2006 Interim Report－A Share.pdf - 中国银行

Domestic Operations are required to place an RMB statutory deposit reserve, a foreign currency statutory deposit
reserve and a fiscal deposit with the PBOC. At 30 June 2006, the required reserve ratio for customer deposits
denominated in RMB was 7.5% (2005: 7.5%); the required reserve ratio for customer deposits denominated in foreign
currencies is 3% (2005: 3%). The fiscal deposit of Domestic Operations is comprised of funds from government
agencies, and proceeds of bonds issued on behalf of the MOF. The foreign currency deposit reserve and fiscal deposits
placed with the PBOC are non-interest bearing.
2. Trading and other debt securities at fair value through profit or loss
Trading
30 June 2006 31 December 2005
Government bonds 27,761 19,116
Public sector and quasi government bonds 3,088 2,095
Financial institution bonds 23,600 30,599
Corporate bonds 3,794 4,179
Sub-total 58,243 55,989
Other debt securities at fair value through profit or loss
(designated at initial recognition)
Government bonds 9,267 10,704
Public sector and quasi government bonds 11,218 12,974
Financial institution bonds 26,667 19,979
Corporate bonds 5,207 7,625
Sub-total 52,359 51,282
Total 110,602 107,271
Included in other debt securities at fair value through profit or loss are debt securities with respect to which the Group
has established economic hedges using derivative instruments. Gains and losses arising on the derivatives are intended
to substantially offset the gains and losses arising on these securities, which might have otherwise been
classified as "available-for-sale" or "held-to-maturity" securities.
3. Derivative financial instruments
The Group enters into the following foreign exchange rate or interest rate related derivative financial instruments for
trading and risk management purposes:
The contractual/notional amount and fair values of derivative instruments held by the Group are set out in the
following table. The contractual/notional amounts of certain types of financial instruments provide a basis for
comparison with fair value instruments recognised on the balance sheet but do not necessarily indicate the amounts
of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Group's
exposure to credit or market risks. The derivative instruments become favourable assets or unfavourable (liabilities)
as a result of fluctuations in market exchange rate, interest rates or equity/commodity prices relative to their terms.
The aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.
The fair values of derivatives that are not quoted in active markets are determined by using valuation techniques.
Valuation techniques used include discounted cash flows analysis and models. To the extent practical, models use
only observable data, such as interest rate and foreign exchange rates, however areas such as credit risk (both own
and counterparty's), volatilities and correlations require management to make estimates. Changes in such observable
data and assumptions about these factors could affect reported fair value of financial instruments.
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