Annual report and accounts 2009 (PDF) - Coventry Building Society

21. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (continued)Interest rate swap agreements under which the Society receives a fixed rate of interest and pays interest at LIBOR. These swapsare used to hedge the exposure to changes in the fair value of fixed rate bonds or liabilities issued in the wholesale market as aresult of changes in market interest rates. These swaps have a nominal principal amount of £1,103.8 million (2008 - £353.5million) and a net positive fair value of £8.6 million (2008 - net positive £23.9 million).Interest rate cap agreements under which the Society pays an initial premium and is subsequently compensated to the extentthat LIBOR exceeds the cap strike rate. These caps are used to hedge changes in the fair value of exposure to the risk thatmarket rates exceed the cap on capped rate mortgage assets. These caps have a nominal principal amount of £392.0 million(2008 - £700.0 million) and a fair value of £3.8 million (2008 - £0.9 million).The derivative gains and losses for the year in respect of fair value hedges comprise losses on derivatives of £22.6 million (2008 -losses of £34.4 million) and associated gains on hedged items of £24.5 million (2008 - gains of £36.0 million).Hedges not qualifying for hedge accountingCross currency swaps under which the Society receives interest at EURIBOR and pays interest at LIBOR. These swaps are usedto hedge the exposure to changes in the fair value of Euro denominated bonds issued in the wholesale market as a result ofchanges in market interest rates and exchange rates. These cross currency swaps have a nominal principal amount of £665.8million (2008 - £760.7 million) and a net positive fair value of £1.5 million (2008 - net positive £105.1 million).Interest rate basis swap agreements under which the Society pays interest at Bank of England Base Rate and receives interest atLIBOR. These swaps are used to hedge the Society’s LIBOR liability position. These basis swaps have a nominal principal amountof £300.0 million (2008 – nil) and a net negative fair value of £1.0 million (2008 – nil).The derivative gains and losses for the year in respect of hedges that do not qualify for hedge accounting comprise losses onderivatives of £0.5 million (2008 – gains of £0.6 million) and associated losses on hedged items of £0.1 million (2008 – losses of£0.4 million).22. LOANS AND ADVANCES TO CUSTOMERSGroup Society Group Society2009 2009 2008 2008£m £m £m £mLoans fully secured on residential property 13,991.2 11,337.3 13,073.2 11,128.6Other loansLoans fully secured on land 0.1 0.1 0.1 0.1Other loans 83.4 59.8 99.5 74.283.5 59.9 99.6 74.314,074.7 11,397.2 13,172.8 11,202.9Other loans incorporate £1.3 million (2008 - £1.5 million) of loans that are fully secured on residential property and that weremade to corporate bodies such as Housing Associations prior to 1 July 1998, the date upon which the Society adopted the powersof the Building Societies Act 1997. Although the classification of these assets is not consistent with similar loans made after 1July 1998 that are included in ‘loans fully secured on residential property’, this treatment has been adopted in order to complywith the requirements of the Building Societies Act 1997.55