UBI Banca Group

A.3 – INFORMATION ON FAIR VALUE
A Information on fair value
A.3.1 Transfers between portfolios
The UBI Banca Group performed no reclassifications of financial asset portfolios as a result of
changes in the purpose or use of those assets, during both the current and the previous
financial year.
A.3.2 Fair value hierarchy
The fair value used for measuring financial instruments is determined on the basis of criteria,
listed below, which involve the use of what are termed observable or unobservable inputs.
Observable inputs are parameters developed on the basis of available market data and they
reflect the assumptions that market participants should use when they price financial
instruments. On the other hand, unobservable inputs are parameters for which market data
are not available and which are therefore developed on the basis of the best available
information on the assumptions that market participants should use when they price financial
instruments.
Fair value determined on the basis of level 1 inputs:
The measurement is based on observable inputs, i.e. prices listed on active markets for
identical financial instruments to which the entity can gain access on the valuation date of the
instrument. A market is defined as active when the prices quoted reflect normal market
transactions, are regularly and readily available and if those prices represent actual and
regular market trading.
Fair value determined on the basis of level 2 inputs:
The measurement is performed using methods that are used if the instrument is not listed on
an active market and is therefore based on inputs that are different from those of level one.
The measurement of the financial instrument is based on prices inferred from market
quotations for similar assets or by using measurement techniques for which all the significant
factors – credit spreads and liquidity spreads – are inferred from observable market variables.
Although this is the application of a measurement technique, there is basically no element of
discretion in the resulting price, because the most important parameters used are drawn from
markets and the calculation methods used replicate quotations existing on active markets.
Fair value determined on the basis of level 3 inputs:
The measurement is performed using methods which consist of measuring unlisted
instruments by employing significant inputs not inferable from markets and which therefore
involve the use of estimates and assumptions made by management.
The choice of the method of measuring fair value is not optional, because the methods must
be applied in hierarchical order.
Level 1
Equity instruments quoted on regulated markets, bonds quoted on the EuroMot circuit and
those for which prices that represent actual and regular market transactions continuously
available from the main contribution platforms occurring on the basis of a normal reference
period with price fluctuations over the last five days which occur at intervals considered
normal are considered as quoted on an active market.
Those derivatives for which a quotation on an active reference market (e.g. IDEM) are also
considered as quoted, to the extent that the markets are considered highly liquid.
The fair value of these instruments is calculated on the basis of the relative closing prices on
the last day of the month on the markets on which they are quoted.
279