Notes to the Consolidated Financial Statements

Notes to the Consolidated Balance Sheet (Assets)

 

Cash and balances with central banks (amortised cost) Due from other banks (amortised cost) Loans (amortised cost) Debt investments (amortised cost) Securitised loans (amortised cost) Equity investments (available for sale) Debt investments (available for sale) Loans (designated at fair value through profit or loss) Residential mortgages own book (designated at fair value through profit or loss) Securitised residential mortgages (designated at fair value through profit or loss) Debt investments at fair value through profit or loss (including trading)

Enhanced investments (designated at fair value through profit or loss) Equity investments (investments in associates) (designated at fair value through profit or loss) Derivative financial instruments Investments in associates (equity method) Intangible assets Property, plant and equipment Investment property Current tax Deferred tax Other assets Enhanced investments (designated at fair value through profit or loss)

 

	Cash and balances with central banks (amortised cost)
14

 

In EUR millions		2009		2008
Cash and balances with central banks		1,353		1,113
		1,353		1,113

 

The amounts included in cash and balances with central banks are available on demand.

 

Balances held with central banks are interest bearing.

 

The fair value of this balance sheet item does not materially deviate from its face value, due to the short-term nature of the underlying assets.

 

	Due from other banks (amortised cost)
15

 

In EUR millions		2009		2008
Current accounts		743		625
Deposits with other banks		2,351		1,145
		3,094		1,770

 

In EUR millions		2009		2008
due from other banks can be categorised as follows:
Receivable on demand		743		613
Cash collateral placements posted under CSA agreements		1,051		933
Not receivable on demand		1,300		224
		3,094		1,770

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF due from other banks NOT RECEIVABLE ON DEMAND IS ANALYSED AS FOLLOWS:
In three months or less		1,291		109
In more than three months but not more than one year		-		12
In more than one year but not more than five years		4		103
Longer than five years		5		-
		1,300		224

 

There are no subordinated loans outstanding due from other banks in 2009 and 2008.

 

The fair value of this balance sheet item does not materially deviate from its face value due to the short-term nature of the underlying assets and the credit quality of the counterparties.

 

No impairments were recorded in 2009 and 2008 on the amounts due from other banks at amortised cost.

 

An amount of EUR 1,051 million (2008: EUR 933 million) relates to cash collateral given to third parties and is not freely available to NIBC.

 

NIBC transacted several reverse repurchase transactions with third parties. The related disclosures are included in repurchase and resale agreements (see note 47).

 

	Loans (amortised cost)
16

 

In EUR millions		2009		2008
Loans to corporate entities		6,597		6,265
Public sector		36		38
		6,633		6,303

 

In EUR millions		2009		2008
The legal maturity analysis of loans is analysed as follows:
In three months or less		755		335
In more than three months but not more than one year		324		175
In more than one year but not more than five years		2,865		2,530
Longer than five years		2,689		3,263
		6,633		6,303

 

In EUR millions		2009		2008
Impairment losses on loans:
BALANCE AT 1 JANUARY		25		-
Additional allowances		101		48
Write-offs		(52)		(7)
Amounts released		(10)		(14)
Unwinding of discount adjustment		(1)		(1)
Differences due to foreign currency translation		1		(1)
BALANCE AT 31 DECEMBER		64		25

 

On 1 July 2008 following the IAS 39 amendments, an amount of EUR 79 million of the impairments related to the available for sale loans were reclassified to the loans category at amortised cost. The total amount of loans in the available for sale category net of impairments has been reclassified to the loans category at amortised cost as at 1 July 2008.

 

If NIBC had fair valued the loans classified as amortised cost using the valuation methodology applied to loans designated as available for sale as per 31 December 2009, then the carrying amount would decrease at the balance sheet date by EUR 380 million (31 December 2008: EUR 432 million). This decrease would reflect both changes due to interest rates and credit spreads. NIBC hedges its interest rate risk from these assets.

 

The maximum credit risk exposure including undrawn credit facilities arising on loans at amortised cost amounts to EUR 7,824 million (2008: EUR 7,313 million).

 

The total amount of subordinated loans in this item amounts to EUR 114 million in 2009 (2008: EUR 111 million).

 

As per 31 December 2009, EUR 36 million (2008: EUR 38 million) is guaranteed by the Dutch State.

 

The following table presents the fair value and carrying value of financial assets reclassified as of 1 July 2008 to loans at amortised cost.

 

In EUR millions		Fair value on date of reclassification		Carrying value as per 31 December 2009		Fair value as per 31 December 2009
Loan portfolio reclassified from available for sale category		3,294		3,275		3,009

 

The effective interest rates on financial assets reclassified into loans at amortised cost as at the date of reclassification - 1 July 2008 - fell approximately into the following ranges:

 

		Range
Loan portfolio reclassified from available for sale category		5% - 9%

 

The following table contains estimates of undiscounted cash flows NIBC expects to recover from the assets reclassified as at 1 July 2008:

 

In EUR millions		Less than one year		Between one and two years		Between two and five years		More than five years		Total
Loan portfolio reclassified from available for sale category		542		772		2,755		-		4,069

  

As of the date of reclassification (1 July 2008), NIBC has recognised total fair value loss in equity of EUR 41 million on assets reclassified as of 1 July 2008.

 

	Debt investments (amortised cost)
17

 

In EUR millions		2009		2008
Debt investments		581		738
		581		738

 

All debt investments are listed and non-government.

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF DEBT INVESTMENTS IS ANALYSED AS FOLLOWS:
In three months or less		-		1
In more than three months but not more than one year		-		39
In more than one year but not more than five years		28		223
Longer than five years		553		475
		581		738

 

In EUR millions		2009		2008
The movement in debt investments may be summarised as follows:
BALANCE AT 1 JANUARY		738		-
Additions		7		-
IAS 39 - reclassifications		-		838
Disposals (sale and redemption)		(151)		(92)
Impairments		(13)		-
Exchange differences and amortisation		-		(8)
BALANCE AT 31 DECEMBER		581		738

 

In EUR millions		2009		2008
Impairment losses on debt investments:
BALANCE AT 1 JANUARY		-		-
Additional allowances		13		-
BALANCE AT 31 DECEMBER		13		-

 

If NIBC had fair valued the debt investments classified as amortised cost using the valuation methodology applied to debt investments at held for trading or available for sale as per 31 December 2009, the carrying amount would decrease at the balance sheet date by EUR 30 million (2008: EUR 167 million). This decrease would reflect both changes due to interest rates and credit spreads. NIBC hedges its interest rate risk from these assets.

 

The following table presents the fair value and carrying value of financial assets reclassified as of 1 July 2008 to debt investments at amortised cost.

In EUR millions		Fair value on date of reclassification		Carrying value as per 31 December 2009		Fair value as per 31 December 2009
DEBT INVESTMENTS RECLASSIFIED FROM:
Held for trading category		523		466		313
Loan portfolio reclassified from available for sale category		123		115		99

 

The effective interest rates on financial assets reclassified into debt investments at amortised cost as at the date of reclassification - 1 July 2008 - fell approximately into the following ranges.

 

		Range
DEBT INVESTMENTS RECLASSIFIED FROM:
Held for trading category		1% - 17%
Available for sale category		5% - 11%

 

The following table contains estimates of undiscounted cash flows NIBC expects to recover from the assets reclassified as at 1 July 2008.

 

In EUR millions		Less than one year		Between one and two years		Between two and five years		More than five years		Total
DEBT INVESTMENTS RECLASSIFIED FROM:
Held for trading category		27		38		244		479		788
Available for sale category		5		7		43		123		178

 

	Securitised loans (amortised cost)
18

 

In EUR millions		2009		2008
Loans to corporate entities		616		630
		616		630

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF THE SECURITISED LOANS IS ANALYSED AS FOLLOWS:
In three months or less		2		7
In more than three months but not more than one year		-		-
In more than one year but not more than five years		-		-
Longer than five years		614		623
		616		630

 

In EUR millions		2009		2008
The movement in securitised loans may be summarised as follows:
BALANCE AT 1 JANUARY		630		638
Additions		-		6
Disposals (sale and redemption)		(14)		(14)
BALANCE AT 31 DECEMBER		616		630

 

If NIBC had fair valued the securitised loans classified as amortised cost using the valuation methodology applied to loans designated as available for sale as per 31 December 2009, then the balance sheet amount would decrease at the balance sheet date by EUR 102 million (2008: EUR 136 million). The fair value reflects movements due to both interest rate changes and credit spread changes. NIBC hedges its interest rate risk from these assets.

 

The maximum credit risk exposure including undrawn credit facilities arising on securitised loans at amortised cost amounts to EUR 616 million (2008: EUR 630 million).

 

No impairments were recorded in 2009 and 2008 on securitised loans at amortised cost.

 

	Equity investments (available for sale)
19

 

In EUR millions		2009		2008
Equity investments		94		108
		94		108

 

In EUR millions		2009		2008
Listed		9		15
Unlisted		85		93
		94		108

 

In EUR millions		2009		2008
The movement in equity investments may be summarised as follows:
BALANCE AT 1 JANUARY		108		144
Additions		7		72
Disposals (sale and capital repayments)		(2)		(14)
Changes in fair value
Impairments		(9)		(64)
Other		(12)		(35)
Differences due to foreign currency translation		2		5
BALANCE AT 31 DECEMBER		94		108

 

In EUR millions		2009		2008
Impairment losses on equity investments:
BALANCE AT 1 JANUARY		79		15
Additional allowances		9		65
Write-offs		-		(1)
BALANCE AT 31 DECEMBER		88		79

 

	Debt investments (available for sale)
20

 

In EUR millions		2009		2008
Debt investments		714		35
		714		35

 

In EUR millions		2009		2008
Government		-		-
Government guaranteed		263		-
Other		451		35
		714		35

 

In EUR millions		2009		2008
Listed		663		27
Unlisted		51		8
		714		35

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF DEBT INVESTMENTS IS ANALYSED AS FOLLOWS:
In three months or less		28		-
In more than three months but not more than one year		170		-
In more than one year but not more than five years		461		7
Longer than five years		55		28
		714		35

 

In EUR millions		2009		2008
The movement in debt investments may be summarised as follows:
BALANCE AT 1 JANUARY		35		311
Additions		699		54
IAS 39 - reclassifications		-		(113)
Disposals (sale and redemption)		(17)		(178)
Changes in fair value
Impairments		(18)		(7)
Other		15		(32)
BALANCE AT 31 DECEMBER		714		35

 

The changes in fair value in the table above reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the balance sheet.

 

 

In EUR millions		2009		2008
Impairment losses on debt investments:
BALANCE AT 1 JANUARY		7		-
Additional allowances		18		7
BALANCE AT 31 DECEMBER		25		7

 

The following table presents the fair value and carrying value of financial assets reclassified as of 1 July 2008 to debt investments at available for sale:

In EUR millions		Fair value on date of reclassification		Carrying value as per 31 December 2009		Fair value as per 31 December 2009
Debt investments reclassified from held for trading category		28		1		1

 

The effective interest rates on financial assets reclassified into debt investments at available for sale as at the date of reclassification - 1 July 2008 - fell approximately into the following ranges:

 

 

		Range
Debt investments reclassified from held for trading category		13% - 26%

 

The following table contains estimates of undiscounted cash flows NIBC expects to recover from the assets reclassified as at 1 July 2008:

 

In EUR millions		Less than one year		Between one and two years		Between two and five years		More than five years		Total
Debt investments reclassified from held for trading category		-		-		-		1		1

 

	Loans (designated at fair value through profit or loss)
21

 

In EUR millions		2009		2008
Loans to corporate entities		1,103		1,136
		1,103		1,136

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF LOANS IS ANALYSED AS FOLLOWS:
In three months or less		3		9
In more than three months but not more than one year		-		-
In more than one year but not more than five years		618		202
Longer than five years		482		925
		1,103		1,136

 

In EUR millions		2009		2008
The movement in loans may be summarised as follows:
BALANCE AT 1 JANUARY		1,136		1,374
Additions		4		-
Disposals		(43)		(190)
Changes in fair value		(13)		(48)
Exchange differences		19		-
BALANCE AT 31 DECEMBER		1,103		1,136

 

The changes in fair value in the previous table reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the balance sheet.

 

Interest income from loans is recognised in interest and similar income based on the effective interest rate. Fair value movements excluding interest are recognised in net trading income.

 

The portion of fair value changes in 2009 included in the balance sheet amount (designated at fair value through profit or loss) as at 31 December 2009 relating to the movement in credit spreads amounts to EUR 13 million credit (2008: EUR 49 million credit), being a reduction in the balance sheet carrying amount.

 

The maximum credit risk exposure including undrawn credit facilities amounts to EUR 802 million (2008: EUR 834 million).

 

	Residential mortgages own book (designated at fair value through profit or loss)
22

 

In EUR millions		2009		2008
Residential mortgages own book		5,817		6,201
		5,817		6,201

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF RESIDENTIAL MORTGAGES OWN BOOK IS ANALYSED AS FOLLOWS:
In three months or less		16		15
In more than three months but not more than one year		27		18
In more than one year but not more than five years		80		107
Longer than five years		5,694		6,061
		5,817		6,201

 

In EUR millions		2009		2008
The movement in residential mortgages own book may be summarised as follows:
BALANCE AT 1 JANUARY		6,201		5,285
Additions (including repurchases from consolidated SPEs)		156		1.547
Disposals (sale and redemption, including replenishment of consolidated SPEs)		(537)		(902)
Changes in fair value		(3)		271
BALANCE AT 31 DECEMBER		5,817		6,201

 

The changes in fair value in the previous table reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the balance sheet.

 

Interest income from residential mortgages own book is recognised in interest and similar income based on the effective interest rate. Fair value movements (excluding interest) are recognised in net trading income.

 

The maximum credit exposure including committed but undrawn facilities is EUR 5,836 million (2008: EUR 6,283 million).

 

At 31 December 2009, EUR 711 million (2008: EUR 797 million) of credit protection by means of a guarantee structured in a synthetic securitisation (Provide Orange) was in place in connection with NIBC’s residential mortgages own book.

 

 

	Securitised residential mortgages (designated at fair value through profit or loss)
23

 

In EUR millions		2009		2008
Securitised residential mortgages		4,783		5,250
		4,783		5,250

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF SECURITISED RESIDENTIAL MORTGAGES IS ANALYSED AS FOLLOWS:
In three months or less		1		1
In more than three months but not more than one year		1		1
In more than one year but not more than five years		12		10
Longer than five years		4,769		5,238
		4,783		5,250

 

In EUR millions		2009		2008
The movement in securitised residential mortgages may be summarised as follows:
BALANCE AT 1 JANUARY		5,250		6,356
Additions		-		50
Disposals (sale and redemption including sales to own book)		(497)		(1,389)
Changes in fair value		30		233
BALANCE AT 31 DECEMBER		4,783		5,250

 

The changes in fair value in the previous table reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the balance sheet.

 

At 31 December 2009, securitised residential mortgages in the amount of EUR 4,783 million (2008: EUR 5,250 million) were pledged as collateral for NIBC’s own liabilities (see note 49).

 

Interest income from securitised residential mortgages is recognised in interest and similar income at the effective interest rate. Fair value movements (excluding interest) are recognised in net trading income.

 

The maximum credit exposure is EUR 4,783 million (2008: EUR 5,250 million).

 

The portion of fair value changes in 2009 included in the balance sheet amount relating to the movement in credit spreads on residential mortgages own book (see note 22) and securitised residential mortgages (see note 23) amounts to EUR 134 million credit at 31 December 2009 (2008: EUR 58 million credit), being a reduction in the balance sheet carrying amount.

 

The aggregate difference yet to be recognised in the profit or loss between transaction prices at initial recognition and the fair value determined by a valuation model at 31 December 2009 amounts to a liability of EUR 29 million (2008: EUR 28 million).

 

Securitised residential mortgages are retained on NIBC’s balance sheet based on the risks and rewards NIBC retains in the SPEs issuing the mortgage-backed notes. Risks and rewards can be retained by NIBC by (amongst others) retaining issued notes, providing overcollateralisation to the SPEs or implementing reserve accounts in the SPEs. At the balance sheet date, NIBC retained EUR 60 million (2008: EUR 65 million) of notes issued by the SPEs, overcollateralisation provided to the SPEs amounted to EUR 35 million (2008: EUR 34 million) and reserve accounts amounted to EUR 8 million (2008: EUR 9 million).

 

	Debt investments at fair value through profit or loss (including trading)
24

 

In EUR millions		2009		2008
Held for trading (non-government)		78		98
Designated at fair value through profit or loss		726		634
		804		732

All debt investments are non-government.

 

In EUR millions		2009		2008
DEBT INVESTMENTS HELD FOR TRADING CAN BE CATEGORISED AS FOLLOWS:
Listed		72		98
Unlisted		6		-
		78		98

 

In EUR millions		2009		2008
DEBT INVESTMENTS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS CAN BE CATEGORISED AS FOLLOWS:
Listed		717		606
Unlisted		9		28
		726		634

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF DEBT INVESTMENTS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS IS ANALYSED AS FOLLOWS:
In three months or less		82		-
In more than three months but not more than one year		235		12
In more than one year but not more than five years		390		583
Longer than five years		19		39
		726		634

 

In EUR millions		2009		2008
The movement in debt investments designated at fair value through profit or loss may be summarised as follows:
BALANCE AT 1 JANUARY		634		955
Additions		333		249
Disposals (sale and redemption)		(244)		(532)
Changes in fair value		4		(30)
Exchange differences		(1)		(8)
BALANCE AT 31 DECEMBER		726		634

 

The changes in fair value in the previous table reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the balance sheet.

 

The portion of fair value changes in 2009 included in the balance sheet amount (designated at fair value through profit or loss) relating to the movement in credit spreads amounts to EUR 2 million credit (2008: EUR 2 million credit), being a reduction in the balance sheet carrying amount.

 

Interest income from debt investments is recognised in interest and similar income at the effective interest rate until the date of reclassification. Fair value movements (excluding interest) have been recognised in net trading income.

 

	Enhanced investments (designated at fair value through profit or loss)
25

 

In EUR millions		2009		2008
Enhanced investments		53		1,079
		53		1,079

 

All enhanced investments are unlisted instruments.

 

In EUR millions		2009		2008
THE LEGAL MATURITY ANALYSIS OF ENHANCED INVESTMENTS IS ANALYSED AS FOLLOWS:
In three months or less		3		67
In more than three months but not more than one year		48		555
In more than one year but not more than five years		2		457
Longer than five years		-		-
		53		1,079

 

In EUR millions		2009		2008
The movement of enhanced investments may be summarised as follows:
BALANCE AT 1 JANUARY		1,079		1,212
Additions		13		491
Disposals		(1,016)		(640)
Changes in fair value		(24)		13
Exchange differences		1		3
BALANCE AT 31 DECEMBER		53		1,079

 

The changes in fair value in the previous table reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the balance sheet.

 

Dividends received from enhanced investments are recognised in dividend income. Fair value movements (excluding interest) are recognised in net trading income.

 

The portion of fair value changes in 2009 included in the balance sheet amount relating to the movement in credit spreads amounts to EUR 3 million debit, being an increase in the balance sheet carrying amount (2008: EUR 2 million debit).

 

The strong decrease of the balance at 31 December 2009 compared to that of 31 December 2008 relates to the unwinding and repayment of a large part of this portfolio.

 

	Equity investments (investments in associates) (designated at fair value through profit or loss)
26

 

In EUR millions		2009		2008
Investments in associates		211		188
Other equity investments		4		-
		215		188

 

There are no significant restrictions on the ability of associates to transfer funds to the investor in the form of cash dividends, or repayment of loans.

 

In EUR millions		2009		2008
The movement in investments in associates may be summarised as follows:
BALANCE AT 1 JANUARY		188		147
Additions		37		83
Disposals		(4)		(18)
Changes in fair value		(7)		(24)
Exchange differences		(3)		-
BALANCE AT 31 DECEMBER		211		188

 

All of these investments in associates are unlisted instruments and are held by the venture capital organisation within the operating segment Merchant Banking.

 

In EUR millions		2009		2008
The movement in other equity investments may be summarised as follows:
BALANCE AT 1 JANUARY		-		-
Additions		3		-
Changes in fair value		1		-
BALANCE AT 31 DECEMBER		4		-

 

All of these other equity investments are unlisted instruments and are held by the venture capital organisation within the operating segment Merchant Banking.

 

	Derivative financial instruments
27

 

In EUR millions		2009		2008
DERIVATIVE FINANCIAL ASSETS
Derivative financial assets held for trading (trading portfolios)		2,423		2,508
Derivative financial assets held for trading (other portfolios)		393		629
Derivative financial assets used for hedging		242		215
		3,058		3,352

In EUR millions		2009		2008
DERIVATIVE FINANCIAL LIABILITIES
Derivative financial liabilities held for trading (trading portfolios)		2,712		2,914
Derivative financial liabilities held for trading (other portfolios)		421		525
Derivative financial liabilities used for hedging		80		42
		3,213		3,481

Derivative financial instruments – held for trading (trading portfolios) at 31 December 2009
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
INTEREST RATE DERIVATIVES
OTC-products:
Interest rate swaps		12,038		7,883		57,872		77,793		1,870		2,314
Interest rate options (purchase)		-		130		955		1,085		21		-
Interest rate options (sale)		4		125		922		1,051		-		14
SUBTOTAL		12,042		8,138		59,749		79,929		1,891		2,328
CURRENCY DERIVATIVES
OTC-products:
Currency/cross-currency swaps		-		294		3,175		3,469		511		356
SUBTOTAL		-		294		3,175		3,469		511		356
OTHER DERIVATIVES (INCLUDING CREDIT DERIVATIVES)
OTC-products:
Other swaps		-		1,000		169		1,169		4		17
Other options (purchase)		24		54		74		152		17		-
Other options (sale)		24		54		74		152		-		11
SUBTOTAL		48		1,108		317		1,473		21		28
TOTAL DERIVATIVES HELD FOR TRADING (TRADING PORTFOLIOS)		12,090		9,540		63,241		84,871		2,423		2,712

 

Derivative financial instruments – held for trading (trading portfolios) at 31 December 2008
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
INTEREST RATE DERIVATIVES
OTC-products:
Forward rate agreements		750		-		-		750		3		16
Interest rate swaps		10,993		10,639		59,757		81,389		1,940		2,382
Interest rate options (purchase)		-		42		685		727		13		-
Interest rate options (sale)		11		91		619		721		-		12
SUBTOTAL		11,754		10,772		61,061		83,587		1,956		2,410
CURRENCY DERIVATIVES
OTC-products:
Currency/cross-currency swaps		-		1,180		2,308		3,488		504		460
SUBTOTAL		-		1,180		2,308		3,488		504		460
OTHER DERIVATIVES (INCLUDING CREDIT DERIVATIVES)
OTC-products:
Other swaps		-		14		967		981		12		23
Other options (purchase)		-		10		153		163		36		-
Other options (sale)		-		10		153		163		-		21
SUBTOTAL		-		34		1,273		1,307		48		44
TOTAL DERIVATIVES HELD FOR TRADING (TRADING PORTFOLIOS)		11,754		11,986		64,642		88,382		2,508		2,914

 

Derivative financial instruments - held for trading (other portfolios) at 31 December 2009
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
INTEREST RATE DERIVATIVES
OTC-products:
Interest rate swaps		331		687		7,327		8,345		318		372
SUBTOTAL		331		687		7,327		8,345		318		372
CURRENCY DERIVATIVES
OTC-products:
Forward rate agreements		74		42		29		145		5		5
Interest currency rate swaps		2,571		284		1,846		4,701		68		42
Other currency contracts		33		39		30		102		-		1
SUBTOTAL		2,678		365		1,905		4,948		73		48
OTC-products:
Credit default swaps (guarantees given)		-		23		99		122		2		1
Credit default swaps (guarantees received)		3		-		-		3		-		-
Other OTC products		-		-		77		77		-		-
SUBTOTAL		3		23		176		202		2		1
TOTAL DERIVATIVES HELD FOR TRADING (OTHER PORTFOLIOS)		3,012		1,075		9,408		13,495		393		421

 

Derivative financial instruments - held for trading (other portfolios) at 31 December 2008
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
INTEREST RATE DERIVATIVES
OTC-products:
Interest rate swaps		133		265		3,754		4,152		335		474
SUBTOTAL		133		265		3,754		4,152		335		474
CURRENCY DERIVATIVES
OTC-products:
Forward rate agreements		45		61		89		195		6		6
Interest currency rate swaps		2,538		77		300		2,915		280		39
Other currency contracts		32		57		111		200		-		3
SUBTOTAL		2,615		195		500		3,310		286		48
OTC-products:
Credit default swaps (guarantees given)		18		22		89		129		1		2
Credit default swaps (guarantees received)		-		-		27		27		-		1
Other OTC products		5		12		78		95		7		-
SUBTOTAL		23		34		194		251		8		3
TOTAL DERIVATIVES HELD FOR TRADING (OTHER PORTFOLIOS)		2,771		494		4,448		7,713		629		525

Derivative financial instruments - used for hedging at 31 December 2009
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
DERIVATIVES ACCOUNTED FOR AS FAIR VALUE HEDGES OF INTEREST RATE RISK
OTC-products:
Interest rate swaps		25		117		6,663		6,805		146		78
Interest currency rate swaps		7		24		115		146		16		1
SUBTOTAL		32		141		6,778		6,951		162		79
DERIVATIVES ACCOUNTED FOR AS CASH FLOW HEDGES OF INTEREST RATE RISK
OTC-products:
Interest rate swaps		-		-		1,651		1,651		80		1
SUBTOTAL		-		-		1,651		1,651		80		1
TOTAL DERIVATIVES USED FOR HEDGING		32		141		8,429		8,602		242		80

 

Derivative financial instruments - used for hedging at 31 December 2008
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
DERIVATIVES ACCOUNTED FOR AS FAIR VALUE HEDGES OF INTEREST RATE RISK
OTC-products:
Interest rate swaps		285		1,374		4,912		6,571		69		41
Interest currency rate swaps		807		99		731		1,637		39		1
SUBTOTAL		1,092		1,473		5,643		8,208		108		42
DERIVATIVES ACCOUNTED FOR AS CASH FLOW HEDGES OF INTEREST RATE RISK
OTC-products:
Interest rate swaps		-		-		429		429		107		-
SUBTOTAL		-		-		429		429		107		-
TOTAL DERIVATIVES USED FOR HEDGING		1,092		1,473		6,072		8,637		215		42

 

Fair value hedges of interest rate risk

The following table discloses the fair value of the swaps designated in fair value hedging relationships.

 

In EUR millions				2009		2008
Fair value pay - fixed swaps (hedging assets)		assets		-		12
Fair value pay - fixed swaps (hedging assets)		liabilities		(38)		(29)
				(38)		(17)
In EUR millions				2009		2008
Fair value pay - floating swaps (hedging liabilities)		assets		162		97
Fair value pay - floating swaps (hedging liabilities)		liabilities		(41)		(13)
				121		84

 

Cash flow hedges of interest rate risk

The following table discloses the fair value of the swaps designated in cash flow hedging relationships.

In EUR millions				2009		2008
Fair value receive - fixed swaps		assets		79		107
Fair value receive - fixed swaps		liabilities		(1)		-
				78		107
In EUR millions				2009		2008
Fair value receive - floating swaps		assets		1		-
Fair value receive - floating swaps		liabilities		-		-
				1		-

 

Sum of fair value and cash flow hedges of interest rate risk

 

In EUR millions				2009		2008
Fair value pay swaps		assets		162		108
Fair value receive swaps		assets		80		107
				242		215

 

In EUR millions				2009		2008
Fair value pay swaps		liabilities		(79)		(42)
Fair value receive swaps		liabilities		(1)		-
				(80)		(42)

 

The average remaining maturity (in which the related cash flows are expected to enter into the determination of profit or loss) is three years (2008: four years).

 

Hedging activities

 

Portfolio fair value hedge of plain vanilla funding

According to NIBC’s hedging policy, NIBC should not be exposed to interest rate risk from its fixed rate plain vanilla funding activities above certain limits prescribed by the Asset & Liability Committee (ALCO). Consequently, NIBC uses interest rate swaps to hedge the fair value interest rate risk arising on this fixed rate funding. To mitigate any accounting mismatches, NIBC has defined a portfolio fair value hedge for the fixed rate plain vanilla funding and corresponding hedging transactions.

 

The hedged risk is the benchmark interest rate (interbank offered rates up to one year and swap rates for periods longer than one year) for the currency in question.

 

The net fair value of the derivative financial instruments designated as hedging instruments in these relationships at 31 December 2009 was EUR 35 million debit (2008: EUR 45 million debit). The losses on the hedging instruments were EUR 6 million (2008: gain of EUR 39 million). The gains on the hedged item attributable to the hedged risk were EUR 5 million (2008: loss of EUR 42 million). Differences between the results recognised on the hedging instruments and hedged items can be explained by hedge ineffectiveness.

 

Micro fair value hedge of plain vanilla funding

According to NIBC’s hedging policy, NIBC should not be exposed to interest rate and foreign exchange risk from its fixed rate plain vanilla funding activities above certain limits prescribed by ALCO. Consequently, NIBC uses cross-currency interest rate swaps to hedge the fair value interest rate risk and foreign exchange risk arising on this fixed rate funding. To mitigate any accounting mismatches, NIBC has defined a micro fair value hedge for fixed rate plain vanilla funding and corresponding hedging transactions.

 

The hedged risk is the benchmark interest rate (interbank offered rates up to one year and swap rates for periods longer than one year) for the currency in question.

 

The net fair value of the derivative financial instruments designated as hedging instruments in these relationships at 31 December 2009 was EUR 71 million debit (2008: EUR 38 million debit). The losses on the hedging instruments were EUR 6 million (2008: gain of EUR 38 million). The gains on the hedged item attributable to the hedged risk were EUR 14 million (2008: loss of EUR 39 million). Differences between the results recognised on the hedging instruments and hedged items can be explained by hedge ineffectiveness.

 

Portfolio fair value hedge of loans

According to NIBC’s hedging policy, NIBC should not be exposed to interest rate risk from its corporate loan activities above certain limits as set by ALCO. Consequently, NIBC uses interest rate swaps to hedge the fair value interest rate risk arising from these fixed rate loans. To mitigate any accounting mismatches, NIBC has defined a portfolio fair value hedge for the fixed rate loan and corresponding hedging transactions.

 

The hedged risk is the benchmark interest rate (interbank offered rates up to one year and swap rates for periods longer than one year) for the currency in question.

 

The net fair value of the derivative financial instruments designated as hedging instruments in these hedge relationships at 31 December 2009 was EUR 14 million credit (2008: EUR 17 million credit). The gains on the hedging instruments were EUR 2 million (2008: loss of EUR 7 million). The losses on the hedged item attributable to the hedged risk were EUR 3 million (2008: gain of EUR 6 million). Differences between the results recognised on the hedging instruments and hedged items can be explained by hedge ineffectiveness.

 

Cash flow hedges

NIBC has classified a large part of its loans as available for sale. Therefore the fair value movement of floating rate loans are being accounted for in equity using the effective interest method. Interest rate swaps are used to hedge the floating cash flows of its floating loans. These swaps are classified as at fair value through profit or loss. This accounting mismatch creates volatility in the income statement of NIBC. Therefore NIBC applies hedge accounting on these positions. Hedge accounting is applied to all swaps that are used to hedge the cash flow risk of the floating loans by defining a macro cash flow hedge relationship with the floating loans.

 

NIBC has classified a large part of its corporate loans as loans and receivable at amortised cost, which were previously at available for sale. Therefore, variability in the cash flows of the floating rate corporate loans is accounted for in future periods, when the coupons are recorded in the income statement on an amortised cost basis. Interest rate swaps are used to hedge the floating cash flows of its floating corporate loans. These swaps are classified at fair value through profit or loss. This accounting mismatch creates volatility in the income statement of NIBC. Therefore NIBC applies hedge accounting on these positions. Hedge accounting is applied to all swaps that are used to hedge the cash flow risk of the floating corporate loans by defining a macro cash flow hedge relationship with the floating corporate loans.

 

The variability in interest cash flows arising on floating rate corporate loans is hedged on a portfolio basis with interest rate swaps that receive fixed and pay floating (generally one, three and six months floating rates). The highly probable cash flows being hedged relate both to the highly probable cash flows on outstanding corporate loans and to the future reinvestment of these cash flows. NIBC does not hedge the variability of future cash flows of corporate loans arising from changes in credit spreads.

 

Interest rate swaps with a net fair value of EUR 79 million debit (2008: EUR 107 million debit) were designated in a cash flow hedge relationship. The cash flow on the hedged item will be reported in income over the next ten years. In 2009, the ineffectiveness recognised in the income statement that arose from cash flow hedges was a loss of EUR 2 million (2008: EUR gain of 7 million).

 

There were no transactions in respect of which cash flow hedge accounting had to be ceased in 2009 or 2008 as a result of the highly probable cash flows no longer being expected to occur.

 

The amount that was recognised in equity during the year 2009 is EUR 37 million debit (2008: EUR 67 million credit). The amount that was removed from equity and included in the income statement in 2009 was a EUR 10 million gain (2008: EUR gain of 13 million).

 

Micro fair value hedge Liquidity portfolio debt investments

According to NIBC’s hedging policy, NIBC should not be exposed to fair value interest rate risk from its fixed rate debt investments held in the Liquidity portfolios above certain limits prescribed by ALCO. Consequently, NIBC uses interest rate swaps to hedge the fair value interest rate risk arising on this fixed rate debt investments. To mitigate any accounting mismatches, NIBC has defined a micro fair value hedge for fixed rate debt investments and corresponding hedging transactions.

 

The hedged risk is the benchmark interest rate (interbank offered rates up to one year and swap rates for periods longer than one year) for the currency in question.

 

The net fair value of the derivative financial instruments designated as hedging instruments in these relationships at 31 December 2009 was EUR 7 million credit (2008: nil). The losses on the hedging instruments were EUR 1 million (2008: nil). The gains on the hedged item attributable to the hedged risk were EUR 1 million (2008: nil).

 

Macro fair value hedge government guarantee fees

According to NIBC’s hedging policy, NIBC should not to be exposed to fair value interest rate risk from the fixed rate government guarantee fees related to the plain vanilla funding issued under the Dutch State’s Credit Guarantee Scheme above certain limits prescribed by ALCO. The guarantee fees are considered as a firm commitment and consequently, NIBC uses interest rate swaps to hedge the fair value interest rate risk arising on this fixed rate government guarantee fees. To mitigate any accounting mismatches, NIBC has defined a macro fair value hedge for fixed rate government guarantee fees and corresponding hedging transactions.

 

The hedged risk is the benchmark interest rate (interbank offered rates up to one year and swap rates for periods longer than one year) for the currency in question.

 

The net fair value of the derivative financial instruments designated as hedging instruments in these relationships at 31 December 2009 was EUR 1 million credit (2008: nil). The losses on the hedging instruments were EUR 1 million (2008: nil). The gains on the hedged item attributable to the hedged risk were EUR 1 million (2008: nil).

 

Net investment hedge

NIBC hedges part of the currency translation risk arising on its net investments in foreign operations by using foreign currency debt as a hedging instrument. Debt amounting to USD 184 million (2008: USD 236 million) as included in other liabilities was designated as a hedging instrument, and gave rise to currency losses for the year 2009 of EUR 4 million (2008: EUR 6 million), which were recognised in the translation reserve component of equity. No ineffectiveness was recognised in the income statement arising from hedges of net investments in foreign operations. Besides an amount of USD 60 million of dividend no amounts were withdrawn from equity during the year (2008: nil), as there were no disposals of foreign operations that were included in the net investment hedge.

 

	Investments in associates (equity method)
28

 

In EUR millions		2009		2008
Investments in associates		35		40
		35		40

In EUR millions		2009		2008
The movement in investments in associates may be summarised as follows:
BALANCE AT 1 JANUARY		40		44
Purchases and additional payments		-		1
Disposals		(3)		(6)
Share in result of associates		5		7
Dividend received		(2)		(6)
Impairments		(5)		-
BALANCE AT 31 DECEMBER		35		40

 

At the end of 2009 and 2008, all investments in associates were unlisted.

 

There are no significant restrictions on the ability of associates to transfer funds to the investor in the form of cash dividends, or repayment of loans.

 

There is no unrecognised share of losses of an associate, either for the period or cumulatively.

 

See note 52 for further details on the investments in associates.

 

In EUR millions		2009		2008
Impairment losses on investments in associates:
BALANCE AT 1 JANUARY		-		-
Additional allowances		5		-
BALANCE AT 31 DECEMBER		5		-

 

	Intangible assets
29

 

In EUR millions		2009		2008
Intangible assets		40		44
		40		44

 

In EUR millions		2009		2008
INTANGIBLE ASSETS RELATED TO NON-FINANCIAL COMPANIES INCLUDED IN THE CONSOLIDATION MAY BE SUMMARISED AS FOLLOWS:
Cost		49		48
Accumulated amortisation		(9)		(4)
		40		44

 

In EUR millions		Goodwill		Trademarks and licences		Customer relationships		Order backlog		Other intangibles		Total
The movement in intangible assets may be summarised as follows:
Balance at 1 January 2008		-		-		-		-		-		-
Acquisition of subsidiaries		20		4		19		4		1		48
Amortisation		-		(1)		(1)		(2)		-		(4)
Balance at 31 December 2008		20		3		18		2		1		44

 

In EUR millions		Goodwill		Trademarks and licences		Customer relationships		Order backlog		Other intangibles		Total
The movement in intangible assets may be summarised as follows:
Balance at 1 January 2009		20		3		18		2		1		44
Additions		-		-		-		-		1		1
Acquisition of subsidiaries		-		-		-		-		-		-
Amortisation		-		(1)		(2)		(2)		-		(5)
Balance at 31 December 2009		20		2		16		-		2		40

 

The accumulated amortisation as at 31 December 2009 is EUR 9 million (2008: EUR 4 million). Amortisation of EUR 5 million is included in the depreciation and amortisation line of the income statement.

 

The remaining amortisation period for the categories trademarks and licences is three years and for customer relationships this is 11 years. There is no remaining amortisation period for order backlog.

 

Intangible assets pledged as security for liabilities are nil for both 2009 and 2008.

 

Goodwill acquired in business combinations is reviewed in the fourth quarter of the respective financial year for impairment, or more frequently when there are indications that impairments may have occurred, by comparing the recoverable amount of each cash generating unit to which goodwill has been allocated with its carrying value.

 

 

In EUR millions		2009		2008
Goodwill has been allocated to the group of cash generating units as follows:
Non-financial companies included in the consolidation		20		20
		20		20

 

No impairments were recorded in 2009 and 2008 on intangible assets.

 

	Property, plant and equipment
30

 

In EUR millions		2009		2008
Land and buildings		58		61
Other fixed assets		6		5
		64		66
Land and buildings from non-financial companies		7		6
Other fixed assets from non-financial companies		30		30
		37		36
		101		102

 

In EUR millions		2009		2008
The movement in property, plant and equipment may be summarised as follows:
BALANCE AT 1 JANUARY		102		72
Additions		11		7
Acquired in business combinations		-		37
Depreciation		(12)		(14)
BALANCE AT 31 DECEMBER		101		102

 

In 2009, EUR 7 million in the depreciation line relates to non-financial companies included in the consolidation (2008: EUR 8 million).

 

In EUR millions		2009		2008
THE ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT CAN BE CATEGORISED AS FOLLOWS:
Land and buildings		36		32
Other fixed assets		15		17
		51		49
Land and buildings from non-financial companies		-		-
Other fixed assets from non-financial companies		11		8
		11		8
		62		57

 

Buildings in use by NIBC are insured for EUR 92 million (2008: EUR 81 million). Other fixed assets are insured for EUR 91 million (2008: EUR 90 million). Other fixed assets of the non-financial companies included in the consolidation are insured for EUR 56 million (2008: EUR 55 million).

 

In 2009, EUR 64 million of land and buildings and other fixed assets from the non-financial companies included in the consolidation are pledged as security for liabilities (2008: EUR 36 million).

 

In 2009, capital expenditure contracted for related to non-financial companies included in the consolidation amounts to EUR 0 million (2008: EUR 5 million). No amount is recognised in the carrying amount of property, plant and equipment in the course of construction at 31 December 2009 (2008: EUR 3 million).

 

NIBC’s land and buildings in own use were last revalued as of 31 December 2006 based on an external appraisal carried out in January 2007.

 

	Investment property
31

 

In EUR millions		2009		2008
Land and buildings		28		30
		28		30

In 2009, investment property is insured for EUR 13 million (2008: EUR 13 million).

 

In EUR millions		2009		2008
The movement in investment property may be summarised as follows:
Balance at 1 January		30		1
Additions resulting from acquisition		2		30
Disposals		(2)		(1)
Changes in fair value		(2)		-
Balance at 31 December		28		30

Investment property is stated at fair value. The fair value at 31 December 2009 is based upon various external appraisals, which were made prior to the acquisition of the properties in the fourth quarter of 2007 and in 2008 on the basis that there have been no material changes in the fair value of the investment property since the acquisition date. This balance sheet item also includes acquired property of EUR 2 million (2008: EUR 2 million) from work-out and restructuring activities related to residential mortgages.

 

The amount recognised in profit or loss is EUR 2 million (2008: EUR 1 million), concerning rental income.

 

	Current tax
32

 

In EUR millions		2009		2008
Current tax assets		14		6
		14		6

It is expected that the current tax balance will be settled within 12 months.

 

	Deferred tax
33

 

Deferred tax is calculated on all temporary differences under the liability method using a nominal tax rate of 25.5% in 2009 (2008: 25.5%).

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

 

In EUR millions		2009		2008
Deferred tax liabilities		22		39
		22		39

 

In EUR millions		2009		2008
THE AMOUNTS OF DEFERRED INCOME TAX ASSETS, WITHOUT TAKING INTO CONSIDERATION THE OFFSETTING OF BALANCES WITHIN THE SAME JURISDICTION, IS AS FOLLOWS:
Loans (available for sale)		9		21
Debt investments (available for sale)		3		6
Tax losses carried forward		5		–
		17		27
THE AMOUNTS OF DEFERRED INCOME TAX LIABILITIES, WITHOUT TAKING INTO CONSIDERATION THE OFFSETTING OF BALANCES WITHIN THE SAME JURISDICTION, IS AS FOLLOWS:
Equity investments (available for sale)		3		3
Cash flow hedges		14		26
Property		9		9
Temporary differences on loans and receivables as a result of internal securitisations		13		28
		39		66
		(22)		(39)

 

Temporary differences on loans and receivables as a result of internal securitisations relate to SPEs, which are consolidated in the financial statements, but not included in the fiscal unity of NIBC.

 

in EUR millions		2009		2008
The gross movement on the deferred income tax account may be summarised as follows:
Balance at 1 January		(39)		(4)
Loans (Reported as available for sale)
Fair value remeasurement (charged)/credited to revaluation reserve		(12)		4
Fair value hedges through revaluation reserve		-		(1)
Debt investments (Reported as available for sale)
Fair value remeasurement (charged)/credited to revaluation reserve		(3)		4
Fair value remeasurement (charged)/credited to hedging reserve		12		(14)
Temporary differences on loans and receivables as a result of internal securitisations		15		(28)
Tax losses carried forward		5		-
Balance at 31 December		(22)		(39)

	Other assets
34

 

In EUR millions		2009		2008
Interest		11		20
Other accruals and receivables		25		37
Other assets related to non-financial companies included in the consolidation		17		23
		53		80

 

The fair value of this balance sheet item does not materially deviate from its face value, due to the short-term nature of its related assets. 

 

In EUR millions		2009		2008
Other assets related to non-financial companies included in the consolidation can be categorised as follows:
Inventories (less provision for obsolence)		12		18
Trade receivables (less provisions for doubtful debt)		5		4
Other		-		1
		17		23