UBI Banca Group

A.2 – THE MAIN ITEMS IN THE FINANCIAL STATEMENTS
1. Financial assets and liabilities held for trading and
financial assets and liabilities at fair value
This category includes:
1.1. Definition of financial assets and liabilities held for trading
A financial asset or liability is classified as held for trading (at fair value through profit or loss
– FVPL) and is stated within either item 20 “Financial assets held for trading” or item 40
“Financial liabilities held for trading”, if it is:
• acquired or incurred for sale or repurchase in the short term;
• part of a portfolio of identified financial instruments which are managed together and for
which there is evidence of a recent and effective strategy of short term profit taking;
• a derivative (except for derivatives designated and effective as a hedging instrument – see
the relative section below).
1.1.1. Derivative financial instruments
A “derivative” is defined as a financial instrument or other contract with the following
characteristics:
• its value changes in response to the change in an interest rate, in the price of a financial
instrument, in a commodity price, in a foreign currency exchange rate, in a price, interest
rate or credit rating index, or credit worthiness index or other specific variable;
• it requires no initial investment, or a net initial investment that is smaller than would be
required for other types of contract from which a similar response to changes in market
factors would be expected;
• it is settled at a future date.
The UBI Group holds derivative financial instruments for both trading and for hedging
purposes (see the relative section below for information on the latter).
1.1.2. Embedded derivative financial instruments
An "embedded derivative financial instrument" is defined as a component of a hybrid
(combined) instrument which also includes a “host” non derivative contract such that some of
the cash flows of the combined instrument behave in a way similarly to the derivative as a
stand-alone instrument. The embedded derivative is separated from the host contract and
treated in the accounts as a stand-alone derivative if and only if:
• the economic risks and characteristics of the embedded derivative are not closely related to
the economic risks and characteristics of the host contract;
• a separate instrument with the same conditions as the embedded derivative would satisfy
the definition of a derivative;
• the hybrid (combined) instrument is not recognised within financial assets or liabilities
held for trading.
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