Annual Report - Ahli United Bank

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Annual Report - Ahli United Bank

28 DERIVATIVES (continued)Derivatives held for hedging purposes (continued)The Group uses options and currency swaps to hedge against specifically identified currency and equity risks. In addition, the Groupuses interest rate swaps and forward rate agreements to hedge against the interest rate risk arising from specifically identified, or aportfolio of, fixed interest rate investments and loans. The Group also uses interest rate swaps to hedge against the cash flow risksarising on certain floating rate deposits. In all such cases the hedging relationship and objective, including details of the hedged itemand hedging instrument, are formally documented and the transactions are accounted for as fair value hedges.Hedging of interest rate risk is also carried out by monitoring the duration of assets and liabilities and entering into interest rate swapsto hedge net interest rate exposures. Since hedging of net positions does not qualify for special hedge accounting, related derivativesare accounted for the same way as trading instruments.29 COMMITMENTS AND CONTINGENT LIABILITIESCredit-related commitmentsCredit-related commitments include commitments to extend credit, standby letters of credit, guarantees and acceptances which aredesigned to meet the requirements of the Group’s customers.Commitments to extend credit represent contractual commitments to make loans and revolving credits available and generally havefixed expiration dates or other termination clauses. Since commitments may expire without being drawn upon, the total contractamounts do not necessarily represent future cash requirements.Standby letters of credit, guarantees and acceptances (standby facilities) commit the Group to make payments on behalf of customerscontingent upon their failure to perform under the terms of the contract. Standby facilities would have market risk if issued or extendedat a fixed rate of interest. However, these contracts are primarily made at floating rates.The Group has the following credit related commitments:2009 2008US$ ’000 US$ ’000Commitments on behalf of customers:Guarantees 1,395,462 1,880,235Acceptances 45,394 65,670Letters of credit 248,337 578,6351,689,193 2,524,540Irrevocable commitments:Undrawn loan commitments 892,493 942,665The Group’s commitments in respect of non-cancellable operating leases were as follows:2009 2008US$ ’000 US$ ’000Within one year 2,017 1,747Between one to five years 7,652 7,299Over five years 13,066 22,31922,735 31,365AUB Annual Report 200987

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