3.9. Interest rate risk

mBank S.A.

In the process of managing interest rate risk of the banking book, the risk monitoring and control functions are performed by the Financial Markets Risk Department supervised by the Vice-president of the Board - Chief Risk Officer, whereas operational management of risk positions takes place in the Treasury Department supervised by the Vice-president of the Board, Head of Financial Markets. This way the Bank ensures independence of risk measurement, monitoring and control functions from operational activity, which gives rise to the positions taken by the bank.

Interest rate risk of the banking book results from the exposure of the bank's interest income and capital to adverse change in the levels of interest rates. Guided by the KNF recommendations, in particular Recommendation G, the Bank monitors the banking book structure in terms of repricing gap as well as basis risk, yield curve risk and customer option risk.

The basic measures used to control interest rate risk in the banking book are the repricing gap and the net interest earnings exposed to risk (EaR - Earnings at Risk). Moreover, the Bank performs also stress test analyses aimed to estimate the impact of adverse interest rate fluctuations on net interest earnings and the economic value of the banking portfolio. Interest rate risk of the banking book is also quantified using market risk measures: Value at Risk and stress tests.

Exposure to interest rate risk is limited for the banking portfolio by means of repricing gap limits (management action triggers) and market risk limits imposed on the value at risk (VaR) and stress tests. The utilisation of all those limits is monitored and controlled on a daily basis.

Interest income subject to risk

As of 31 December 2014 and 31 December 2013, a sudden, permanent and unfavourable shift of market interest rates by 100 basis points for all maturities would result in decrease in the interest within 12 months after the year-end date by the following amounts:

 
(PLN mln) 2014 2013
31.12.2014 Mean Maximum Minimum 31.12.2013 Mean Maximum Minimum
PLN 32.8 28.4 69.8 4.2 70.9 50.6 116.9 6.7
USD 1.0 1.4 4.0 0.2 1.0 1.2 2.3 0.1
EUR 4.5 6.6 12.6 1.4 7.2 6.5 10.0 1.8
CHF 13.3 0.8 15.7 0.0 0.5 0.4 0.6 0.2
CZK 2.3 4.2 8.5 2.2 4.6 5.6 7.4 3.0
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To calculate these values, the Bank assumed that the structure of financial assets and liabilities disclosed in the financial statements as of above indicated dates would be fixed during the year and the Bank would not take any measures to change related exposure to interest rate change risk. In calculation there were included positions resulted from modelling of repricing period according to replicating portfolio method.

Stress tests

The Bank runs also other analyses of the changes of the economic value of the banking book under stress test scenarios. Under the stress test, which assumes unfavourable shift of the interest rates for respective currencies by 200 bps, the economic value of the banking book at the end of 2014 would change by PLN 377.5 million (at the end of 2013: PLN 273 million). During the calculation of these values no correlation between currencies was taken into account and it was assumed that taking into account small interest rate values after the negative shift cannot become less than or equal to zero.

Important position in banking portfolio, in respect of fair value calculations, is debt securities portfolio in PLN (NBP bills, Polish Treasury bonds and bills). Interest rate risk of this portfolio is calculated additionally using stress test methodology (described above in p. 3.7). The methodology includes changes of market interest rates scenarios as well as credit spread, which in case of treasury debt securities may reflect basis risk (spread changes between government and swap curve). As of the end of 2014, calculated change in fair value of potential stress test realization in respect of above-mentioned debt securities amounted to PLN 784 million (comp. to nominal value of the portfolio – PLN 24 976 million).

mBank Hipoteczny S.A.

Repricing date misfit gap and interest earnings at risk (EaR) based on the former are the key interest rate risk measures at mBank Hipoteczny S.A.

As at 31 December 2014 and 31 December 2013 a sudden, lasting and disadvantageous change of market interest rates by 100 basis points for all maturities would result in decrease in the annual interest income by the following amounts:

 
31.12.2014 31.12.2013
in PLN million currency in PLN million currency
4.59 PLN 5.22 PLN
0.00 EUR 0.05 EUR
0.03 USD 0.01 USD
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To calculate these values, the Bank assumed that the structure of financial assets and liabilities disclosed in the financial statements as of above indicated dates would be fixed during the year and the mBank
Hipoteczny would not take any measures to change related exposure to interest rate change risk.

mLeasing Sp. z o.o.

mLeasing Sp. z o.o. performs risk analysis based on the following risk factors:

  • interest rates
  • fx rates.

The sensitivity of individual transactions to the risk factors is calculated by adding the shock rate and analysing its impact on the present value of the portfolio (MTM).

As at 31 December 2014 and 31 December 2013 a sudden, lasting and disadvantageous change of market interest rates by 100 basis points for all maturities would result in decrease in the annual interest income by the following amounts:

 
31.12.2014 31.12.2013
in PLN million currency in PLN million currency
5.00 PLN 3.70 PLN
1.00 EUR 1.40 EUR
0.00 USD 0.00 USD
0.00 CHF 0.00 CHF
0.00 JPY 0.00 JPY
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mBank S.A. Group interest rate risk

The following tables present the Group's exposure to interest rate risk. The tables present the Group’s financial instruments at carrying amounts, categorised by the earlier of contractual repricing or maturity
dates.

 
31.12.2014 Up to 1 month

1-3 months

3-12 months

1-5 years

More than 5 years

Non-interest bearing

Total
ASSETS
Cash and balances with the Central Bank 2 124 756 - - - - 929 793 3 054 549
Loans and advances to banks 3 088 814 74 917 164 886 380 - 422 418 3 751 415
Trading and investment securities 10 385 364 210 285 4 985 791 12 826 940 173 210 260 968 28 842 558
Loans and advances to customers 58 298 128 9 212 909 3 293 937 2 613 027 25 505 1 138 844 74 582 350
Other assets and derivative financial instruments 778 870 863 502 2 047 725 992 435 94 510 883 439 5 660 481

T o t a l   a s s e t s

74 675 932 10 361 613 10 492 339 16 432 782 293 225 3 635 462 115 891 353
LIABILITIES
Amounts due to the Central Bank - - - - - - -
Amounts due to other banks 7 512 690 5 858 317 10 083 - - 2 739 13 383 829
Amounts due to customers 58 714 053 9 319 680 3 955 680 284 873 - 148 193 72 422 479
Debt securities in issue 1 013 216 543 244 3 704 809 2 656 217 2 424 256 - 10 341 742
Subordinated liabilities 605 518 2 270 219 1 251 987 - - - 4 127 724

Other liabilities and derivative financial instruments

617 056 868 643 2 088 779 922 384 79 951 1 491 897 6 068 710
Total liabilities 68 462 533 18 860 103 11 011 338 3 863 474 2 504 207 1 642 829 106 344 484
Total interest repricing gap 6 213 399 (8 498 490) (518 999) 12 569 308 (2 210 982)  

 

31.12.2013 Up to 1 month

1-3 months

3-12 months

1-5 years

More than 5 years

Non-interest bearing

Total
ASSETS
Cash and balances with the Central Bank 1 650 452 - - - - 15 1 650 467
Loans and advances to banks 2 936 051 329 977 3 493 - - 201 720 3 471 241
Trading and investment securities 13 096 527 166 332 1 110 870 11 279 441 274 046 177 611 26 104 827
Loans and advances to customers 56 908 185 5 699 191 2 617 423 2 218 925 8 612 758 049 68 210 385
Other assets and derivative financial instruments 532 223 383 471 1 006 721 531 654 26 840 820 912 3 301 821

T o t a l   a s s e t s

75 123 438 6 578 971 4 738 507 14 030 020 309 498 1 958 307 102 738 741
LIABILITIES
Amounts due to the Central Bank - - - - - - -
Amounts due to other banks 11 171 188 8 050 078 - - - 2 916 19 224 182
Amounts due to customers 52 473 616 4 999 356 3 335 951 - 374 527 490 077 61 673 527
Debt securities in issue 885 337 204 040 1 356 421 2 832 725 123 533 - 5 402 056
Subordinated liabilities 621 287 2 639 591 501 879 - - - 3 762 757

Other liabilities and derivative financial instruments

358 282 410 486 1 194 623 558 553 29 138 1 176 305 3 727 387
Total liabilities 65 509 710 16 303 551 6 388 874 3 391 278 527 198 1 669 298 93 789 909
Total interest repricing gap 9 613 728 (9 724 580) (1 650 367) 10 638 742 (217 700)  
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