ING Bank Śląski | Annual Report 2014

ING BANK ŚLĄSKI

ING BANK ŚLĄSKIAnnual Report 2014

6. NPV at Risk Concept

NPV-at-Risk is a measure of the sensitivity of the economic value of the interest rate position to shock changes in interest rates. The measurement is carried out for the curve changes by +/- 1% and +/- 2%. This measurement is used for all banking book positions and is limited by regulatory limits of 20% of the equity.

Overall Interest Rate Sensitivity 

The following tables provide a good overview of the sensitivity of the consolidated Bank to changes in interest rates. The first table shows the sensitivity of the Bank’s results to changes in interest rates; the following should be noted:

  • Positions are divided into banking book vs. trading book. Positions include all material currencies; PLN positions represent the vast majority of the interest rate sensitivity of the Bank.
  • A basis point value (“BPV”) is shown for each (sub-) position; by BPV we mean the change in the economic value of a position for a 0.01% parallel yield curve shift.
  • Positions are further split where relevant by accounting method: accrual or MTM. Changes in the market value are fully and immediately reflected in reported results. The positions display an asymmetry between the economic and financial effect of a given yield curve shift; this is an unavoidable result of accounting regulations. The financial effects of yield curve shifts are calculated in line with the definition of EaR presented earlier. The “advanced” EaR approach is used for PLN demand deposits; the “basic” EaR approach is used for all other positions. The economic result shown is the predicted change in the present value of future As can be seen in the table in case of banking book there is a difference between the economic and financial sensitivity. Although the bank is aware of the sensitivity of its short-term financial results to changes in interest rates, the most important metric is – in line with the ING Group’s “Managing For Value” approach – the sensitivity of the long-term economic results of the bank.

The second table shows the sensitivity of the Bank’s capital base to changes in the market value of debt securities classified as Available-for-Sale (“AFS”) in Bank Treasury. It is important to note that the potential changes in capital base shown here are relevant only for the Bank’s regulatory capital base. The Bank’s calculations of its economic capital base do not include positive or negative revaluations of AFS-classified debt securities. This is because AFS-classified debt securities positions largely arise from the investment of portions of PLN demand deposit volumes in line with the Bank’s economic modelling of these demand deposits.

Sensitivity of consolidated results to Changes in Interest Rates (PLN million)*
end of 2014
Book Change in Economic Result for Yield Curve Move Change in Reported Financial Result for Yield Curve Move
-2% -1% 1% 2% -2%
ramped
-1%
shocked
1%
shocked
2%
ramped
BANKING -86.04 -41.62 41.62 86.04 18.67 -43.71 67.92 20.01
TRADING -14.75 -7.37 7.37 14.75 -14.75 -7.37 7.37 14.75
TOTAL -100.79 -48.99 48.99 100.79 3.92 -51.08 75.29 34.76

 

end of 2013
Book Change in Economic Result for Yield Curve Move Change in Reported Financial Result for Yield Curve Move
-2% -1% 1% 2% -2%
ramped
-1%
shocked
1%
shocked
2%
ramped
BANKING -10.48 -5.19 5.19 10.48 40.01 11.86 -16.78 -46.03
TRADING -9.84 -4.92 4.92 9.84 -9.84 -4.92 4.92 9.84
TOTAL -20.32 -10.11 10.11 20.32 30.17 6.94 -11.86 -36.19

*) including subsidiaries
**) for the purpose of comparability with the methodology used in 2014, the calculation for 2013 was modified in relation to the values contained in the annual report for 2013.

 

Sensitivity of Capital Accounts to Changes in Interest Rates (PLN million)
end of 2014
Position BPV Approximate Change in Regulatory Capital Base for Yield Curve Move
-2% -1% 1% 2%
FM AFS Portfolio -2.82 563.79 281.89 -281.89 -563.79
IRS classified to macro cash flow hedge portfolio -10.90 2,179.72 1,089.86 -1,089.86 -2,179.72
Total -13.72 2,743.51 1,371.75 -1,371.75 -2,743.51

 

end of 2013
Position BPV Approximate Change in Regulatory Capital Base for Yield Curve Move
-2% -1% 1% 2%
FM AFS Portfolio -2.74 547.75 273.88 -273.88 -547.75
IRS classified to macro cash flow hedge portfolio -6.59 1,317.07 658.54 -658.54 -1,317.07
Total -9.33 1,864.82 932.42 -932.42 -1,864.82

Briefcase

Your place for bookmarking and printing favourite pages

In Briefcase: page(s)

Your favourite pages Notes      
Your favourite pages Notes      

Send your comments to this Report

×