GENERAL MEETING DRAFT - Bankier.pl

1.4 Reclassification of Structured Credit Products
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>> Consolidated Financial Statements
Part E – Information on risks and related risk management policies
In 2008 and in Q1 2009 most structured credit products were reclassified from financial assets held for
trading or available for sale to “loans and receivables with customers”, pursuant to the amendments to
IAS 39 endorsed by Regulation EC 1004/2008 (see Part A – 3.1. Transfers between portfolios).
The following table shows the amounts of these instruments which were subject to reclassification, the
amounts which would have been recognized in the year if they had not been reclassified, as well as the
amounts actually recognized in the year.
Carrying amount
as at
Fair Value
as at
Income/expenses absent reclassification
(before taxes)
Income/expense recognized during the
period (before taxes)
Accounting Portfolio Accounting Portfolio
before reclassification after reclassification 12/31/2009 12.31.2009
(2)
(3)
From measurement Other From measurement Other
Available for sale Loans to customers 173,698 159,275 -13,569 5,768 0 4,883
Held for Trading Loans to customers 7,239,131 5,910,812 125,758 317,364 -58,675 363,512
Total 7,412,829 6,070,087 112,189 323,132 -58,675 368,395
These data include a non-significant amount of asset backed securities from own synthetic
securitizations or in respect of which the underlying assets were derecognized from the balance sheet.
1.5 The Fair Value of Structured Credit Products
Structured credit products classified as financial assets held for trading, designated at fair value and
available for sale are valued at their market value, in line with the general rules described in Part A. 3)
Information on Fair Value.
The deterioration of market conditions since H2 2007 made it particularly complex to valuate these
products due to the gradual disappearance of a liquid secondary market characterized by executable
prices that could be used for valuation purposes.
As described in Part A.3, in order to react to this new market environment, the Group has resorted to
Indipendent Price Verification and Fair Value Adjustment processes.
In respect of structured credit products, this process requires that the prices for trading positions be
verified monthly by Risk Management units that are independent from the units that assume the risk
exposure, and that the fair value be adjusted in order to consider the subjectivity resulting from the use of
illiquid parameters.
As a result of the valuation process described above, structured credit products are valued by using as a
reference the prices of the main price providers (MarkIt). However, these valuations should be
considered as “second-level” as they are not necessarily executable (for further information on fair value
levels see Part A.3.2. Fair Value Hierarchy).
Absent this type of prices for the instrument being valued, its fair value is determined by using cash-flow
discounting models.
These models discount the instrument’s estimated cash flows at a rate that considers an adequate risk
spread, whose determination is therefore fundamental for the valuation process. In particular, the spread
used is the average spread applied to instruments which are similar to that being valued in terms of asset
class, rating, underlying geography.