2012 Registration document and annual financial report - BNP Paribas

5RISKSAND CAPITAL ADEQUACYSovereign risks➤ TABLE 48: CASH FLOWS HEDGED.In millions of euros 31 December 2012 31 December 2011Period to realisationLess than1 year1 to5 yearMore than5 years TotalLess than1 year1 to5 yearMore than5 years TotalHedged cash flows 309 888 546 1,743 746 1,796 1,132 3,674In the year ended 31 December 2012, several hedges of future incomerepresenting a non-material impact on profit and loss were requalifiedas ineligible for hedge accounting on the grounds that the related futureevent would be no longer highly probable (see Financial Statementnote 2.c).5.8 Sovereign risks [A udited]5Sovereign risk is the risk of a State defaulting on its debt, i.e. a temporaryor prolonged interruption of debt servicing (interests and/or principal).The Group holds sovereign bonds as part of its liquidity managementprocess. Liquidity management is based on holding securities eligibleas collateral for refinancing by central banks and includes a substantialshare of highly rated debt securities issued by governments, representinga low level of risk. Moreover, as part of its assets and liability managementand structural interest-rate risk management policy, the Group also holdsa portfolio of assets including sovereign debt instruments, with interestratecharacteristics that contribute to its hedging strategies. In addition,the Group is a primary dealer in sovereign debt securities in a numberof countries, which leads it to take temporary long and short tradingpositions, some of which are hedged by derivatives.Exposures to euro zone sovereign debt in the Group's banking bookamounted to EUR 44.0 billion at 31 December 2012, before revaluationand including accrued interest. This compares to an exposure of EUR 58.1billion at 31 December 2011 and EUR 73.9 billion at 30 June 2011, whenthe crisis first hit several sovereign issuers in the euro zone.The EUR 14.2 billion decline in the book during the year was due to theexchange of securities related to the Greek debt restructuring, disposalsand redemptions collected (EUR -17 billion related mostly to securitiesissued by Italy, France, Belgium, Germany and the Netherlands), partlyoffset by acquisitions (securities worth EUR 4 billion issued by France,Belgium and Italy).Securities of non-euro zone sovereign issuers held within the bankingbook amounted to EUR 19.2 billion as of 31 December 2012 comparedwith EUR 16 billion at 31 December 2011 .3002012 Registration document and annual financial report - BNP PARIBAS