Nordic Investment Bank

Primary Credit Analyst: Gabriel Forss, Stockholm (46) 8-440-5933; gabriel.forss@spglobal.com Secondary Contact: Alexander Ekbom, Stockholm (46) 8-440-5911; alexander.ekbom@spglobal.com Table Of Contents Major Rating Factors Rationale Outlook Stand-Alone Credit Profile: 'aaa' Business Profile: Very Strong Financial Profile: Extremely Strong Likelihood of Extraordinary Shareholder Support Related Criteria And Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 1

Major Rating Factors Strengths: Extremely strong financial profile on the back of solid capitalization. Strong shareholder commitment, enforced green lending profile, and overall sound loan book growth cements policy relevance. Robust liquidity and conservative liquidity risk management. Solid support from several 'AAA'-rated member governments. Competent financial risk management with robust monitoring. Counterparty Credit Rating Foreign Currency AAA/Stable/A-1+ Weaknesses: High regional concentration in the loan portfolio, compared with peers. Small balance sheet and niche lending mandate limits scope for contracyclical lending Rationale S&P Global Ratings bases its ratings on Nordic Investment Bank (NIB) on its assessment of NIB's very strong business profile and extremely strong financial profile. A rebound in loan disbursements to record high levels in 2016 has resulted in solid earnings. Combined with a focus on lending to public entities, this has cemented the institution's extremely strong capital position, which underpins our assessment of its stand-alone credit profile (SACP) at 'aaa'. Denmark, Sweden, Norway, Finland, and Iceland founded NIB as the Nordic countries' joint international financial institution in 1975. Its primary purpose is to promote economic growth in member countries by financing medium-and long-term projects in the private and public sectors that strengthen competitiveness and enhance the environment by promoting green growth initiatives. The five founding member countries enjoy some of the highest per capita incomes of all rated sovereigns. In January 2005, NIB expanded its membership for the first time by inviting Estonia, Latvia, and Lithuania to join. This reflected the new members' economic integration with and geographic proximity to the incumbent Nordic members. The combined shareholding of the newer members amounted to 4.2% of NIB's total capital as of year-end 2016. Of NIB's callable capital, 77.2% is pledged by 'AAA' rated member states, comfortably above the ratio of any other rated multilateral lending institution (MLI) peer. NIB's public policy mandate and role in the Nordic and Baltic regions supports our assessment of its very strong business profile. This assessment further reflects NIB's connection to and relationship with its shareholders, our view of the bank's governance and risk management as robust, and its effective track record in all of its major lines of business. Although NIB has relatively limited geographic scope, its shareholders and main countries of operation have strong governance indicators. In addition, NIB has mostly enjoyed preferred creditor treatment for its public sector loans and preferential treatment for its private sector loans. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 2

While focusing on its core lending mandates and acting as a complement to capital markets and local private sector financing, NIB has started to gradually expand its product offering, in line with shareholders' requests to extend its lending to small and midsize enterprises (SMEs) through, for example, risk-sharing with local banks. It has also expanded its lending to countries that are not members and offers funding facilities in the Arctic region. These developments appear in line with the shareholder review of the institution's policy relevance, purpose, and business strategy, completed in 2015. In this process, the shareholders asserted the relevance of NIB in terms of its position as a long-term funding alternative to environmental and competitiveness-enhancing investments in the region. Moreover, in line with shareholder interest in promoting green initiatives, in 2016, NIB began investing in green bonds of highly rated issuers. It books these investments as lending under its environment mandate. NIB engagement in such investments is made with the intent of using the expertise of the institution to promote the development of the green bond market in the Nordic and Baltic region. We observe that the interest of NIB's shareholders in green initiatives could result in NIB further enhancing its role as a financier of green investments in the region. We would interpret such a development as a sign that shareholder commitment is increasing the institution's policy relevance. For 2017 and 2018, we expect sound growth in total loans outstanding, on the back of continued strong deal flow from public sector entities. NIB recorded record-high disbursement in 2016, with net loan book growth of 6.5% for the full year, up from the 3% growth rate of 2015. Notably, of the new loans agreed in 2016, more than half were to new borrowers, reflecting the bank's conscious market penetration. The increase in lending is fueled by strong demand. In 2016, demand predominantly came from the region's local and regional governments, which have significant infrastructure financing needs. In spite of the low interest rates, NIB recorded sound profitability in 2016 due to strong disbursement, combined with an additional boost from one-off gains related to the implementation of two-way credit support annexes (CSAs) with derivative counterparties. As such, the bank continued to pay cash dividends of 55 million, as it has since 2012. The dividends distributed in 2012-2016 have limited the institution's organic capital growth, in our view. We expect similar dividend payout ratios to continue through 2018, but note that NIB's shareholders have taken a proactive stance on dividends in the past and, in certain situations, have waived the payment of dividends to preserve capital. For example, NIB suspended dividends in 2008-2011 after incurring a loss in 2008. We expect NIB's capital ratios to stay solid in coming years, based on maintaining the credit quality of its assets, despite our expectation of moderating profitability from continued low interest rates. In spite of NIB's dividend payouts in recent years, its capital ratios have continued to improve from the extremely strong levels in 2015. Our assessment of NIB's extremely strong financial profile factors in its robust capitalization, supported by an S&P Global Ratings' risk-adjusted capital (RAC) ratio before adjustments of 26.5% as of year-end 2016. It achieved this despite the fact that most of NIB's loans are to the private sector, while most other MLIs have a majority of loans to sovereign or sovereign-guaranteed entities. NIB's RAC ratio stands at 24.7% when we take into account adjustments specific to MLIs under our methodology. These primarily reflect our expectation that MLIs would receive preferred creditor treatment (PCT) from sovereign borrowers, a cap on the risk weight of high-risk exposures, and the geographic diversification of NIB's exposures. These ratios have further improved since 2015, largely because part of the new lending is directed to the public sector, and they underpin our assessment of the bank's financial profile. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 3

NIB held a comprehensive liquidity buffer of 11 billion at year-end 2016, equivalent to about 35% of its balance sheet. Even though the bank is exposed to risks through its dependence on wholesale market funding, we believe this is mitigated by liquidity policies stipulating a 12-month liquidity survival horizon and entailing significant levels of high-quality assets in its treasury portfolio. Our liquidity ratios for NIB indicate that the bank would be able to cover all committed lending and debt repayments for at least one year, even under extremely stressed market conditions, without access to the capital markets. We view NIB's comprehensive liquidity position as important in light of the institution's ongoing move to two-way CSAs on its derivatives counterparty portfolio. This move is well underway and has affected NIB's liquidity and funding strategy. We note that contingent capital flows are prefunded under NIB's liquidity policy and the bank has appropriately increased its treasury assets to balance the liquidity need stemming from additional collateral postings. We expect it to further size up its liquidity holdings as the remaining derivatives counterparties are moved to two-way CSAs in 2017. In light of this, we observe the emergence of a more dynamic funding strategy at NIB, resulting in more frequent issuances over a funding year, which is supporting funding ratios. Historically, NIB's benchmark issuance has resulted in episodically short-term financing needs which are uncharacteristic of other highly rated MLIs. The occasional slight funding gaps between NIB's maturing assets and liabilities are improving as the institution expands its issuance profile to cater for the liquidity needs necessary for collateral posting under two-way CSAs. Our 'AAA' rating on NIB is supported by 4.4 billion (1.35x of adjusted common equity) in subscribed callable capital from members rated 'AAA': Denmark, Sweden (unsolicited ratings), and Norway. In our opinion, the callable capital mechanism for NIB is one of the strongest among rated MLIs--funds have already been cleared by national parliaments or governments. Outlook The stable outlook on NIB reflects our expectation that the bank will maintain its extremely strong financial profile and very strong business profile over the next two years and continue to make a relevant funding contribution, fulfilling its public policy mandate through the economic cycle. Furthermore, we expect that support from NIB's shareholders will maintain the adequacy of its internally generated capital and back its lending mandate. If either NIB's business or financial profile substantially deteriorates, we could lower the ratings on NIB. For example, we could lower the ratings if we observed deteriorating governance at NIB, demonstrated by actions such as substantially increasing dividend payment ratios. In addition, if we observed that NIB was unable to match lending offers from the private sector, it could signal that its funding contribution was of diminishing relevance. If the bank's liquidity deteriorated or asset quality weakened markedly, and there was a change in the owners' willingness to support the institution, it would put pressure on the financial profile, and thus on our ratings on NIB. Stand-Alone Credit Profile: 'aaa' Our assessment of NIB's SACP reflects our view of its very strong business profile and extremely strong financial profile. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 4

Table 1 Nordic Investment Bank -- Selected Indicators --Financial year ended Dec. 31-- (%) 2016 2015 2014 2013 2012 Balance sheet characteristics Liquid assets/adjusted total assets 36.6 32.1 28.7 30.3 31.1 Purpose-related assets (gross)/adjusted total assets 55.3 57.4 61.2 62.6 58.4 Net loans/adjusted total assets 55.1 57.2 60.9 62.4 58.2 Public-sector (including sovereign-guaranteed) loans/total loans 44.7 39.5 36.6 34.5 32.4 Private-sector loans/total loans 55.3 60.5 63.4 65.5 67.6 Other indicators RAC ratio after adjustments 24.7 23.0 23.0 22.0 20.0 Static funding gap at 1 year (x) 1.5 1.2 1 0.9 0.9 Gross debt/adjusted common equity (x) 7.7 7.1 6.8 6.6 8.2 Short-term debt (by remaining maturity)/gross debt 22.3 26.5 22.5 24.3 27.8 Net income/average adjusted assets 0.6 0.8 0.9 0.9 0.8 RAC--Risk-adjusted capital. Business Profile: Very Strong NIB's business profile reflects our assessment of the bank's governance, role in terms of providing a relevant funding contribution, and public policy mandate. Policy importance assessment Founded in 1975 to strengthen and develop Nordic cooperation and promoting growth in its five member countries by financing long-term projects in the private and public sectors, NIB now focuses on competitiveness and the environment. Since its establishment, NIB has enjoyed the unwavering support of member governments, which provide high-quality callable capital. In January 2005, NIB extended membership to Estonia, Latvia, and Lithuania, reflecting their economic integration and geographic proximity with the incumbent Nordic members. Subscription of new members' capital took place through a capital increase of 142 million in January 2005. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 5

Chart 1 The willingness of members to authorize sizable increases in the bank's capital base (paid in plus callable) over time shows the depth of membership support. In June 2010, the bank's board of governors increased authorized capital by 2.00 billion to 6.14 billion, the latest increase in authorized capital. This came into force on Feb. 16, 2011, after all member countries approved the increase, with either national parliamentary or government endorsement. There was no increase in paid-in capital. The difference between authorized capital and its paid-in portion was callable capital, potentially providing additional capital support if needed. About 80% of NIB's callable capital comes from shareholders rated 'AAA', which is the highest proportion among all rated MLIs. If the bank's board of directors deems it necessary to call capital to fulfill the bank's debt obligations, each member country is obliged to pay the balance of its subscribed capital. The failure of one member to honor a capital call does not relieve any other member of its obligation. Should a member country withdraw from the bank agreement, it remains responsible for its subscribed capital for bank commitments at the time of withdrawal. Although it is not explicitly stated in the bank's statutes, we understand that, if less than the remaining capital balance is called by the directors, each member is liable for a pro rata share of the call. No shareholder has withdrawn from NIB, and we do not expect that any will do so in the next few years. In 2016, NIB took the decision to align each member country's percentage share of authorized capital, paid-in capital, WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 6

and the guarantee provided for its specific project investment loan (PIL) and environmental investment loan (MIL) lending programs. This will align a member state's commitments to the bank with its percentage share of authorized capital. The changes will be effected over the course of 2017 as the parliaments of the member states approve and ratify the proposal. Members also demonstrate their support through limited explicit guarantees when NIB lends to nonmember countries under its PIL and MIL facilities. Under its MIL lending program, NIB holds exposures in Belarus, Russia, and Ukraine. NIB called on the MIL guarantee mechanism because of nonpayment of a loan under its MIL lending in 2014 and again regarding the remaining overdue payments under the facility in May 2016. The execution of the guarantee process worked smoothly, and it received a 19.4 million payment as planned in July 2014 and received all payments by July 2, 2016. In our view, this demonstrates the robustness of the MIL guarantee process and shareholders' commitment to NIB. Demand for NIB lending was strong in 2016 with loan disbursement noticeably outpacing planned disbursements, resulting in a 6.5% increase in outstanding loans and more than doubling the growth rate of 2015. The 2016 lending growth supports NIB's fulfilment of its mandate; 96% of disbursed new projects score as "good" or "excellent" against the bank's mandate rating on competitiveness or environment. For 2017 and 2018, we expect loans outstanding to continue demonstrating a robust annual growth rate. Specifically, we continue to see significant scope for increased lending in NIB's business areas over the next few years, given that there is an increasing need for major infrastructure investments in the region, not least in the municipal sectors, to maintain competitiveness and foster green technology. The outcome of NIB's strategic review process in 2014-2015 has led its shareholders to opt for more lending to mid-caps (companies with an annual turnover of 150 million- 500 million) and SMEs, for example, through a risk-sharing setup with local banks, of which we saw the first examples in 2016. We also expect to see more initiatives for lending to nonmember countries at the request of NIB's shareholders. These initiatives are gradually being incorporated into NIB's business activities, which we believe will continue to be centered on its core lending mandates. NIB's longer-term lending will likely be especially in demand, given that there is a gap for longer-dated investments from private-sector funding in the Nordic and Baltic regions. Even though NIB's niche lending mandate and its relatively small balance sheet compared with other highly rated peers limits its role as a contracyclical lending contributor, the institution has showed relevance through economic cycles, and played an important role during the financial crisis since 2008, facing increasing financing demand and maintaining its presence in nonmember countries. Table 2 Nordic Investment Bank -- Principal Business Activities --Financial year ended Dec. 31-- (%) 2016 2015 2014 2013 2012 Purpose-related assets (gross)/adjusted total assets 55.3 57.4 61.2 62.6 58.4 Net loans adjusted total assets 55.1 57.2 60.9 62.4 58.2 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 7

Table 2 Nordic Investment Bank -- Principal Business Activities (cont.) --Financial year ended Dec. 31-- (%) 2016 2015 2014 2013 2012 Public-sector (including sovereign-guaranteed) loans/total loans 44.7 39.5 36.6 34.5 32.4 Private-sector loans/total loans 55.3 60.5 63.4 65.5 67.6 Memo Total guarantees 0 0 0 0 0 Total adjusted assets ( )* 30,178,330 27,311,447 24,870,400 23,489,941 25,982,911 *Adjustments made to reported shareholders' equity to calculate adjusted common equity (an institution's cash capital) are carried through to total assets. Governance and management expertise In our opinion, NIB rests on sound principles, the rigorous application of accounting standards, and a balanced shareholder composition. Member states have a direct role in decision-making and close control over NIB's activities. The shareholders recently affirmed their commitment to NIB, together with the institution's public policy relevance, in a 2014-2015 strategy review. The original member countries enjoy some of the highest per capita incomes of all rated sovereigns and generally have a long track record of political stability and macroeconomic prudence. NIB was established by an agreement, whose articles we view as equivalent to a treaty, and is governed by statutes. The bank benefits from comprehensive tax exemptions relating to its establishing agreement. NIB has senior staff with considerable aggregate experience and expertise, in our view, and a sufficient number of key personnel. NIB is headquartered in Helsinki, where it has about 190 employees. We expect NIB to be able to finance a large part of its growth through internal capital generation, since the bank allocates annual profits to its general risk fund and reserves. Although NIB does not pursue a profit-maximizing strategy, the board of directors proposed to the board of governors to pay 55 million of dividends for 2016, continued from 2012, which was the first payout since 2007. NIB's shareholders view it as essential that NIB is profitable and run on sound banking principles, resulting in maintained dividend requirements. In this regard, we note that NIB's shareholders have waived dividends in situations where it has been deemed necessary for NIB to internally finance its lending growth, such as in 2008-2011. In our view, NIB has a prudent risk management policy. The bank has limits on lending by country and economic sector, concerning both credit exposure and the use of economic capital; concentration risks are evaluated when granting loans. The bank applies control rules regarding the exposure to individual borrowers and the composition of its portfolio. Although the bank doesn't have lending limits for its exposures in its member countries, country limits are set for lending to nonmember countries. In addition, the bank limits the maximum amount granted to a single project through loan or guarantee to 50% of the total project cost, and up to 75% for SMEs. Like other MLIs, NIB controls risk to shareholders and creditors by restraining indebtedness and limiting the scope of WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 8

its financial operations. The bank does not have an explicit debt-leverage policy, but its leverage limits effectively constrain net debt to 250% of subscribed capital and reserves. At year-end 2016, the utilization of the limit was approximately 72%, resulting in gearing of 181% against the 250% limit. The bank has separate ceilings for its special lending facility of 4 billion for the PIL facility and originally 300 million for the MIL facility. The bank has a special credit risk fund for the PIL, designed to cover potential risks with regard to the facility, partly guaranteed by member states. The bank would assume 100% of a loss arising from a PIL, up to the amount available in this fund. After this fund has been fully used, the NIB could call a member state's guarantee, up to 90% of the loan value, and up to a total of 1.8 billion. NIB's member countries guarantee up to 100% of the loans under a MIL. Following the board of directors' decision in May 2016 to call for payments under the MIL guarantees, due to nonpayment of one MIL loan, the ceiling for the MIL facility guarantee was lowered to 266 million. Moreover, very high asset quality continues to sustain NIB's leverage and debt ratios. In addition, about half of the loans agreed in 2016 were to new borrowers, meeting NIB's target of broadening its client base and diversifying the risks in its loan book. NIB's statutes call for adequate security for loans granted, and loans to nonmember countries are to a large extent supported by members' guarantees under the special lending facilities and benefit from NIB's preferred-creditor status. We note, however, that NIB did not receive preferred treatment in the Greek sovereign debt restructuring for its treasury assets. Furthermore, NIB has generally remained profitable. In the past 10 years, it posted a loss only in 2008, in the context of the global financial crisis, with losses arising from both the loan portfolio and treasury assets. In spite of very low interest rates, profitability in 2016 remained sound on the back of strong growth in disbursement and a one-off revenue item from the implementation of two-way CSAs. Specifically, NIB recorded net interest income of 242 million, similar to the 247 million recorded in 2015. In 2016, lending continued to generate more profits than treasury, due to low interest rates affecting returns on treasury. Comprehensive income for 2016 stood at 184 million, compared with 215 million in 2015, and was supported by one-off financial revenues of around 16 million related to the implementation of two-way CSAs. NIB reports derivatives at fair value, in accordance with International Financial Reporting Standards (IFRS) 9 requirements, which introduced an aspect of volatility in 2016 comprehensive income and will continue to do so in the years ahead. In accounting terms, NIB's comprehensive income for 2016 held a negative fair value impact of hedges at 28 million. We do not factor this as a key concern, as the bank holds the swaps used for hedging purposes solely on a hold-to-maturity basis. From 2017, we expect that continued low interest rates will likely result in profitability declining from the robust levels in recent years. We foresee a continued strong deal flow to sustain interest income from lending, but foresee that meagre returns from treasury will continue to limit overall profitability. Financial Profile: Extremely Strong Our view of NIB's extremely strong financial profile incorporates our calculation of the organization's capital adequacy, as well as its funding and liquidity. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 9

Chart 2 Capital Adequacy Capital and earnings. In our opinion, NIB's capitalization remains comfortable, with high-quality capital, consisting predominantly of paid-in share capital and retained earnings. The bank's RAC ratio is 26.5% before adjustments, despite its relatively higher exposure to the private sector than most other MLIs. A significant part of NIB's loans are to the private sector, which reduces single-name concentration. NIB's liquidity portfolio is invested in highly rated fixed-income securities denominated in euros. In total, NIB's portfolio management generated 63.2 million as of year-end 2016, or 26% of NIB's net interest income. In 2016, NIB's lending activities were very strong, with outstanding loans increasing by 6.5%, double the growth rate of 2015. Despite the expanding balance sheet, robust earnings meant that NIB's solvency ratio (equity to total assets) remained fairly stable in 2016, at 10.9%, down from 11.5% one year earlier. As of year-end 2016, the bank's outstanding debt was 7.3x of shareholders' equity (adjusted), up from 7.0x in 2015 and consistent with 2013 levels, but down from 11.0x in 2008. Our assessment of NIB's extremely strong financial profile factors in its robust capitalization, supported by an S&P Global Ratings' RAC ratio of 26.5% as of year-end 2016 before adjustments, despite the fact that the main part of NIB's loans are in the private sector, while most other MLIs have a majority of loans to sovereign or sovereign-guaranteed WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 10

entities. In 2016, a majority of new lending was directed to the public sectors, which has led to positive developments of risk-weighted assets and a noticeable strengthening of the RAC ratio. As a consequence, NIB's RAC ratio, taking into account adjustments specific to MLIs under our methodology, has similarly improved and stood at 24.7%, according to year-end 2016 data. Our MLI-specific adjustments are primarily our expectation for PCT for sovereign borrowers, a cap on the risk weight of high-risk exposures, and the geographic diversification of NIB's exposures. These ratios cemented themselves at an extremely strong level in 2016 and underpin our assessment of the company's financial profile. Table 3 Nordic Investment Bank -- Adjusted Common Equity --Financial year ended Dec. 31-- (Mil. ) 2016 2015 2014 2013 2012 Shareholders' equity (reported) 3,275,105 3,146,497 2,986,099 2,830,887 2,665,677 Total adjustments to shareholders' equity N.A. N.A. N.A. N.A. N.A. Adjusted common equity 3,275,105 3,146,497 2,986,099 2,830,887 2,665,677 N.A.--Not available. For 2017 and 2018, we expect total loans outstanding will continue increasing at a robust pace, driven by strong underlying demand. Due to very low interest rates, we expect NIB's profitability will noticeably moderate. However, we believe that NIB's internal earnings generation, taking into account expected continued payouts of dividends and continued focus of lending to the public sectors in 2017, will be sufficient to sustain its RAC ratio comfortably above 23%, after MLI-specific adjustments. NIB's potential risk-bearing activities can be categorized as either treasury or development related. The former generate holdings of deposits, securities, derivatives, and borrowings, while the latter are represented by loans. Table 4 Nordic Investment Bank -- Risk-Adjusted Capital Framework Data (Mil. ) Exposure S&P Global Ratings' RWA Average S&P Global Ratings' RW (%) Credit risk Government and central banks 7,672 822 11 Institutions 10,660 1,237 12 Corporate 11,848 9,569 81 Securitization* 51 23 46 Other assets 52 69 133 Total credit risk 30,283 11,721 39 Market risk Equity in the banking book 0 -- Trading book market risk -- 0 -- Total market risk -- 0 -- Operational risk 0 Total operational risk -- 625 -- RWA before MLI adjustments 12,346 100 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 11

Table 4 Nordic Investment Bank -- Risk-Adjusted Capital Framework Data (cont.) MLI adjustments Industry and geographic diversification (2,546) (22) Preferred creditor treatment (221) (27) Single-name concentration 3,703 30 High-risk exposure cap (0) (0) Total MLI adjustments 935 8 RWA after MLI adjustments 13,281 108 Adjusted common equity S&P Global Ratings' RAC ratio (%) Capital ratio before adjustments 3,275 27 Capital ratio after adjustments 25 *Includes the securitization tranches deducted from capital in the regulatory framework. MLI--Multilateral lending institutions. RW--Risk weight. RWA--Risk-weighted assets. Purpose-related exposure (PRE). Purpose-related activities constitute most of the risk borne by NIB. NIB's environmental and competitiveness mandate involves financing via loans and guarantees, which strongly focused on energy environment lending in 2016, accounting for 35% of the new loan agreements or 1.5 billion, more than doubled in nominal value from 2015. Lending under the environmental mandate included 143 million worth of green bond investments. New lending also entailed infrastructure, transportation, and telecommunications, to which new agreed loans totaled 1.2 billion in 2015, compared with 823 million in 2015. Lending focus was also kept on industries and services (the lending units for heavy industries and services were merged in 2013), accounting for about 20% of the new loan agreements of 912 million in 2016. NIB is also increasingly focusing on lending to smaller companies in member states using local financial institutions as intermediaries (known as second-floor lending) and thereby enhancing competitiveness and promoting job creation. Loans to SMEs amounted to 17% of agreed loans as of year-end 2016, up from 11% in 2015. We observe that NIB's shareholders are targeting lending to SMEs as a prioritized area of NIB's activities. As such, we expect that NIB's share of lending to mid-caps and SMEs, for example through risk-sharing initiatives with local banks, will increase in 2017-2018, as it continues gradually implementing this strategy. NIB benefits from the very high quality of its loan portfolio. In 2016, the average credit quality strengthened, as a large part of the new lending was directed to public sector counterparties. Using its internal rating scale, the bank classified 85% of its lending exposures at investment grade as of year-end 2016, up from 83% in 2015. NIB conducts regular monitoring of lending counterparties. In 2013, NIB increased the monitoring frequency of its lending counterparties to yearly reviews for all credits. Previously, the bank conducted a three-year review cycle for sound credits. Treasury activities. NIB's treasury activities aim to cover its liquidity needs, while at the same time minimizing the cost of funding and ensuring that its liquid assets are remunerated by a satisfactory long-term return. Credit risk. In our opinion, NIB has a prudent approach to credit risk, with 11.1 billion in treasury assets (at year-end 2016), including 4.5 billion in cash and cash equivalents. At year-end 2016, 70% of its treasury exposures were rated 'AAA' or 'AA+' (compared with 67% in 2015), 17% were WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 12

rated 'AA' or 'AA-' (13% in 2015), and 13% were in the 'A' or 'BBB' category (20% in 2015). NIB is moving to two-way CSAs on its derivatives portfolio. The move is well underway and we expect that all active derivatives counterparties will be moved to two-way contracts by 2017. This change is impacting NIB's liquidity and funding strategy. In this regard, we note the institution's liquidity policy underpins stability, since it prescribes a liquidity buffer sufficient to survive 12 months under stressed market conditions and meet all payment obligations and forecast lending operations without access to new funding. In addition, we note that contingent capital flows are prefunded under NIB's current liquidity policy and stress testing. As such, we observe that NIB has prudently sized up its liquidity portfolio to balance the potential liquidity needs stemming from forecast additional collateral postings. As the move to two-way CSAs completes in 2017, we expect NIB to further upscale its liquidity portfolio to cater for the situation. To cater for the liquidity needs required for collateral posting under two-way CSAs, we have observed the emergence of a more dynamic funding strategy, which is closing the episodically short-term refinancing funding gaps that previously characterized the institution. Foreign-exchange-rate risk. As laid out in the bank's statutes, all foreign-currency risk is hedged as far as is attainable. The overnight exposure limit to any currency stands at 1 million, except U.S. dollars, for which the limit is $4 million. The bank has no open foreign-exchange positions on its balance sheet that could materially affect its financial position or net income. Interest-rate risk. In 2016, the net basis point value (BPV) limit on interest rate risk was set at 1.5 million, about 0.05% of NIB's equity capital, but in practice, total interest rate risk exposure has usually been well below this limit. NIB uses derivative contracts extensively to manage the currency and interest rate mismatch between its funding and lending. NIB's lending is mostly in euros, U.S. dollars, and Nordic currencies, while its funding is in a wide range of currencies and for the most part well in advance of disbursements. At year-end 2016, 47% of its borrowing was in in U.S. dollars (17% after swap), 11% in Australian dollars, 9% in New Zealand dollars, and 5% in British pound sterling (all nearly 0% after swap). Moreover, as of the same date NIB had borrowed 11% in Nordic currencies (35% after swap), 10% in euros (47% after swap), and the remainder in other currencies. In 2013, NIB revised its management of interest-rate risk, setting interest-rate limits to cover all interest-rate-sensitive cash flows, including paid-in capital and retained earnings. Earnings. NIB's shareholders hold a firm view that NIB should be run according to sound banking principles and maintain sound profitability. NIB has historically presented stable profitability and, despite very low interest rates, it achieved robust earnings in 2016, with net interest income at 242 million and total comprehensive income at 212 million, compared with 247 million and 215 million in 2015. Return on equity stood at a solid 7% in 2016. In 2016, total comprehensive income was 183.6 million after deduction of 28.2 million for movements in cross-currency basis spreads. From 2017, we expect that low interest rates will continue to further limit NIB's return on its treasury portfolio and loan book, which will likely lead to moderating profitability. This should, however, be partly counterbalanced by our expectation that NIB will exhibit robust annual lending growth in 2017-2018 and a continued focus on lending to public sector counterparties. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 13

Administrative expenses, meanwhile, continued to represent 17% of net interest income in 2016, which is comparable with those of the European Investment Bank and the Council of Europe Development Bank, but well below those of other MLIs. NIB paid dividends of 55 million for 2016 as it has since 2012, and we expect that the payout ratio will be similar for 2017. Prior to 2012, the bank had not paid dividends since 2007. Most of the large supranational institutions are authorized by their charters to pay dividends, but they usually prefer to retain earnings in order to increase their capital faster. Table 5 Nordic Investment Bank -- Summary Liquidity And Funding Ratios --Financial year ended Dec. 31-- (%) 2016 2015 2014 2013 2012 Liquid assets/adjusted total assets 36.6 32.1 28.7 30.3 31.1 Cash and cash equivalents/liquid assets 40.5 30.5 23.1 24.8 35.0 Securities/liquid assets 59.5 69.5 76.9 75.2 65.0 Liquid assets/gross debt 43.7 39.2 35.1 37.8 36.8 Liquid assets/short-term debt by remaining maturity* 196.1 148.2 155.9 155.7 132.3 Liquid assets net of deposits/total adjusted assets 36.6 32.1 28.7 30.3 31.1 Liquid assets net of deposits/gross debt 43.7 39.2 35.1 37.8 36.8 Liquid assets net of deposits/short-term debt by remaining maturity* Funding ratios 196.1 148.2 155.9 155.7 132.3 Short-term debt (by remaining maturity)/adjusted total assets 18.6 21.6 18.4 19.4 23.5 Gross debt/adjusted total assets 83.6 81.8 81.7 80.0 84.4 Gross debt net of liquid assets/adjusted total assets 47.1 49.7 53.0 49.7 53.4 Short-term liabilities (by remaining maturity)/total liabilities 20.9 25.0 20.9 22.1 26.2 Total liabilities/adjusted total assets 89.1 88.5 88.0 87.9 89.7 Gross debt/adjusted common equity (x) 7.7 7.1 6.8 6.6 8.2 Short-term debt (by remaining maturity)/gross debt 22.3 26.5 22.5 24.3 27.8 *Short-term debt by remaining maturity includes short-term debt (maturing in less than 12 months) and long-term debt maturing in the next 12 months. Table 6 Nordic Investment Bank -- Liquidity And Funding Ratios Liquidity stress test* (x) Without loan disbursements 3 months 2.1 6 months 2.0 1 year 1.8 2 years 1.1 With expected loan disbursements (x) 3 months 1.4 6 months 1.4 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 14

Table 6 Nordic Investment Bank -- Liquidity And Funding Ratios (cont.) 1 year 1.3 2 years 0.9 Static cumulative funding gap (x) Without loan disbursements 3 months 1.3 6 months 1.4 1 year 1.5 2 years 1.1 5 years 1.0 Data as of Dec. 31, 2016. *Liquidity stress tests assume net derivatives payables as cash outflow. Risk position In our view, NIB benefits from high capitalization. The bank's RAC ratio is 26.5% before supranational-specific adjustments, despite its relatively higher exposure to the private sector than most other MLIs. Factoring in these adjustments--notably, single-name concentration, lower geographic diversification, and our expectation of preferred creditor treatment--our RAC ratio stands at 24.7%, underpinning our assessment of the bank's extremely strong financial profile. As of year-end 2016, most of NIB's exposures were in 'AAA' rated countries. About 27% of the bank's total lending was in Sweden, 22% in Finland, 22% in Norway, 7% in Denmark, and 3% in Iceland. Loan loss experience. The bank aims to ensure a strong portfolio and minimal risk to its capital with cautious lending policies. Historically, NIB's asset quality has been excellent, although it weakened in 2008. Nonperforming loans returned to zero at year-end 2011 and remained zero in 2012, after rising to 24.1 million in 2009 and 22.1 million in 2010. In 2014, NIB executed a call on the MIL guarantees extended by its shareholders to address the nonpayment of one nonperforming MIL loan totaling 29.9 million. As of December 2015, the remainder ( 14.8 million) of the same MIL loan was nonperforming, and for which a guarantee call was made in May, and paid in full on July 2, 2016. In 2016, NIB made provisions of 47 million related to two particular loan exposures. In total, after reversals of previous provisions and recoveries, net loan losses stood at 20 million. On the other hand, charges for collective impairments amounted to 42 million as of year-end 2016, down from 61 million in 2016. Funding and Liquidity Funding. In its funding strategy, NIB targets benchmark issuance. While this strategy allows NIB to improve market liquidity for its bonds, given the bank's relatively smaller size than some institutions, it has historically created episodic short-term refinancing needs. We have observed that the assets of highly rated MLIs generally at least cover their liabilities due within a year. NIB's funding ratios are improving thanks to the institution's expanded funding profile necessary to cater for potential collateral calls under two-way CSAs. As this process is completed in 2017, we believe that funding ratios could stabilize at a stronger level than historically. NIB benefits from excellent name recognition in the capital markets and maintained a diversified funding profile in 2016. NIB's total outstanding capital market debt at year-end 2016 amounted to 23.9 billion, up from 20.9 billion in 2015. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 15

Reflecting the increased disbursements, as well as liquidity requirements for implementation of two-way CSAs, NIB was significantly more active in the funding markets in 2016 than in 2015, In 2016, NIB borrowed 6.7 billion through 58 issues spanning 9 different currencies. This compares with 4.3 million in 2015 spread over 25 borrowing transactions. The more regular funding presence has contributed to the improvement of NIB's funding ratios and we foresee that these could stabilize at improved levels over 2017-2018. In terms of funding access, NIB maintains a global $20 billion program, an Australian-dollar (A$) medium-term note program with a ceiling of A$8 billion or New Zealand dollar 8 billion, a euro-denominated medium-term note program of up to 15 billion, and a Swedish krona (SEK) medium-term note program with a SEK8 billion ceiling. Liquidity. Our liquidity ratio as of year-end 2016 indicates that NIB will be able to meet its financial obligations over a one-year period. Our liquidity ratio factors in stressed market conditions, under which we assume the bank would not have access to the capital markets. NIB implemented a new liquidity policy in 2014, enforcing a target to maintain a liquidity buffer sufficient to meeting all payment obligations, including forecast new lending, without access to new funding. At year-end 2016, NIB held 37% of the balance sheet as liquid assets, compared with 32% in 2015. At year-end 2016, NIB's survival period stood at 443 days. NIB's liquidity policies stipulate compliance with Basel III liquidity ratios, even though NIB is not subject to the regulatory framework. NIB does not have direct access to central bank repurchase agreements, but it can repurchase its bond securities via intermediating banks. Its liquidity ratio compares favorably with that of 'AAA' rated MLIs with similarly strong loan portfolios. We view NIB's comprehensive liquidity position as important in light of the institution's ongoing move to two-way CSAs on its derivatives counterparty portfolio. We note that contingent capital flows are prefunded under NIB's liquidity policy and the bank has appropriately increased its treasury assets to balance the liquidity need stemming from additional collateral postings. We expect it to further size up its liquidity holdings as the remaining derivatives counterparties are moved to two-way CSAs in 2017, resulting in a sustained robust liquidity position. Likelihood of Extraordinary Shareholder Support NIB's adjusted shareholders' equity at year-end 2016 is supported by its subscribed callable capital from 'AAA' rated members, which totals 4.4 billion, equal to about 1.35x of its adjusted common equity. Even if the bank's RAC ratio were to decrease, significantly, callable capital could help preserve our assessment of its financial profile at its current level. If we revised our assessment of the SACP downward to 'aa+' or 'aa', because of a weakening of NIB's capital position, we could then factor in extraordinary shareholder support, which could maintain the long-term rating at 'AAA', all else being equal. In our opinion, NIB's callable capital mechanism is one of the strongest among rated MLIs, with funds already cleared by national parliaments or governments. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 16

Table 7 Nordic Investment Bank -- Summary Statement Of Income --Financial year ended Dec. 31-- (Mil. ) 2016 2015 2014 2013 2012 Interest expense 70,047 92,005 143,652 159,975 242,371 Net interest income 241,809 246,776 239,108 244,204 251,693 Operating noninterest income 34,413 21,609 33,105 27,201 51,464 Operating revenues 346,269 360,390 415,865 431,380 545,528 Noninterest expenses 44,573 50,478 41,096 38,810 37,902 Credit loss provisions (net new) 19,839 2,509 20,906 15,385 56,050 Operating income after loss provisions 211,810 215,398 210,211 217,210 209,205 Net income 211,810 215,398 210,211 217,210 209,205 Comprehensive income 183,608 215,398 210,211 217,210 209,205 Memo Net increase (decrease) in cash and cash equivalents during the year 2,114,639 263,219 (618,084) 161,363 304,415 Table 8 Nordic Investment Bank -- Summary Balance Sheet --Financial year ended Dec. 31-- (Mil. ) 2016 2015 2014 2013 2012 Cash and money market instruments 4,464,631 2,673,991 1,645,710 1,763,356 2,821,380 Securities 6,572,244 6,080,069 5,489,623 5,343,419 5,248,858 Memo Total deposits 1,131,434 869,593 819,253 535,736 2,080,226 Liquid assets 11,036,875 8,754,060 7,135,333 7,106,775 8,070,238 Net loans 16,640,030 15,626,946 15,156,486 14,666,747 15,130,669 Purpose-related assets (gross) 16,682,030 15,687,946 15,211,486 14,703,747 15,170,669 Purpose-related assets (net) 16,640,030 15,626,946 15,156,486 14,666,747 15,130,669 Derivative assets 2,156,921 2,557,979 2,198,003 1,308,990 2,347,873 Fixed assets 26,723 28,360 28,324 29,640 29,856 Accrued receivables 285,353 298,977 305,590 318,151 351,875 Other assets, other 32,428 45,125 46,664 59,638 52,400 Total assets 30,178,330 27,311,447 24,870,400 23,489,941 25,982,911 Total adjustments to shareholders' equity N/A N/A N/A N/A N/A Total adjusted assets* 30,178,330 27,311,447 24,870,400 23,489,941 25,982,911 Liabilities Other borrowings (gross debt) 25,236,235 22,328,912 20,317,659 18,792,959 21,940,691 Other liabilities 1,666,990 1,713,482 1,566,643 1,866,095 1,376,543 Memo Derivative liabilities 1,444,341 1,480,736 1,329,097 1,615,146 1,102,707 Total liabilities 26,903,225 24,164,950 21,884,302 20,659,054 23,317,234 Shareholders' equity Paid-in capital and surplus 418,602 418,602 418,602 418,602 418,602 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 17

Table 8 Nordic Investment Bank -- Summary Balance Sheet (cont.) --Financial year ended Dec. 31-- (Mil. ) 2016 2015 2014 2013 2012 Reserves (including inflation revaluations) 2,672,895 2,512,497 2,357,286 2,195,075 2,037,870 Retained earnings 211,810 215,398 210,211 217,210 209,205 Shareholders' equity 3,275,105 3,146,497 2,986,099 2,830,887 2,665,677 Memo Total guarantees 0 0 0 0 0 Undisbursed loans (100%) 1,994 1,193 1,316 1,374 1,613 *Adjustments made to reported shareholders' equity to calculate adjusted common equity (an institution's cash capital) are carried through to total assets. N/A--Not applicable. Related Criteria And Research Related Criteria Methodology For Linking Long-Term And Short-Term Ratings, 7 April 2017 Multilateral Lending Institutions And Other Supranational Institutions Ratings Methodology, Nov. 26, 2012 Bank Capital Methodology And Assumptions, Dec. 6, 2010 Use Of CreditWatch And Outlooks - September 14, 2009 Related Research Supranationals Special Edition 2016: Five-Year Comparative Data For Multilateral Lending Institutions, Sept. 29, 2016 Ratings Detail (As Of June 9, 2017) Nordic Investment Bank Counterparty Credit Rating Foreign Currency Commercial Paper Foreign Currency Senior Unsecured Senior Unsecured AAA/Stable/A-1+ A-1+ A-1+ AAA Counterparty Credit Ratings History 18-Sep-1989 Foreign Currency AAA/Stable/A-1+ 30-Nov-1982 23-Nov-1981 AAA/--/A-1+ --/--/A-1+ *Unless otherwise noted, all ratings in this report are global scale ratings. S&P Global Ratings credit ratings on the global scale are comparable across countries. S&P Global Ratings credit ratings on a national scale are relative to obligors or obligations within that specific country. Issue and debt ratings could include debt guaranteed by another entity, and rated debt that an entity guarantees. Additional Contact: International Public Finance Ratings Europe; PublicFinanceEurope@spglobal.com WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 9, 2017 18

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