Currency risk is the risk of incurring losses due to exchange rate changes. The risk is generated by maintaining open currency positions in a given foreign currencies.
The objective of managing the currency risk is to reduce potential losses arising from exchange rate changes to an acceptable level by proper shaping the currency structure of statement of financial position and off-balance sheet items.
The Bank measures currency risk using the Value at Risk (VaR) model and stress-tests. In 2015 the PKO Bank Polski SA introduced a historical method of determining VaR for foreign exchange risk.
The Group has set limits and threshold values for currency risk for i.e.: currency positions, Value at Risk calculated for a 10-day time horizon and daily loss from transactions on currency market.
Methods of currency risk management in the Group’s subsidiaries are defined by internal regulations implemented by these entities, which are characterised by the significant values of currency risk measures. The regulations are developed after consultation with the Bank and taking into account recommendations issued to the entities by the Bank
VaR PKO Bank Polski SA and stress-tests of the Group’s exposure to the currency risk, cumulatively for all currencies (in PLN thousand)
|Name of sensitivity measure||31.12.2015||31.12.2014|
|VaR for a 10-day time horizon*||25 384||6 230|
|Change in CUR/PLN rates by 20% (in PLN thousand) (stress-test)**||1 941||28 609|
* Due to the nature of the activities carried out by the other Group entities generating significant currency risk as well as the specific nature of the market on which they operate, the Bank does not calculate consolidated VaR. These entities apply their own risk measures in the currency risk management. The KREDOBANK SA Group uses the 10-day VaR, which amounted to approx. PLN 4 836 thousand as at 31 December 2015 and approx. PLN 3 663 thousand as at 31 December 2014.
** The table presents the value of the most adverse stress-test of the scenarios: PLN appreciation by 20% and PLN depreciation by 20%.
The Group’s currency position for particular currencies (in PLN thousand)
|EUR||94 134||-216 994|
|USD||-87 336||-113 960|
|CHF||-72 465||-36 566|
|GBP||-1 798||5 009|
|Other (global net)||171 137||214 752|