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102 being focused: being better
The following forward currency transactions were recognized at balance sheet date:
Nominal value
Dec. 31, 2002 Dec. 31, 2001
‘000 euros ‘000 euros
Exchange rate hedges of current/recognized transactions 5,725 –
Exchange rate hedges of expected cash flow 7,114 1,125
12,839 1,125
The nominal values represent the reference values of interest swaps, as well as the purchase
and selling amounts of derivative transactions, valued at the prevailing hedge rates on the
balance sheet date.
Valuation of interest rate derivatives is performed by the contracting bank by discounting
expected cash flows at market interest rates over the remaining term of the instrument (markto-market
valuation). Valuation of forward currency hedges corresponds to the expenses or
income which would otherwise be realized if the transaction was terminated at balance sheet
date.
Summary of derivative transactions recognized at balance sheet date:
Nominal Market Nominal Market
value value
Dec. 31, 2002 Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2001
‘000 euros ‘000 euros ‘000 euros ‘000 euros
Interest rate derivatives 266,069 – 14,876 370,022 – 4,609
Currency hedges 12,839 – 65 1,125 – 31
Total 278,908 – 14,941 371,147 – 4,640
Derivative financial instruments are recognized in the balance sheet at market value under
other accounts receivable, other assets or other liabilities.
In compliance with SFAS No. 133 (Accounting For Derivative Instruments And Hedging
Activities), derivative financial transaction are accounted as follows:
Where forward currency deals are used to hedge the fair value, changes in value of the
derivative, as well as in the underlying transaction, are recognized with effect on income. In
the case of cash flow hedges for foreign currency risks on future payments, changes in value
up to completion date are recognized directly in profits/losses.
Where interest swaps or caps are used to hedge the cash flow, changes in fair value are
treated as changes in equity not affecting profits and reported under comprehensive income
(part of equity). For interest rate derivatives which, in accordance with SFAS No. 133 are not
sufficiently effective as “cash flow hedges”, changes in their value are recognized in the
Income Statement under interest expenses/income.