap ratio is that the Core Gap ratio is calculated on a more detailed level based on internal statistics, resulting in different weightings of available and required stable funding. Wholesale funding dependence One way of measuring tolerance for deteriorating market conditions is to assess the time that SEB’s liquid assets would last if the wholesale and interbank fund- ing markets were closed. This measure, the maturing funding ratio, captures the bank’s liquid assets in relation to wholesale funding and net interbank borrow- ings that come to maturity over the coming months, or as the number of months it would take to deplete the liquid assets in a scenario where all maturing funding must be repaid from liquid assets. Wholesale funding dependence is also meas- ured as the loan to deposit ratio, excluding repos. Stressed survival horizon Severe stress can be modelled by combining assumptions of a wholesale fund- ing market shutdown with assumptions of deposit outflows and drawdowns on commitments, etc. The outcome is captured by the regulatory defined Liquidity Coverage Ratio (LCR) where, in a stressed scenario, modelled net outflows during a -day period are related to the amount of total liquid assets. As at January , the EU’s definition of LCR is used. SEB also measures the time it would take for the liquid assets to be depleted in a severely stressed scenario, expressed as the stressed survival horizon (SSH). The same scenario is also used for monitoring of the outcome in the currency dimension, this in order to discover potential mismatches and dependencies towards the FX-swap market. In addition, SEB monitors various rating agencies’ survival metrics. Internal liquidity adequacy assessment process Liquidity risk is not primarily mitigated by capital. However, there are strong links between a bank’s capital and liquidity position. Hence, an internal liquidity adequacy assessment process (ILAAP) complements the Internal Capital Ade- quacy Assessment Process (ICAAP). The ILAAP is designed to identify potential gaps against SEB’s long-term desired level of liquidity adequacy, taking into account that effective liquidity management is an ongoing improvement pro- cess. Liquid assets 1) SEK EUR USD Other Total SEK EUR USD Other Total Cash and balances with central banks 196,066 143,190 84,041 11,676 434,973 124,989 146,567 37,856 7,988 317,399 Securities issued or guaranteed by sovereigns, central banks, MDBs and international organisations 62,221 18,712 33,472 22,940 137, 3 45 58,340 20,001 37,111 37,791 153,242 Securities issued by municipalities and PSEs 3,206 679 4,894 10,694 19,473 3,619 2,624 5,703 9,807 21,753 Extremely high quality covered bonds 25,375 46 277 35,174 60,872 49,042 268 256 38,371 87,937 Level 1 assets 286,868 162,627 122,685 80,483 652,663 235,990 169,460 80,925 93,956 580,331 Securities issued or guaranteed by sover- eigns, central banks, municipalities and PSEs 20 752 437 1,209 1,620 364 1,984 High quality covered bonds 2,106 595 140 8,179 11,021 16,091 1,713 9,736 27,540 Corporate debt securities (lowest rating AA–) 84 85 1 0 1 Level 2A assets 2,106 616 976 8,617 12,315 16,091 1 3,333 10,100 29,525 Asset-backed securities 6,341 6,341 6,801 24 6,825 High quality covered bonds 21 21 Corporate debt securities (rated A+ to BBB–) 194 49 243 49 411 1 1 462 Level 2B assets 6,535 49 21 6,605 49 7,211 1 26 7,287 Level 2 assets 2,106 7,151 1,025 8,637 18,919 16,140 7,213 3,334 10,126 36,812 TOTAL LIQUID ASSETS 288,974 169,777 123,710 89,121 671,582 252,129 176,672 84,259 104,082 617,143 1) All definitions are in accordance with the Liquidity Coverage Ratio in the CRR. Liquidity risk management measures Net Stable Funding ratio (NSFR) 1) 111% Loan to deposit ratio 111% 122% Liquidity Coverage Ratio 145% 163% 1) The NSFR is disclosed for the first time, hence no comparison figure is available for 2020. Financial statements—Notes 184 — SEB Annual and Sustainability Report 2021 Note 40f continuedLiquidity risk Contractual maturities The following tables present cash flows by remaining contractual maturities at the balance sheet date and applies the earliest date on which the group can be required to pay regardless of probability assumptions. The cash flows are not discounted. Derivatives are reported at fair value. Obligations such as loan commitments are reported as when the obligation matures. Group, 2021 Balance sheet (contractual maturity dates) Payable on demand < months months years years Not distributed Subtotal Discount effect Total Cash and cash balances at central banks 439,344 439,344 439,344 Loans to central banks 3,390 807 256 0 4,454 4,454 Loans to credit institutions 10,362 38,732 5,925 4,811 156 59,986 23 60,009 of which repos 5,905 5,905 1 5,906 General governments 53 9,048 4,219 7,597 4,588 25,506 873 24,633 Households 8,251 13,301 30,499 56,104 667,814 775,969 72,439 703,530 Corporates 65,275 280,879 210,066 505,562 89,780 1,151,562 33,363 1,118,199 Loans to the public 73,579 303,229 244,784 569,263 762,182 1,953,037 106,675 1,846,362 of which repos 81,613 81,613 339 81,274 Debt securities 59,387 32,937 94,844 21,827 208,995 3,045 205,950 of which eligible debt securities 56,463 6,217 31,578 6,744 101,002 1,030 99,972 of which other debt securities 2,552 26,451 63,258 15,083 107,344 2,015 105,329 Equity instruments 120,742 120,742 120,742 Derivatives 126,051 126,051 126,051 Financial assets for which the customers bear the investment risk 422,497 422,497 422,497 Financial assets at fair value 59,387 32,937 94,844 21,827 669,290 878,286 3,045 875,241 Other assets 11,838 1,238 73 508 65,160 78,816 6 78,822 of which other financial assets 11,790 1,225 7 500 1 13,522 6 13,528 Total assets 526,675 413,994 285,140 668,991 784,673 734,450 3,413,921 109,691 3,304,230 of which accrued interest loans 1,735 1,735 1,735 of which accrued interest debt securities 649 649 649 Deposits from central banks and credit institutions 47,243 21,014 4,871 698 1,399 75,225 19 75,206 of which repos 1,824 1,824 1,824 General governments 14,949 2,954 923 119 1,333 20,278 1 20,277 Households 413,262 19,884 5,412 643 80 439,283 2 439,281 Corporates 1,010,436 117,908 6,601 2,801 151 1,137,897 6 1,137,891 Deposits and borrowings from the public 1,438,647 140,746 12,937 3,563 1,564 1,597,457 9 1,597,448 of which deposits 1,308,477 118,851 10,433 2,582 1,398 1,441,741 7 1,441,734 of which borrowing 8,007 4 58 10 8,079 8,079 of which repos 7,713 7,713 7,713 Financial liabilities for which the customers bear the investment risk 424,226 424,226 424,226 Liabilities to policyholders 690 1,908 8,143 23,852 30 34,623 34,623 Certificates 113,122 175,639 0 288,761 900 287,861 Covered bonds 1,158 68,890 207,396 17,887 295,331 3,853 291,478 Other bonds 17,868 24,525 78,657 32,158 153,208 2,441 150,767 Debt securities issued 132,148 269,054 286,053 50,045 737,300 7,194 730,106 Debt securities 21 409 10,022 11,601 22,053 1,889 20,164 Equity instruments 14,405 14,405 14,405 Derivatives 118,173 118,173 118,173 Other liabilities 172 5,144 405 702 6,423 1 6,422 Financial liabilities at fair value 193 5,553 10,427 11,601 133,280 161,055 1,890 159,165 Other liabilities 6,664 2,439 2,726 3,318 46,541 61,689 10 61,679 of which other financial liabilities 6,102 1,558 291 1,025 56 9,032 10 9,022 of which lease liabilities 331 664 2,237 1,991 5,223 304 5,527 Subordinated liabilities 5,639 24,014 1,112 30,765 2,216 28,549 Equity 193,228 193,228 193,228 Total Liabilities and Equity 1,485,890 301,455 302,401 335,625 92,891 797,306 3,315,568 11,338 3,304,230 of which accrued interest deposits and borrowing 476 476 476 of which accrued interest issued securities 1,075 1,075 1,075 Off balance sheet items Loan commitments 799 287,857 130,408 348,422 46,450 813,936 813,936 Acceptances and other financial facilities 127,401 11,099 7,693 14,101 160,294 160,294 Total liabilities, equity and off balance sheet items 1,486,689 716,713 443,908 691,740 153,442 797,306 4,289,798 11,338 4,278,460 1) Includes items available overnight. SEB Annual and Sustainability Report 2021 — 185 Note 40 f continuedLiquidity risk Group, 2020 Balance sheet (contractual maturity dates) Payable on demand months ) months years years Not distributed Subtotal Discount effect Total Cash and cash balances at central banks 323,776 323,776 323,776 Loans to central banks 74 3,453 107 0 3,633 3,633 Loans to credit institutions 9,789 31,133 5,290 4,445 133 50,789 2 50,791 of which repos 10,253 10,253 10,253 General governments 704 8,310 1,864 7,336 6,101 24,315 1,081 23,234 Households 8,036 13,174 30,198 50,399 628,770 730,577 74,400 656,177 Corporates 49,627 300,078 212,874 473,173 90,381 1,126,133 35,383 1,090,750 Loans to the public 58,367 321,562 244,936 530,908 725,252 1,881,025 110,864 1,770,161 of which repos 112,425 112,425 515 111,910 Debt securities 42,852 52,483 151,340 25,095 271,770 6,337 265,433 of which eligible debt securities 37,505 22,323 33,622 6,139 99,589 1,613 97,976 of which other debt securities 4,949 29,622 117,713 18,955 171,239 4,724 166,515 Equity instruments 82,240 82,240 82,240 Derivatives 164,909 164,909 164,909 Financial assets for which the customers bear the investment risk 330,950 330,950 330,950 Financial assets at fair value 42,852 52,483 151,340 25,095 578,098 849,868 6,337 843,531 Other assets 10,718 398 84 581 36,758 48,539 48,539 of which other financial assets 10,613 1 6 569 628 11,817 11,817 Total assets 392,005 409,718 303,214 686,776 751,061 614,856 3,157,631 117,199 3,040,432 of which accrued interest loans 1,654 1,654 1,654 of which accrued interest debt securities 943 943 943 Deposits from central banks and credit institutions 33,233 35,506 5,003 36,611 1,334 111,687 378 111,309 of which repos 1,604 1,604 1 1,603 General governments 14,190 1,281 23 112 1,380 16,986 9 16,977 Households 355,391 20,521 5,878 903 169 382,864 12 382,852 Corporates 866,250 96,530 1,831 5,993 836 971,440 42 971,398 Deposits and borrowings from the public 1,235,831 118,333 7,732 7,008 2,385 1,371,290 63 1,371,227 of which deposits 1,125,323 94,514 4,574 4,527 1,459 1,230,397 44 1,230,353 of which borrowing 7,598 2 58 34 7,692 2 7,690 of which repos 7,274 7,274 2 7,272 Financial liabilities for which the customers bear the investment risk 332,392 332,392 332,392 Liabilities to policyholders 537 1,553 6,380 21,118 36 29,624 29,624 Certificates 88,024 155,952 1,645 245,621 1,493 244,128 Covered bonds 16,258 64,258 228,694 33,209 342,419 8,663 333,756 Other bonds 24,345 35,244 93,473 22,848 175,910 4,292 171,618 Debt securities issued 128,627 255,454 323,812 56,057 763,950 14,448 749,502 Debt securities 778 14,722 6,105 21,605 2,069 19,536 Equity instruments 10,873 10,873 10,873 Derivatives 161,561 161,561 161,561 Other liabilities 242 491 11 744 744 Financial liabilities at fair value 242 1,269 14,733 6,105 172,434 194,783 2,069 192,714 Other liabilities 13,079 2,036 2,976 3,374 28,001 49,466 33 49,433 of which other financial liabilities 10,959 273 258 921 40 12,451 33 12,418 of which lease liabilities 324 639 2,215 2,122 5,300 339 5,639 Subordinated liabilities 10,645 23,319 559 34,523 2,236 32,287 Equity 171,943 171,943 171,943 Total Liabilities and Equity 1,269,064 296,324 283,693 414,839 90,932 704,807 3,059,659 19,227 3,040,432 of which accrued interest deposits and borrowing 435 435 435 of which accrued interest issued securities 1,961 1,961 1,961 Off balance sheet items Loan commitments 534 296,675 86,800 305,360 35,564 724,933 724,933 Acceptances and other financial facilities 117,577 6,657 4,778 8,328 137,340 137,340 Total liabilities, equity and off balance sheet items 1,269,598 710,576 377,150 724,977 134,824 704,807 3,921,932 19,227 3,902,705 1) Includes items available overnight. Financial statements—Notes 186 — SEB Annual and Sustainability Report 2021 Note 40 f continuedLiquidity risk Parent company, 2021 Balance sheet (contractual maturity dates) Payable on demand months ) months years years Not distributed Subtotal Discount effect Total Cash and cash balances at central banks 371,466 371,466 371,466 Loans to credit institutions 31,138 33,218 5,269 4,683 0 74,309 25 74,334 of which repos 1,368 1,368 1,368 General governments 33 8,452 3,198 2,771 41 14,496 177 14,319 Households 7,876 8,303 23,058 31,191 604,773 675,201 60,464 614,737 Corporates 62,405 268,455 191,304 448,856 67,787 1,038,806 26,531 1,012,275 Loans to the public 70,314 285,210 217,560 482,818 672,602 1,728,504 87,172 1,641,332 of which repos 81,588 81,588 314 81,274 Debt securities 55,821 29,173 74,865 21,432 181,291 2,850 178,441 of which eligible debt securities 53,668 3,509 12,948 6,444 76,570 714 75,856 of which other debt securities 2,153 25,664 61,917 14,988 104,721 2,136 102,585 Equity instruments 147,380 147,380 147,380 Derivatives 121,326 121,326 121,326 Financial assets at fair value 55,821 29,173 74,865 21,432 268,705 449,996 2,850 447,146 Other assets 13,585 6,002 13,112 5,159 15,693 53,552 4 53,556 of which other financial assets 11,507 1,224 0 3 12,735 4 12,739 Total assets 472,918 387,834 258,004 575,479 699,193 284,398 2,677,827 89,993 2,587,834 of which accrued interest loans 1,412 1,412 of which accrued interest debt securities 583 583 Deposits by credit institutions 57,613 19,864 4,751 1,822 1,219 85,269 7 85,276 of which repos 778 778 778 General governments 3,986 4,723 922 62 1,307 11,000 3 10,997 Households 314,740 7,757 2,420 445 66 325,427 2 325,425 Corporates 947,014 112,945 6,170 1,951 0 1,068,080 12 1,068,068 Deposits and borrowings from the public 1,265,740 125,425 9,512 2,457 1,373 1,404,507 17 1,404,490 of which deposits 1,265,740 117,407 9,510 2,455 1,370 1,396,482 1 1,396,483 of which borrowing 8,007 8,007 8,007 of which repos 7,713 7,713 7,713 Certificates 113,121 175,639 0 288,761 900 287,861 Covered bonds 1,158 68,890 207,396 17,888 295,331 3,853 291,478 Other bonds 17,868 24,449 78,656 32,157 153,131 2,441 150,690 Issued securities 132,148 268,977 286,052 50,045 737,222 7,194 730,028 Debt securities 19 404 9,688 10,592 20,703 539 20,164 Equity instruments 14,405 14,405 14,405 Derivatives 113,497 113,497 113,497 Other liabilities 6,422 6,422 6,422 Financial liabilities at fair value 19 404 9,688 10,592 134,324 155,027 539 154,488 Other liabilities 5,283 1,450 148 90 24,020 30,991 2 30,989 of which other financial liabilities 5,138 1,302 2 0 6,442 2 6,440 Subordinated liabilities 5,645 24,087 29,733 2,084 27,649 Untaxed reserves 17,137 17,137 17,137 Equity 137,776 137,776 137,776 Total Liabilities and Equity 282,739 290,740 324,255 63,319 296,121 2,597,663 9,829 2,587,834 of which accrued interest deposits and borrowing 446 446 446 of which accrued interest issued securities 1,035 1,035 1,035 Off balance sheet items Loan commitments 74,322 112,098 332,998 8,728 528,146 528,146 Acceptances and other financial facilities 24,053 42,426 38,580 54,386 159,445 159,445 Operating lease commitments 239 540 1,934 2,199 4,913 214 4,699 Total liabilities, equity and off balance sheet items 381,354 445,804 697,767 128,631 296,121 3,290,166 10,043 3,280,123 1) Includes items available overnight. SEB Annual and Sustainability Report 2021 — 187 Note 40 f continuedLiquidity risk Parent company, 2020 Balance sheet (contractual maturity dates) Payable on demand < months ) months years years Not distributed Subtotal Discount effect Total Cash and cash balances at central banks 294,391 294,391 294,391 Loans to credit institutions 9,571 35,048 7,319 19,074 0 71,013 14 71,027 of which repos 8,087 8,087 8,087 General governments 475 7,961 183 3,049 1,423 13,091 315 12,776 Households 8,036 8,191 23,106 27,090 570,353 636,775 62,706 574,069 Corporates 45,266 290,189 194,435 408,577 72,324 1,010,791 28,326 982,465 Loans to the public 53,776 306,340 217,724 438,715 644,101 1,660,657 91,347 1,569,310 of which repos 112,391 112,391 481 111,910 Debt securities 41,098 46,538 133,064 25,479 246,178 6,250 239,928 of which eligible debt securities 36,607 17,664 15,888 7,053 77,212 1,249 75,963 of which other debt securities 4,491 28,874 117,176 18,426 168,966 5,001 163,965 Equity instruments 111,110 111,110 111,110 Derivatives 159,380 159,380 159,380 Financial assets at fair value 41,098 46,538 133,064 25,479 270,490 516,669 6,250 510,419 Other assets 12,867 4,691 14,606 5,554 14,244 51,962 1 51,963 of which other financial assets 10,451 0 163 0 10,614 1 10,615 Total assets 357,738 395,353 276,273 605,459 675,134 284,735 2,594,692 97,582 2,497,110 of which accrued interest loans 1,354 1,354 of which accrued interest debt securities 866 866 Deposits by credit institutions 33,497 68,632 7,430 37,536 1,159 148,254 423 147,831 of which repos 659 659 1 658 General governments 5,396 1,224 15 60 1,352 8,049 34 8,015 Households 273,859 9,058 2,654 457 115 286,143 22 286,121 Corporates 810,811 89,223 1,305 3,466 904,805 108 904,697 Deposits and borrowings from the public 1,090,066 99,506 3,975 3,983 1,467 1,198,997 164 1,198,833 of which deposits 1,090,066 91,842 3,967 3,956 1,439 1,191,270 33 1,191,237 of which borrowing 7,597 7,597 1 7,596 of which repos 7,273 7,273 1 7,272 Certificates 88,013 155,952 1,645 245,610 1,493 244,117 Covered bonds 16,258 64,259 228,694 33,209 342,419 8,663 333,756 Other bonds 24,344 35,244 93,395 22,848 175,832 4,290 171,542 Issued securities 128,615 255,455 323,734 56,057 763,861 14,446 749,415 Debt securities 0 767 14,074 5,434 20,274 738 19,536 Equity instruments 10,873 10,873 10,873 Derivatives 157,529 157,529 157,529 Other liabilities 242 491 11 744 744 Financial liabilities at fair value 242 1,258 14,084 5,434 168,402 189,420 738 188,682 Other liabilities 11,794 61 270 103 15,790 28,018 2 28,016 of which other financial liabilities 11,527 6 45 13 0 11,591 2 11,589 Subordinated liabilities 10,648 23,341 33,989 2,152 31,837 Untaxed reserves 18,628 18,628 18,628 Equity 133,868 133,868 133,868 Total Liabilities and Equity 308,789 278,827 402,948 64,219 318,060 2,515,035 17,925 2,497,110 of which accrued interest deposits and borrowing 471 471 471 of which accrued interest issued securities 1,886 1,886 1,886 Off balance sheet items Loan commitments 163,667 74,487 195,850 32,478 466,481 466,481 Acceptances and other financial facilities 22,953 40,084 39,286 39,446 141,769 141,769 Operating lease commitments 225 507 1,931 2,371 5,034 253 4,781 Total liabilities, equity and off balance sheet items 495,634 393,904 640,015 138,514 318,060 3,128,319 18,178 3,110,141 1) Includes items available overnight. Average remaining maturity (years) Group Parent company Loans to credit institutions 0.41 0.43 0.29 0.93 Loans to the public 4.69 4.60 4.65 4.58 Deposits from credit institutions 0.29 1.16 0.27 0.92 Deposits from the public 0.03 0.03 0.03 0.03 Borrowing from the public 0.16 0.19 0.13 0.13 Certificates 0.43 0.46 0.43 0.46 Covered bonds 2.84 3.06 2.84 3.06 Other bonds 3.71 2.98 3.71 2.98 Financial statements—Notes 188 — SEB Annual and Sustainability Report 2021 40g IBOR Reform (Interest Rate Benchmark Reform) Overview Interbank Offered Rates (IBORs) are widely used benchmarks interest rates. They are referenced in financial products such as derivatives, bonds, loans, structured products, and mortgages and form the basis on which interests pay- ments under those products are calculated. Following the financial crisis, and a slowdown in the interbank market together with a decline in the IBORs rele- vancy and credibility, global regulators called for reform of IBORs. The exact timing of the transition will vary by currency and product. All LIBORs, except for certain USD LIBOR settings, will cease to exist by the end of and will be replaced by alternative reference rates. USD LIBOR m, m and m will cease to exist after June . Nordic IBORs such as STIBOR, CIBOR and NIBOR as well as EURIBOR are expected to continue to exist. The adoption rate of alternative reference rates has improved considerably in , notably in Sterling Overnight Index (SONIA) replacing GBP LIBOR and Secured Overnight Finance Rate (SOFR) replacing USD LIBOR. There are key differences between IBORs and their preferred alternative reference rates (ARR), IBORs are term rate benchmarks across multiple tenors and they are forward-looking as they are published in the beginning of the interest period. ARRs, e.g. SOFR and SONIA are transaction based backward-looking overnight rates published at the end of the interest period, with no term element. Further- more, IBORs include a credit spread over the risk-free rate, which SOFR and SONIA do not. In order to migrate existing contracts and agreements that refer- ence USD LIBOR to SOFR and GBP LIBOR to SONIA, adjustments for term differ- ences and credit differences might need to be applied to SOFR and SONIA, to enable the benchmark rates to be economically equivalent on transition. SEB Group’s IBOR transition The group-wide IBOR transition programme is governed by a steering commit- tee and a working group, across SEB’s divisions that coordinates the implemen- tation of needed changes to systems, processes, risk- and valuation models, as well as manages related tax and accounting implications. The group continuously monitors and participates in market discussions to further prepare for and deliver on a smooth transition in line with the market development and authorities guidance. As from April , SEB does no longer enter into deals certain LIBORs in accordance with the market milestones. To assist in an orderly transition to alternative benchmarks, active customer engagement and communication has been the strategy. SEB has adhered to the ISDA IBOR Fallbacks Protocol. Furthermore, the group has engaged with customers to amend collateral rates in Credit Support Annexes. Exposure overview The table below summarises the significant LIBOR exposures in scope for benchmark rate migration as per December . There are no remaining EUR Eonia balances. Product/currency GBP LIBOR CHF LIBOR JPY LIBOR USD LIBOR Derivatives 26,626 214 895 1,689,363 Non-derivative assets (lending, mortgages, stocks etc.) 21,880 238 106,530 Non-derivative liabilities 240 NOTIONAL EXPOSURE AMOUNT PER CURRENCY Out of the volumes in the table above, significant portions have been contractu- ally renegotiated during and are set for transition at the first interest rate fixing in . All of JPY has been transitioned and the majority of GBP and CHF. The group’s objective is to, by mid have finalised the transition of remaining exposures to ceased benchmarks. The group also aims to have agreed the transition of remaining legacy USD exposures prior to the cessation of USD LIBOR, June . Interest Rate Benchmark Reform (IBOR) – Phase 2 Interest Rate Benchmark Reform (IBOR) – Phase is applicable for . The amendments to IFRS , IAS , IFRS , IFRS and IFRS address issues that might affect financial reporting as a result of the IBOR reform, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative bench- mark rate. In accordance with the amendments, changes made to a financial instrument that relate directly to the interest rate benchmark reform and that are economically equivalent, do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require the effec- tive interest rate to be updated to reflect the change in the interest rate bench- mark without adjusting the carrying amount. In addition, hedge accounting will not be discontinued solely because of the replacement of the interest rate benchmark if the hedge meets other hedge accounting criteria. For more information about Interest Rate Benchmark Reform (IBOR) – Phase , se note . SEB Annual and Sustainability Report 2021— 189 41 Capital adequacy Capital management SEB takes various types of risks in line with the bank’s strategy and business plan. In order to manage these risks and to guarantee SEB’s long-term survival, the bank must maintain satisfactory capital strength. At the same time, SEB must balance the trade-off between financial reward and overall risk tolerance. In particular, SEB’s capital management balances the following dimensions: . regulatory: the capital requirements established by the EU regulation and directives through Swedish law on capital adequacy, and by the bank’s supervisory authorities, . access to debt investors: the capitalisation level required to support a cer- tain rating level in order to reach a debt investor base necessary for con- ducting SEB’s business activities, . access to financial products: the capital level required by corporate clients and other counterparties to facilitate the bank’s activity in the capital mar- kets, including derivatives and foreign exchange, and . optimal return on equity: the balance between the shareholders’ expected return on capital and risks taken. To meet the expectations of the shareholders, supervisors and market partici- pants, SEB’s capitalisation is based on an assessment of all risks incurred in SEB’s business, and forward-looking, aligned with long- and short-term business plans and with expected macroeconomic developments. Furthermore, the capi- talisation is stress-tested to identify the potential effect of adverse changes to SEB’s financial situation. Internal capital adequacy assessment process The internal capital adequacy assessment process (ICAAP) encompasses SEB’s internal views on material risks and their development as well as risk measure- ment models, risk governance and risk mitigants. It is linked to overall business planning and establishes a strategy for maintaining appropriate capital levels. Together with continuous monitoring and reporting of the capital adequacy to the Board, this ensures that the relationship between shareholders’ equity, eco- nomic capital, regulatory and rating-based requirements are managed so that the bank’s survival is not jeopardised. Thus, the ICAAP is integrated with SEB’s business planning, internal governance framework and internal control systems. SEB’s capital plan covers the strategic planning horizon and projects eco- nomic and legal capital requirements, as well as available capital resources and relevant ratios. It is forward-looking, taking into account current and planned business volumes as well as strategic initiatives. The capital plan is stress tested to potential down-turns in the macroeconomic environment, to strategic risk fac- tors identified in the business planning, and to other relevant scenarios. The capi- tal plan is established annually and updated as needs arise during the year. Economic capital constitutes an important part of capital adequacy assess- ment. It is an internal measurement of risk, similar to the rules for capital ade- quacy in that many of the underlying risk components are the same. The eco - nomic capital calculation is based on a confidence level of . per cent, which is equivalent to the capital requirement for a very high rating. The eco- nomic capital, or internally assessed capital requirement for SEB including insurance risk, amounted to SEK bn ). SEB employs an internal capital allocation framework for measuring return on risk, named business equity. It is similar to regulatory capital models includ- ing Pillar requirements and is calibrated with SEB’s capital targets. The regulatory supervisors annually assess SEB and its ICAAP in accordance with the parameters of the Supervisory Review and Evaluation Process (SREP). The assessment covers SEB’s capital adequacy, risk measurement models and risk governance, among other things, and in the SREP it was concluded that SEB is sufficiently capitalised and adequately measures and manages risks. Regulatory capital requirements On December , new capital requirements started to apply for Swedish banks, as the EU Banking package was transposed into Swedish law. Capital requirements are built up of four main parts: i) a Pillar minimum requirements of per cent, ii) a Pillar requirements (PR), iii) a combined buffer requirement, and iv) a Pillar guidance (PG). As at year-end , SEB’s applicable CET capital requirement was approxi- mately . per cent .), whereof the Pillar requirement was . .) per cent. During , the remaining parts of the Banking package has been implemented. As part of the Supervisory Review and Evaluation Process (SREP) the Swedish FSA introduced a Pillar Guidance (PG) of . per cent for the group. SEB Consolidated situation – Prudential requirements (explicit or implicit) Dec 2021 CET AT Tier Total Pillar 1 .% .% .% .% Pillar 2 requirement Corporate exposures – Commercial real estate RW-floor 0.6% 0.0% 0.2% 0.8% Credit concentration risk 0.3% 0.1% 0.1% 0.5% Interest rate risk in the banking book 0.3% 0.1% 0.1% 0.6% Total Pillar 2 requirement 1.2% 0.2% 0.4% 1.8% Total SREP capital requirement (TSCR) 5.7% 1.7% 2.4% 9.8% Institution specific buffer requirement Capital conservation buffer 2.5% 2.5% Systemic risk buffer 3.0% 3.0% Other Systemically Important Institution buffer (O-SII) 1.0% 1.0% Countercyclical capital buffer 0.1% 0.1% Combined buffer requirement (CBR) 6.6% 6.6% Overall capital requirement (TSCR+CBR) 12.3% 1.7% 2.4% 16.4% Pillar 2 Guidance (P2G) 1.5% 1.5% Overall capital requirement and P2G 13.8% 1.7% 2.4% 17.9% Financial statements — Notes 190 — SEB Annual and Sustainability Report 2021 Note 41 continued Capital adequacy Capital adequacy analysis Consolidated situation Parent company Own funds Common Equity Tier 1 capital 154,821 152,124 131,207 134,055 Tier 1 capital 168,375 164,403 144,761 146,334 Total own funds 181,737 181,835 157,935 163,646 Own funds requirement Risk exposure amount 787,490 725,560 712,916 659,989 Expressed as own funds requirement 62,999 58,045 57,033 52,799 Common Equity Tier 1 capital ratio 19.7% 21.0% 18.4% 20.3% Tier 1 capital ratio 21.4% 22.7% 20.3% 22.2% Total capital ratio 23.1% 25.1% 22.2% 24.8% Own funds in relation to own funds requirement 2.88 3.13 2.77 3.10 Regulatory Common Equity Tier 1 capital requirement including buffer 11.1% 11.1% 7.1% 7.1% of which capital conservation buffer requirement 2.5% 2.5% 2.5% 2.5% of which systemic risk buffer requirement 3.0% 3.0% of which other systemically important institution buffer requirement (O-SII) 1.0% 1.0% of which countercyclical capital buffer requirement 0.1% 0.1% 0.1% 0.1% Common Equity Tier 1 capital available to meet buffer 1) 13.2% 14.8% 12.3% 14.3 Leverage ratio Exposure measure for leverage ratio calculation 3,352,452 3,226,866 3,065,713 3,025,643 of which on balance sheet items 2,981,244 2,678,521 2,709,501 2,487,526 of which off balance sheet items 371,209 548,345 356,212 538,118 Leverage ratio 5.0% 5.1% 4.7% 4.8% 1) Year-end 2020 recalculated as if Pillar 2 requirements were formally decided. Own funds Consolidated situation Parent company Total equity according to balance sheet 1) 193,228 171,943 151,353 148,628 Accrued dividend 12,938 8,864 12,938 8,864 Deconsolidation of insurance companies and other foreseeable charges 2) 1,397 988 1,397 21 Common Equity Tier 1 capital before regulatory adjustments 181,687 162,091 139,812 139,786 Additional value adjustments 1,133 894 1,113 874 Goodwill 4,261 4,378 3,358 3,358 Intangible assets 1,327 1,557 1,196 1,217 Deferred tax assets that rely on future profitability 7 11 Fair value reserves related to gains or losses on cash flow hedges 18 47 18 47 Gains or losses on liabilities valued at fair value resulting from changes in own credit standing 194 3 205 159 Defined-benefit pension fund assets 17,211 3,008 Direct and indirect holdings of own CET1 instruments 2,752 169 2,752 169 Total regulatory adjustments to Common Equity Tier 1 26,866 9,967 8,606 5,731 Common Equity Tier 1 capital 154,821 152,124 131,207 134,055 Additional Tier I instruments 13,555 12,279 13,555 12,279 Tier 1 capital 168,375 164,403 144,761 146,334 Tier 2 instruments 3) 13,826 18,606 13,826 18,606 Net provisioning amount for IRB-reported exposures 736 476 548 355 Holdings of Tier 2 instruments in financial sector entities 1,200 1,650 1,200 1,650 Tier 2 capital 13,362 17,432 13,174 17,311 TOTAL 181,737 181,835 157,935 163,646 1) For the parent company, Total equity includes Untaxed reserves net of tax. 2) Starting from the second quarter 2021 and forward this item is solely attributable to reversal of direct and indirect holdings of own CET1 instrument. 3) Following an approval from the Swedish Financial Supervisory Authority to call a Tier 2 instrument of EUR 1.0 bn issued in 2014, the instrument was excluded from the bank’s own funds as at Q1 2021. The instrument was redeemed in Q2 2021. A new Tier 2 instrument of EUR 0.5 bn was issued during Q4 2021. SEB Annual and Sustainability Report 2021— 191 Note 41 continued Capital adequacy Risk exposure amount Credit risk IRB approach Consolidated situation Parent company Risk exposure amount Own funds requirement ) Risk exposure amount Own funds requirement ) Risk exposure amount Own funds requirement ) Risk exposure amount Own funds requirement ) Exposures to central governments or central banks 18,374 1,470 13,893 1,111 10,362 829 8,221 658 Exposures to institutions 52,833 4,227 46,522 3,722 52,349 4,188 45,136 3,611 Exposures to corporates 371,928 29,754 342,199 27,376 308,939 24,715 281,603 22,528 Retail exposures 66,879 5,350 63,740 5,099 44,205 3,536 42,131 3,371 of which secured by immovable property 43,718 3,497 40,817 3,265 34,274 2,742 32,283 2,583 of which retail SME 5,621 450 5,278 422 2,187 175 of which other retail exposures 17,540 1,403 17,644 1,412 7,744 619 9,848 788 Securitisation positions 1,976 158 1,973 158 1,976 158 1,973 158 Total IRB approach 511,989 40,959 468,326 37,466 417,831 33,426 379,064 30,325 Credit risk standardised approach Exposures to central governments or central banks 949 76 966 77 Exposures to institutions 937 75 909 73 11,628 930 18,339 1,467 Exposures to corporates 6,635 531 4,905 392 3,319 266 3,024 242 Retail exposures 15,278 1,222 13,528 1,082 9,001 720 8,206 656 Exposures secured by mortgages on immovable property 2,016 161 1,935 155 2,012 161 1,931 155 Exposures in default 45 4 52 4 24 2 26 2 Exposures associated with particularly high risk 845 68 1,043 83 845 68 1,043 83 Exposures in the form of collective investment undertakings (CIU) 57 5 Equity exposures 8,459 677 4,139 331 44,992 3,599 37,286 2,983 Other items 10,180 814 10,327 826 3,098 248 2,807 225 Total standardised approach 45,344 3,628 37,860 3,029 74,920 5,994 72,662 5,813 Market risk Trading book exposures where internal models are applied 26,756 2,140 28,088 2,247 26,756 2,140 28,088 2,247 Trading book exposures applying standardised approaches 5,021 402 8,742 699 4,975 398 8,675 694 Foreign exchange rate risk 4,153 332 3,377 270 Total market risk 31,778 2,542 36,830 2,946 35,883 2,871 40,140 3,211 Other own funds requirements Operational risk advanced measurement approach 49,897 3,992 50,483 4,039 39,185 3,135 39,928 3,194 Settlement risk 13 1 3 0 13 1 3 0 Credit value adjustment 9,493 759 7,336 587 9,485 759 7,336 587 Investment in insurance business 22,527 1,802 16,633 1,331 22,527 1,802 16,633 1,331 Other exposures 3,898 312 5,237 419 528 42 1,377 110 Additional risk exposure amount 2) 112,551 9,004 102,851 8,228 112,544 9,004 102,845 8,228 Total other own funds requirements 198,379 15,870 182,544 14,604 184,282 14,743 168,122 13,450 TOTAL 787,490 62,999 725,560 58,045 712,916 57,033 659,989 52,799 1) Own funds requirement 8 per cent of risk exposure amount according to Regulation (EU) No 5752013 (CRR). 2) Additional risk exposure amount according to Article 458, Regulation (EU) No 5752013 (CRR), for risk-weight floors in the Swedish mortgage portfolio and as from Q3 2021 for risk- weight floors in the Norwegian mortgage portfolio as well as for Norwegian corporate exposures collateralized by immovable property. Average risk-weight Consolidated situation Parent company Exposures to central governments or central banks 2.9% 2.9% 1.9% 1.9% Exposures to institutions 23.5% 21.7% 23.5% 21.7% Exposures to corporates 27.6% 27.5% 25.0% 24.7% Retail exposures 9.2% 9.4% 7.3% 7.4% of which secured by immovable property 6.7% 6.7% 5.9% 5.9% of which retail SME 50.3% 49.6% 33.8% 34.6% of which other retail exposures 28.5% 29.6% 38.5% 40.1% Securitisation positions 16.9% 16.4% 16.9% 16.4% The consolidated SEB Group must also comply with capital requirements con- cerning combined banking and insurance groups, i.e. financial conglomerates. The combined capital requirement for the SEB financial conglomerate was SEK .bn .) while the Own funds amounted to SEK .bn .). In these total figures, SEB Life and Pension Holding AB has contributed with Solvency II figures from September , . Financial statements — Notes 192 — SEB Annual and Sustainability Report 2021 42 Life insurance operations Income statement Group Premium income, net 5,025 4,688 Income investment contracts – Own fees including risk gain/loss 1,383 1,310 – Commissions from fund companies 2,122 1,801 3,505 3,110 Net investment income 2,889 898 Other operating income 417 334 Total income, gross 11,836 9,031 Claims paid, net 2,094 1,727 Change in insurance contract provisions 4,956 3,407 Total income, net 4,786 3,897 Of which fees net from other entities within the SEB Group 1,712 1,413 Direct acquisition costs investment and insurance contracts 765 705 Change in deferred acquisition costs 201 233 967 937 Commissions received and profit share from ceded reinsurance 99 128 Other expenses 1,573 1,621 Total expenses 2,440 2,430 Net expected credit losses 0 1 OPERATING PROFIT 2,346 1,468 Change in surplus values in division Life Present value of new sales 1) 1,280 955 Return on existing policies 1,179 1,184 Realised surplus value in existing policies 2,501 2,485 Actual outcome compared to assumptions 2) 1,288 43 Change in surplus values from ongoing business, gross 1,246 303 Capitalisation of acquisition costs 98 74 Amortisation of capitalised acquisition costs 299 307 Change in deferred front end fees 19 19 Change in surplus values from ongoing business, net 3) 1,428 90 Financial effects due to short-term market fluctuations 4) 3,170 133 Change in assumptions 5) 677 176 TOTAL CHANGE IN SURPLUS VALUES 6 5,276 219 Calculations of surplus value in the life insurance operations are based on assumptions of the future development of existing insurance contracts and a risk- adjusted discount rate. The most important assumptions (Swedish unit-linked – which represent per cent ) of the total surplus value). Discount rate 6.5% 6.5% Growth in fund units, gross before fees and taxes 4.65% 4.65% Transfer rate 3.73% 3.73% Lapse rate of regular premiums unit-linked 7.8% 8.3% Surrender of endowment insurance contracts: contracts signed within 1 year / 14 years / 5 years / 6 years / thereafter 1% / 6% / 9% / 8% / 6% 1% / 5% / 11% / 9% / 7% Inflation CPI / Inflation expenses 2% / 3% 2% / 3% Mortality The group's experience The group's experience 1) Sales defined as new contracts and extra premiums in existing contracts. 2) The calculated deviation between the actual outcome from existing contracts and the assumed outcome based on previous assumptions. In 2021 there was a large positive effect related to a new distribution model. 3) Acquisition costs are capitalised and amortised according to plan. Certain front end fees are also recorded on the balance sheet and recognized as revenue in the income statement during several years. The reported change in surplus values is adjusted by the net effect of changes in deferred acquisition costs and front end fees during the period. 4) Assumed investment return (growth in fund values) is 4.65 per cent 4.65) gross before fees and taxes. Actual returns results in positive or negative financial effects. 5) Positive effect in 2021 from change in annuity term, deferral of vesting, lower surrender rate and expenses. Negative effect from assumed higher transfers out. Positive effect in 2020 mainly from lower assumed surrenders, lower transfers out, lower loss ratio and lower mortality which were reduced by higher assumed expenses. 6) The calculated surplus value is not included in the SEB Group’s consolidated accounts. The surplus value is net of capitalised acquisition costs and deferred front end fees. Summarised financial information for Gamla Livförsäkringsaktiebolaget SEB Trygg Liv 1) Income statement, condensed Life insurance technical result 33,778 2,419 Other costs and appropriations 15 2 Taxes 170 235 NET RESULT 33,594 2,182 Balance sheet, condensed TOTAL ASSETS 195,183 175,870 Total liabilities 77,055 84,228 Consolidation fund / equity 118,016 91,545 Untaxed reserves 112 97 TOTAL LIABILITIES AND EQUITY 195,183 175,870 1) SEB owns all shares of Gamla Livförsäkringsaktiebolaget SEB Trygg Liv except for a golden share owned by Trygg-Stiftelsen. Gamla Livförsäkringsaktiebolaget SEB Trygg Liv is not consolidated as subsidiary of the group, since the ownership of SEB in Gamla Livförsäkringsaktiebolaget SEB Trygg Liv does not result in control. Current year figures are unaudited. SEB Annual and Sustainability Report 2021— 193 43 Assets in unit-linked operations Within the unit-linked business SEB holds, for its customers’ account, a share of more than per cent in ) funds, where SEB is the investment manager. The total value of those funds amounted to SEK ,m ,) of which SEB, for its customers’ account, holds SEK ,m ,). 44 Interest in unconsolidated structured entities Assets, Group Parent company Special purpose entities Asset management ) Total Special purpose entities Asset management ) Total Loans to the public 10,355 10,355 10,355 10,355 Financial assets 1 380,621 380,622 1 44 45 of which derivatives 1 1 1 1 TOTAL 10,356 380,621 390,977 10,356 44 10,400 Liabilities Deposits and borrowings from the public 461 0 461 461 461 Financial liabilities 13 13 13 13 of which derivatives 13 13 13 13 TOTAL 474 0 474 474 474 Obligations 1,145 1,145 1,145 1,145 The group’s maximum exposure to loss 11,501 23,026 34,527 11,501 44 11,545 1) Investments in SEB- and non-SEB managed funds Assets, 2020 Loans to the public 10,549 10,549 10,549 10,549 Financial assets 16 311,770 311,786 16 1,540 1,556 of which derivatives 16 16 16 16 TOTAL 10,565 311,770 322,335 10,565 1,540 12,105 Liabilities Deposits and borrowings from the public 423 1 424 423 1 424 Financial liabilities 0 0 of which derivatives 0 0 TOTAL 423 1 424 423 1 424 Obligations 669 669 669 669 The group’s maximum exposure to loss 11,234 18,550 29,784 11,234 1,540 12,775 1) Investments in SEB- and non-SEB managed funds Interests in unconsolidated structured entities refers to cases when the group has interests in structured entities which it does not control. A structured entity is an entity that is designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. The group enters into transactions with structured entities in the normal cause of business for various reasons. Depending on the type of structured entity the purpose is to support customer transactions, to engage in specific investment oppor tunities and to facilitate the start-up of certain entities. The group has interests in the following types of structured entities: Interests in funds The group establishes and manages funds to provide customers with invest- ment opportunities, SEB is considered to be the sponsor of those funds. Total assets under management represent the size of a fund. Total assets under man- agement of funds managed by SEB are SEK bn ). The total assets of non-SEB managed funds are not publicly available and not considered meaning- ful for understanding related risks, and have therefore not been presented. In some cases the group facilitates the start-up of funds by holding units and it may hold units in funds managed by the group or by a third party for investment purposes within the life business. The funds managed by the group generate income in the form of management fees and performance fees based on the assets under management. The income from asset management is presented in note . The maximum exposure to loss is limited to the carrying amount of units held by the group. This amount does not reflect the probable loss. Interests in other structured entities The group has had a role in establishing structured entities to support customer transactions. The purpose of these entities is to provide alternative funding and liquidity improvement to the sellers and investment opportunities to investors by purchasing assets and obtain funding for the purchases with the assets as collateral. The group provides senior revolving credit facilities and administra- tive services to the entities and earn fee and interest income on market based conditions. The group holds the most senior investments in debt instruments issued by banks, through securitisation vehicles (SPV) whose purpose is to provide alter- native funding to the issuers and investment opportunities to investors. The SPVs purchase pools of asset from the originating banks balance sheet, e.g. credit card loans, residential mortgage loans, loans to small and medium sized enterprises and fund these purchases by issuing debt securities with the assets as collateral. The securities have multiple tranches of subordination. The maximum exposure to loss regarding investments in other structured entities is limited to the carrying amount of the investments and may occur only after losses by creditors with junior exposures. The maximum exposure to loss does not reflect the probability of loss and hedging or collateral arrangements are not considered. The total assets for these entities are not considered mean- ingful information for the purpose of understanding the related risks and there- fore have not been presented. Financial statements — Notes 194 — SEB Annual and Sustainability Report 2021 45 Related parties Group, Group Associated companies Key management Other related parties Assets/ Liabilities Interest Assets/ Liabilities Interest Assets/ Liabilities Interest Loans to the public 1,557 15 218 3 62 1 Notional amount of derivatives 1,373 Deposits and borrowings from the public 473 9 45 1,313 1 Group, 2020 Loans to the public 1,198 14 211 3 71 1 Notional amount of derivatives 1,877 Deposits and borrowings from the public 39 0 29 1,723 0 Parent company, Parent company Associated companies Group companies Assets/ Liabilities Interest Assets/ Liabilities Interest Loans to credit institutions 21,495 64 Loans to the public 1,557 15 12,963 6 Interest-bearing securities 1,401 25 Positive replacement values of derivatives 380 Other assets 0 1,184 0 TOTAL 1,557 15 37,423 96 Deposits from credit institutions 12,630 59 Deposits and borrowings from the public 462 9 13,777 13 Negative replacement values of derivatives 456 Other liabilities 0 66 4 TOTAL 462 9 26,929 68 Parent company, 2020 Loans to credit institutions 29,491 117 Loans to the public 1,199 14 8,355 8 Interest-bearing securities 3,350 36 Positive replacement values of derivatives 533 Other assets 6 1,512 0 TOTAL 1,205 14 43,241 161 Deposits from credit institutions 38,849 143 Deposits and borrowings from the public 39 2 13,634 4 Negative replacement values of derivatives 994 Other liabilities 0 188 3 TOTAL 39 2 53,665 142 Key management above refers to the Board of Directors and the Group Execu- tive Committee. Entities with significant influence or significantly influenced by key management in the group, and post-employment benefit plans are pre- sented as other related parties. Investor AB and the pension foundation SEB- stiftelsen are within this category as well as close family members to key man- agement. In addition the group has insurance administration and asset manage- ment agreements with Gamla Livförsäkringsaktiebolaget SEB Trygg Liv based on conditions on the market. SEB has received SEK m ) under the insur- ance administration agreement and SEK m ) under the asset manage- ment agreement. For more information on Gamla Livförsäkringsaktiebolaget SEB Trygg Liv, see note . The parent company is a related party to its subsidiaries and associates. See note , Investments in subsidiaries, associates and joint ventures, for disclosures of investments. SEB Annual and Sustainability Report 2021— 195 46 Financial assets and liabilities subject to offsetting or netting arrangements Group, Financial assets and liabilities subject to offsetting or netting arrangements Other instruments in balance sheet not subject to netting arrangements Total in balance sheet Gross amounts Offset Net amounts in balance sheet Related arrangements Net amounts Master netting arrangements Collaterals received/ pledged Derivatives 149,013 22,956 126,057 81,580 43,553 923 6 126,051 Reversed repo receivables 190,909 108,261 82,649 8,491 74,158 5,018 87,667 Securities borrowing 26,059 26,059 25,639 419 180 26,239 Client receivables 12,105 12,105 ASSETS 365,981 131,216 234,764 90,071 143,351 1,342 17,298 252,062 Derivatives 141,118 22,956 118,163 81,580 34,653 1,930 10 118,173 Repo payables 117,024 108,261 8,763 8,491 273 773 9,537 Securities lending 33,254 33,254 33,033 221 35 33,289 Client payables 6,701 6,701 LIABILITIES 291,397 131,216 160,180 90,071 67,686 2,423 7,520 167,700 Group, 2020 Derivatives 166,111 1,323 164,787 87,837 53,700 23,251 121 164,909 Reversed repo receivables 153,867 33,878 119,989 8,876 111,113 5,395 125,384 Securities borrowing 12,413 12,413 11,908 505 307 12,719 Client receivables 1 1 9,764 9,764 ASSETS 332,391 35,203 297,189 96,712 176,721 23,755 15,587 312,776 Derivatives 162,624 1,323 161,300 87,837 52,410 21,054 261 161,561 Repo payables 42,754 33,878 8,876 8,876 8,876 Securities lending 19,513 19,513 18,408 1,105 1 19,514 Client payables 1 1 11,599 11,599 LIABILITIES 224,892 35,203 189,689 96,712 70,817 22,159 11,861 201,550 Parent company, Financial assets and liabilities subject to offsetting or netting arrangements Other instruments in balance sheet not subject to netting arrangements Total in balance sheet Gross amounts Offset Net amounts in balance sheet Related arrangements Net amounts Master netting arrangements Collaterals received/ pledged Derivatives 143,777 22,451 121,326 77,709 43,617 121,326 Reversed repo receivables 190,903 108,261 82,643 8,491 74,158 82,643 Securities borrowing 25,639 25,639 25,639 25,639 Client receivables 0 0 11,432 11,432 ASSETS 360,319 130,712 229,608 86,199 143,414 11,432 241,040 Derivatives 135,948 22,451 113,497 77,709 35,108 680 113,497 Repo payables 116,751 108,261 8,491 8,491 8,491 Securities lending 33,033 33,033 33,033 33,033 Client payables 5,119 5,119 LIABILITIES 285,733 130,712 155,021 86,199 68,142 680 5,119 160,140 Parent company, 2020 Derivatives 159,380 159,380 84,448 52,959 21,973 159,380 Reversed repo receivables 153,867 33,878 119,989 8,876 111,113 119,989 Securities borrowing 11,908 11,908 11,908 11,908 Client receivables 1 1 9,204 9,204 ASSETS 325,156 33,880 291,277 93,324 175,980 21,973 9,204 300,481 Derivatives 157,529 157,529 84,448 52,410 20,671 157,529 Repo payables 42,754 33,878 8,876 8,876 8,876 Securities lending 18,408 18,408 18,408 18,408 Client payables 1 1 10,488 10,488 LIABILITIES 218,693 33,880 184,813 93,324 70,817 20,671 10,488 195,301 The table shows financial assets and liabilities that are presented net in the balance sheet or with potential rights to off-set associated with enforceable master netting arrangements or similar arrangements, together with related collateral. Financial assets and liabilities are presented net in the balance sheet when SEB has legally enforceable rights to set-off, in the ordinary cause of business and in the case of bankruptcy, and intends to settle on a net basis or to realize the assets and settle the liabilities simultaneously. Repos with central counter- party clearing houses that SEB has agreements with and client receivables and client payables are examples of instruments that are presented net in the bal- ance sheet. Financial assets and liabilities subject to enforceable master netting arrange- ments or similar arrangements that are not presented net in the balance sheet are arrangements that are usually enforceable in the case of bankruptcy or default but not in the ordinary course of business or arrangements where SEB does not have the intention to settle the instruments simultaneously. Assets and liabilities that are not subject to offsetting or netting arrange- ments, i.e those that are only subject to collateral agreements, are presented as Other instruments in balance sheet not subject to netting arrangements. Financial statements — Notes 196 — SEB Annual and Sustainability Report 2021 47 Pledged assets Group Parent company Pledged assets and comparable securities for own liabilities 541,308 493,629 539,115 490,032 Pledged assets for own liabilities to insurance policyholders 458,849 362,016 Other pledged assets and comparable securities 66,226 108,336 65,329 106,252 TOTAL 1,066,382 963,981 604,443 596,284 Pledged assets and comparable securities for own liabilities 1 ) Repos 32,543 47,425 32,270 47,425 Assets collateralised for issued mortgage covered bonds 293,858 332,821 292,874 331,128 Assets collateralised for issued public covered bonds 673 Other collateral 214,906 112,710 213,970 111,479 TOTAL 541,308 493,629 539,115 490,032 1) Transfers that do not qualify for derecognition. Pledged assets for own liabilities to insurance policyholders Assets pledged for insurance contracts 34,623 29,624 Assets pledged for investment contracts 1) 424,226 332,392 TOTAL 458,849 362,016 1) Shares in funds. Other pledged assets and comparable collateral Bonds 1) 33,424 80,735 33,424 80,735 Securities lending 897 2,083 Other 31,904 25,517 31,904 25,517 TOTAL 66,226 108,336 65,329 106,252 1) Pledged but unencumbered bonds. Transferred financial assets entirely recognized 1) Group, Transferred assets Associated liabilities Associated collateral received ) Securities lending Repurchase agreements Other ) Total Securities lending Repurchase agreements Other ) Total Securities lending Equity instruments 44,309 1,339 45,648 7,970 7,970 29,535 Debt securities 22,548 4,737 55 27, 340 3,242 4,737 7,979 15,888 Financial assets held for trading 66,857 4,737 1,394 72,989 11,212 4,737 15,950 45,423 Group, 2020 Equity instruments 24,344 135 24,480 4,645 4,645 17,103 Debt securities 34,370 1,832 2,408 38,610 2,660 1,832 2,000 6,491 28,119 Financial assets held for trading 58,715 1,832 2,543 63,090 7,304 1,832 2,000 11,136 45,221 Parent company, Transferred assets Associated liabilities Associated collateral received ) Securities lending Repurchase agreements Other ) Total Securities lending Repurchase agreements Other ) Total Securities lending Equity instruments 44,194 44,194 7,907 7,9 07 29,477 Debt securities 22,548 4,737 55 27, 340 3,228 4,737 7,966 15,895 Financial assets held for trading 66,742 4,737 55 71,534 11,135 4,737 15,873 45,372 Parent company, 2020 Equity instruments 24,344 24,344 4,603 4,603 17,103 Debt securities 34,370 1,832 2,408 38,610 2,636 1,832 2,000 6,467 28,119 Financial assets held for trading 58,715 1,832 2,408 62,954 7,238 1,832 2,000 11,070 45,221 1) Carrying amount and fair value are the same. 2) Other than cash collateral. 3) Assets provided as collateral for derivatives trading, clearing etc. Pledged assets Assets are transferred for repurchase agreements and securities lending agreements. The counterpart has the right to sell or repledge the assets. Other transferred assets refer to assets provided as collateral for derivatives trading, clearing etc., where the title to the instrument has been transferred to the coun- terparty. The assets continue to be recognised on SEB’s balance sheet since SEB is still exposed to changes in the fair value of the assets. The carrying value and fair value of the assets transferred as collateral for liabilities or contingent lia- bilities are shown in the table above. SEB issues covered bonds secured by mortgage loans pledged as security according to the local legislation. The pledged securities are mainly residential mortgages in single family homes, tenant owned homes or other residential apartment buildings. The loan-to-value ratio does not exceed per cent. In the event of SEB’s insolvency, the holders of the covered bonds have priority to the assets registered as collateral. Obtained collateral SEB obtains collateral under reverse repurchase agreements and securities borrowing agreements. Under the terms of standard financial market agree- ments SEB has the right to sell or repledge the collateral, subject to returning equivalent securities on settlement of the transactions. More information about the accounting of repurchase agreements and secu- rities lending can be found in the accounting principles. SEB Annual and Sustainability Report 2021— 197 48 Obligations Group Parent company Contingent liabilities 160,294 137,341 159,445 141,769 Commitments 813,936 724,933 754,551 667,824 TOTAL 974,231 862,274 913,996 809,592 Contingent liabilities Own acceptances 2,190 1,521 2,079 1,427 Financial guarantees given 1) 10,281 8,573 17,998 21,045 of which group internal 7,750 12,532 Other guarantees given 147,824 127,247 139,367 119,296 of which group internal 994 918 Guarantees given 158,105 135,820 157,366 140,341 TOTAL 160,294 137,341 159,445 141,769 1) SEB does not regularly securitise its assets and has no outstanding own issues. Other contingent liabilities The parent company has a contingent liability to provide capital to DSK Hyp AG’s (former SEB AG) for annual net losses unless the losses could be covered by other reserves. The parent company has issued a deposit guarantee for DSK Hyp AG (former SEB AG) in Germany to the Bundesverband deutscher Banken e.V. The parent company has issued an irrevocable standby letter of credit in favor of MasterCard in the amount of USD m related to card business in the subsidiaries. Legal proceedings Within the ordinary course of business SEB is engaged in various legal proceed- ings, both in Sweden and in other jurisdictions. SEB does not expect these cur- rent legal proceedings to have a significant adverse effect on the financial posi- tion of the group. Re-assessment of credited withholding tax in Germany SEB and its subsidiaries are continuously subject to tax field audits where local tax authorities review previous years’ tax returns. The German tax authorities have in relation to SEB’s wholly owned German subsidiary, DSK Hyp AG (“DSK”) re-assessed DSK’s crediting of withholding tax in its securities finance business for the years and claimed the repayment by DSK of EUR m, plus interest. DSK has over the years claimed and credited approx- imately EUR ,m in withholding tax against its corporate income tax. SEB and DSK are of the opinion that the securities finance business of DSK under review by the German tax authorities was conducted in accordance with market practice, law and administrative guidance applicable at the time. SEB and DSK, as supported by its external legal advisor, are of the view that it is more likely than not that it will be ultimately confirmed in a fiscal court proceed- ing that the withholding tax has been claimed and credited correctly by DSK. Hence, to date and in accordance with current accounting rules, no provisions have been made on a group level. The legal proceedings are estimated to take several years as it is expected that the matter will be appealed to the highest fiscal court. It cannot be ruled out that the re-assessment by the German tax authorities of DSK’s crediting of withholding tax may lead to negative financial effects for the SEB Group. Investigation of alleged tax evasion The public prosecutor in Cologne, Germany, is investigating whether former and current employees of DSK and SEB have been involved in alleged tax eva- sion of a severe nature. DSK and SEB are cooperating with the prosecutor in the investigation. As far as SEB and DSK are aware, no indictments have been filed against any of the aforementioned employees. It is unclear what impact this investigation may have on the re-assessment by the German tax authorities of DSK’s crediting of withholding tax referred to above. It cannot be ruled out that the investigation or potential indictments may lead to negative financial effects for the SEB Group. Commitments Group Parent company Granted undrawn credit facilities 544,344 482,380 528,146 466,481 of which group internal 0 23 Unutilised part of overdraft facilities 143,745 139,149 107,943 104,046 of which group internal 13,526 17,754 Repledged collaterals 101,737 80,260 101,737 80,282 of which group internal 0 22 Other commitments given 24,111 23,144 16,725 17,014 TOTAL 813,936 724,933 754,551 667,824 Discretionary managed assets Discretionary managed assets in the parent company amounted to SEK bn ). Financial statements — Notes 198 — SEB Annual and Sustainability Report 2021 49 Leases Lessee Group Income statement Interest expense on lease liabilities (Net interest income) 78 86 Expenses relating to short-term leases (Other expenses) 12 26 Expenses relating to leases of low-value assets (Other expenses) 97 96 Depreciation expense of right-of-use assets (Depreciation, amortisation) 1) 844 848 TOTAL 1,032 1,056 Balance sheet Right-of-use assets – additions 328 325 Right-of-use assets – closing balance 2) 5,079 5,141 Lease liabilities (Other liabilities) 5,527 5,639 1) Of which Property leases SEK 818m 818) and Other (mainly IT equipment) SEK 26m 30). 2) Of which Property leases SEK 5,049m 5,102) and Other (mainly IT equipment) SEK 30m 39). Lessor Finance lease Group Undiscounted lease payments expected after reporting date and within year 1 10,415 9,978 year 2 9,586 10,247 year 3 9,564 9,786 year 4 5,442 6,619 year 5 5,262 4,998 year 6 and later 25,229 20,404 Total undiscounted lease payments receivable 65,499 62,031 Unearned finance income 2,898 2,800 NET INVESTMENT LEASES 62,601 59,232 Finance income (interest income) on the net investment 1,028 1,098 Lessor portfolio mainly includes transport vehicles, machinery and facilities. Residual value risk is not significant, because of the existence of a secondary market. 50 Events after the balance sheet date Jeanette Almberg, currently Head of Group Human Resources and a member of the bank’s Group Executive Committee (GEC), has been appointed as new Head of Business Support & Operations and a member of GEC. Robert Celsing, currently Head of FICC Markets at SEB, has been appointed new Head of Group Human Resources and a member of GEC. Nina Korfu-Pedersen, currently Head of Business Support & Operations, has been appointed Chief Transfor- mation Officer for Control & Staff Functions. The changes are effective as at February . SEB Annual and Sustainability Report 2021 — 199 Five-year summary — The SEB Group The SEB Group Income Statement SEK m ) Net interest income 26,321 25,143 22,950 21,022 19,893 Net fee and commission income 21,142 18,063 18,709 18,364 17,677 Net financial income 6,992 6,275 7,617 6,079 6,880 Net other income 159 236 858 402 1,112 Total operating income 54,614 49,717 50,134 45,868 45,561 Staff costs 15,372 14,976 14,660 14,004 14,025 Other expenses 5,763 5,864 6,623 7,201 6,947 Depreciation, amortisation and impairment of tangible and intangible assets 2,110 1,906 1,662 735 964 Total operating expenses 23,245 22,747 22,945 21,940 21,936 Gains less losses on disposals of tangible and intangible assets 5 7 2 18 162 Net expected credit losses 2) 510 6,118 2,294 1,166 808 Operating profit before items affecting comparability 30,864 20,846 24,894 22,779 22,655 Items affecting comparability 3) 1,000 4,506 1,896 Operating profit 30,864 19,846 24,894 27,285 20,759 Income tax expense 5,441 4,100 4,717 4,152 4,562 NET PROFIT 25,423 15,746 20,177 23,134 16,197 Attributable to shareholders 25,423 15,746 20,177 23,134 16,197 1) The 2017 income statement has been restated for the transition to IFRS 15. 2) 20182021: IFRS 9 expected loss model. 2017: IAS 39 incurred loss model. 3) 2020 is administrative fine. Balance sheet SEK m ) Cash and cash balances and loans to central banks 443,798 327,409 151,186 242,408 190,000 Loans to central banks and credit institutions 60,009 50,791 46,995 44,287 38,717 Loans to the public 1,846,362 1,770,161 1,837,605 1,644,825 1,486,765 Other financial assets 889,366 855,351 787,341 606,584 629,907 Other assets 64,696 36,720 33,521 29,412 211,520 TOTAL ASSETS 3,304,230 3,040,432 2,856,648 2,567,516 2,556,908 Deposits from central banks and credit institutions 75,206 111,309 88,041 135,719 95,489 Deposits and borrowing from the public 1,597,449 1,371,227 1,161,485 1,111,390 1,032,048 Other financial liabilities 1,391,207 1,355,604 1,414,917 1,120,487 1,059,241 Other liabilities 47,140 30,349 36,505 51,131 228,892 Total equity 193,228 171,943 155,700 148,789 141,237 TOTAL LIABILITIES AND EQUITY 3,304,230 3,040,432 2,856,648 2,567,516 2,556,908 1) 2017 have been restated for changes in the presentation of the balance sheet and for the transition to IFRS 15. Key figures ) Return on equity, % 13.9 9.7 13.7 16.3 11.7 Return on equity excluding items affecting comparability, % 13.9 10.3 13.8 13.4 12.9 Basic earnings per share, SEK 11.75 7.28 9.33 10.69 7.47 Cost/Income ratio 0.43 0.46 0.46 0.48 0.48 Net ECL level 1) , % 0.02 0.26 0.10 0.06 0.05 Common Equity Tier 1 capital ratio 2) , % 19.7 21.0 17.6 17.6 19.4 Tier 1 capital ratio 2) , % 21.4 22.7 20.8 19.7 21.6 Total capital ratio 2) , % 23.1 25.1 23.3 22.2 24.2 1) 20182021: Net ECL level based on IFRS 9 expected loss model. 2017: Credit loss level based on IAS 39 incurred loss model. 2) Basel III. 3) 2017 has been restated for the transition to IFRS 15. 200 — SEB Annual and Sustainability Report 2021 Five-year summary — Parent company Parent company Income Statement SEK m Net interest income 27,247 25,707 23,402 21,860 20,017 Net fee and commission income 12,343 10,698 10,461 10,064 9,557 Net financial income 4,882 5,297 5,838 4,574 4,493 Other income 3,926 3,532 6,930 10,900 8,323 Total operating income 48,397 45,234 46,631 47,398 42,390 Administrative expenses 16,207 17,372 16,345 15,263 14,252 Depreciation, amortisation and impairment of tangible and intangible assets 5,644 5,683 5,749 5,512 6,377 Total operating costs 21,851 23,055 22,094 20,775 20,629 Profit before credit losses 26,547 22,179 24,537 26,623 21,761 Net expected credit losses 744 5,550 2,044 1,020 Net credit losses 749 Impairment of financial assets 1,911 220 741 2,928 1,497 Operating profit 23,892 16,409 21,752 22,675 19,515 Appropriations including pension compensation 3,839 2,390 2,694 2,716 1,885 Taxes 4,980 4,185 4,140 3,671 3,590 NET PROFIT 22,751 14,614 20,305 21,720 17,811 Balance sheet SEK m ) Cash and cash balances at central banks 371,466 294,391 110,104 164,081 97,741 Loans to central banks and credit institutions 74,334 71,027 92,450 120,333 198,781 Loans to the public 1,641,332 1,569,310 1,601,243 1,410,687 1,205,906 Other financial assets 459,885 521,530 472,945 334,801 343,890 Other assets 40,817 40,852 41,930 48,373 45,845 TOTAL ASSETS 2,587,834 2,497,110 2,318,672 2,078,275 1,892,163 Deposits from central banks and credit institutions 85,276 147,831 126,891 160,022 134,561 Deposits and borrowing from the public 1,404,490 1,198,833 973,834 927,224 849,479 Other financial liabilities 918,606 981,523 1,059,727 846,685 770,333 Other liabilities 24,549 16,427 19,810 10,794 11,599 Total equity and untaxed reserves 154,913 152,496 138,410 133,550 126,191 TOTAL LIABILITIES, UNTAXED RESERVES AND EQUITY 2,587,834 2,497,110 2,318,672 2,078,275 1,892,163 1) 2017 have been restated for changes in the presentation of the balance sheet. Key figures Return on equity, % 15.0 10.4 15.9 18.1 16.3 Cost/Income ratio 0.45 0.51 0.47 0.44 0.49 Net ECL level 1) , % 0.03 0.26 0.10 0.07 0.05 Common Equity Tier 1 capital ratio 2) , % 18.4 20.3 16.9 16.9 19.8 Tier 1 capital ratio 2) , % 20.3 22.2 20.6 19.3 22.5 Total capital ratio 2) , % 22.2 24.8 23.2 22.2 25.5 1) 20182021: Net ECL level based on IFRS 9 expected loss model. 2017: Credit loss level based on IAS 39 incurred loss model. 2) Basel III. SEB Annual and Sustainability Report 2021 — 201 Proposal for the distribution of profit Proposal for the distribution of profit Standing at the disposal of the Annual General Meeting in accordance with the balance sheet of Skandinaviska Enskilda Banken AB: SEK Fair value fund 353,483,074 Retained earnings 79,611,939,934 Net profit for the year 22,750,797,057 Total 1) 102,009,253,917 The Board proposes that, following approval of the balance sheet of Skandinaviska Enskilda Banken AB for the financial year 2021, the Annual General Meeting should distribute the earnings as follows: SEK Dividend to shareholders: – SEK 6 per Class A share 13,020,115,764 – SEK 6 per Class C share 144,915,048 To be carried forward to: – retained earnings 88,844,223,105 Total 102,009,253,917 It is the assessment of the Board of Directors that the proposed dividend is justifiable considering the demands which are imposed by the nature, scope, and risks associated with the business and the size of the parent company’s and the group’s equity and need for consolidation, liquidity and financial position in general. 1) The parent company’s equity would have been SEK 9,306m lower if assets and liabilities had not been measured at fair value in accordance with Chapter 4, Section 14 of the Swedish Annual Accounts Act. 202 — SEB Annual and Sustainability Report 2021 Signatures of the Board of Directors and the President Signatures of the Board of Directors and the President The Board of Directors and the President declare that the consol- idated financial statements have been prepared in accordance with IFRS as adopted by the EU and give a relevant and faithful representation of the group’s financial position and results of operations. The financial statements of the parent company have been prepared in accordance with generally accepted accounting principles in Sweden and give a true and fair view of the parent company’s financial position and results of operations. The Report of the Directors for the group and the parent com- pany provides a fair review of the development of the group’s and the parent company’s operations, financial position and re- sults of operations and describes material risks and uncertainties facing the parent company and companies included in the group. Stockholm 21 February 2022 Marcus Wallenberg Chair Signhild Arnegård Hansen Director Anne-Catherine Berner Director Winnie Fok Director Sven Nyman Vice chair Jesper Ovesen Vice chair Lars Ottersgård Director Helena Saxon Director Anna-Karin Glimström Director Appointed by the employees Charlotta Lindholm Director Appointed by the employees Johan Torgeby President and Chief Executive Officer Director Hamish Mabon Authorized Public Accountant Our audit report was issued on 28 February 2022 Ernst & Young AB SEB Annual and Sustainability Report 2021 — 203 Auditor’s report Auditor’s report This is a translation from the Swedish original. Report on the annual accounts and consolidated accounts Opinions We have audited the annual accounts and consolidated ac- counts of Skandinaviska Enskilda Banken AB (publ) (“SEB”) for the year 2021 except for the corporate governance statement on pages 92107. The annual accounts and consolidated ac- counts of the company are included on pages 70202 in this document. In our opinion, the annual accounts have been prepared in ac- cordance with the Annual Accounts Act for Credit Institutions and Securities Companies and present fairly, in all material re- spects, the financial position of the parent company as at 31 December 2021 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act for Credit Institutions and Securities Companies. The con- solidated accounts have been prepared in accordance with the Annual Accounts Act for Credit Institutions and Securities Com- panies and present fairly, in all material respects, the financial position of the group as at 31 December 2021 and their financial performance and cash flow for the year then ended in accord- ance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act for Credit Insti- tutions and Securities Companies. Our opinions do not cover the corporate governance statement on pages 92107. The statu- tory administration report is consistent with the other parts of the annual accounts and consolidated accounts. We therefore recommend that the general meeting of share- holders adopts the income statement and balance sheet for the parent company and the group. Our opinions in this report on the annual accounts and consoli- dated accounts are consistent with the content of the additional report that has been submitted to the parent company’s audit committee in accordance with the Audit Regulation 5372014) Article 11. Basis for Opinions We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Swe- den and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation 5372014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU. We believe that the audit evidence we have obtained is suffi- cient and appropriate to provide a basis for our opinions. Key Audit Matters Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters be- low, provide the basis for our audit opinion on the accompanying financial statements. To the general meeting of the shareholders of Skandinaviska Enskilda Banken AB (publ), corporate identity number 5020329081 Auditor’s report 204 — SEB Annual and Sustainability Report 2021 Provision for Expected Credit Losses (“ECL”) Description As at 31 December 2021, loans amount to SEK 1,910,824m for the group, which represents 58 per cent of the group’s total assets. The total credit risk exposure, including off-balance com- mitments, amounts SEK 2,699,923m for the group. The provision for expected credit losses amounts to SEK 8,786m for the group. In order to provide for expected credit losses, SEB uses both models and credit expert judgement to consider factors not cap- tured by the models. Expected credit losses shall be measured in a way that re- flects an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes and is based on past events, current conditions and forecasts of future economic conditions. The provision for expected credit losses requires SEB to make assessments of the key model assumptions. For example, assessments are made of the criteria to identify a significant increase in credit risk, current and forward-looking information such as the effect of the prolonged COVID19 pandemic and the impact of development in specific industries on the ECL. Due to the use of judgement in applying the expected credit loss measurement criteria, the materiality of the credit risk exposure, the complexity of the calculation, and the effect on the ECL, pro- visioning for expected credit losses has been considered a key audit matter. How our audit addressed this key audit matter We have tested the design and operating effectiveness of key controls in the credit process, including credit approval, credit review, rating classification as well as identifying and determin- ing loans in default. We have also tested controls relating to input data to models and the general IT-controls including the handling of authorizations within the relevant systems. We have assessed the models including the assumptions and input parameters as well as assessed how the models calculate. Our assessment of input parameters includes probability of de- fault, loss given default, exposure at default and staging criteria parameters determining a significant increase in credit risk at engagement level in accordance with IFRS 9. For engagements subject to individual assessment by SEB, we have assessed col- lateral valuation in the audit procedures, including in the assess- ment of model overlays and SEB’s expert credit judgment. We have on a sample basis assessed SEB’s initial and current engagement risk rating. We have tested that data used from supporting systems used in the models, are complete and ac- curate. We have also assessed the model validations which have been performed and reviewed the reasonableness of the mac- roeconomic data used in the models. We have also assessed the reasonableness of the credit expert judgement made by SEB. In our audit we have used our internal model specialists when performing our audit procedures. We have assessed the disclosures in the annual accounts re- lated to ECL. Such information is found in the annual accounts in notes 1 and 18. Valuation of financial instruments at fair value Description SEB holds financial instruments where unadjusted quoted market prices are not readily available. For such instruments fair value is determined either using valuation techniques based on observable market parameters (categorized as level 2 under IFRS fair value hierarchy) or using valuation techniques with significant unobservable inputs (categorized as level 3 under IFRS fair value hierarchy). The group has financial assets and financial liabilities in level 2 of SEK 322,341m and SEK 174,527m and financial assets and liabilities in level 3 of SEK 28,456m and SEK 8,103m respec- tively. The main part of the financial instruments in level 2 are comprised of loans, deposits, debt securities and derivative contracts. Financial instruments in level 3 primarily consist of unlisted equity securities and Financial assets for which the cus- tomers bear the investment risk. Due to the complexity in the calculation of fair value, the ma- teriality of the financial instruments, as well as the need for SEB to make judgements with respect to valuation parameters, the valuation of financial instruments with no readily available un- adjusted quoted market prices, has been considered a key audit matter. Financial assets for which the customers bear the in- vestment risk has not been considered a key audit matter since the corresponding liability is recorded in the balance sheet. How our audit addressed this key audit matter We have tested the key controls in the valuation process, includ- ing SEB’s assessment and approval of assumptions and methods used in model-based calculations, control of data input as well as the handling of changes in internal valuation models. We have also tested the general IT-controls including the handling of authorizations with respect to relevant IT-systems for the valua- tion process. We have assessed SEB method for valuing financial instru- ments with no readily available quoted market prices, including the classification in the valuation hierarchy in accordance with IFRS 13. Furthermore, we have assessed the assumptions made by SEB when valuating financial instruments with no readily avail- able quoted market prices. We have compared the valuation models to valuing guidelines and industry practice. We have compared input parameters to appropriate reference sources when available and examined any significant deviations. We have also tested the mathematical accuracy of the valua- tions through sample tests and performed our own independent valuations. In our audit we have engaged our internal valuation specialists when performing our audit procedures. We have assessed the disclosures in the annual accounts related to Valuation of financial instruments at fair value. Disclo- sures on the financial instruments at fair value are found in the annual accounts in notes 1 and 36. SEB Annual and Sustainability Report 2021 — 205 Uncertain tax positions Description SEB is subject to taxation in many jurisdictions and in many cas- es the final tax treatment is not determined until resolved with the relevant tax authority. Consequently, SEB makes judgements about the probability and amount of tax liabilities which are subject to assessments by tax authorities and potentially asso- ciated with legal processes. Given the complexity of the assess- ments, the expected time to resolutions that may be years into the future, and the wide range of possible outcomes, uncertain tax positions has been considered a key audit matter. How our audit addressed this key audit matter We have assessed whether SEB’s method for assessing uncer- tain tax positions is in accordance with IFRS, including SEB’s assessment of the probability thresholds in key cases. We have substantively tested the process for uncertain taxes and related tax assessments and tax liability estimates. In performing these procedures, we have used our specialists to examine potential implications of ongoing tax audits and similar processes. We have obtained correspondence with tax authorities and opinions SEB has received from its external legal advisers. We have also independently assessed matters in dispute and the accounting treatment. We have assessed of the disclosures in the annual accounts related to uncertain tax positions. Disclosures on the uncertain tax positions are found in the annual accounts in note 1 and 48. Other Information than the annual accounts and consolidated accounts This document also contains other information than the annual accounts and consolidated accounts and is found on pages 169 and 208235. The Board of Directors and the Managing Director are responsible for this other information. Our opinion on the annual accounts and consolidated ac- counts does not cover this other information and we do not express any form of assurance conclusion regarding this other information. In connection with our audit of the annual accounts and con- solidated accounts, our responsibility is to read the information identified above and consider whether the information is mate- rially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowl- edge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated. If we, based on the work performed concerning this informa- tion, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsi- ble for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act for Credit Institutions and Securi- ties Companies and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error. In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsi- ble for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so. The Audit Committee shall, without prejudice to the Board of Director’s responsibilities and tasks in general, among other things oversee the company’s financial reporting process. Auditor’s responsibility Our objectives are to obtain reasonable assurance about wheth- er the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, indi- vidually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts. A further description of our responsibilities for the audit of the annual accounts and the consolidated accounts is located at Revisorsinspektionen’s (the Swedish Inspectorate of Auditors) website at: http://www.revisorsinspektionen.se/rn/showdocu- ment/documents/rev_dok/revisors_ansvar.pdf. This description forms part of our auditor’s report. Auditor’s report 206 — SEB Annual and Sustainability Report 2021 Report on other legal and regulatory requirements Report on the audit of the administration and the pro- posed appropriations of the company’s profit or loss Opinions In addition to our audit of the annual accounts and consoli- dated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Skandinaviska Enskilda Banken AB (publ) for the year 2021 and the proposed appropriations of the company’s profit or loss. We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year. Basis for opinions We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suffi- cient and appropriate to provide a basis for our opinions. Responsibilities of the Board of Directors and the Managing Director The Board of Directors is responsible for the proposal for ap- propriations of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the group’s equity, consolida- tion requirements, liquidity and position in general. The Board of Directors is responsible for the company’s or- ganization and the administration of the company’s affairs. This includes among other things continuous assessment of the com- pany’s and the group’s financial situation and ensuring that the company’s organization is designed so that the accounting, man- agement of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other mat- ters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the management of assets in a reassuring manner. Auditor’s responsibility Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect: • has undertaken any action or been guilty of any omission which can give rise to liability to the company, or • in any other way has acted in contravention of the Compa- nies Act, the Banking and Financing Business Act, the Annual Accounts Act for Credit Institutions and Securities Companies or the Articles of Association. Our objective concerning the audit of the proposed appropria- tions of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect ac- tions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act. A further description of our responsibilities for the audit of the administration is located at Revisorsinspektionen’s (the Swedish Inspectorate of Auditors) website at: http://www.revisorsins- pektionen.se/rn/showdocument/documents/rev_dok/revisors_ ansvar.pdf. This description forms part of our auditor’s report. The auditor’s examination of the Esef report Opinion In addition to our audit of the annual accounts and consolidated accounts, we have also examined that the Board of Directors and the Managing Director have prepared the annual accounts and consolidated accounts in a format that enables uniform electronic reporting (the Esef report) pursuant to Chapter 16, Section 4 a of the Swedish Securities Market Act 2007528) for Skandinaviska Enskilda Banken AB (publ) for the financial year 2021. Our examination and our opinion relate only to the statutory requirements. In our opinion, the Esef report #[checksum] has been pre- pared in a format that, in all material respects, enables uniform electronic reporting. Basis for the opinion We have performed the examination in accordance with FAR’s recommendation RevR 18 Examination of the ESEF report. Our responsibility under this recommendation is described in more detail in the Auditors’ responsibility section. We are independ- ent of Skandinaviska Enskilda Banken AB (publ) in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are respon- sible for the preparation of the Esef report in accordance with the Chapter 16, Section 4 (a) of the Swedish Securities Market Act 2007528), and for such internal control that the Board of Directors and the Managing Director determine is necessary to prepare the Esef report without material misstatements, whether due to fraud or error. Auditor’s responsibilities Our responsibility is to obtain reasonable assurance whether the Esef report is in all material respects prepared in a format that meets the requirements of Chapter 16, Section 4(a) of the Swedish Securities Market Act 2007528), based on the proce- dures performed. RevR 18 requires us to plan and execute procedures to SEB Annual and Sustainability Report 2021 — 207 achieve reasonable assurance that the Esef report is prepared in a format that meets these requirements. Reasonable assurance is a high level of assurance, but it is not a guarantee that an engagement carried out according to RevR 18 and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Mis- statements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Esef report. The audit firm applies ISQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements and accordingly maintains a comprehensive system of quality control, including documented policies and procedures regarding compliance with professional ethical requirements, professional standards and legal and regulatory requirements. The examination involves obtaining evidence, through various procedures, that the Esef report has been prepared in a format that enables uniform electronic reporting of the annual accounts and consolidated accounts. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement in the report, whether due to fraud or error. In carrying out this risk assessment, and in order to design audit procedures that are appropriate in the circumstances, the auditor considers those elements of internal control that are relevant to the preparation of the Esef report by the Board of Directors and the Managing Director, but not for the purpose of expressing an opinion on the effectiveness of those internal controls. The examination also includes an evaluation of the appropriateness and reasonableness of assumptions made by the Board of Directors and the Managing Director. The procedures mainly include a technical validation of the Esef report, i.e., if the file containing the Esef report meets the technical specification set out in the Commission’s Delegated Regulation (EU) 2019815 and a reconciliation of the Esef report with the audited annual accounts and consolidated accounts. The auditor’s examination of the corporate governance statement The Board of Directors is responsible for that the corporate governance statement on pages 92107 has been prepared in accordance with the Annual Accounts Act. Our examination of the corporate governance statement is conducted in accordance with FAR´s auditing standard RevU 16 The auditor´s examination of the corporate governance state- ment. This means that our examination of the corporate govern- ance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Swe- den. We believe that the examination has provided us with suf- ficient basis for our opinions. A corporate governance statement has been prepared. Dis- closures in accordance with chapter 6 section 6 the second paragraph points 26 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated ac- counts and are in accordance with the Annual Accounts Act for Credit Institutions and Securities Companies. Ernst & Young AB was appointed auditor of Skandinaviska Enskilda Banken AB (publ) by the general meeting of the share- holders on the 30 of March 2021 and has been the company’s auditor since the 26 of March 2019. Stockholm 28 February 2022 Ernst & Young AB Hamish Mabon Authorized Public Accountant Sustainability notes and GRI Index Page Sustainability notes Financial strength and resilience 209 Taxonomy – voluntary report 209 Sustainable financing 210 Sustainable investments 210 Business ethics and conduct 212 Our people 214 Community engagement and sponsorship 217 Innovation and entrepreneurship 217 Environment 218 Procurement 219 Country-by-country reporting – companies by country 220 Country-by-country reporting – company income tax by country 221 SEB’s approach to tax 221 GRI Index GRI 101: Foundation 222 GRI 102: General disclosures 222 GRI 103: Management approach 224 GRI 200: Economic topics 225 GRI 300: Environmental topics 226 GRI 400: Social topics 226 Other disclosures 227 Principles for Responsible Banking SEB and the Principles for Responsible Banking 228 Contents Sustainability notes 208 — SEB Annual and Sustainability Report 2021 Sustainability notes Financial strength and resilience Direct economic value created by SEB Gross income (SEK m) 66,505 67,022 74,374 Total operating income (SEK m) 54,614 49,717 50,134 Total operating expenses (SEK m) 23,245 22,747 22,945 Interest expenses (SEK m) 5,540 11,187 16,643 Fee and commission expense (SEK m) 4,987 4,870 5,467 Other expenses (SEK m) 5,763 5,864 6,623 Staff costs (SEK m) 3 15,372 14,976 14,660 Regulatory fees including resolution and deposit guarantee fees (SEK m) 1,364 1,248 2,129 Income tax expense (SEK m) 5,441 4,100 4,717 Dividends, to shareholders (SEK m) 4 13,165 17,740 - Net profit (SEK m) 25,423 15,746 20,177 Financial assistance received from government (SEK m) - - - Economic contribution to community investments (SEK m) 42.4 42.9 46.6 This year’s profit that is reinvested into the bank (SEK m) 12,258 – 1,994 20,177 ) Direct economic value generated and distributed is presented in accordance with the outline in SEB’s annual report. ) Interest expense, excluding Regulatory fee. ) Staff cost details, see financial note . ) The proposed dividend for a financial year is paid out to the shareholders the following year (dependent AGM resolution). Dividend is not distributed for shares in own holding as per record date. Final dividend payment is taken into account in the table the following year. Voluntary EU Taxonomy report Assets Assets, SEKm Share of covered assets, % Share of total assets, % Exposures to Taxonomy-eligible economic activities 1,319,219 54 40 of which, NFRD undertakings 120,116 5 4 of which, households 618,756 25 19 of which, non-NFRD undertakings 580,347 24 18 Exposures to Taxonomy non-eligible economic activities 862,453 35 26 of which, NFRD undertakings 140,941 6 4 of which, households 43,350 2 1 of which, non-NFRD undertakings 678,162 28 21 Exposures not yet assessed whether taxonomy eligible/ non-eligible 207,358 8 6 Covered assets, included in both numerator and denominator 2,389,031 97 72 Derivatives (hedge accounting) 973 0 0 On demand interbank loans 6,745 0 0 Other assets 64,696 3 2 Covered assets, excluded from numerator 72,414 3 2 Total covered assets 2,461,445 100 74 Central governments, central banks, supranationals 492,093 15 Trading portfolio (incl derivatives excl hedge accounting) 350,692 11 Assets not covered by calculation 842,785 26 TOTAL ASSETS 3,304,230 100 General information about EU Taxonomy Regulation and SEB Group mandatory Taxonomy report is presented in the Sustainability report (see p. ). Both the mandatory and the voluntary Taxonomy report covers the SEB Group. In SEB Group voluntary Taxonomy report assets have been classified based on assessment of the underlying undertakings’ economic activities. Assessment, of whether exposure relate to NFRD- or non-NFRD undertaking, is based on number of employees () and whether each entity is a Public Interest Entity (PIE). Taxonomy eligibility assessment is based on underlying undertakings’ NACE-codes, in relevant cases adjusted for knowledge of the economic activities on group/company level. Financial investments have been assessed based on taxonomy information provided by third party ESG information providers, where available. Fund holding assessments have been weighted, where the economic activities of the underlying investments and access to information has been taken into account. Household mortgage loans are classified as taxonomy eligible, due to real estate collateral, regardless of geographical location (EU/non-EU). Car loans, granted from the date of application of the Taxonomy disclosure requirements January ), will be taken into account for assessment in . Derivatives have been allocated to Derivatives (hedge accounting) and the Trading portfolio respectively. Supranational issuers have been identified based on ECB definition. SEB Annual and Sustainability Report 2021 — 209 Sustainable financing Green loans Green loans (SEK bn) 1 29.4 24.7 19.0 Green mortgages (SEK bn) 7.9 4.0 1.5 Green bonds Aggregated Green bonds underwritten by SEB since inception, excluding self-led (USD bn) 40.5 34.4 29.6 Green bonds underwritten by SEB since inception, global share (%) 3.2 4.1 5.2 Current year Green bonds issued globally current year (USD bn) 474.0 303.2 262.5 Green bonds underwritten by SEB current year, excluding self-led (USD bn) 6.2 4.7 7.0 Green bonds underwritten by SEB current year, global share (%) 1.3 1.6 3.8 Green bonds underwritten by SEB current year, Nordic share (%) 18.0 20.2 32.3 Equator Principles Project finance transactions of which, Category A transactions approved (number) 0 0 0 of which, Category B transactions approved (number) 4 3 3 of which, Category C transactions approved (number) 4 1 0 Project related corporate loans of which, Category A transactions approved (number) 0 1 0 of which, Category B transactions approved (number) 0 0 0 of which, Category C transactions approved (number) 0 0 0 ) Green loans includes loans and leases to customers that promote the transition to low-carbon and climate-resilient development as well as environmental and ecosystem improvements. The green loans include project financing within the EU, UK and Nordic region, which fulfil the sustainability criteria in the SEB Green Bond framework. ) The source for Green Bond data is Bloomberg, Green Bond League table. For “Green Bonds issued globally current year” BloombergNEF was the source in . ) SEB’s share of global transactions, all currencies, by Nordic banks. Sustainable investments Assets under management Assets under management, AuM, SEB total (SEK bn) 2,682 2,106 2,041 Assets under management, AuM, managed by SEB’s fund company (SEK bn) 831 672 685 Principles for Responsible Investments (PRI) SEB’s fund company’s AuM, evaluated according to PRI, share of SEB total AuM (%) 31 32 32 SEB’s fund company’s AuM evaluated according to PRI, share of SEB’s fund company’s total AuM(%) 1 100 100 100 SEB’s external fund managers that have signed the PRI, share (%) 100 100 100 Carbon emission (CO ) measurements SEB’s fund company’s equity funds where carbon emissions are measured and have an official benchmark (%) 93 95 94 ) Share of AuM does not include “SEB Sverige Indexfond”. Sustainability notes 210 — SEB Annual and Sustainability Report 2021 Sustainability approach SEB’s fund company’s AuM assessed with sustainability criteria (SEK bn) - 304 256 SEB’s fund company’s AuM, Articles 8 and 9 under SFDR (SEK bn) 3 678 - - SEB’s fund company’s AuM assessed with sustainability criteria, as share of SEB’s fund company’s total AuM (%) - 45 37 SEB’s fund company’s AuM, Articles 8 and 9 under SFDR, as share of SEB’s fund company’s total AuM (%) 3 81.6 - - SEB’s AuM assessed with sustainability criteria, as share of SEB’s total AuM (%) - 14 13 SEB’s AuM, Articles 8 and 9, as share of SEB’s total AuM (%) 3 27.2 - - Human rights assessment SEB funds assessed with human rights criteria, as share of SEB’s fund company’s total AuM (%) 100 100 100 SEB funds assessed with human rights criteria, as share of SEB’s total AuM (%) 31 32 32 Influence and engagement Total engagement dialogues with portfolio companies (number) 3,200 2,089 1,564 Share of engagement dialogues with Nordic portfolio companies (%) 9 3 1 Share of of engagement dialogues in collaboration with external parties (%) 91 97 97 Companies excluded from the investment portfolio in accordance with SEB’s ethical investment guidelines (number) 3,780 1,540 1,062 Participation in nomination committees (number) 35 33 33 Engagement themes , Human rights (number) 20 20 20 Palm oil (number) - 25 25 Environment (number) 167 160 161 Water disclosure (number) 149 965 515 SEB impact and thematic funds Total value Microfinance funds, Impact Opportunity Fund, Green Bond Fund and Lyxor SEB Impact Fund (SEK bn) 13.0 12.2 11.2 Microfinance funds, incl. SEB Impact Opportunity Fund Assets under Management (SEK bn) 7.1 8.1 8.6 Assets under Management (USD m) 781 965 970 Number of microfinance funds 7 7 7 Number of countries 55 60 59 Number of customers reached via microfinance institutions (MFI’s) 19,897,967 22,269,236 25,384,944 Green Bond Fund Assets under Management (SEK bn) 2.5 2.0 1.2 Lyxor SEB Impact Fund Assets under Management (SEK bn) 3.4 2.1 1.4 ) Read more about SEB sustainable investments on www.sebgroup.com “Sustainability > Supporting our customers > Sustainable investments” and “Sustainability in SEB’s fund company” describing SEB fund company sustainability approach. ) AuM defined as Article or under SFDR, Sustainable Finance Disclosure Regulation (from March ). ) Information pertains to SEB’s fund Company (SEB IM AB). ) SEB’s fund company engages on several topics both direct and through collaborations. Common topics include the: environment, good governance and workers’ rights. The dialogues we have in collaboration with Federated Hermes are proactive and thereby cover a wide range of topics. Our engagements through the CDP are mainly focused on water disclosure and Climate Action + for the companies with the highest carbon emissions. ) All data concerning microfinance funds also includes the SEB Impact Opportunity Fund. The Impact Opportunity Fund invests mainly in microfinance institutions but has a broader mandate, e.g. solar energy and education. Similar to the microfinance fund’s this fund invests in emerging and frontier markets. SEB Annual and Sustainability Report 2021 — 211 Business ethics and conduct Crime prevention Whistleblowing Number of whistleblowing cases 1 31 31 23 Reported suspicious activities Number of suspicious orders and transactions reported to Finansinspektionen (Market Abuse) 13 9 33 Share of Market Abuse reports consisting of manual tips from employees or external sources (%) 0 3 6 Share of Market Abuse reports pertaining to insider dealing (%) 38 8 79 Number of suspicious AML activity reports reported to Finanspolisen 2 2,225 1,810 1,224 Share of AML reports consisting of manual tips from employees or external sources (%) 65 68 63 Competence and awareness Employees who have completed mandatory training (sorted by employee category) All employees 4 Anti-money laundering and combating financing of terrorism – AML/ CFT (%) 95.1 93.2 86.0 Fraud prevention (%) 97.3 86.9 87.8 Cyber security (%) 94.5 88.0 88.8 Code of Conduct (%) 97.0 87.0 88.2 General Data Protection Regulation/GDPR (%) 94.2 70.5 87.9 Sustainability training on climate change (%) 95.5 59.6 - Sexual harassment – bystander intervention strategies (%) 93.0 - - Group Executive Committee Anti-money laundering and combating financing of terrorism – AML/ CFT (%) 90.5 78.6 83.3 Fraud prevention (%) 85.7 50.0 83.3 Cyber security (%) 76.2 64.3 83.3 Code of Conduct (%) 85.7 50.0 83.3 General Data Protection Regulation/GDPR (%) 85.7 35.7 75.0 Sustainability training on climate change (%) 76.2 35.7 - Sexual harassment – bystander intervention strategies (%) 71.4 - - All managers Anti-money laundering and combating financing of terrorism – AML/ CFT (%) 94.6 98.4 97.6 Fraud prevention (%) 98.0 90.6 83.9 Cyber security (%) 95.2 93.3 98.1 Code of Conduct (%) 97.5 90.0 82.5 General Data Protection Regulation/GDPR (%) 94.3 74.5 97.6 Sustainability training on climate change (%) 95.9 63.8 - Sexual harassment – bystander intervention strategies (%) 93.8 - - Sustainability notes 212 — SEB Annual and Sustainability Report 2021 Employees who have completed mandatory training (sorted by region) Sweden Anti-money laundering and combating financing of terrorism – AML/ CFT (%) 93.0 91.5 83.3 Fraud prevention (%) 96.0 84.7 84.4 Cyber security (%) 92.2 85.7 85.5 Code of Conduct (%) 95.5 84.8 84.5 General Data Protection Regulation/GDPR (%) 92.4 67.2 84.5 Sustainability training on climate change (%) 93.3 57.1 - Sexual harassment – bystander intervention strategies (%) 89.9 - - Other Nordic countries Anti-money laundering and combating financing of terrorism – AML/ CFT (%) 95.4 95.0 74.9 Fraud prevention (%) 97.9 86.9 92.1 Cyber security (%) 95.7 89.8 92.4 Code of Conduct (%) 98.1 88.1 92.0 General Data Protection Regulation/GDPR (%) 94.5 74.3 89.7 Sustainability training on climate change (%) 97.2 63.6 - Sexual harassment – bystander intervention strategies (%) 95.7 - - Baltic countries Anti-money laundering and combating financing of terrorism – AML/ CFT (%) 97.9 97.0 93.3 Fraud prevention (%) 99.1 91.6 92.9 Cyber security (%) 97.6 92.2 93.9 Code of Conduct (%) 99.0 91.3 93.9 General Data Protection Regulation/GDPR (%) 96.9 75.1 93.8 Sustainability training on climate change (%) 98.5 62.8 - Sexual harassment – bystander intervention strategies (%) 97.0 - - Rest of the world Anti-money laundering and combating financing of terrorism – AML/ CFT (%) 96.3 88.2 85.2 Fraud prevention (%) 97.5 82.3 87.8 Cyber security (%) 95.9 85.5 88.2 Code of Conduct (%) 97.3 83.3 88.0 General Data Protection Regulation/GDPR (%) 95.0 71.7 86.1 Sustainability training on climate change (%) 95.7 62.1 - Sexual harassment – bystander intervention strategies (%) 94.4 - - ) The external whistleblowing function has been in use since January . The reported complaints cover different areas, such as breaches of the Code of Conduct, fraud, harassment and money laundering. ) The number of filed SARs continues to increase. Manual alerts still form the basis for the major part of reports in Sweden. Various types of fraud account for a substantial part of them. ) The trainings are mandatory to perform either every year or every three years for all SEB employees, including consultants. Employees who were on leave of absence during the entire year have been excluded. Anti-corruption is included in the Code of Conduct training. ) An updated GDPR training was released in August , and a new training on climate change was released in November (due in March ), which resulted in lower completion rates in compared to previous years. The sexual harassment training was introduced in , and thus no data is available for previous years. SEB Annual and Sustainability Report 2021 — 213 Our people Employee information Average number of employees Total (number) 1 16,347 16,007 15,691 Men (%) 44.4 44.2 43.8 Women (%) 55.6 55.8 56.2 Employees by age group Total employees years (%) 18.0 18.2 18.1 years (%) 55.0 55.2 57.9 years (%) 26.9 26.6 24.0 All managers years (%) 2 2 2 years (%) 64 64 68 years (%) 33 34 30 Gender by management type (men/women) Board of Directors (%) 2 5644 5644 6436 Group Executive Committee (%) 3 6733 6436 6931 Top Senior Management (%) 4 5644 5644 - All managers (%) 5248 5248 5446 Employees by employment contract/type Permanent (%) 96 95 95 Temporary (%) 4 5 5 Employees working full-time (%) 95 95 94 Employees working part-time (%) 5 5 6 By gender and employment contract/type (men/women) Permanent (%) 4456 4456 4456 Temporary (%) 4753 4852 4555 Employees working full-time (%) 4654 4654 4555 Employees working part-time (%) 2278 1981 2080 By region Sweden Permanent (%) 96.0 95.4 94.4 Temporary (%) 4.0 4.6 5.6 Other Nordic countries Permanent (%) 97.7 97.5 96.5 Temporary (%) 2.3 2.5 3.5 Baltic countries Permanent (%) 96.3 96.4 95.6 Temporary (%) 3.7 3.6 4.4 Rest of the world Permanent (%) 93.9 92.1 93.3 Temporary (%) 6.1 7.9 6.7 ) Reference financial note e “Number of employees”. ) Deputy directors and directors appointed by the employees are not included. See p for full overview of the Board. ) Group Executive Committee as per . Co-opted members are not included. ) Top Senior Management are GEC and GEC. New group measured starting from , and thus no data was reported in . Sustainability notes 214 — SEB Annual and Sustainability Report 2021 Parental leave (Sweden) Total (days) 82,400 79,900 84,600 Men (%) 33 31 29 Women (%) 67 69 71 New employee hires Total (number) 2,338 1,921 1,998 Men (%) 49 49.0 48.6 Women (%) 51 51.0 51.4 By age group years (%) 50 52 50 years (%) 33 31 32 years (%) 12 11 13 > years (%) 4 6 5 By region Sweden (%) 41 49 35 Estonia (%) 5 5 6 Latvia (%) 17 16 16 Lithuania (%) 26 22 29 Nordic countries, excl. Sweden (%) 3 2 4 Germany (%) 1 1 4 Rest of the world (%) 7 4 6 Employee turnover Total (%) 11.0 8.6 12.1 Men (%) 11.9 8.3 12.6 Women (%) 10.3 9.0 11.8 Voluntary turnover (%) 5 9.9 7.1 10.8 By age group years (%) 19 14 22 years (%) 13 9 13 years (%) 8 6 9 > years (%) 7 9 7 By country-region Sweden (%) 8.6 6.0 9.3 Estonia (%) 8.7 8.1 10.1 Latvia (%) 12.2 11.4 17 Lithuania (%) 17.6 13.0 16 Nordic countries, excl. Sweden (%) 9.7 9.1 6.8 Germany (%) 11.8 22.9 32.9 Rest of the world (%) 14.8 7.9 17.6 Labour management Percentage of total employees covered by collective bargaining agreements (%) 6 75 59 59 Percentage of total employees represented and covered by EWC, Employees within EU/EEA (%) 100 100 100 ) Total number of employees leaving SEB in relation to the average number of employees during the year (excluding employees leaving due to sold operations, retirements and redundancies). ) Increase in as Lithuania signed collective agreement. SEB Annual and Sustainability Report 2021 — 215 Health and workplace Absence Absentee rate, share of ordinary working hours (%) 7 3.2 3.8 3.3 Sick-leave rate, share of ordinary working hours Sweden (%) 2.7 3.3 2.9 Men (%) 1.7 2.1 1.8 Women (%) 3.8 4.5 4.0 Health and work environment Share of documented annual work environment reviews (%) 8 81 71 80 Share of employees covered by Health & Safety management system or similar (%) 100 100 100 Share of employees represented in formal Health and safety committees (%) 9 100 100 100 Learning and engagement Learning and development Average hours of training 10 Per employee (hours) 23 15 16 Men/women (hours) 2024 1316 1318 All managers (hours) 23 14 20 Money invested in learning and development per employee (SEK) 10,11 16,670 11,825 14,794 Employees participating in leadership/talent development programmes (number) 10, 12 1,493 1,444 1,896 By application men/women (number) 533842 571781 1,012770 By nomination men/women (number) 6156 4349 6648 Global talent review Total (number) 10, 13 1,942 1,639 1,785 Men (%) 57 56 56 Women (%) 43 44 44 Engagement Employee survey, Glint Employee participation rate in employee survey (%) 90 91 92 How happy are you working at SEB (%) 79 80 80 I would recommend SEB as a great place to work (%) 79 80 79 SEB’s commitment to sustainability is genuine (%) 78 79 79 I have good opportunities to learn and grow at SEB (%) 78 78 78 Regardless of background everyone at SEB has equal opportunity to succeed (%) 75 75 74 People at SEB live the company values (%) 75 74 74 ) Only Sweden. Absentee rate includes employee sick leave and employees taking care of sick children. ) Only Sweden. In addition, all legal entities within the EU must conduct continuous risk assessments. ) per cent within the EU. SEB follows local laws and regulations in all countries where we are present. ) Consultants and other temporary workforce employed on contractual basis have not been included. ) The amount for money invested in learning and development in has been adjusted related to recategorisation of suppliers and spend. Amount is now aligned with data. ) Programmes with application: Lead with Impact, Learn Growth, SEB Trainees, Tech, Boost Your Service, IMD, Leading Digital Acceleration, Change Management for Leaders, Develop your Team – Making it Last, Leadership Foundation, Starting a New Team – Get to Know Each Other, Starting a New Team – Start working together. Programmes with nomination: Wallenberg Institute, Internal Business Seminar, Artex, Advanced Specialist Programme. ) A global talent review is performed annually within SEB. Sustainability notes 216 — SEB Annual and Sustainability Report 2021 Community engagement and sponsorship Economic contributions to community engagement and sponsorship Total (SEK m) 42.4 42.9 46.6 By focus area 1 Entrepreneurship (SEK m) 13.5 12.7 16.1 Inclusion & Diversity (SEK m) 7.3 5.8 5.8 Equality, incl. Financial literacy (SEK m) 10.3 10.4 4.0 Environment, incl. Climate change (SEK m) 3.5 1.4 0.4 Sports and culture (SEK m) 7.1 10.3 19.4 Other community investments SEK m) 0.6 2.3 6.5 Number of people coached in entrepreneurship (number) 1 44,666 31,274 - Number of people trained in Inclusion & Diversity, and/or Equality (number) 1 20,944 5,114 - Number of people engaged in an environmental activity (number) 1 21,345 7,132 - By country Sweden (SEK m) 32.1 33.3 37.2 Estonia (SEK m) 2.9 3.2 3.1 Latvia (SEK m) 2.4 1.7 2.0 Lithuania (SEK m) 3.2 3.2 2.7 Denmark (SEK m) 0.0 0.0 2.0 Norway (SEK m) 0.6 0.4 0.9 Finland (SEK m) 0.9 0.7 0.8 Other sites (SEK m) 0.3 0.4 3.3 By type of engagement Employee volunteering (hours) 19,932 22,289 17,826 ) In a new strategy and focus areas were initiated and implemented. Due to the coronavirus pandemic, some planned activities were cancelled, while the digital activities and meetings made it possible to reach a high number of participants. ) Employee volunteer hours consist of total employee hours reported for each engagement. employee volunteer hours were based on total employee hours reported for each engagement, however partly estimated to get annual figures. Innovation and entrepreneurship Startups Number of greentech investments 1 4 0 0 Number of venture debt investments 2 4 1 0 Number of fintech investments 3 13 12 8 Number of startups 4 18,778 17,399 16,628 Greenhouse concept Number of clients participating in Scaleup Summit (event) 1,875 718 500 Number of clients participating in Scaleup Club (event) 900 5,000 600 Number of companies participating in Scaleup Lab 10 week programme) 6 1 - 13 Number of clients participating in Sustainability business programme 10 8 - ) Innovative technologies and/or companies primarily dedicated to: a) reducing GHG (green-house gas) emissions, and/or b) enabling a sustainable economy within the Planetary Boundaries (as defined by Stockholm Resiliance Center). ) SEB venture debt refers to debt investments in start up / scale-up companies in SEB’s home markets. ) The purpose of the investment mandate is to make investments in companies in the financial technology (fintech) sector and other related sectors of the financial industry. ) Startup is defined as a company that has no previous organisational number or activity registered, but is classified as a payment customer. ) The Greenhouse concept is a solution for growing companies with sales of around SEK m or more. SEB offers services and carefully selected partners to help develop the business. ) Previous programme format transferred for individual partner-offering. (“Greenhouse Ignite”) – due to the coronavirus pandemic this has been delayed and started in Q . SEB Annual and Sustainability Report 2021 — 217 Environment General indicators Net internal m area of offices covered 1 347,352 335,564 329,761 Energy Total energy consumption in buildings (MWh) 1 72,083 64,705 67,478 Electricity total (MWh) 1 42,904 43,481 47,609 Heating/cooling (MWh) 1,2 29,179 21,225 19,869 Change in total electricity consumption compared to previous year (MWh) 1 – 577 4,128 9,159 Data centres, share of electricity consumption (%) 1 34 37 32 Change in total electricity consumption compared to previous year (%) 1 – 1 9 16 Renewable electricity of total electricity consumption (%) 1 91 91 87 Total energy consumption (MWh/ m) 1 0.21 0.19 0.20 Total energy consumption (MWh/employee) 3 4.4 4.0 4.3 Emissions 4 Total carbon emissions (tonnes) 1 9,389 9,734 21,774 Scope (tonnes) 1 1 4 Scope (tonnes) 2,852 1,619 1,807 Scope (tonnes) 6,536 8,114 19,963 of which, carbon emissions from energy consumption in buildings (tonnes) 1 ,5 3,352 3,505 4,968 of which, carbon emissions from business travel (tonnes) 1,050 2,471 12,426 of which, carbon emissions from paper consumption (tonnes) 882 1,160 1,361 of which, carbon emissions from company cars (tonnes) 1 908 978 1,208 of which, carbon emissions from waste (tonnes) 6 344 Total carbon emissions (tonnes/employee) 1,3 0.57 0.61 1.39 Change in carbon emissions from baseline 2015 (tonnes) 1 – 13,946 13,600 2 Change in carbon emissions, change from baseline 2015 (%) 1 59.8 58.3 6.7 Effluents and waste Paper Total paper consumption (tonnes) 602 792 929 Environmentally labelled paper consumption (%) 80 61 61 Waste Waste generation (tonnes) 806 1,160 1,895 Waste reused or recycled (%) 57 64 68 Waste generation after reuse or recycling (tonnes/employee) 0.021 0.026 0.039 Water Total water consumption in buildings (m) 89,307 127,202 166,249 Total water consumption (m/employee) 5.46 7.95 10.6 ) The reported values for have been updated to reflect new information known past the reporting period. ) Heating MWh increase due to multiple offices in the Baltics during a transition phase. ) Reference to note e “Number of employees”. ) SEB reports according to the Greenhouse Gas Protocol. SEB has chosen to report according to the GHG Protocol’s financial control approach. Whether SEB owns, has financial leased or operational leased facilities and vehicles impact whether emissions are disclosed in Scope , Scope or Scope . The emissions that are covered are energy consumption in facilities, business travel (air travel, train travel, car travel), paper consumption and leakage of refrigerants. Well established emissions factors are used for the emissions calculations, with sources as IEA, IVL, AIB, Swedish EPA and Swedish Energy Agency. ) Scope energy emissions adjusted for and as breakdown from only contain Scope emissions. ) CO emissions from waste reported from . Sustainability notes 218 — SEB Annual and Sustainability Report 2021 Procurement Suppliers Number of suppliers 8,313 8,915 11,300 Total spent on procurement (SEK bn) 10.1 10.4 10.7 Total number of suppliers screened and rated by EcoVadis (since 2014) 232 226 224 Number of suppliers screened and rated by EcoVadis, current year 6 2 11 Rating of suppliers screened by EcoVadis Outstanding rating 85100p (%) 0 0 0 Advanced rating 6585p (%) 19 15 14 Confirmed rating 4564p (%) 57 60 60 Partial rating 2544p (%) 24 25 26 No rating 024p (%) 0 0 0 ) To identify sustainability risks among our suppliers, we perform, when applicable, an initial assessment of suppliers using an internal risk model that takes country, industry sector and business criticality into account. The suppliers that are identified in the internal risk assessment as having an increased risk level will also go through EcoVadis’ screening. These suppliers cover around per cent of total supplier costs, i.e. around of the total number of suppliers. The EcoVadis assessment focuses on four themes: Environment, Labour Practices & Human Rights, Fair Business Practices and Sustainable Procurement. The issues assessed and their relative weight vary based on the company’s activities, size, and geographic location. Business travel & company car fleet Total business travel (million km) 6.6 14.8 72.6 Total business travel (km/employee) 405 923 4,625 Total air travel (million km) 5.7 13.2 67.0 Train travel Sweden (million km) 1.0 1.6 5.5 Environmentally certified company cars, share of company car fleet (%) 1,7 - 62 57 Environmentally certified company cars, share of company car fleet (%) 8 43 - - Environmental compliance Number of reported environmental prosecutions 0 0 0 Monetary value of significant fines due to non-compliance with environmental laws and regulations (SEK m) 0 0 0 ) The reported values for have been updated to reflect new information known past the reporting period. ) Old definition, defined as cars that emit less than g CO e/km. ) New definition, defined as cars that emit less than g CO e/km. SEB Annual and Sustainability Report 2021 — 219 Country-by-country reporting – companies by country Companies 1) within SEB Group, by country 2) Sweden Aktiv Placering AB Enskilda Kapitalförvaltning SEB AB Försäkrings AB Suecia Försäkringsaktiebolaget Skandinaviska Enskilda Captive IFA DBB AB Onyx Leasing AB Parkeringshuset Lasarettet HGB KB Repono Consulting AB Repono Holding AB SEB Förvaltnings AB SEB Internal Supplier AB SEB Investment Management AB SEB Kort Bank AB SEB Life and Pension Holding AB SEB Pension och Försäkring AB SEB Portföljförvaltnings AB SEB Strategic Investments AB Skandinaviska Enskilda Banken AB (publ) Skandinaviska Kreditaktiebolaget Suecia Insurance Management AB Norway Skandinaviska Enskilda Banken AB (publ), branch in Norway (P.E.) SEB Kort Bank AB, branch in Norway (P.E.) SEB Njord AS Denmark Skandinaviska Enskilda Banken AB (publ), branch in Denmark (P.E.) SEB Kort Bank AB, branch in Denmark (P.E.) SEB Investment Management AB, branch in Denmark (P.E.) Finland Skandinaviska Enskilda Banken AB (publ), branch in Finland (P.E.) SEB Kort Bank AB, branch in Finland (P.E.) SEB Leasing Oy SEB Life International Assurance Company Designated Activity Company, branch in Finland (P.E.) SEB Investment Management AB, branch in Finland (P.E.) Estonia SEB Life and Pension Baltic SE, branch in Estonia (P.E.) Aktsiaselts SEB Liising Aktiaselts SEB Varahaldus AS Rentacar AS SEB Pank Latvia Skandinaviska Enskilda Banken AB (publ), branch in Latvia (P.E.) SEB atklātais pensiju fonds, AS SEB banka, AS SEB Life and Pension Baltic SE SEB līzings, SIA IP AS SEB Investment Management Lithuania AB SEB Bankas Skandinaviska Enskilda Banken AB (publ), branch in Lithuania (P.E.) SEB Life and Pension Baltic SE, branch in Lithuania (P.E.) UAB SEB investiciju valdymas Germany FVH Frankfurter Vermögens-Holding GmbH Skandinaviska Enskilda Banken AB (publ), branch in Germany (P.E.) DSK Hyp AG SEB Immowert Beteiligungs GmbH SEB Leasing GmbH SEB Stiftung GmbH United Kingdom Skandinaviska Enskilda Banken AB (publ), branch in the United Kingdom (P.E.) SEB UK Pension Trustees Limited Skandinaviska Enskilda Limited Suecia Re & Marine Insurance Co Limited EFL Futures Limited Enskilda Securities Limited Scandinavian Bank Limited USA Skandinaviska Enskilda Banken AB (publ), branch in the United States of America (P.E.) SEB Securities Inc. Suecia Holding Corporation Suecia Insurance Company Ireland Eskimo (ABC) Holdings Limited SEB Life International Assurance Company Designated Activity Company Luxembourg Skandinaviska Enskilda Banken AB (publ), branch in Luxembourg (P.E.) SEB Life International Assurance Company Designated Activity Company, branch in Luxembourg (P.E.) SEB Investment Management AB, branch in Luxembourg (P.E.) SEB Private Equity Opportunity Management S.A. China Skandinaviska Enskilda Banken AB (publ), branch in China (P.E.) Singapore Skandinaviska Enskilda Banken AB (publ), branch in Singapore (P.E.) Russia SEB Bank JSC Poland Skandinaviska Enskilda Banken AB (publ), branch in Poland (P.E.) SEB Commercial Finance sp. z o.o. Hong Kong Skandinaviska Enskilda Banken AB (publ), branch in Hong Kong (P.E.) Ukraine PJCS SEB Corporate Bank Cayman Islands Skandinaviska Enskilda Banken AB (publ), branch in Cayman Islands (P.E.) Brazil SEB do Brasil Representações Canada Suecia Reinsurance Company ) Country refers to the tax jurisdiction where the entities are resident for tax purposes. ) Company refers to company, branch office or any other entity type being a tax subject in a tax jurisdiction. Sustainability notes 220 — SEB Annual and Sustainability Report 2021 Country-by-country reporting – company income tax by country Company income tax, by country Country Number of employees Tangible assets Gross income, third-party Gross income, group Operating profit Calculated company income tax Tax effect relating to not tax deductible expenses / non-taxable income, net Tax effect relating to a previously recognised / unrecognised tax loss / tax credit, net Current year company income tax Company income tax, paid Sweden 8,440 670 53,582 7,850 19,289 3,978 677 550 3,850 3,169 Norway 369 40 1,877 2,177 1,699 447 31 416 36 Denmark 327 4 1,060 1,634 1,405 310 21 3 334 312 Finland 272 37 414 1,206 1,311 254 2 20 236 172 Estonia 1,138 102 2,020 108 1,250 146 48 194 129 Latvia 1,832 63 1,203 236 738 7 3 15 19 22 Lithuania 2,935 200 2,601 66 1,554 305 21 10 294 259 Germany 241 3 638 1,724 1,546 474 28 446 358 United Kingdom 99 48 769 1,320 939 252 3 249 233 United States 9 32 3 444 518 262 83 53 30 17 Ireland 95 2 574 20 243 21 4 25 20 Luxembourg 159 6 779 316 234 46 2 44 99 China 40 4 430 1 101 26 16 42 68 Singapore 90 2 229 292 138 24 3 27 29 Russia 87 21 353 21 93 26 26 25 Poland 120 7 56 64 46 9 1 10 6 Hong Kong 19 1 31 83 6 1 9 11 14 Ukraine 52 1 63 7 10 3 0 3 3 Brazil Canada Group eliminations 618 1,930 1 TOTAL 16,347 1,212 66,506 0 30,864 6,413 715 558 6,255 4,927 The primary activities in the group entities, regardless of country, are finance and insurance activities. The above information covers the reporting period . Additional information, compared to financial note , is based on GRI reporting requirements. ) Country refers to the tax jurisdiction, where the SEB Group entities are resident for tax purposes. ) Tangible assets other than cash and cash equivalents (i.e. properties and equipment). ) Gross income, third party, refers to transactions with group external parties. Gross income is defined as the sum of interst income, fee and commission income, net financial income and net other income according to IFRS. The basis for the income allocation is SEB’s presence in each country, with the exception of when the local companies / branches serve as sales offices and receive commission payments and the transaction is booked in the central unit. ) Gross income, group, refers to transactions with group units in other tax jurisdictions. ) Operating profit before tax. ) Calculated corporate income tax at statutory rate in respective tax jurisdiction. ) Corporate income tax refers to corporate current income tax, excluding deferred tax, reported during reporting period. For more information about taxes see note . ) Income tax paid refers to corporate current income tax, excluding deferred tax, paid during the year. SEB’s approach to taxes Operating in more than countries, SEB acknowledges the changing land- scape around tax from both regulators and society and puts strong efforts into ensuring compliance with applicable tax laws and regulations in all countries where SEB operates. SEB strives to have high standards for tax governance, monitoring risks and ensuring tax compliance. SEB’s approach to tax is described in the SEB Group Code of Conduct and SEB Group Tax Policy (see sebgroup.com), SEB’s United Kingdom Tax Strategy, Transfer Pricing Policy and additional policies and instructions established for significant areas such as VAT, FATCA and CRS. The SEB Group Tax Policy is adopted by the Board of Directors and is reviewed annually. The CFO is responsible for financial control, including the control environment and governance in the SEB Group, which includes tax activ- ities. A Tax and Accounting Committee, including the CFO and the Head of Group Tax, analyses important tax issues for SEB raised by the Board of Directors, the CFO, Group Tax, business areas or external parties, on a quarterly basis. In line with SEB’s efforts to have high tax standards, SEB has implemented sev- eral controls within SEB’s ICFR (Internal Control over Financial Reporting) frame- work, which is overseen by the Audit and Compliance Committee of the SEB Board. This means that controls over the data that underlies financial and tax reporting, and controls over reporting processes, are regularly reviewed. Identified weak- nesses are prioritised and fed back into a process of continuous improvement. SEB’s risk management processes include a New Product Approval Process focussed on identifying and managing risks related to new or amended prod- ucts. The tax department is represented in this process. The range of issues considered includes taxation matters in order to ensure tax compliance. The level of acceptable tax risk in SEB is low. Significant potential tax risks are reported to the Tax and Accounting Committee. Products and services offered by SEB impact the tax situation for SEB and its customers and must always have business rationale. SEB operates in accordance with applicable tax laws and regulations. SEB must not use, encourage or facili- tate products or services in conflict with tax legislation or anti-tax avoidance law. SEB must not co-operate with external parties to facilitate products or services in conflict with tax legislation or anti-tax avoidance law. SEB works actively with risk assessments, frameworks and controls in order to ensure compliance. Wherever SEB operates, SEB seeks to establish and maintain good relation- ships with local tax authorities and other governmental bodies. SEB undertakes all dealings with them in a professional, transparent and timely manner, both when it comes to SEB’s own tax matters and in reporting obligations regarding customers. If tax regulations differ between countries/localities, SEB transparently seeks a globally acceptable solution in dialogue with the governments and tax authorities of each country. SEB also encourages the development of an inter- national framework for taxation in order to avoid double taxation. SEB is committed to meet the heightened expectations on transparency in respect of its tax management, and continuously works to improve the scope of its communication around tax. Guidance from national tax authorities and inter- national organisations like the OECD is important. SEB is also committed to fulfil its reporting obligations to tax authorities, relat- ing to both corporate and customer information. This covers local reporting and adherence to third party requests as well as international exchange of informa- tion according to multilateral Convention on Mutual Administrative Assistance in Tax Matters, CRS (Common Reporting Standard), FATCA (Foreign Accounts Tax Compliance Act) and DAC (Directive on Administrative Cooperation). If an employee discovers possible unethical or unlawful behaviour, this can be reported anonymously through SEB’s digital whistleblowing service WhistleB. Alternatively, Group Compliance or Internal Audit can be contacted directly. SEB is a member of the Swedish Bankers’ Association, which represents banks and financial institutions established in Sweden. One part of this associa- tion’s work is to ensure good quality in proposed tax legislation, but also to advo- cate in public for reasonable tax treatment of banks and financial institutions. SEB Annual and Sustainability Report 2021 — 221 GRI Index GRI 101: Foundation 2016 The report has been prepared in accordance with the Global Reporting Initiative, GRI Standards, Core option. EY has been engaged to undertake a limited assurance on SEB’s Sustainability report, prepared in accordance with the Annual Accounts Act and the GRI reporting criteria. Page references are abbreviated as follows: FC – Front cover of SEB Annual & Sustainability Report 2021 BC – Back cover of SEB Annual & Sustainability Report 2021 GRI 102: General Disclosures 2016 Disclosure Description Page reference/URL Organizational profile 1021 Name of the organisation Skandinaviska Enskilda Banken AB (publ) 1022 Activities, brands, products and services SEB offers advisory-driven commercial and investment bank- ing services, acting as intermediary between Nordic and global financial markets for our large corporate customers and financial institutions. SEB provides bank services for small and medium sized companies, the public sectors and to private individuals as well as private banking services with global reach. The group also provides asset management and life insurance services. For examples of products and services offered to our customers, p. 3031, our division offerings p. 8082. For examples of more sustainability-related products, p. 4851. 1023 Location of headquarters Stockholm, Sweden, p. 118. 1024 Location of operations P. 118, 220. 1025 Ownership and legal form The parent company is a Swedish limited liability company, p. 118. 1026 Markets served P. 3. 1027 Scale of the organisation Total number of employees: p. 142, 214. Total number of operations: p. 127128 (Operating segments), p. 129 (Geographical information). Net sales: p. 109 (Income state- ment), p. 130133 Net interest - / Net fee and commission - / Net financial - / Net other income. Total capitalization: p. 115 (Balance sheet total), p. 7477 (Financial structure). Exam- ples of products and services: p. 3031, 8082. 1028 Information on employees Sustainability Notes p. 214216 (Our people). The data has been compiled through our internal HR system. 1029 Supply chain P. 59 (Working with suppliers), Sustainability Notes p. 219. 10210 Significant changes to the organisation and its supply chain No significant changes. 10211 Precautionary principle or approach P. 8691 (Risk, liquidity and capital management). 10212 External initiatives, standards and principles Sustainability Report p. 45, 49, 57. 10213 Membership of associations Some examples of memberships are UNEPFI, Swedish Bank- ers´ Association, Swedish Securities Market Association, ICC, Institute of International Banking Law & Practice, Bankers´ association for Finance and Trade, Swedish Leadership for Sustainable Development, Swedish Investors for Sustainable Development, Swedish Insurance Society, Swedish Invest- ment Fund Association, IIF and European Banking Federation. Sustainability notes 222 — SEB Annual and Sustainability Report 2021 GRI 102: General Disclosures 2016 Disclosure Description Page reference/URL Strategy 10214 Statement from senior decisionmaker Statement from the Chair and statement from the President p. 69. 10215 Key impacts, risks and opportunities P. 6468 (Sustainability Report) and p. 8691 (Risk, liquidity and capital management). Ethics and integrity 10216 Company values, principles, standards and norms of behaviour; SEB Code of Conduct Core values: p. 35. Risk culture: p. 89. Norms of behaviour: SEB Code of Conduct p. 54(Sustainability report). Governance 10218 Governance structure Corporate governance p. 92104, Sustainability governance, including steering documents for sustainability p. 56. Stakeholder engagement 10240 List of stakeholder groups Customers, employees, shareholders and society at large, see front cover of SEB Annual and Sustainability Report, and p. 2425. 10241 Collective bargaining agreements Sustainability Notes p. 215 (Labour management). European works council representatives p. 53. 10242 Identifying and selecting stakeholders P. 59 (Engaging with stakeholders). 10243 Approach to stakeholder engagement P. 59 (Engaging with stakeholders). 10244 Key topics and concerns raised P. 59 (Engaging with stakeholders). Reporting practice 10245 Entities included in the consolidated financial statements The report cover all entities included in the SEB Group, p. 220. 10246 Defining report content and topic Boundaries The report content comprises SEB Group if nothing else is stated, see p. 69, 220. No significant changes in scope and boundaries since previous report. 10247 List of material topics P. 44, 224 (Material topics and its boundaries). 10248 Restatements of information Restatements are described in conjunction with each adjustment. 10249 Changes in reporting GRI 207 Tax has been added to the sustainable notes. 10250 Reporting period The reporting period corresponds to the reporting period of the annual report. 10251 Date of most recent report The previous report was published in March 2021. 10252 Reporting cycle P. 69 (About this report). 10253 Contact point for questions regarding the report P. 69 (About this report). 10254 Claims of reporting in accordance with the GRI Standards P. 69 (About this report). 10255 GRI content index P. 222227. 10256 External assurance P. 69 (About this report). SEB Annual and Sustainability Report 2021 — 223 GRI 103: Management Approach 2016 Disclosure Description 1031 Explanation of the material topic and its boundaries The integration of economic, social and environmental aspects in SEB’s business is fundamental. The sustainability topics of impor- tance for SEB, as identified in previously performed materiality analyses and through continuous interaction with stakeholders, remains valid, p. 59. The material topics are areas where we, through our core business, have the best opportunities to impact. The areas are climate and environment, human rights, social relations and anti-corruption. Through our business we strive to reorient capital flow to support sustainable purposes, in line with the bank’s vision and strategy and with the UN SDGs and Paris Agreement as guiding principles, p. 4547. Read more about the material topics and fundamental aspects which enables the business to create positive impact on sustainability: Sustainable financing (p. 47, 4849, 210) Sustainable investments (p. 47, 5051, 210) Innovation and entrepreneurship (p. 2223, 4041, 47, 217) People and Competence (p. 26, 3435, 47, 5253, 214216) Environment (p. 47, 55, 6069, 218219) Financial strength and resilience (p. 25, 27, 9091, 209) Risk management (p. 6068, 8690) Business ethics and conducts (p. 25, 35, 54, 8990, 92, 100) Crime prevention (p. 14, 23, 54, 59, 92, 100, 182, 212213) SEB considers environment to be a material topic, especially with regards to the environmental impact from our products and services, i.e. with regards to sustainable finance and sustainable investments. See p. 4869. Our own direct environmental impact may not be of major impact but is nevertheless considered to be material to some extent. See p. 47, 218, 219. SEB has a direct and indirect impact on stakeholders, p. 59. Most of the impact is indirect from our financing – investment – and advi- sory products and services, but some impact is direct, such as our people, p. 3435. We continuously enhance processes and ways of working, defining and integrating sustainability risks and strategies. We strive to avoid causing, contributing or being directly linked to negative impacts on people and environment for our activities, products and services. In 2021 SEB’s impact assessment work has focused on climate issues, primarily indirect climate impact related to financing and investments, in geographies where SEB is operating. The impact analysis will be extended to include also social and governance issues. 1032 The management approach and its components All material topics are managed in the same way as all of SEB’s activities, i.e. through management, control and follow-up accord- ing to our corporate governance structure (p. 9295). SEB has further strengthened the sustainability organisation and govern- ance structure (p. 56) for a comprehensive approach and focused progress from a strategic and business perspective. The sustainability material topics and aspects are managed by integrating the material aspects into our business activities. The purpose of the management approach, i.e. managing the material topics and impacts, is our ambition to support our customers in the transition to a low-carbon economy, whereby contributing to a climate-resilient economy and society. Several steering documents, which covers the material topics, provides guidelines for best practice as well as for international conventions and standards. They are part of our work to strengthen operations and align with international and national require- ments and which we encourage companies to follow. See p. 45, 49, 5758, 6365 (policy framework, position statements, sector policies, international agreements and commitments). SEB Corporate Sustainability Policy describes our sustainability organisation and governance model with established responsibili- ties (p. 56). Sustainability is integrated in SEB´s core business, with sustainability competence, related procedures and controls implemented to ensure adherence to sustainability objectives, strategy and policies. Commitments and targets for SEB Group are followed up on a regular basis. For baseline and expected result, see p. 47. Grievance mechanisms are implemented through a whistleblowing process, see p. 54 (Business ethics and conduct) and p. 90 (Risk, liquidity and capital management). For examples of specific actions that have been taken during the year, see the following pages for relevant material topics: An updated sustainability strategy was communicated and new ambitions and goals was defined, p. 46. Establishment of the Next Awards in recognition of sustainable entrepreneurship, p. 40. A new crime prevention function was established to further strengthen the work to prevent financial crime, p. 14. Further development of advisory-, classification tools and products to support sustainable investments and transition for our clients, p, 48, 63, 6668. SEB Investment management launched a sustainability rating model for potential investments, p. 50. Launch of new green and thematic funds, p. 51. A sustainability training for advisors was launched, p. 52. New policies on Customer Data Ethics and Anti-Corruption was adopted, p. 54. Improved measuring of SEBs direct environmental impacts, p. 55. Review and update of sector polices, p. 57. Strengthening the supplier screening in Group technology, p. 59. 1033 Evaluation of the management approach The responsibilities for managing risks and ensuring satisfactory internal controls related to the sustainability material topics and aspects are the same as for all SEB activities, see Corporate Governance p 8095, and Sustainability Governance structure p. 45. The Corporate Sustainability Policy and Corporate Sustainability Governance instruction outlines the framework and governance model for the sustainability work in SEB. The responsibilities of the board and the president can be found on p. 92104 Corporate Governance) p. 56 (Sustainability Governance). Management at all levels within the divisions, the Group’s business support and staff functions represent the first line of defence for risks in the organisation. The Group Risk organisation and Group Compliance form the second line of defence for ensuring that the Board’s intent regarding risk management and risk controls are applied. Group Internal Audit provides independent assurance and is the third line of defence. The performance against SEB goals and targets related to the material topics are disclosed in the Sustainability report (p. 47). Measurement of indicators related to fundamental aspects are disclosed in Sustainability notes, p. 208221. Sustainability notes 224 — SEB Annual and Sustainability Report 2021 GRI 200: Economic topics Disclosure Description Material topic Page reference/URL GRI : Economic performance 2011 Direct economic value generated Financial strength and resilience P. 209 (Financial strength and resilience). 2012 Financial implications and other risks and opportunities due to climate change Risk management P. 6069 (Sustainability report, climate risk, climate impact). GRI : Anti-Corruption 2052 Communication and training about anti-corruption policies and procedures Crime prevention P. 14, 23, 54, 59, 92, 100, 182, 212213. GRI : Tax 2071 Approach to tax Financial strength and resilience SEB’s approach to tax, p. 221. 2072 Tax governance, control and risk management SEB’s approach to tax, p. 221. 2073 Stakeholder engagement and management of concerns SEB’s approach to tax, p. 221. 2074 Country-by-country reporting Country-by-country reporting – companies by country p. 220. Country-by-country reporting – corporate income tax by country p. 221. SEB Annual and Sustainability Report 2021 — 225 GRI 400: Social topics Disclosure Description Material topic Page reference/URL GRI : Employment 4011 New employee hires and employee turnover Our People Sustainability notes p. 215 (New employee hires, Employee turnover). 4013 Parental leave Our People Sustainability notes p. 215 (Number of days split by men/women). GRI : Labour/Management Relations 4021 Minimum notice periods regarding operational changes Our People Consultation procedures are outlined in both local collective agreements and the Swedish Co-Determination Act. Consultations with local trade unions shall be conducted prior any significant changes of operations. GRI : Occupational health and safety 4034 Workers participation, consultation and communication on occupational health and safety Our People Sustainability notes p. 216 (Health and work environment). GRI : Training and Education 4041 Average hours of training per year per employee Our People Sustainability notes p. 216 (Learning and engagement). GRI : Diversity and Equal opportunity 4051 Diversity of governance bodies and employees Our People Sustainability notes p. 214 (Employee information), p. 34 (Diversity for innova- tion and growth), p. 47 (Goals and outcome). GRI : Supplier Social Assessment 4141 New suppliers that are screened using social criteria Procurement New suppliers that are identified with increased risk level are screened by EcoVadis. Sutainability notes p. 219 (Procurement). GRI : Public Policy 4151 Political contributions Financial strength and resilience SEB does not support political parties through donations or otherwise, see Code of Conduct p. 7 at sebgroup.com. GRI : Customer Privacy 4181 Substantiated complaints concerning breaches of customer privacy and losses of customer data Crime prevention During 2021 No substantiated complaints from regulatory bodies or customers regarding breaches of customer privacy or losses of customer data. The total numbers of identified breaches in the whole group reported to the Supervising Authorities was 30. During 2020 SEB did not receive any substantiated complaints from regulatory bodies regarding breaches of customer privacy and losses of customer data. SEB received no complaints from customers regarding breaches of customer privacy and the total number of identified breaches reported to the Supervising Authori- ties was 56. Included in the total number of breaches are incidents reported to Baltic Authorities that, due to stricter regulatory requirements, may not be breaches of GDPR. During 2019 No substantiated complaints from regulatory bodies, two customer complaints on breach of customer privacy, and 56 identified breaches of customer data. GRI 300: Environmental topics Disclosure Description Material topic Page reference/URL GRI : Energy 3021 Energy consumption within the organisation Direct Environment Sustainability notes p. 218219 (Environment). GRI : Emissions 3051 Scope 1 Sustainability notes p. 218. 3052 Scope 2 Sustainability notes p. 218. 3053 Scope 3 Sustainability notes p. 218. 3054 GHG emissions intensity Sustainability notes p. 218. 3055 Reduction of GHG emissions Direct environment Sustainability notes p. 218219 (Environment), p. 47 (Goals and outcome) The decrease in CO emissions continued during 2021, still impacted by the coronavirus pandemic. GRI : Effluents and Waste 3062 Waste by type and disposal method Direct environment Sustainability notes p. 218 (Environment). GRI : Environmental Compliance 3071 Non-compliance with environmental laws and regulations Direct/Indirect environment Sustainability notes p. 219 (Environment). Sustainability notes 226 — SEB Annual and Sustainability Report 2021 Other disclosures Disclosure Description Material topic Page reference/URL G – Product portfolio Scope Product portfolio G4-FS8 Monetary value of products and services designed to deliver a specific environmental benefit for each business line broken down by purpose (excluding asset management) Sustainable finance P. 47 (Goals and outcome), p. 4849 (Sustainable financing), p. 210 (Sustainable financing). G- Active Ownership Scope Active Ownership G4-FS10 Number of companies held in the institution’s portfolio with which the reporting organisation has interacted on environmental or social issues Sustainable investments P. 211 (Influence and engagement). G- Active Ownership Scope Active Ownership G4- FS11 Percentage of assets subject to positive and negative environmental or social screening Sustainable investments P. 5051 (Sustainable investments), p. 211 (Sustainability approach, Human Rights assessment). SEB’s own disclosure Scope Percentage of SEB funds assessed with sustainability criteria Sustainable investments P. 211 (Sustainability approach). SEB’s own disclosure Scope Contribution to entrepreneurial and innovation partnerships Innovation and entrepreneurship P. 23 (Strategic change, Strategic partnerships), p. 40 (Sustainable entrepreneurship, p. 217 (Innovation and entrepreneurship, Commu- nity engagement and sponsorship). SEB’s own disclosure Scope Measurement of customer experience and satisfaction Responsible and proactive advice P. 26, 3033 (Customers). SEB Annual and Sustainability Report 2021 — 227 Principles for Responsible Banking Reporting and Self-Assessment Template The table below is SEB’s second report as a signatory to the Principles for Responsible Banking. In the report we provide our self-assessment in relation to the principles, and provide references to our existing reporting in the SEB Annual and Sustainability Report . The information provided in the PRB report is included in the GRI report, which is covered by the limited review performed by SEB’s auditor EY. Reporting and Self-Assessment Requirements High-level summary of the bank’s response (limited assurance required for responses to highlighted items) Reference(s)/link(s) to the bank’s full response/relevant information Principle 1: Alignment SEB will align its business strategy to be consistent with, and contribute to corporates’ and individuals’ needs and society’s goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and relevant national and regional frameworks. 1.1 Description of business model Being part of the financial backbone of society, providing support, advice and capital to businesses and private individuals. SEB is a northern European financial institution, providing infrastructure for payments and transactions, financing and savings solutions, wealth manage- ment, financial advice and life insurance. SEB serves large corporations and financial institutions in its home markets in Sweden, the Nordic and Baltic countries, Germany, and UK, but also through our international presence. We provide advisory-driven commercial and investment banking services, investment opportunities for pension funds and other inves- tors, and life insurance solutions, across a broad spectrum of industries. 69 per cent of SEB’s non-bank credit portfolio pertains to corporate customers; by segment approximately 49 per cent large corporations and financial institu- tions, 20 per cent SMEs, or by geography 53 per cent in Sweden and other Nordic countries, 10 per cent in Germany and UK, 6 per cent in the Baltics and other countries. SEB will expand its business for large customers to the Netherlands, Austria and Switzerland. SEB also serves private individuals and small- and medium size companies in Sweden. The Nordic and the Baltic countries are served with universal banking services, life insurance solutions, asset management/investment products and card, private banking and advisory services. 28 per cent of SEB’s non-bank credit portfolio pertains to households, mainly mortgages: by geography 54 per cent in Sweden and other Nordic countries, 3 per cent in the Baltics. The remaining part, 3 per cent, pertains to public administration, mainly in Sweden. See SEB Annual and Sustainability Report 2021: p. 1213 (A strategy of embracing change) p. 2425 (Long-term value creation) p. 2931 (Our four customer segments) p. 165 (Credit portfolio distributed on sectors) 1.2 Description of the business strategy SEB is committed to aligning its strategy to international goals such as the UN Sustainable Development Goals (SDGs) and the Paris Agreement. In 2021 SEB presented and updated its sustainability strategy, outlining the bank’s role in the transition towards a sustainable society. The strategy is integrated in the busi- ness plan 20222024 and is a cornerstone of SEB’s 2030 Strategy. SEB as a financial institution, providing financing and investment opportunities, has identified that its main contribution to the SDGs is by supporting customers in their transition. Through our business in sustainable financing and investments, advisory services, innovation and people, we serve our customers and strive to reorient capital flows to support sustainable purposes, in line with the SEB’s vision and strategy and with the UN SDGs, Paris Agreement and EU Action Plan as guiding principles and frameworks. SEB’s sustainability strategy sets out the areas where we believe we can create sustainable short- medium- and long-term value for our stakeholders by aligning financing and investment with the UN SDGs and the Paris Agreement. These areas include climate and environment, human rights, social relations and anti- corruption. From an SEB Group perspective we prioritise five of the SDGs that are clearly linked to our business strategy and our sustainability ambitions: SDG 13 Climate action, SDG 8 Decent work and economic growth, SDG 9 Industry, innovation and infrastructure, SDG 16 Peace, justice and strong institutions, SDG 5 Gender equality. These are tightly linked to our business strategy and sustainability work. Read also on p. 45 and the PRB Impact Analysis 2.1 SEB’s climate change approach is integrated in the bank’s overall business strat- egy and is articulated around three areas: support our customers on their transi- tion journeys toward a low-carbon economy, manage the bank’s climate impact (direct and indirect), and manage climate-related risks. As a long-term financial partner to many of the large corporations and institutions in the Nordic region and a major asset manager, SEB is uniquely positioned to contribute to the transi- tion towards a low-carbon society. See SEB Annual and Sustainability Report 2021: p. 3435, 5253 (Working at SEB and People and community) p. 4041 (SEB in society) p. 4445 (Sustainability at SEB) p. 4647 (Sustainability strategy and goals) p. 4849 (Sustainable financing) p. 5051 (Sustainable investments) p. 5455 (Business ethics and conduct) p. 55, 6068 (Environment/climate) Sustainability notes 228 — SEB Annual and Sustainability Report 2021 Reporting and Self-Assessment Requirements High-level summary of the bank’s response (limited assurance required for responses to highlighted items) Reference(s)/link(s) to the bank’s full response/relevant information Principle 2: Impact and Target Setting SEB will work continuously to increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services. To this end, we will set and publish targets where we can have the most significant impacts. 2.1. Impact Analysis In 2021 SEB conducted an impact analysis in line with our commitments to the Principles for Responsible Banking, identifying the SDGs we impact the most. The analysis was performed of our credit portfolio, cross geographies, and sectors. The exposures in our credit portfolio were proportionately combined with respective sector impacts, positive and negative, on the SDGs. Based on this approach, and consid- ering that SEB’s major activities lie within northern Europe, the analysis showed that the areas where SEB’s exposure has a potential negative impact are climate change (SDG 13), biodiversity (SDG 14 and SDG 15) and fresh water (SDG 6). In these areas SEB’s commitments and engagements are particularly relevant. The areas with the most significant positive impact were for example, Decent work and economic growth (SDG 8), and Industry, innovation and infrastructure (SDG 9). Our corporate credit portfolio, in our home markets has large exposure sectors such as real estate 22 per cent, capital goods 9 per cent, transportation 8 per cent, automotive 4 per cent, conventional/mixed power generation 5 per cent and oil & gas 3 per cent. Among the products that SEB offers are green bonds, social bonds, sustainable bonds, sustainability-linked bonds, green loans and sustainability-linked loans. We experienced an increased demand for these products and services from our corporate customers during 2021. See more details in the Clients and customers section 3.1 and 3.2. Green mortgages are offered to private customers with homes that meet specific energy or environmental classification. The same criteria apply when financing construction of residential and commercial properties (green construction loans). SEB also offers green loans for the purpose of financing and/or refinancing projects promoting the transition to low-carbon and climate-friendly development, as well as improvements to the environment and eco-systems. SEB’s goal is to reduce the fossil credit exposure within the bank’s energy portfolio, which includes power generation and distribution. See more details in the Target Setting section 2.2. See SEB Annual and Sustainability Report 2021: p. 4445 (Sustainability at SEB) p. 4647 (Strategy and goals) p. 4849 (Sustainable financing) p. 55 (Environment) p. 6068 (Environment/climate) p. 61 (Break-down of SEB’s corporate and real estate credit portfolio reflecting the sector’s carbon footprint) Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Impact Analysis. In 2021, SEB conducted an impact analysis in line with our commitments to the Principles for Responsible Banking on which SDGs we impact the most through our exposure in the credit portfolio. 2.2. Target Setting In 2021 SEB presented an updated sustainability strategy, outlining the bank’s role in the transition towards a sustainable society. Key elements in the sustainability strategy, are the new goals: Carbon Exposure Index (The Brown), Sustainability Activity Index (The Green) and the Transition Ratio (The Future). These goals will allow us to measure SEB’s positive impacts both short- and long-term, and our negative impacts through our credit portfolio. Carbon Exposure Index – The Brown (SDG 13): SEB’s goal is to reduce the fossil fuel credit exposure in the bank’s energy portfolio, which includes power generation and distribution (by 30 per cent), oil and gas exploration and production (by 70 per cent) and refining and distribution (by 30 percent ), for combined reduction of 4560 per cent by 2030 compared with a 2019 baseline. Sustainability Activity Index – The Green (SDGs 13 and 8): This index is a volume-based metric that captures our sustainability activity in sustainable financing, sustainable finance advisory, greentech venture capital investments, and investment products (AuM) classified according to EU Sustainable Finance Disclosure Regulation Article 9. The goal is to increase the average volume-based activity 68 times by 2030. Transition Ratio – The Future (SDG 13): We will transition together with our customers as reflected in a Transition Ratio, which is a ratio based on our internal Customer Sustainability Classification Model, CSC model (see 2.3). This means that we are assessing our customers’ climate impact and alignment towards the goals set out in the Paris Agreement, by classifying our credit portfolio. Baseline will be defined in 2022. See more details around the CSC Model in the Plans for target implementation and monitoring section 2.3. SEB became a founding signatory of the Net-Zero Banking Alliance in 2021, and we are in the process of defining targets for carbon emissions reduction accordingly. These targets will be developed during 2022. SEB’s direct CO emissions target (SDG 13): SEB’s goal is to reduce the bank’s direct climate impact by limiting emissions to 17,000 tonnes 5 percent by 2025. We aim to reduce absolute emissions of greenhouse gases from energy consumption, use of paper, company cars and business travel to almost zero by 2045. These targets will drive alignment of our portfolio with SDG 13 (Climate Action). Gender equality (SDG 5): SEB’s goal is to have gender balance in senior management teams and to reach 5050 10 per cent. Business ethics and conduct (SDG 16): SEB has seven mandatory trainings in place for employees and consultants. The goal is to increase completed trainings towards 100 per cent. See SEB Annual and Sustainability Report 2021: p. 45 (SEB and the UN Sustainability Development Goals) p. 4647 (Strategy and goals) p. 4849 (Sustainable financing) p. 6068 (Environment/climate) SEB Annual and Sustainability Report 2021 — 229 Reporting and Self-Assessment Requirements High-level summary of the bank’s response (limited assurance required for responses to highlighted items) Reference(s)/link(s) to the bank’s full response/relevant information Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Target Setting. SEB publicly communicated new measurable climate goals during 2021. The previous communicated goals on environment, direct impact, gender equality and business ethics and conduct are still valid. The goals established are continuously monitored by the GESC (Group Executive Sustainability Committee). 2.3. Plans for Target Implementation and Monitoring In line with SEB’s goal for the Carbon Exposure Index (The Brown): the goal is to reduce the fossil credit exposure within the energy portfolio with 4560 per cent by 2030 compared with a 2019 baseline. Divisions monitor fossil-related transactions’ effects on the Carbon Exposure Index in order to gradually decrease the exposure. As stated in SEB’s Policy on Fossil Fuels, published in February 2021, we will phase out thermal coal mining exposures from all busi- ness relationships by 2025. Coal-fired power generation will be phased out by 2030 among companies where coal-fired revenues is above 5per cent. Sustainability Activity Index (The Green): SEB will continuously develop and increase its customer offerings in sustainable financing, sustainable finance advisory, greentech venture capital investments and Article 9 investment prod- ucts (in line with the EU’s Sustainable Finance Disclosure Regulation, SFDR). Transition Ratio (The Future): Understanding and assessing customers’ climate impact requires tools specifically designed for such tasks. SEB has developed a Customer Sustainability Classification Model that constitutes the foundation for assessing, classifying and measuring how SEB’s corporate and real estate customers, in the credit portfolio, impact the planet and people from a sustain- ability perspective. The two-step classification model considers both sector breakdown and customer-specific information such as transition strategies, actual climate impact based on technology used, and mitigation activities. The result enables SEB to assess to what extent customers’ business activities are in line with the Paris Agreement. The methodology is based on definitions, targets and transition indicators set in the EU Taxonomy, the Paris Agreement, and EU or country-specific regulations or initiatives. To perform the assessment, SEB collects information about each customer’s current emission reductions compared to a baseline year as well as its short-term (5 years), medium-term 510 years) and long-term (10 years) reduction targets. This results in four data points that reflect the customer’s transition journey. When fully implemented, this model will be a key component of both business strategy and risk management and will support SEB’s ambition to gradually shift its credit portfolio towards more sustainable financing, including social and governance aspects. This is monitored and reported to Group Executive Sustainability Committee, GESC. SEB’s direct CO emissions target: To reach these targets SEB will work to; improve energy efficiency of operations and buildings, use renewable energy in buildings owned or rented, reduce business travel by using alternative tech- niques for meetings, reduce travel-related emissions by choosing bio fuel where possible, and move to an electrified fleet of company cars. See SEB Annual and Sustainability Report 2021: p. 46 (Strategy and goals) p. 6163 (Measuring the climate impact of our credit portfolio) p. 55 (SEB’s direct environmental impact) Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Plans for Target Implementation and Monitoring. SEB is integrating recently set targets in business processes and related monitoring and reporting systems. We are also developing methodologies and tools to support our dialogues with customers and stakeholders to further support the transition towards a low-carbon society. 2.4. Progress on Implementing Targets Carbon Exposure Index (The Brown): SEB introduced the goal in 2021 and will start measuring and reporting in 2022. Sustainability Activity Index (The Green): SEB introduced the goal in 2021 and will start measuring and reporting in 2022. Transition Ratio (The Future): SEB introduced the goal in 2021. Measurement of the goal is dependent on the ongoing work with classifying the credit portfolio according to the CSC model, which will be finalised during 2022. A baseline and target will be defined in connection with this. Gender equality: SEB’s goal is to increase gender balance in senior management teams, to reach 5050 10 per cent. SEB met this goal in 2021 for Top senior managers. Business ethics and conduct: SEB has seven mandatory trainings in place for employees and consultants. The goal is to increase completed trainings towards 100 per cent. SEB reached 95 per cent in 2021. SEB’s direct CO emissions target: SEB’s direct carbon emissions are measured on an annual basis and are communicated in the Annual and Sustainability Report. SEB’s total CO emissions amounted to 9 387 tonnes. See SEB Annual and Sustainability Report 2021: p. 6163 (Measuring the climate impact of our credit portfolio) p. 55 (SEB’s direct environmental impact) p. 47 (Strategy and goals) Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Progress on Implementing Targets. SEB will measure, and publicly communicate, the outcome of the goals stated in section 2.2 regularly. Outcomes on targets as set in 2021 have been reported as per above. Sustainability notes 230 — SEB Annual and Sustainability Report 2021 Reporting and Self-Assessment Requirements High-level summary of the bank’s response (limited assurance required for responses to highlighted items) Reference(s)/link(s) to the bank’s full response/relevant information Principle 3: Clients and Customers SEB will work responsibly with its clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations. 3.1. Policies and practices SEB’s sustainability policy framework covers the Corporate Sustainability Policy, thematic policies and sector policies. The framework provides guide- lines on best practice and on the international conventions and standards that the bank encourages companies to follow. The Corporate Sustainability Policy defines the framework for sustainability in SEB and provides a governing platform for our sustainability work for all busi- ness decisions, including investment and credit decisions. SEB’s thematic and sector policies primarily take a risk-based approach to address sustainability in financing and investment activities. The framework is reviewed annually in order to strengthen the business and in line with regulatory, technological and industry specific development. Thematic policies: Environment Policy and Human Rights Policy. Sector policies: Arms and Defence, Forestry, Fossil Fuels, Mining and Metals, Renewable Energy, Shipping, Transportation, Tobacco and Gambling. In 2021 the internal document, the Sustainability Policy Implementation Instruction, was decided on which guides the business in how policies should be implemented in a coherent and consistent manner. In late 2021 and early 2022 SEB conducted a major review of the Environmen- tal Policy, covering climate change, freshwater and biodiversity, aimed to be adopted in spring 2022. In February 2022 updates were made in the policies for Forestry, Renewable Energy and Shipping. Moreover, SEB published its first Sector Policy on Trans- portation. Other important sustainability-related documents and policies in place are the Code of Conduct, the Code of Conduct for Suppliers, the Inclusion and Diversity Policy and the Tax Policy. In addition to policies, and in order to emphasise SEB’s commitment to the Paris Agreement, one of the principles in the bank’s Customer Acceptance Standards (CAS), established in 2020, is that “customers in industries with a high negative climate impact and without a credible plan to manage the transition to a low- carbon economy in line with the Paris Agreement shall be avoided”. To manage its credit exposure to customer segments with a material carbon footprint, the bank defines risk strategies for these sub-portfolios. The strategies are reviewed annually. See SEB Annual and Sustainability Report 2021 p. 57 (Sustainability policy framework) 3.2 Encourage sustainable practices and activities We engage in constructive and concrete dialogues about our customers’ needs in relation to sustainability challenges and opportunities. The CSC model (see 2.3) is a hands-on tool for SEB’s client teams that enables us to deepen our relationships and mutual understanding of our corporate customers’ decarbon- isation journeys. We strive to proactively offer solutions that we identify as relevant for them, based on a structured analysis. The model constitutes the foundation for assessing, classifying and measuring how SEB’s corporate and real estate customers, in the credit portfolio, impact the planet and people from a sustainability perspective. To support our customers to further understand their investment portfolios’ impact on sustainability aspects, SEB has developed the Impact Metric Tool. The tool consists of modules that allow measurement of environmental, social and governance (ESG) aspects of portfolio company operations at a portfolio level. SEB also provides a methodology for ESG assessment within equity research (SEAM), which analyses how these factors will have a material impact on companies’ financial performance. See SEB Annual and Sustainability Report 2021 SEB Annual and Sustainability Report 2021 — 231 Reporting and Self-Assessment Requirements High-level summary of the bank’s response (limited assurance required for responses to highlighted items) Reference(s)/link(s) to the bank’s full response/relevant information Principle 4: Stakeholders SEB proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals. 4.1 Stakeholder engagement and partnerships We engage stakeholders to ensure that we prioritise the most important issues. Among all our stakeholder groups, strong focus is on sustainability, especially on climate change. Customers: We are convinced that we can make the greatest positive impact by being engaged in our customers’ transition journeys. A proof that our customers appreciate our advisory services are the Prospera surveys, published in 2021 and 2022, focusing on banks’ sustainability advice. SEB was two years in a row ranked number one by companies as well as institutions in the Nordic region. Private customers in Sweden are highly engaged in sustainability. More than 7,000 custom- ers responded to SEB’s annual sustainability survey. They highlighted climate change, clean water and sanitation and biodiversity as topics they want SEB’s fund company to prioritise in its engagement work. Employees: SEB’s annual employee survey shows that the bank’s employees continue to be highly engaged with strong key performance indicators (KPI) compared to the financial sector. The survey also shows that our employees share a strong belief in SEB’s future and confidence in SEB’s management, and that they feel they have opportunities to develop and contribute to change. The results form a strong foundation for the bank’s continued work with its long-term strategy. Society: In connection to the development of the Environmental Policy, SEB organ- ised an external stakeholder meeting with actively engaged civil society organisa- tions to get technical input and insights on the relevant challenges and priorities that are identified in the PRB Impact Analysis. Through its participation in various mentoring programmes, the bank’s employees reach thousands of young people throughout the country every year. We have dialogues with non-governmental organisations (NGOs), consumer advocate groups and the media through direct dialogues, local engagements, round table discussions and press conferences. SEB is one of two European commercial banks represented in the EU Platform of Sustainable Finance, an expert group with the mandate to advise the EU Commission on development and application of the EU Taxonomy. SEB works actively with the Nordic and Baltic banking associations and their members to share the latest public information about progress and gather views regarding development of the Taxonomy. See SEB Annual and Sustainability Report 2021 p. 59 (Engaging with stakeholders) Principle 5: Governance & Culture SEB will implement its commitment to these Principles through effective governance and a culture of responsible banking. 5.1 Governance structure SEB strengthened its sustainability organisation in 2020, to accelerate the pace of the transformation, set a clear and forcible structure for responsibility distribution, and to ensure that SEB’s sustainability efforts address relevant issues and secure implementation across the entire company. The Board of Directors is responsible for the establishment of a strategy for corporate sustainability and an organisation to execute this strategy. The President and CEO is responsible for execution of the corporate sustainability strategy and implementation of the governance structure. The President and CEO has established a Group Executive Sustainability Committee (GESC) to manage execution of the corporate sustainability strategy. GESC is a decision-making body that is chaired by the President and CEO and is responsible for overseeing imple- mentation of the principles. Sustainable Banking is a first-line, operational body that is responsible for coordi- nating and driving the overall corporate sustainability agenda in close collaboration with the Divisions and Group Staff and Support functions. The Chief Sustainability Officer heads the Sustainable Banking and is a member of GESC. SEB’s group policies, sector policies and position statements provide guidelines on best practice as well as on the international conventions and standards that we encourage companies to follow. See SEB Annual and Sustainability Report 2021: p. 56 (Sustainability governance) p. 57 (Sustainability policy framework) 5.2 Initiatives and measures We have strong focus on strengthening sustainability competence among employ- ees. In 2021 we also introduced a sustainability training for employees working with private and medium-sized corporate customers. See SEB Annual and Sustainability Report 2021: p. 52 (People and community) 5.3 Governance Structure for Implementation of the Principles SEB sees the importance of aligning incentive structures with its sustainability ambitions. The bank has group-wide as well as specific goals for the various divi- sions and units, targeting environmental, social and governance areas, for example carbon emissions, diversity and regulatory compliance. Sustainability KPIs are integrated in the allocation process of long-term incentive structures for members of SEB’s Group Executive Committee (GEC), for managers who report to the GEC as well as other applicable positions. Going forward SEB aims to integrate the bank’s updated ambitions and goals into the evaluation among SEB’s senior managers. See SEB Annual and Sustainability Report 2021: p. 52 (People and community) Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Governance Structure for Implementation of the Principles. SEB’s governance structure ensures the establishment, execution and monitoring of implementation of the sustainability strategy, thereby ensuring that the Principles are implemented effectively. Sustainability notes 232 — SEB Annual and Sustainability Report 2021 Reporting and Self-Assessment Requirements High-level summary of the bank’s response (limited assurance required for responses to highlighted items) Reference(s)/link(s) to the bank’s full response/relevant information Principle 6: Transparency & Accountability SEB will periodically review its individual and collective implementation of these Principles and be transparent about and accountable for our positive and negative impacts and our contribution to society’s goals. 6.1 Progress on Implementing the Principles for Responsible Banking During 2021 SEB strengthened its sustainability policy framework in multiple ways. A major revision of the Fossil Fuel Policy was performed, and updates were made in the Mining and Metals Policies. Updates will be made of the Shipping, Forestry, Renewable Energy and Transportation Policies in early 2022. The Environment Policy is also being revised during spring 2022. An internal instruction, the Sustainability Policy Implementation Instruction, started to be implemented during 2021. SEB became a signatory of the Net-Zero Banking Alliance (NZBA) in 2021, and the first reporting in accordance with that framework will take place in 2022. The Net Zero Asset Managers initiative was signed in late 2020, committing to support the goal of net zero greenhouse gas emissions by 2050. In 2021 SEB publicly announced an updated sustainability strategy, and in connection with this new ambitions and goals were communicated, which included laying out a path for the reduction of our fossil credit exposure and at the same time setting growth ambitions for our sustainable products, advisory services and investments. Our goals and ambitions are expressed as measurable indexes. As a credit institution SEB is obligated to report in accordance with the requirements of the EU Taxonomy Regulation by year-end of 2021. In addition to the mandatory taxonomy reporting, SEB has chosen to disclose voluntary taxonomy reporting for transparency reasons. In 2021 SEB improved its CDP score from D to B, a result of our sustainability efforts. SEB monitors regulatory compliance within the sustainability area on a continuous basis. During 2022 we will proceed with implementation of the Taxonomy Regulation and monitor progress around development of sustainability reporting standards, both on EU and international levels. See SEB Annual and Sustainability Report 2021: p. 52 (People and community) p. 56 (Sustainability governance) p. 57 (Sustainability policy framework) p. 197 (Sustainability notes, Taxonomy) Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Progress on Implementing the Principles for Responsible Banking. In 2021 SEB has taken important steps in implementing the Principles for Responsible Banking, and the work will continue in 2022. SEB Annual and Sustainability Report 2021 — 233 Auditor’s Limited Assurance Report on Skandinaviska Enskilda Banken AB’s Sustainability Report and statement regarding the Statutory Sustainability Report Introduction We have been engaged by the Board of Directors of Skandinaviska Enskilda Banken AB to undertake a limited assurance engage- ment of Skandinaviska Enskilda Banken AB’s Sustainability Report for the year 2021. Skandinaviska Enskilda Banken AB has defined the scope of the Sustainability Report to the pages 4269 and 208233 in this document and the Statutory Sustainability Report to the pages 4469. Responsibilities of the Board of Directors and the Executive Management The Board of Directors and the Executive Management are responsible for the preparation of the Sustainability Report including the Statutory Sustainability Report in accordance with applicable criteria and the Annual Accounts Act respec- tively. The criteria are defined on page 69 in the Sustainability Report, and are part of the Sustainability Reporting Guidelines published by GRI (The Global Reporting Initiative), that are applicable to the Sustainability Report, as well as the accounting and calculation principles that the Company has developed. This responsibility also includes the internal control relevant to the preparation of a Sustainability Report that is free from material misstatements, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express a conclusion on the Sustainability Report based on the limited assurance procedures we have performed and to express an opinion regarding the Statutory Sustainability Report. Our review is limited to the information in this document and to the historical information and does there- fore not include future oriented information. We conducted our limited assurance engagement in accord- ance with ISAE 3000 Assurance engagements other than audits or reviews of financial information. A limited assurance engagement consists of making inquiries, primarily of persons responsible for the preparation of the Sustainability Report, and applying analytical and other limited assurance procedures. Our examination regarding the Statutory Sustainability Report has been conducted in accordance with FAR’s accounting standard RevR 12 The auditor’s opinion regarding the statutory sustainability report. A limited assurance engagement and an examination according to RevR 12 is different and substantially less in scope than an audit conducted in accordance with Inter- national Standards on Auditing and generally accepted auditing standards in Sweden. The firm applies ISQC 1 (International Standard on Quality Control) and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We are independent of Skandinaviska Enskilda Banken AB in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. The limited assurance procedures performed and the examina- tion according to RevR 12 do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. The conclusion based on a limited assurance engagement and an examination according to RevR 12 does not provide the same level of assurance as a conclusion based on an audit. Our procedures are based on the criteria defined by the Board of Directors and Executive Management as described above. We consider these criteria suitable for the preparation of the Sustainability Report. We believe that the evidence obtained is sufficient and appropriate to provide a basis for our conclusions below. Conclusions Based on the limited review performed, nothing has come to our attention that causes us to believe that the Sustainability Report is not prepared, in all material respects, in accord- ance with the criteria defined by the Board of Directors and Executive Management. A Statutory Sustainability Report has been prepared. Stockholm 28 February 2022 Ernst & Young AB Hamish Mabon Charlotte Söderlund Authorized Public Accountant Authorized Public Accountant This is the translation of the auditor’s report in Swedish. To Skandinaviska Enskilda Banken AB (publ), Corp Id 5020329081 234 — SEB Annual and Sustainability Report 2021 Auditor’s Limited Assurance Report Other information SEB Annual and Sustainability Report 2021 — 235 Definitions INCLUDING ALTERNATIVE PERFORMANCE MEASURES 1 Items affecting comparability To facilitate the comparison of operating profit between current and previous periods, items with significant impact that management considers affect the comparability or are relevant for the understanding of the financial result, are identified and presented separately, for example impair- ment of goodwill, restructuring, gains and losses from divestments and other income or costs that are not recurring. Operating profit Total profit before tax. Operating profit before items affecting comparability Total profit before items affecting comparability and tax. Net profit Total profit after tax. Return on equity Net profit attributable to shareholders in relation to average ) shareholders’ equity. Return on equity excluding items affecting comparability Net profit attributable to shareholders, excluding items affecting comparability and their related tax effect, in relation to average ) shareholders’ equity. Return on business equity Operating profit by division, reduced by a standard tax rate, in relation to the divisions’ average ) business equity (allocated capital). Return on total assets Net profit attributable to shareholders, in relation to average ) total assets. Return on risk exposure amount Net profit attributable to shareholders in relation to average ) risk exposure amount. Cost/income ratio Total operating expenses in relation to total operating income. Basic earnings per share Net profit attributable to shareholders in relation to the weighted average ) number of shares outstanding before dilution. Diluted earnings per share Net profit attributable to shareholders in relation to the weighted average ) diluted number of shares. The calculated dilution is based on the estimated economic value of the long-term equity-based programmes. Net worth per share The total of shareholders’ equity, the equity portion of any surplus values in the holdings of debt securities and the surplus value in life insurance operations in relation to the number of shares outstanding. Equity per share Shareholders’ equity in relation to the number of shares outstanding. Expected credit losses, ECL Probability-weighted credit losses with the respective risk of a default. ECL allowances The allowance for expected credit losses on financial assets, contract assets, loan commit- ments and financial guarantee contracts. Net ECL level Net expected credit losses in relation to the open- ing balance of the year of debt securities, loans to the public and loans to credit institutions meas- ured at amortised cost, financial guarantees and loan commitments, net of ECL allowances. ECL coverage ratio ECL allowances in relation to underlying gross carrying amounts for loans and debt securities as well as nominal amounts of financial guarantees and loan commitments. Stage 3 loans / Total loans, gross Gross carrying amount for stage loans (credit-impaired loans) in relation to gross carrying amount for total loans measured at amortised cost (including trade and client receivables presented as other assets). Stage 3 loans / Total loans, net Carrying amount for stage loans (credit-impaired loans) in relation to carrying amounts for total loans measured at amortised cost (including trade and client receivables presented as other assets). The excel file Alternative Performance Measures, available on sebgroup.com/ir, provides information on how the measures are calculated. DEFINITIONS According to the EU Capital Requirements Regulation no 5752013 (CRR): Risk exposure amount Total assets and off-balance sheet items, risk- weighted in accordance with capital adequacy regulations for credit risk and market risk. The operational risks are measured and added as risk exposure amount. Risk exposure amounts are only defined for the consolidated situation, excluding insurance entities and exposures deducted from own funds. Common Equity Tier 1 capital (CET) Shareholders’ equity excluding dividend, deferred tax assets, intangible assets and certain other regulatory adjustments defined in EU Regulation no (CRR). Tier 1 capital Common Equity Tier capital plus qualifying forms of subordinated loans liabilities, so-called additional tier instruments. Tier 2 capital Mainly subordinated loans liabilities not qualifying as Tier capital contribution. Own funds The sum of Tier and Tier capital. Common Equity Tier 1 capital ratio Common Equity Tier capital as a percentage of risk exposure amount. Tier 1 capital ratio Tier capital as a percentage of risk exposure amount. Total capital ratio Total own funds as a percentage of risk exposure amount. Liquidity Coverage Ratio (LCR) High-quality liquid assets in relation to the estimated net liquidity outflow over the next calendar days. According to the EU Capital Requirements Regulation no 8762019 (CRR2): Leverage ratio Tier capital as a percentage of the exposure value of assets, derivatives and off-balance sheet items. Net stable funding ratio (NSFR) Available stable funding in relation to the amount of required stable funding. ) Alternative Performance Measures, APMs, are financial measures of historical or future financial performance, financial position, or cash flows, other than those defined in the applicable financial reporting framework (IFRS) or in the EU Capital Requirements Regulation and Directive CRR/CRD IV. APMs are used by SEB when relevant to assess and describe SEB’s financial situation and provide additional relevant information and tools to enable analysis of SEB’s performance. APMs on basic earnings per share, diluted earnings per share, net worth per share, equity per share, return on equity, return on tangible equity, return on total assets and return on risk exposure amount provide relevant information on the performance in relation to different investment measurements. The cost/income ratio provides information on SEB’s cost efficiency. APMs related to lending provide information on provisions in relation to credit risk. All these measures may not be comparable to similarly titled measures used by other companies. ) Average year-to-date, calculated on month-end figures. ) Average, calculated on a daily basis. Abbreviations IFRS 9 abbreviations FVTPL Fair Value Through Profit or Loss FVHFT Fair Value Through Profit or Loss Held for Trading FVMPL Fair Value Through Profit or Loss Mandatorily FVDPL Fair Value Through Profit or Loss Designated AmC Amortised Cost Other information 236 — SEB Annual and Sustainability Report 2021 Financial information and publications Order printed copies of the Annual and Sustainability Report on sebgroup.com/ir. Subscribe to digital versions of the quarterly reports (pdf) and the Fact Book (pdf) on sebgroup.com/press Digital Annual and Sustainability Report A digital introduction to the Annual and Sustainability Report sebgroup.com/annualreport SEB corporate website Financial information, publications and other information regarding SEB is available at sebgroup.com Annual and Sustainability Report – ESEF The Annual and Sustainability report, machine readable in accordance with ESEF requirements. Annual and Sustainability Report Information on SEB’s business, financial performance and position, as well as the sustainability work. Capital Adequacy & Risk Management Report (Pillar 3) Disclosure on capital adequacy and risk management in accordance with regulatory requirements. SEB Green Bond Investor Report Overview of SEB’s green loan portfolio and the green bond that was issued in 2017. Interim Reports and Fact Books Quarterly reports on SEB’s financial position and results. Detailed information in Fact Books. Annual and Sustainability Report March Annual General Meeting March Quarterly report January–March April Quarterly report April–June July Quarterly report July–September October Calendar The Annual General Meeting will be held on March at pm (CET) at Stockholm Concert Hall, Hötorget, Stockholm, Sweden. A notice convening the Annual General Meeting, including an agenda, is available on sebgroup.com. Shareholders who wish to attend the meeting room in person or through a representative shall: • both be listed as a shareholder in the share register produced by Euroclear Sweden AB on March , • and no later than March register for the meeting. Registration must be made on telephone no. ( outside Sweden) weekdays between . - . or via the internet on SEB’s website sebgroup.com, or in writing at the address Skandinaviska Enskilda Banken AB (publ), c/o Euroclear Sweden, Box , Stockholm. When registering, the shareholder must state his name, personal or registration number, telephone number and any assistants. Shareholders who wish to participate in the meeting by postal vote shall: • both be listed as a shareholder in the share register produced by Euroclear Sweden AB on March , • and no later than March register by casting their postal vote. Completed and signed postal voting form can be sent by post to Skandinaviska Enskilda Banken AB (publ), c/o Euroclear Sweden, Box , Stockholm or by e-mail to [email protected]. The completed form must be received by SEB, c/o Euroclear, no later than March . Annual General Meeting The Board proposes a dividend of SEK 6.00 per share for 2021. 24 March 2022 is proposed as record date for the dividend payments. If the Annual General Meeting resolves in accordance with the proposal, the share will be traded ex-dividend on 23 March 2022 and dividend payments are expected to be distributed by Euroclear Sweden AB on 29 March 2022. Dividend Please recycle me! Production: SEB and Narva • Printing: Elanders Sverige AB, 2022 Photos: Superstudio, Joel Sherwood, Niklas Munter and others. N O R D I C S W A N E C O L A B E L Printed matter 3041 0242 Skandinaviska Enskilda Banken AB (publ) — Corporate registration number 5020329081 Peter Kessiakoff Acting Chief Financial Officer Telephone: 46 771 62 10 00 E-mail: [email protected] Pawel Wyszynski Head of Investor Relations Telephone: 46 70 462 21 11 E-mail: [email protected] Malin Schenkenberg Financial Information Officer Telephone: 46 70 763 95 31 E-mail: [email protected] Contacts Head office Postal address: SEB, SE Stockholm, Sweden Visiting address: Kungsträdgårdsgatan , Stockholm, Sweden Telephone: Ulrika Areskog Lilja Head of Group Marketing and Communication Telephone: 46 771 62 10 00 E-mail: [email protected] Frank Hojem Head of Corporate Communication Telephone: 46 70 763 99 47 E-mail: [email protected]
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.