UBI Banca Group

Financial derivative instruments for trading with customers
The analysis performed as at 31 st December 2011 for internal monitoring purposes shows that
the risks assumed by customers continue to remain generally low and they outlined a
conservative profile for the Group business in OTC derivatives with customers.
The quantitative data updated at the end of the 2011 showed the following:
- an increase in the total negative mark-to-market for customers, which stood at 4.95% of
the notional amount of the contracts compared to 3.35% twelve months before. The
worsening of the mark-to-market amounts is strictly connected with the European
financial crisis, which became more severe in the last quarter of 2011 and caused a
generalised reduction in interest rate levels;
- the notional amount for existing contracts, totalling €6.979 billion, was attributable to
interest rate derivatives amounting to €6.486 billion and currency derivatives amounting
to €0.486 billion plus a marginal notional amount for commodities contracts of €7 million;
- hedging derivative transactions accounted for approximately 96.3% of the notional amount
traded for interest rate derivatives and 93.3% of the notional amount for currency
derivatives;
- the net total mark-to-market (interest rate, currency and commodities derivatives)
amounted to approximately -€330 million. Those contracts with a negative mark-to-market
for customers were valued at approximately -€346 million.
In 2011 the Group incorporated regulations for its business in OTC derivative instruments
with customers in its “Policy for the trading, sale and subscription of financial products” and the
relative regulations to implement it as follows:
customer segmentation and classes of customers associated with specific classes of
products, stating that the purpose of the derivatives transactions must be hedging and that
transactions containing speculative elements must be of a residual nature;
rules for assessing the appropriateness of transactions, defined on the basis of the products
sold to each class of customer;
principles of integrity and transparency on which the range of OTC derivatives offered to
customers must be based, in compliance with the guidelines laid down by the Italian
Banking Association (and approved by the CONSOB) for illiquid financial products;
rules and processes for assessing credit exposure, which grant credit lines with maximum
limits for trading in interest rate and currency derivatives and credit lines on each single
transaction for commodities derivatives or derivatives with private individual retail
counterparties, while counterparty risk is assessed on the basis of Bank of Italy circular No.
263/2006;
rules and processes for managing restructuring operations, while underlining their
exceptional nature;
the rules and processes for the settlement of transactions in OTC derivative instruments
with customers that are subject to verbal or official dispute;
the catalogue of products offered to customers and the relative credit equivalents, updated
with respect to previous versions.
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