UOB Annual Report 2002 - United Overseas Bank

Other foreign exchange exposures of the Group are primarily structural foreign currency exposures. These comprise the net asset
values of the Group’s overseas branches and investments in overseas subsidiaries, and long-term investments in overseas properties.
Where possible, the Group mitigates the effect of structural currency exposures by funding all the Group’s investments in
overseas branches with borrowings in the same currencies as the functional currencies of the respective overseas branches. On
a selective basis, the Group’s investments in overseas subsidiaries and long-term investments in overseas properties are also
funded in the same functional currencies. The Group also hedges some of the structural foreign currency exposures using
foreign exchange derivatives.
The structural currency exposures of the Group are as follows:
Structural
Currency Hedges by Net
Exposures Funding in Other Structural
in Overseas Respective Currency Currency
Currency of Structural Exposures Operations Currencies Hedges Exposures
$’000 $’000 $’000 $’000
2002
Australian dollars 241,901 37,280 93,319 111,302
Hong Kong dollars 301,138 16,533 285,259 (654)
Indonesian rupiah 98,863 – (51) 98,914
Malaysian ringgit 769,579 – – 769,579
Philippine pesos 77,567 – – 77,567
Thai baht 119,973 – 113,103 6,870
US dollars 386,674 209,162 133,948 43,564
Others 228,084 9,357 57,190 161,537
Total 2,223,779 272,332 682,768 1,268,679
2001
Australian dollars 156,626 36,622 7,266 112,738
Hong Kong dollars 576,597 17,633 190,869 368,095
Indonesian rupiah 51,650 – (36) 51,686
Malaysian ringgit 1,021,315 – – 1,021,315
Philippine pesos 71,068 – – 71,068
Thai baht 81,877 – 71,699 10,178
US dollars 375,830 199,283 129,913 46,634
Others 223,008 12,752 15,324 194,932
Total 2,557,971 266,290 415,035 1,876,646
(c)
Interest Rate Risk
Interest rate risk is the risk to earnings and value of financial instruments caused by fluctuations in interest rates.
Sensitivity to interest rates arises from the differences in the maturities and repricing dates of assets, liabilities and off-balance
sheet items. These mismatches are actively monitored and managed as part of the overall interest rate risk management process
which is conducted in accordance with the Group’s policies.
The following table shows the interest rate sensitivity gap, by time bands, on which interest rates of instruments are next
repriced on a contractual basis or, if earlier, the dates on which the instruments mature.
UNITED OVERSEAS BANK 151