Inhoudsopgave Voorwoord Bestuursverslag Corporate governance
Consolidated Financial Statements Company Financial Statements Pillar 3
Fair value hedges
The main components of the fair value hedge at Rabobank
are interest rate swaps and cross-currency interest rate swaps
which serve as protection against a potential change in the
fair value of fixed-income financial assets and liabilities in both
local and foreign currencies, such as mortgages, available-
for-sale debt securities and issued debt securities. The net fair
value of these interest rate swaps on 31 December 2016 was
-6,921 (2015: -9,374). The net fair value of the cross-currency
swaps on 31 December 2016 was 2,050 (2015: 2,190).
Rabobank tests the hedge effectiveness on the basis of
statistical regression analysis models, both prospectively and
retrospectively. At year-end 2016, the hedge relations were
highly effective within the range set by IAS 39.
The IFRS ineffectiveness for the year ended 31 December 2016
was 118 (2015:130). The result on the hedging instrument
amounted to -850 (2015:1,466), with the result from the
hedged position, allocable to the hedged risk, amounting to
968 (2015:-1,336).
Cash flow hedges
Rabobank's cash flow hedges consist mainly of cross-currency
interest rate swaps which serve to protect against a potential
change in cash flows from financial assets in foreign currencies
with floating interest rates.
Rabobank tests the hedge effectiveness on the basis of
statistical regression analysis models, both prospectively
and retrospectively. At year-end 2016 and 2015, the hedge
relations were highly effective within the range set by IAS
39. On 31 December 2016, the net fair value of the cross-
currency interest rate swaps, classified as cash flow hedges was
-594 (2015:-707).
In 2016, Rabobank accounted for an amount of-87 (2015: 659)
after taxation in other comprehensive income as effective
changes in the fair value of derivatives in cash flow hedges.
In 2016, an amount of 56 (2015: -709) after taxation of cash
flow hedge reserves was reclassified to the income statement.
On 31 December 2016, the cash flow hedge reserves as part
of equity totalled -70 (2015: -39) after taxation. This amount
fluctuates along with the fair value of the derivatives in the
cash flow hedges and is accounted for in profit over the term of
the hedged positions as trading income.The cash flow hedge
reserve relates to a large number of derivatives and hedged
positions with different terms.The maximum term is 25 years,
with the largest concentrations exceeding five years.The IFRS
ineffectiveness for the year ended 31 December 2016 was
148 (2015: 181).
Net investment hedges
Rabobank uses foreign forward-exchange contracts to hedge
a portion of the currency translation risk of net investments in
foreign operations. The net fair value of these foreign forward-
exchange contracts on 31 December 2016 was 20 (2015:4).
On 31 December 2016, forward contracts with a nominal
amount of 1,230 (2015: 657) were designated as net investment
hedges.These resulted in exchange gains and losses of-6 for
the year (2015: -6), which are deferred in equity. A total of 24
was made in withdrawals from equity during the reporting
year (2015: 22). For the year ended 31 December 2016,
Rabobank reported no ineffectiveness resulting from the net
investment hedges.
10.4 Notional amount and fair value
Although the notional amount of certain types of financial
instruments provides a basis for comparing instruments that
are included in the statement of financial position, it does
not necessarily represent the related future cash flows or the
fair values of the instruments and therefore the exposure of
Rabobank to credit or exchange risks. The nominal value is
the amount of the asset, reference rate or index underlying
a derivative financial instrument, which represents the basis
on which changes in a derivative financial instrument's value
are measured. It provides an indication of the volume of
transactions executed by Rabobank, but is not a measure
of risk exposure. Some derivatives are standardised in terms
of notional amount or settlement date and are specifically
designed for trading on active markets (stock exchanges).
Other derivatives are specifically constructed for individual
clients and not for trading on an exchange, even though
they can be traded at prices negotiated between buyers and
sellers (OTC instruments).
The positive fair value represents the cost for Rabobank to
replace all contracts on which it will be entitled to receive
payment if all counterparties were to default. This is the
standard method in the industry for calculating the current
credit risk exposure.The negative fair value represents the
cost of all Rabobank contracts on which it will have to make
payment if Rabobank defaults. The totals of the positive and
negative fair values are disclosed separately in the statement of
financial position. Derivatives are positive (assets) or negative
(liabilities) as a result of fluctuations in market or exchange rates
in relation to their contract values.The total contract amount
or notional amount of derivatives held, the degree to which
these instruments are positive or negative, and hence the total
fair value of the derivative financial assets and liabilities can
sometimes fluctuate significantly.
The following table shows the notional amounts and the
positive and negative fair values of derivative contracts held
by Rabobank.
219 Notes to the consolidated financial statements