The Capital Group applies the following hedging strategies:
Description of hedge 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 foreign exchange rates CHF/PLN during the hedged period.
Hedged risk - currency risk and interest rate risk.
Hedging instrument - CIRS transactions where the Bank 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 position - the portfolio of floating interest rate mortgage loans denominated in CHF and the portfolio of short-term negotiated term deposits, including renewals in the future (high probability of occurrence). The Group designated the hedged position according to the regulations of IAS. 39.AG.99C as adopted by the European Union.
Periods in which cash flows are expected and in which they should have an impact on the financial result – January 2016 - October 2026.
Description of hedge relationship - elimination of the risk of cash flow fluctuations generated by floating interest rate PLN loan portfolio resulting from the interest rate risk in the period covered by the hedge.
Hedged risk - interest rate risk.
Hedging instrument - IRS transactions where the Bank 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 position - the portfolio of loans in PLN indexed to the floating 3M WIBOR rate.
Periods in which cash flows are expected and in which they should have an impact on the financial result – January 2016 - June 2020.
Description of hedge relationship:
Elimination of the risk of cash flow fluctuations generated by floating interest rate EUR loan portfolio resulting from the interest rate risk in the period covered by the hedge.
Hedged risk - interest rate risk.
Hedging instrument - IRS transactions, where the Bank 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 position - the portfolio of loans in EUR indexed to the floating EURIBOR rate.
Periods in which cash flows are expected and in which they should have an impact on the financial result – January 2016 - July 2016.
Description of hedge relationship - elimination of the risk of cash flow fluctuations generated by floating interest rate CHF loan portfolio resulting from the interest rate risk in the period covered by the hedge.
Hedged risk - interest rate risk.
Hedging instrument - IRS transactions where the Bank 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 position - the portfolio of loans in CHF indexed to the floating LIBOR CHF 3M rate.
Periods in which cash flows are expected and in which they should have an impact on the financial result – January 2016 - July 2016.
Description of hedge relationship - elimination of the risk of cash flow fluctuations of 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 cash flow fluctuations of fixed interest rate financial liability in foreign currency, resulting from foreign exchange rate risk, using CIRS transactions.
Hedged risk - currency risk and interest rate risk.
Hedging instrument - CIRS transactions, where the Bank pays coupons based on floating 3M CHF LIBOR rate, and receives coupons based on a fixed USD rate on the nominal value, for which they were concluded.
Hedged position - the portfolio of floating interest rate mortgage loans denominated in CHF and fixed interest rate financial liability denominated in USD.
Periods in which cash flows are expected and in which they should have an impact on the financial result – January 2016 - September 2022.
Description of hedge relationship - elimination of the risk of cash flow fluctuations generated by floating interest rate loans denominated in EUR and negotiated term deposits in PLN, resulting from fluctuations in reference interest rates in EUR and PLN, and changes in foreign exchange rates EUR/PLN during the hedged period.
Hedged risk - currency risk and interest rate risk.
Hedging instrument - CIRS transactions where the Bank pays coupons based on EURIBOR 3M, and receives coupons based on 3M WIBOR on the nominal value defined in EUR and PLN respectively.
Hedged position - the portfolio of floating interest rate mortgage loans denominated in EUR and the portfolio of short-term negotiated term deposits, including renewals in the future (high probability of occurrence). The Bank designated the hedged position according to the regulations of IAS. 39.AG.99C as adopted by the European Union.
Periods in which cash flows are expected and in which they should have an impact on the financial result – January 2016 - December 2019.
As at 31 December 2015 and as at 31 December 2014, the Group did not use the fair value hedge.
In 2015 the Group adopted new hedging strategy ‘Hedges against fluctuations in cash flows from mortgage loans in other foreign currencies than CHF and negotiated term deposits in PLN, resulting from the risk of fluctuations in interest rates and in foreign exchange rates, using CIRS transactions’.
All types of hedging relationships applied by the Group are cash flow hedge accounting (macro cash flow hedge).
Hedge effectiveness is verified through the use of prospective and retrospective effectiveness tests. Tests are performed monthly.
| Type of instrument: | Carrying amount/fair value of derivative instruments constituting cash flow hedges related to the interest rate and/or exchange rate | |||
| 31.12.2015 | 31.12.2014 | |||
| Assets | Liabilities | Assets | Liabilities | |
| IRS | 269 122 | - | 421 101 | - |
| CIRS | 239 543 | 998 527 | 178 740 | 494 961 |
| Total | 508 665 | 998 527 | 599 841 | 494 961 |
| Type of instrument: | Nominal value as at 31 December 2015 | |||||
| up to 1 month | 1 - 3 months | 3 months - 1 year |
1 - 5 years | Over 5 years | Total | |
| IRS PLN fixed - float | 1 680 000 | 2 910 000 | 984 000 | 4 670 000 | - | 10 244 000 |
| IRS EUR fixed – float: | ||||||
| translated into PLN | 149 153 | 1 568 232 | 247 167 | - | - | 1 964 552 |
| EUR (original currency) | 35 000 | 368 000 | 58 000 | - | - | 461 000 |
| IRS CHF fixed – float: | ||||||
| translated into PLN | - | - | 984 850 | - | - | 984 850 |
| CHF (original currency) | - | - | 250 000 | - | - | 250 000 |
| CIRS float CHF/float PLN | ||||||
| float PLN | 150 000 | - | 250 000 | 1 520 000 | 300 000 | 2 220 000 |
| float CHF | 465 750 | - | 914 645 | 5 421 616 | 1 039 037 | 7 841 048 |
| CIRS fixed CHF/float CHF | ||||||
| fixed USD | - | - | - | - | 814 481 | 814 481 |
| float CHF | - | - | - | - | 875 000 | 875 000 |
| CIRS float EUR/float PLN | ||||||
| float EUR | - | - | - | 200 000 | - | 200 000 |
| float PLN | - | - | - | 851 650 | - | 851 650 |
| Type of instrument: | Nominal value as at 31 December 2014 | |||||
| up to 1 month | 1 - 3 months | 3 months - 1 year | 1 - 5 years | Over 5 years | Total | |
| IRS PLN fixed - float | - | 2 540 000 | 3 264 000 | 6 114 000 | - | 11 918 000 |
| IRS EUR fixed – float: | ||||||
| translated into PLN | - | - | 1 538 690 | 473 115 | - | 2 011 806 |
| EUR (original currency) | - | - | 361 000 | 111 000 | - | 472 000 |
| IRS CHF fixed – float: | ||||||
| translated into PLN | - | - | - | 886 175 | - | 886 175 |
| CHF (original currency) | - | - | - | 250 000 | - | 250 000 |
| CIRS float CHF/float PLN | ||||||
| float PLN | 525 690 | - | 3 598 193 | 4 079 294 | 2 664 515 | 10 867 691 |
| float CHF | 150 000 | - | 1 075 000 | 1 195 000 | 775 000 | 3 195 000 |
| CIRS fixed CHF/float CHF | ||||||
| fixed USD | - | - | - | - | 875 000 | 875 000 |
| float CHF | - | - | - | - | 814 481 | 814 481 |
The nominal values were translated using the average NBP rate as at 31 December 2015 and as at 31 December 2014 respectively.
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Other comprehensive income at the beginning of the period, gross | 6 425 | (155 053) |
| Gains/losses transferred to other comprehensive income in the period | (689 075) | 330 221 |
| Amount transferred from other comprehensive income to the income statement | 611 468 | (168 743) |
| - interest income | (450 929) | (343 316) |
| - net foreign exchange gains (losses) | 1 062 397 | 174 573 |
| Accumulated other comprehensive income at the end of the period, gross | (71 182) | 6 425 |
| Tax effect | 13 525 | (1 221) |
| Accumulated other comprehensive income at the end of the period, net | (57 657) | 5 204 |
| Effect on other comprehensive income in the period, gross | (77 607) | 161 478 |
| Deferred tax on cash flow hedges | 14 746 | (30 681) |
| Effect on other comprehensive income in the period, net | (62 861) | 130 797 |
| The ineffective portion of cash flow hedges recognized in the profit and loss account | (2 685) | (6 078) |