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322 NEDBANK GROUP Limited INTEGRATED REPORT 201024 FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS ... continued24.1 Financial assets designated as at fair value through profit or loss ... continuedRm2009Maximumexposure tocredit riskNegotiable certificates of deposit purchased 238Treasury bills 4 976Government-guaranteed 13 602Other dated securities 2 427Change in fair valuedue to change in credit riskCurrentperiod*Commercial mortgage loans 17 285 (11)Instalment credit 4 111 (1)Leases and debentures 647Preference shares 1 774Loans and advances (secured and unsecured) 9 119Foreign correspondents 1 330Other loans 2 999Loans to other banks 137Trade and other bills and acceptances 196Debtors and accruals 221Other assets 446Associate companies 908Listed investments 496Unlisted investments 1 889Endowment policy 18Insurance policyholder investments 8 082Policyholder assets (34)* Positive amounts represent a loss and negative amounts a profit. See note 27.1.Cumulative70 867 (12) –Nedbank Group has estimated the change in credit risk in accordance with IFRS 7.IG11 as being the amount arising from the changein fair value of the financial instrument that is not attributable to changes in market conditions that give rise to market risk. Individualcredit spreads for loans or receivables that have been designated as at fair value through profit or loss are determined at inception of thedeal. The credit spread is calculated as the difference between the benchmark interest rate and the interest rate charged to the client.Subsequent changes in the benchmark interest rate and the credit spread give rise to changes in fair value in the financial instrument. Loansand advances are reviewed for observable changes in credit risk and the credit spread is adjusted at subsequent dates if there has been anobservable change in credit risk relating to a particular loan or advance. No credit derivatives are used to hedge the credit risk on any of thefinancial assets designated as at fair value through profit or loss.
323Reports andcertificationsConsolidatedannual financialstatementsShareholdermeeting mattersDefinitions andabbreviationsInstrumentcodesContactdetailsnotes to the financial statements for the year ended 31 December 201024.2 Financial liabilities designated as at fair value through profit or lossRm Fair value2010Contractuallypayable atmaturityChange in fair valuedue to change in credit riskCurrentperiod*CumulativeLong-term subordinated debt instruments 7 774 7 614 (213) 54Call and term deposits 33 676 33 620 (41) 30Fixed deposits 112 115Promissory notes and other liabilities 7 7Foreign currency liabilities 6 447 6 447Investment contract liabilities 7 309 7 309Negotiable certificates of deposit 49 902 49 595 (69) 79Insurance funds 1 392 1 3922009106 619 106 099 (323) 163Long-term subordinated debt instruments 7 811 8 094 5 267Call and term deposits 22 602 22 640 16 71Fixed deposits 67 73Promissory notes and other liabilities 6 6Foreign currency liabilities 5 118 5 118Investment contract liabilities 6 749 6 749Negotiable certificates of deposit 47 200 47 119 51 148Insurance funds 1 133 1 133* Positive amounts represent a profit and negative amounts a loss.90 686 90 932 72 486The change in fair value due to credit risk has been determined as the difference between fair values determined using a credit-adjusted liabilitycurve and a risk-free liability curve.The curves are constructed using a standard ‘bootstrapping’ process to derive a zero-coupon yield curve. The credit-adjusted curve was based onoffer rates of negotiable certificates of deposit and promissory notes with maturity periods of up to five years, and thereafter the offer rates ofissued Nedbank bonds are applied.
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262 NEDBANK GROUP Limited INTEGRATE
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