24. Derivative hedging instruments
Risk Management Strategy
The Group applies hedge accounting to hedge its interest rate risk and currency risk. The hedging transactions are concluded to mitigate the risk of incurring losses as a result of unfavourable changes in foreign currency exchange rates and interest rates. Cash flows related to the transactions performed and the fair value of assets held are hedged.
The interest rate risk covers in particular:
Annual report
2018
2018
- the risk related to the repricing (change in interest rates) frequency and dates mismatch of the assets and liabilities, and of off-balance sheet items (repricing date mismatch risk);
- the risk following from the change in the angle of the inclination and shape of the yield curve (yield curve risk);
- the risk resulting from an imperfect match between the reference rates used in respect of banking products and the changes in the market rates, or from imperfect transmission systems of changes in market interest rates on those products (base risk);
- risks resulting from options, including embedded options concerning e.g. restrictions on interests on loans (option risk).
The Group’s foreign exchange risk arises as a result of transactions performed under:
- core business activities;
- trading activities;
- contracts concluded by the Group which generate foreign exchange risk.
Where necessary, foreign exchange risk arising in companies in respect of the Group’s activities is managed by specialist units, within their own activities, on the basis of the data received on open foreign exchange positions.
A system of threshold values and limits attributed to particular interest and foreign exchange risks is in force at the Group, aimed at determining the maximum allowable risk level which ensures that the strategic tolerance limits are not exceeded.
Accounting policies
The Group decided to further apply the provisions of IAS 39 and did not apply IFRS 9 in respect of hedge accounting.
The Group applies hedge accounting when all the terms and conditions below have been met:
- upon setting up the hedge, a hedge relationship, the hedging relationship, the purpose of risk management by the entity and the hedging strategy were officially established and documented;
- the hedge is expected to be highly effective;
- the planned hedged transaction must be highly probable and must be exposed to the variability of cash flows which may, as a result, have an impact on the income statement;
- the effectiveness of the hedge may be reliably assessed;
- the hedge is regularly assessed and its high effectiveness is confirmed in all the reporting periods for which the hedge had been designated.
As at 31 December 2018 as at 31 December 2017, the Group applied fair value hedge accounting and cash flow hedges.
- a hedge instrument expires, is sold, released or exercised – accumulated gains or losses related to the hedging instrument which were recognized directly in other comprehensive income over the period in which the hedge was effective are recognized in a separate item in other comprehensive income until the planned transaction occurs;
- the hedge ceases to meet the hedge accounting criteria – accumulated gains or losses related to the hedging instrument which were recognized directly in other comprehensive income over the period in which the hedge was effective are recognized in a separate item in other comprehensive income until the planned transaction occurs;
- the planned transaction is no longer considered probable – accumulated gains or losses related to the hedging instrument which were recognized directly in other comprehensive income over the period in which the hedge was effective, are recognized in the income statement;
- the hedging relationship ceased to be valid – accumulated gains or losses related to the hedging instrument which were recognized directly in other comprehensive income over the period in which the hedge was effective are recognized in a separate item in other comprehensive income until the planned transaction occurs.
Changes in the fair value of a derivative financial instrument designated as a cash flow hedge are recognized directly in other comprehensive income in respect of the portion constituting the effective portion of the hedge. The ineffective portion of a hedge is recognized in the income statement in the item “Net income from financial instruments designated at fair value” or “Foreign exchange gains (losses)”.
Amounts transferred directly to other comprehensive income are transferred to the income statement in the same period or periods in which the hedged planned transaction affects the income statement. Interest and foreign exchange gains/losses are shown in the income statement, in “Net interest income” and “Net foreign exchange gains (losses)”, respectively.
The effectiveness tests comprise the valuation of hedging transactions, net of interest accrued and foreign exchange gains (losses) on the nominal value of the hedging transactions (in the case of CIRS transactions).
Hedge effectiveness is verified through the use of prospective and retrospective effectiveness tests. The tests are performed on a monthly basis.
Changes in the fair value of a derivative hedging instrument designated as fair value hedges are recognized in “Net income from financial instruments designated at fair value”, net of the interest component. The interest component is presented in the same line item as interest income on the hedged item, i.e. in “Net interest income”. A change in the adjustment of the measurement of a hedged item at fair value is recognized in “Net income from financial instruments designated at fair value”.
The effectiveness tests comprise the measurement of hedging transactions net of accrued interest.
Hedge effectiveness is verified through the use of prospective and retrospective effectiveness tests. The tests are performed on a monthly basis.
Types of hedging strategies applied by the Group
The tables below present the change in the fair value of hedging instruments and hedged items from the moment of designation of hedging relationships for hedge accounting.
| Strategy 1 | Hedges against fluctuations in cash flows from mortgage loans in CHF and negotiated term deposits in pln, resulting from the risk of fluctuations in interest rates and in foreign exchange rates, using CIRS transactions |
|---|---|
| Description of the hedging relationship | elimination of the risk of cash flow fluctuations generated by floating interest rate loans denominated in CHF and negotiated term deposits in PLN, resulting from fluctuations in reference interest rates in CHF and PLN, and changes in CHF/PLN foreign exchange rates using CIRS transactions during the hedged period |
| Hedged risk | foreign exchange risk and interest rate risk |
| Hedging instrument | CIRS transactions where the Group pays coupons based on 3M CHF LIBOR, and receives coupons based on 3M WIBOR on the nominal value defined in CHF and PLN respectively |
| Hedged item | the portfolio of floating interest mortgage loans in CHF and the portfolio of short-term negotiated term deposits, including their future renewals (high probability of occurrence. In designating the hedged item the Group used the IAS39 AG 99C in the version adopted by the European Union |
| Sources of hedge ineffectiveness |
|
| The period in which cash flows are expected to occur and affect the financial results: January 2019 – October 2026 |
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE MARGIN WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | INEFECTIVE PORTION OD SASCH FLOW HEDGES RECOGNIZED IN THE INCOME STATEMENT | CHANGE IN THE FAIR VALUE OF THE HEDGING INSTRUMENT | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| CIRS CHF/PLN | float CHF | 1,675 | 0.1530% | 60 | 428 | – | (377) |
| float PLN | 6,030 | 0.0000% | |||||
| 31.12.2017 | |||||||
| CIRS CHF/PLN | float CHF | 1,770 | 0.1528% | 186 | 169 | 3 | 43 |
| float PLN | 6,355 | 0.0000% | |||||
| HEDGED ITEMS | NOMINAL AMOUNT OF HEDGED ITEMS | ITEM IN THE STATEMENT OF FINANCIAL POSITION | CHANGE IN THE FAIR VALUE THE HEDGED ITEMS |
| 31.12.2018 | |||
| Loans in CHF | 1,675 | Loans and advances to customers | 435 |
| Negotiated deposits in PLN | 6,030 | Amounts due to customers | |
| 31.12.2017 | |||
| Loans in CHF | 1,770 | Loans and advances to customers | 2 |
| Negotiated deposits in PLN | 6,355 | Amounts due to customers | |
| Strategy 2 | Hedges against fluctuations in cash flows from floating interest rate loans in PLN, resulting from the risk of fluctuations in interest rates, using IRS transactions |
|---|---|
| Description of the hedging relationship | elimination of the risk of cash flow fluctuations generated by floating interest rate PLN loan portfolio resulting from the interest rate risk using IRS transactions in the period covered by the hedge |
| Hedged risk | interest rate risk |
| Hedging instrument | IRS transactions where the Group pays coupons based on floating 3M WIBOR rate, and receives coupons based on a fixed rate on the nominal value for which they were concluded |
| Hedged item | the portfolio of loans in PLN indexed to the floating 3M WIBOR rate |
| Sources of hedge ineffectiveness |
|
| The period in which cash flows are expected to occur and affect the financial results: January 2019 – August 2028. |
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE FIXED INTEREST RATE WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | INEFFECTIVE PORTION OF CASH FLOW HEDGES RECOGNIZED IN THE INCOME STATEMENT | CHANGE IN THE FAIR VALUE OF THE HEDGING INSTRUMENT | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| IRS PLN | PLN | 11,575 | 2.4386% | 101 | – | (1) | 57 |
| 31.12.2017 | |||||||
| IRS PLN | PLN | 8,411 | 2.3318% | 89 | 4 | 2 | 14 |
| HEDGED ITEM | NOMINAL AMOUNT OF THE HEDGED ITEM | ITEM IN THE STATEMENT OF FINANCIAL POSITION | CHANGE IN THE FAIR VALUE THE HEDGED ITEM |
| 31.12.2018 | |||
| Loans in PLN | 11,575 | Loans and advances to customers | (55) |
| 31.12.2017 | |||
| Loans in PLN | 8,411 | Loans and advances to customers | (10) |
| Strategy 3 | Hedges against fluctuations in cash flows from floating interest rate loans in CHF, resulting from the risk of fluctuations in interest rates, using IRS transactions |
|---|---|
| Description of the hedging relationship | elimination of the risk of cash flow fluctuations generated by floating interest rate CHF loan portfolio resulting from the interest rate risk using IRS transactions in the period covered by the hedge |
| Hedging instrument | interest rate risk |
| Hedging instrument | IRS transactions where the Group pays coupons based on floating 3M CHF LIBOR rate, and receives coupons based on a fixed rate on the nominal value for which they were concluded |
| Hedged item | the portfolio of loans in CHF indexed to the floating 3M CHF LIBOR rate |
| Sources of hedge ineffectiveness |
|
| The period in which cash flows are expected to occur and affect the financial results: January 2019 – November 2021 |
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE FIXED INTEREST RATE WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | INEFFECTIVE PORTION OF CASH FLOW HEDGES RECOGNIZED IN THE INCOME STATEMENT | CHANGE IN THE FAIR VALUE OF THE HEDGING INSTRUMENT | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| IRS CHF | CHF | 400 | -0.4425% | 7 | – | – | 2 |
| 31.12.2017 | |||||||
| IRS CHF | CHF | 400 | -0.4425% | – | 3 | – | (1) |
| HEDGED ITEM | NOMINAL AMOUNT OF THE HEDGED ITEM | ITEM IN THE STATEMENT OF FINANCIAL POSITION | CHANGE IN THE FAIR VALUE THE HEDGED ITEM |
| 31.12.2018 | |||
| Loans in CHF | 400 | Loans and advances to customers | (2) |
| 31.12.2017 | |||
| Loans in CHF | 400 | Loans and advances to customers | 1 |
| Strategy 4 | Hedges against fluctuations in cash flows from floating interest rate loans in EUR, resulting from the risk of fluctuations in interest rates, using IRS transactions |
|---|---|
| Description of the hedging relationship | elimination of the risk of cash flow fluctuations generated by floating interest rate EUR loan portfolio resulting from the interest rate risk using IRS transactions in the period covered by the hedge |
| Hedged risk | interest rate risk |
| Hedging instrument | IRS transactions where the Group pays coupons based on floating 3M EURIBOR rate, and receives coupons based on a fixed rate on the nominal value for which they were concluded |
| Hedged item | the portfolio of loans in EUR indexed to the floating 3M EURIBOR rate |
| Sources of hedge ineffectiveness |
|
| The period in which cash flows are expected to occur and affect the financial results: January 2019 – February 2024 |
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE FIXED INTEREST RATE WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | INEFFECTIVE PORTION OF CASH FLOW HEDGES RECOGNIZED IN THE INCOME STATEMENT | CHANGE IN THE FAIR VALUE OF THE HEDGING INSTRUMENT | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| IRS EUR | EUR | 524 | 0.2087% | 2 | 5 | – | (3) |
| 31.12.2017 | |||||||
| IRS EUR | EUR | 524 | 0.2087% | 1 | 28 | – | (15) |
| HEDGED ITEM | NOMINAL AMOUNT OF THE HEDGED ITEM | ITEM IN THE STATEMENT OF FINANCIAL POSITION | CHANGE IN THE FAIR VALUE THE HEDGED ITEM |
| 31.12.2018 | |||
| Loans in EUR | 524 | Loans and advances to customers | 3 |
| 31.12.2017 | |||
| Loans in EUR | 524 | Loans and advances to customers | 15 |
| Strategy 5 | Hedges against fluctuations in cash flows from floating interest rate convertible currency loans arising from interest rate and foreign exchange risk, as well as hedges against fluctuations in cash flows from fixed interest foreign currency financial liabilities using CIRS transactions |
| Description of the hedging relationship | elimination of the risk of fluctuations in cash flows from floating interest rate loans in foreign currencies, resulting from the risk of fluctuations in interest rates and from foreign exchange rate risk and elimination of the risk of fluctuations in cash flows from fixed interest rate financial liability in a foreign currency, resulting from foreign exchange rate risk, using CIRS transactions in the hedged period |
| Hedged risk | foreign exchange risk and interest rate risk |
| Hedging instrument | CIRS transactions where the Group pays coupons based on floating 3M CHF LIBOR rate, and receives coupons based on a USD or EUR fixed rate on the nominal value for which they were concluded |
| Hedged item | the portfolio of floating interest rate mortgage loans denominated in CHF and fixed interest rate financial liability denominated in USD or EUR |
| Sources of hedge ineffectiveness |
|
| The period in which cash flows are expected to occur and affect the financial results: January 2019 – August 2024 |
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE MARGIN WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | INEFFECTIVE PORTION OF CASH FLOW HEDGES RECOGNIZED IN THE INCOME STATEMENT | CHANGE IN THE FAIR VALUE OF THE HEDGING INSTRUMENT | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| CIRS CHF/USD | float CHF | 818 | 148 | – | 1 | 88 | |
| fixed USD | 875 | 2.4315% | |||||
| CIRS CHF/EUR | float CHF | 2,000 | 240 | 37 | 3 | 284 | |
| fixed EUR | 1,802 | 0.3504% | |||||
| 31.12.2017 | |||||||
| CIRS CHF/USD | float CHF | 818 | 116 | – | (1) | 62 | |
| fixed USD | 875 | 2.4315% | |||||
| CIRS CHF/EUR | float CHF | 2,000 | 397 | – | 12 | 614 | |
| fixed EUR | 1,802 | 0.3504% | |||||
| HEDGED ITEMS | NOMINAL AMOUNT OF HEDGED ITEMS | ITEM IN THE STATEMENT OF FINANCIAL POSITION |
CHANGE IN THE FAIR VALUE THE HEDGED ITEMS |
| 31.12.2018 | |||
| Loans in CHF | 2,818 | Loans and advances to customers | (312) |
| Financial liabilities in USD | 875 | Debt securities in issue | |
| Financial liabilities in EUR | 1,802 | Debt securities in issue | |
| 31.12.2017 | |||
| Loans in CHF | 2,818 | Loans and advances to customers | (652) |
| Financial liabilities in USD | 875 | Debt securities in issue | |
| Financial liabilities in EUR | 1,802 | Debt securities in issue | |
| Strategy 6 | Hedges against fluctuations in cash flows from mortgage loans in convertible currencies other than CHF and negotiable term deposits in PLN arising from the risk of a change in interest rate and foreign exchange risk, using CIRS transactions |
|---|---|
| Description of the hedging relationship | elimination of the risk of cash flow fluctuations generated by floating interest rate loans denominated in foreign currencies other than CHF and negotiated term deposits in PLN, resulting from fluctuations in reference interest rates and changes in foreign exchange rates using CIRS transactions during the hedged period |
| Hedged risk | foreign exchange risk and interest rate risk |
| Hedging instrument | CIRS transactions where the Group pays coupons based on 3M EURIBOR rate, and receives coupons based on WIBOR 3M rate on the nominal value for which they were concluded |
| Hedged item | the portfolio of floating interest mortgage loans in EUR and the portfolio of short-term negotiated deposits, including their future renewals (high probability of occurrence). In designating the hedged item the Group used the IAS39 AG 99C in the version adopted by the European Union |
| Sources of hedge ineffectiveness |
|
| The period in which cash flows are expected to occur and affect the financial results: January 2019 – March 2021 |
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE MARGIN WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | INEFFECTIVE PORTION OF CASH FLOW HEDGES RECOGNIZED IN THE INCOME STATEMENT | |||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| CIRS EUR/PLN | float EUR | 125 | 0.0000% | 7 | – | – | 6 |
| float PLN | 545 | -0.0092% | |||||
| 31.12.2017 | |||||||
| CIRS EUR/PLN | float EUR | 125 | 0.0000% | 23 | – | – | 20 |
| float PLN | 545 | -0.0092% | |||||
| HEDGED ITEMS | NOMINAL AMOUNT OF HEDGED ITEMS | ITEM IN THE STATEMENT OF FINANCIAL POSITION | CHANGE IN THE FAIR VALUE THE HEDGED ITEMS |
| 31.12.2018 | |||
| Loans in EUR | 125 | Loans and advances to customers | (6) |
| Negotiated deposits in PLN | 545 | Amounts due to customers | |
| 31.12.2017 | |||
| Loans in EUR | 125 | Loans and advances to customers | (20) |
| Negotiated deposits in PLN | 545 | Amounts due to customers | |
| Strategy 7 | Hedges against fluctuations in cash flows from mortgage loans in foreign currencies and regular savings products in pln, resulting from the risk of fluctuations in interest rates and in foreign exchange rates, using cirs transactions |
|---|---|
| Description of the hedging relationship | elimination of the risk of cash flow fluctuations generated by floating interest rate loans denominated in CHF and floating interest rate regular savings products in PLN, resulting from fluctuations in reference interest rates in CHF and PLN, and changes in CHF/PLN foreign exchange rates using CIRS transactions during the hedged period |
| Hedged risk | foreign exchange risk and interest rate risk |
| Hedging instrument | CIRS transactions where the Group pays coupons based on 3M CHF LIBOR, and receives coupons based on 3M WIBOR on the nominal value defined in CHF and PLN respectively |
| Hedged item | the portfolio of floating interest rate mortgage loans in CHF and the portfolio of floating interest rate regular savings products in PLN |
| Sources of hedge ineffectiveness |
|
| The period in which cash flows are expected to occur and affect the financial results: January 2019 – July 2023 |
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE MARGIN WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | INEFFECTIVE PORTION OF CASH FLOW HEDGES RECOGNIZED IN THE INCOME STATEMENT | CHANGE IN THE FAIR VALUE OF THE HEDGING INSTRUMENT | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| CIRS CHF/PLN | float CHF | 225 | -0.2478% | 18 | – | – | 14 |
| float PLN | 872 | 0.0000% | |||||
| 31.12.2017 | |||||||
| CIRS CHF/PLN | float CHF | 225 | -0.2478% | 75 | – | – | 69 |
| float PLN | 872 | 0.0000% | |||||
| HEDGED ITEMS | NOMINAL AMOUNT OF HEDGED ITEMS | ITEM IN THE STATEMENT OF FINANCIAL POSITION |
CHANGE IN THE FAIR VALUE THE HEDGED ITEMS |
| 31.12.2018 | |||
| Loans in CHF | 225 | Loans and advances to customers | (15) |
| Regular saving products in PLN | 872 | Amounts due to customers | |
| 31.12.2017 | |||
| Loans in CHF | 225 | Loans and advances to customers | (70) |
| Regular saving products in PLN | 872 | Amounts due to customers | |
| Strategy 8 | Hedges against fluctuations in the fair value of fixed interest loans in foreign currencies, resulting from the risk of fluctuations in interest rates, using irs transactions |
| Description of the hedging relationship | elimination of the risk of fluctuations in the fair value of fixed interest loans in foreign currencies, resulting from the risk of fluctuations in interest rates, during the hedged period |
| Hedged risk | interest rate risk |
| Hedging instrument | IRS (Interest Rate Swap) transactions in foreign currencies, where the Group pays coupons based on a fixed rate (the market IRS rate) and receives coupons based on a floating reference rate without an additional margin |
| Hedged item | a component of the interest rate risk relating to a fixed interest rate loan in a foreign currency, which corresponds to the market IRS rate |
| Sources of hedge ineffectiveness |
|
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE FIXED INTEREST RATE WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | FAIR VALUE ADJUSTMENT OF THE HEDGED ITEM | CHANGE IN THE FAIR VALUE OF THE HEDGING INSTRUMENT | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| IRS EUR | EUR | 103 | -0.3090% | – | 1 | 1 | – |
| 31.12.2017 | |||||||
| IRS EUR | EUR | 46 | -0.3290% | – | – | – | – |
| HEDGED ITEM | CARRYING AMOUNT OF THE HEDGED ITEM | ITEM IN THE STATEMENT OF FINANCIAL POSITION |
CHANGE IN THE FAIR VALUE THE HEDGED ITEM |
| 31.12.2018 | |||
| Loans in EUR | 103 | Loans and advances to customers | – |
| 31.12.2017 | |||
| Loans in EUR | 46 | Loans and advances to customers | – |
| Strategy 9 | Hedges against fluctuations in cash flows from floating interest rate mortgage loans in PLN arising from interest rate risk and hedges against fluctuations in cash flows from fixed interest convertible currency financial liabilities arising from foreign exchange risk using CIRS transactions |
| Description of the hedging relationship | elimination of the risk of fluctuations in cash flows from floating interest rate mortgage loans in PLN arising from interest rate risk and elimination of the risk of fluctuations in cash flows from fixed interest convertible currency financial liabilities arising from foreign exchange risk using CIRS transactions in the period covered by the hedge |
| Hedged risk | foreign exchange risk and interest rate risk |
| Hedging instrument | CIRS transactions in which the Group pays a coupon based on a floating 3M WIBOR rate and receives a coupon based on a fixed EUR rate on the nominal amount for which it was concluded |
| hedged item | the portfolio of floating interest rate mortgage loans in PLN and a fixed interest financial liability in EUR |
| Sources of hedge ineffectiveness |
|
| The period in which cash flows are expected to occur and affect the financial results: January 2019 – January 2024 |
| HEDGING DERIVATIVES | NOMINAL VALUE OF HEDGING DERIVATIVES | AVERAGE FIXED INTEREST RATE WEIGHTED BY THE PRINCIPAL | CARRYING AMOUNT (FAIR VALUE) OF HEDGING INSTRUMENTS | INEFFECTIVE PORTION OF CASH FLOW HEDGES RECOGNIZED IN THE INCOME STATEMENT | CHANGE IN THE FAIR VALUE OF THE HEDGING INSTRUMENT | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| 31.12.2018 | |||||||
| CIRS PLN/EUR | float PLN | 2,101 | 75 | – | 7 | 76 | |
| fixed EUR | 499 | 0,7690% | |||||
| 31.12.2017 | |||||||
| CIRS PLN/EUR | float PLN | – | – | – | – | – | |
| fixed EUR | – | – | |||||
| HEDGED ITEMS | NOMINAL AMOUNT OF HEDGED ITEMS | ITEM IN THE STATEMENT OF FINANCIAL POSITION |
CHANGE IN THE FAIR VALUE THE HEDGED ITEMS |
| 31.12.2018 | |||
| Loans in PLN | 2,101 | Loans and advances to customers | (69) |
| Financial liabilities in EUR | 499 | Debt securities in issue | |
In 2018, the Group introduced Strategy 9 which concerns cash flow hedging. In 2017, the Group introduced Strategy 7, which concerns cash flow hedging, and Strategy 8, which concerns fair value hedging. These strategies are described above.
In 2018 and in 2017 the Group did not use the hedging strategies referred to in IFRS 7 23C, i.e. strategies where both the hedging instrument and the hedged item change frequently (i.e. the entity uses a dynamic process where both the exposure and the hedging instruments used to manage it do not remain unchanged over a longer period).
In 2018 and in 2017 the Group did not identify a situation which is referred to in IFRS 7 23F, i.e. planned transactions for which hedge accounting had been used in the previous period but which are no longer expected to occur.
In 2018 and in 2017 the Group did not use credit derivative instruments to manage its credit risk and did not designate a financial instrument (or its part) as measured at fair value through profit or loss, which would be linked to this instrument.
| Carrying amount of hedging instruments | 31.12.2018 | 31.12.2017 | ||
|---|---|---|---|---|
| Assets | Liabilities | Assets | Liabilities | |
| Cash flow hedges | 658 | 470 | 887 | 204 |
| Hedges of interest rate risk | 110 | 5 | 90 | 35 |
| IRS | 110 | 5 | 90 | 35 |
| Hedges of currency and interest rate risks | 548 | 465 | 797 | 169 |
| CIRS | 548 | 465 | 797 | 169 |
| Fair value hedges | – | 1 | – | – |
| Hedges of interest rate risk | – | 1 | – | – |
| IRS | – | 1 | – | – |
| Total | 658 | 471 | 887 | 204 |
| Nominal value of hedging instruments by maturity as at 31 December 2018 | up to 1 month | 1 to 3 months | 3 months to 1 year | 1 to 5 years | over 5 years | Total |
|---|---|---|---|---|---|---|
| Cash flow hedges | ||||||
| Hedges of interest rate risk | ||||||
| IRS PLN fixed – float | – | 300 | 1 230 | 9 985 | 60 | 11 575 |
| IRS EUR fixed – float (original currency) | – | – | – | 499 | 25 | 524 |
| IRS CHF fixed – float (original currency) | – | – | – | 400 | – | 400 |
| Hedges of currency and interest rate risks | ||||||
| CIRS float CHF/float PLN | ||||||
| float CHF | – | – | 650 | 1 225 | 25 | 1 900 |
| float PLN | – | – | 2 378 | 4 436 | 88 | 6 902 |
| CIRS fixed USD/float CHF | ||||||
| fixed USD | – | – | – | 875 | – | 875 |
| float CHF | – | – | – | 818 | – | 818 |
| CIRS float EUR/float PLN | ||||||
| float EUR | – | – | 25 | 100 | – | 125 |
| float PLN | – | – | 109 | 436 | – | 545 |
| CIRS float PLN/fixed EUR | ||||||
| float PLN | – | – | – | – | 2 101 | 2 101 |
| fixed EUR | – | – | – | – | 499 | 499 |
| CIRS fixed EUR/float CHF | ||||||
| fixed EUR | – | – | – | 1 302 | 500 | 1 802 |
| float CHF | – | – | – | 1 424 | 576 | 2 000 |
| Fair value hedges | ||||||
| Hedges of interest rate risk | – | – | – | – | – | – |
| IRS EUR fixed – float (original currency) | – | – | – | 91 | 12 | 103 |
| Nominal value of hedging instruments by maturity as at 31 December 2017 | up to 1 month | 1 to 3 months | 3 months to 1 year | 1 to 5 years | over 5 years | Total |
|---|---|---|---|---|---|---|
| Cash flow hedges | ||||||
| Hedges of interest rate risk | ||||||
| IRS PLN fixed – float | 700 | 1 610 | 3 030 | 3 071 | – | 8 411 |
| IRS EUR fixed – float (original currency) | – | – | – | 499 | 25 | 524 |
| IRS CHF fixed – float (original currency) | – | – | – | 400 | – | 400 |
| Hedges of currency and interest rate risks | ||||||
| CIRS float CHF/float PLN | ||||||
| float CHF | – | – | 95 | 1 750 | 150 | 1 995 |
| float PLN | – | – | 325 | 6 329 | 573 | 7 227 |
| CIRS fixed USD/float CHF | ||||||
| fixed USD | – | – | – | 875 | – | 875 |
| float CHF | – | – | – | 818 | – | 818 |
| CIRS float EUR/float PLN | ||||||
| float EUR | – | – | – | 125 | – | 125 |
| float PLN | – | – | – | 545 | – | 545 |
| CIRS fixed EUR/float CHF | ||||||
| fixed EUR | – | – | – | 802 | 1 000 | 1 802 |
| float CHF | – | – | – | 889 | 1 111 | 2 000 |
| Fair value hedges | ||||||
| Hedges of interest rate risk | – | – | – | – | – | – |
| IRS EUR fixed – float (original currency) | – | – | – | 46 | – | 46 |
| Change in other comprehensive income relating to cash flow hedges and an ineffective portion of cash flow hedges | 2018 | 2017 |
|---|---|---|
| Other comprehensive income at the beginning of the period, gross | (142) | (134) |
| Gains/losses recognized in other comprehensive income during the period | (62) | 1 821 |
| Amounts transferred from other comprehensive income to the cash flow statement, of which: | 232 | (1 829) |
| – interest income | (355) | (322) |
| – net foreign exchange gains/(losses) | 587 | (1 507) |
| Accumulated other comprehensive income at the end of the period, gross | 28 | (142) |
| Tax effect | (6) | 26 |
| Accumulated other comprehensive income at the end of the period, net | 22 | (116) |
| Impact on other comprehensive income during the period, gross | 170 | (8) |
| Tax effect | (32) | 1 |
| Impact on other comprehensive income during the period, net | 138 | (7) |
| Ineffective portion of cash flow hedges recognized in the income statements, including in: | 11 | 16 |
| Net foreign exchange gains/(losses) | 12 | 14 |
| Net gain/(loss) on financial instruments measured at fair value | (1) | 2 |
| Gains (losses) losses on hedging instruments and hedged items attributable to hedged risks | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Hedges of interest rate risk | – | (1) |
| Fair value measurement of the hedging derivative instrument | (1) | – |
| IRS PLN fixed – float | (1) | – |
| Fair value adjustment of the hedged instrument attributable to the hedged risk | 1 | (1) |
| Loans in EUR fixed | 1 | (1) |
| Estimated change in valuation following a parallel movement in yield curves: |
31.12.2018 | 31.12.2017 | ||
|---|---|---|---|---|
| +50 bp scenario | -50 bp scenario | +50 bp scenario | -50 bp scenario | |
| IRS | (146) | 148 | (107) | 109 |
| CIRS | (200) | 204 | (117) | 119 |
| Total | (346) | 352 | (224) | 228 |