NEDBANK CAPITAl - Nedbank Group Limited

isk and BALANCE SHEET management reportNedbank Limited behavioural liquidity mismatchPercentage420-2-4-6-8-10-12-14Next day2 to 7 days8 days to 1 month1 to 2 months2 to 3 months3 to 6 months20092008(Expressed on total assets and based on maturity assumptions before rollovers and risk management)Note: The improvement in the 2009 profile is mainly due to refinements to the refinancing assumptions as detailed above.Interest rate risk in the banking bookNedbank Group is exposed to IRRBB primarily because:• the bank writes a quantum of prime-linked advances;• funding is prudently raised across the curve at fixed-term deposit rates that reprice only on maturity;• three-month JIBAR-linked swaps and forward rate agreements are typically used in the risk management of term deposits andfixed-rate advances;• short-term demand funding products reprice to different short-end base rates;• certain non-repricing transactional deposit accounts are non-rate-sensitive; and• the bank has a mismatch in net non-rate-sensitive balances, including shareholders’ funds that do not reprice for interest ratechanges.IRRBB comprises:• Repricing risk (mismatch risk) – timing difference in the maturity (for fixed rate) and repricing (for floating rate) of bank assets,liabilities and off-balance-sheet positions.• Reset or basis risk – imperfect correlation in the adjustment of the rates earned and paid on different instruments with otherwisesimilar repricing characteristics.• Yield curve risk – changes in the shape and slope of the yield curve.• Embedded optionality – the risk pertaining to interest-related options embedded in bank products.Nedbank Group interest rate repricing profile at year-endBetween3 and6 monthsBetween6 and12 months > 1 yearWithinNon-rate-Rm3 monthssensitiveNet repricing profile before hedging 65 358 (27 622) (32 210) 31 335 (36 861)Net repricing profile after hedging 33 999 (1 017) (2 726) 6 605 (36 861)Cumulative repricing gap after hedging 33 999 32 982 30 256 36 861172NEDBANK GROUP ANNUAL REPORT 2009