33.1. Hedge accounting – financial information

Types of hedging strategies applied by the group

As at 31 December 2023 the Group had had active relationships as part of:

  • 7 strategies for hedging cash flow volatility;
  • 5 strategies for hedging fair value volatility.

In 2023, the Group terminated the hedging relationships as part of the hedging strategy “Hedging fair value volatility of fixed-interest-rate security measured at fair value through other comprehensive income in convertible currencies resulting from interest rate risk, using IRS transactions”, due to failure to meet the prospective effectiveness test. The effect of discontinuing hedge accounting in the above relationships on profit or loss was PLN 8.3 million.

In 2023, the Group implemented a new hedging strategy – Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on a fixed-rate financial liability in a convertible currency resulting from foreign currency risk, using a CIRS transaction.

No other changes were made to other active hedging strategies in 2023.

In 2022, the Group introduced two new hedging strategies to hedge fair value volatility.

The tables below summarize the types of strategies applied by the Group.

Type of hedging strategy Cash flow hedges (Strategies No: 1, 5,6,7,9,14,15,19)
Risk hedged foreign exchange risk and interest rate risk
Hedging instrument float – float CIRSs

fixed – float CIRSs
Hedged item
  • the portfolio of floating interest loans in foreign currencies and
  • the portfolio of short-term negotiated deposits in PLN, including their future renewals. In designating the hedged item, the Group used the IAS39 AG 99C in the version adopted by the European Union, or
  • fixed interest rate financial liability denominated in foreign currency or
  • the portfolio of floating interest rate regular savings products in PLN or
  • a financial liability in foreign currencies

sources of hedge ineffectiveness
  • margin on the hedging instrument
  • differences in discount on the hedged item and the hedging instrument
  • CVA/DVA adjustment of the hedging instrument

The period in which cash flows are expected to occur and affect the financial results:

 January 2024 – February 2025
Strategy No Strategy Name
1 Hedges against fluctuations in cash flows on variable interest CHF loans, resulting from interest rate risk and currency risk, and hedging against fluctuations in cash flows on negotiated deposits in PLN, resulting from interest rate risk, using CIRS transactions (inactive)
5 Hedges against fluctuations in cash flows on variable interest loans in convertible currencies, resulting from interest rate risk and currency risk, and hedging against fluctuations in cash flows on a fixed-rate financial liability in a convertible currency resulting from foreign currency risk, using CIRS transactions.
6 Hedges against fluctuations in cash flows on variable interest loans in convertible currencies other than CHF, resulting from interest rate risk and currency risk, and hedging against fluctuations in cash flows on negotiated deposits in PLN, resulting from interest rate risk, using CIRS transactions (inactive).
7 Hedges against fluctuations in cash flows on variable interest loans in convertible currencies, resulting from interest rate risk and currency risk, and hedging against fluctuations in cash flows on regular savings bank products in PLN, resulting from interest rate risk, using CIRS transactions (inactive).
9 Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on a fixed-rate financial liability in a convertible currency resulting from foreign currency risk, using CIRS or CIRS-EP transactions.
14 Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on financial liabilities in a convertible currency resulting from foreign currency risk, using two CIRS transactions.
15 Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on financial liabilities in a convertible currency resulting from foreign currency risk, using two CIRS transactions (inactive)
19 Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on a fixed-rate financial liability in a convertible currency resulting from foreign currency risk, using CIRS transactions.
Type of hedging strategy Cash flow hedges (Strategies No: 2,3,4,16)
Risk hedged interest rate risk
Hedging instrument fixed – float IRSs
Hedged item the portfolio of loans in PLN or foreign currencies indexed to a floating interest rate

sources of hedge ineffectiveness
  • change in market parameters between the moment of determining the terms and conditions relating to the hedged item and the moment of concluding the hedge
  • differences in discount on the hedged item and the hedging instrument
  • CVA/DVA adjustment of the hedging instrument

The period in which cash flows are expected to occur and affect the financial results:

 January 2024 – June 2032
Strategy No Strategy Name
2 Hedges against fluctuations in cash flows from variable interest loans in PLN, resulting from interest rate risk, using IRS transactions.
3 Hedges against fluctuations in cash flows from variable interest loans in convertible currencies, resulting from interest rate risk, using IRS transactions.
4 Hedges against fluctuations in cash flows from variable interest loans in convertible currencies, resulting from interest rate risk, using IRS transactions.
16 Hedges against fluctuations in cash flows on deposits in PLN, resulting from interest rate risk, using IRS transactions (inactive).
Type of hedging strategy Fair value volatility hedges (strategy No: 8,10,11,12,17,18)
Risk hedged interest rate risk
Hedging instrument fixed – float IRSs
Hedged item interest rate risk component relating to a fixed interest rate loan or security in a foreign currency or in PLN, which corresponds to the market IRS rate

interest rate risk component of a portfolio of financial liabilities replicated by a portfolio of fixed-rate instruments measured at amortised cost, corresponding to the market IRS ate

sources of hedge ineffectiveness
  • change in market parameters between the moment of determining the terms and conditions relating to the hedged item and the moment of concluding the hedge
  • CVA/DVA adjustment of the hedging instrument
  • difference between the present value of the floating leg of IRS and the present value of the nominal value of a security
Strategy No Strategy Name
8 Hedges against fair value volatility of fixed-interest-rate loans in convertible currencies resulting from interest rate risk, using IRS transactions.
10 Hedges against fair value volatility of fixed-interest-rate security in convertible currencies measured at amortised cost, resulting from interest rate risk, using IRS transactions.
11 Hedges against fair value volatility of fixed-interest-rate security measured at fair value through other comprehensive income in convertible currencies resulting from interest rate risk, using IRS transactions.
12 Hedges against fair value volatility of fixed-interest-rate FVOCI security in PLN resulting from interest rate risk, using IRS transactions.
17 Hedges against fluctuations in the fair value of a portfolio of financial liabilities in PLN measured at amortized cost, resulting from interest rate risk, using IRS transactions
18 Hedges against fluctuations in the fair value of a portfolio of financial liabilities in convertible currencies measured at amortized cost, resulting from interest rate risk, using IRS transactions

Carrying amount of hedging instruments

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CARRYING AMOUNT OF HEDGING INSTRUMENTS 31.12.2023 31.12.2022
Assets Liabilities Assets Liabilities
Cash flow hedges 473 2,972 888 7,336
interest rate risk – IRS 147 2,167 31 6,507
IRS PLN (strategy 2.16) 112 2,127 31 6,331
IRS EUR (strategy 3.4) 35 40 – 176
foreign exchange risk and interest rate risk – CIRS 326 805 857 829
CIRS CHF/USD (strategy 5.15) 46 – 32
CIRS PLN/EUR (strategy 9) 55 181 –
CIRS PLN/CHF (strategy 14.15) 271 676 –
CIRS CHF/EUR (strategy 14) 552 – 797
CIRS PLN/EUR (strategy 19) 207 – –
Fair value hedges 701 20 154 133
interest rate risk – IRS 701 20 154 133
IRS EUR (strategy 8,10,11,18) 92 19 75 91
IRS USD (strategy 8; 11.18) 4 1 14 –
IRS PLN (strategy 12.17) 605 65 42
Total 1,174 2,992 1,042 7,469

Cash flow hedges

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CHANGE IN OTHER COMPREHENSIVE INCOME RELATING TO CASH FLOW HEDGES 2023 2022
Accumulated other comprehensive income at the beginning of the period, net (5,218) (3,699)
Impact on other comprehensive income during the period, gross 4,146 (1,901)
Gains/losses recognized in other comprehensive income during the period (425) (6 525)
Amounts transferred from other comprehensive income to the income statement, of which: 4,571 4,624
– net interest income 3,758 3,588
– net foreign exchange gains/ (losses) 813 1 036
Tax effect (788) 382
Accumulated other comprehensive income at the end of the period, net (1,860) (5,218)
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INEFFECTIVE PORTION OF CASH FLOW HEDGES 2023 2022
Ineffective portion of cash flow hedges recognized in the income statements, including in: (2) (5)
Foreign exchange gains/ (losses) (1) (5)
CIRS CHF/USD (strategy 5.15) 2 (2)
CIRS PLN/CHF (strategy 14.15) (8) (8)
CIRS CHF/EUR (strategy 14) 5 5
Gains/(losses) on financial transaction (1) –
IRS PLN (strategy 2.16) (1) –

 

 

Fair value hedges

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INTEREST RATE AND FOREIGN EXCHANGE RISK HEDGES 31.12.2023 31.12.2022
Fair value measurement of the hedging derivative instrument 681 20
Interest rate risk hedge – fixed – float IRSs 681 20
Fair value adjustment of the hedged instrument attributable to the hedged risk (461) (51)
Interest rate risk hedge, of which: (461) (51)
Securities (21) (30)
Loans and advances to customers (2) (8)
Fair value adjustment recognized in OCI (26) (69)
Amounts due to customers (412) 56
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FAIR VALUE ADJUSTMENT OF THE HEDGED INSTRUMENT ATTRIBUTABLE TO THE HEDGED RISK BY TYPE OF HEDGING INSTRUMENT 31.12.2023 31.12.2022
IRS EUR (strategy 8,10,11,18) (41) 25
IRS USD (strategy 8; 11.18) (4) (18)
IRS PLN (strategy 12.17) (416) (58)
Total (461) (51)

Nominal value of hedging instruments by maturity

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Strategy No Hedging derivative up to 1 month 1 to
3 months		 3 months to 1 year 1 to 5 years More than 5 years Total Change in the fair value since designation Nominal-weighted average fixed interest rate/ Nominal-weighted average margin
31.12.2023
Hedge type: Cash flow hedges
Hedged risk: interest rate risk 
2.16 PLN fixed – float IRSs 705 4,950 6,796 30,840 177 43,468 (2 060) 2.7097%
3.4 EUR fixed – float IRSs – 630 130 4,944 222 5 926 (25) 2.0611%
Risk hedged: foreign exchange and interest rate risks 
14 Float CHF/float PLN CIRSs
float CHF – – 2,702 – – 2,702 254 0.3596%
float PLN – – 2,418 – – 2,418 0.5292%
5 CIRS fixed USD/float CHF
fixed USD 153 – 307 – – 460 (43) 0.4142%
float CHF 164 – 328 – – 492 –
9 Float PLN/fixed EUR CIRSs
float PLN 2,101 – – – – 2,101 65 –
fixed EUR 2,170 – – – – 2,170 0.7690%
19 Float PLN/fixed EUR CIRSs
float PLN – – – 2,595 – 2,595 (226) –
fixed EUR – – 2,391 – 2,391 1.8935%
14 CIRS fixed EUR/float CHF
fixed EUR – – 2,174 – – 2,174 (540) 0.7640%
float CHF – – 2,702 – – 2,702 –
Hedge type: Fair value hedges
Hedged risk: interest rate risk
12.17 PLN fixed – float IRSs – – – 5,960 2,091 8,051 386 5.9261%
11.18 USD fixed – float IRSs 319 – – 236 – 555 1 2.6551%
8,10,11,18 EUR fixed – float IRSs 0 152 696 3,404 548 4,800 9 2.2604%
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Strategy No Hedging derivative up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years More than 5 years Total Change in the fair value since designation Nominal-weighted average fixed interest rate/ Nominal-weighted average margin
31.12.2022
Hedge type: Cash flow hedges
Hedged risk: interest rate risk
2.16 PLN fixed – float IRSs –  1,501  29,674  42,269  1,278  74,722 (5,928) 2.5090%
3.4 EUR fixed – float IRSs – – 703 5,206 253 6,162 (65) 1.6952%
Risk hedged: foreign exchange and interest rate risks 
14.15 Float CHF/float PLN CIRSs
float CHF 2,551 2,751 5,302 671 0.3555%
float PLN 2,204 – –  2,418 –  4,622 0.4614%
5.15 CIRS fixed USD/float CHF
fixed USD – – 585 511 1,096 (21) 0.3871%
float CHF – – 572 501 1,073 –
9 Float PLN/fixed EUR CIRSs
float PLN – – – 2,101 –  2,101 199 –
fixed EUR – – – 2,340 2,340 0.7690%
14 CIRS fixed EUR/float CHF
fixed EUR 2,345 2,345 4,690 (656) 0.6970%
float CHF 2,551 2,751 5,302 –
Hedge type: Fair value hedges
Hedged risk: interest rate risk 
12.17 PLN fixed – float IRSs – – – –  2,841  2,841 30 6.2990%
11.18 USD fixed – float IRSs – – – 357 357 3 1.5128%
8,10,11,18 EUR fixed – float IRSs – – 469 3,508 591 4,568 (6) 1.5789%

Financial information on hedged items (in original currencies)

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HEDGED ITEM CARRYING AMOUNT OF THE HEDGED ITEM ITEM OF THE STATEMENT OF FINANCIAL POSITION CHANGE IN THE FAIR VALUE OF THE HEDGED ITEM* STRATEGY NO
31.12.2023
Cash flow hedges
Loans in PLN 43,467 Loans and advances to customers 2,080 2
Loans in EUR 1,363 Loans and advances to customers 26 3; 4
Loans in CHF 105 Loans and advances to customers 43 5
Financial liability in USD 116 Amounts due to customers
Loans in PLN 2,101 Loans and advances to customers (61) 9
Financial liability in EUR 499 Securities in issue
Loans in PLN 5,013 Loans and advances to customers 517 14
Financial liability in EUR 1,050 Securities in issue
Fair value hedges
 Loans in EUR 11 Loans and advances to customers (1) 8
 Security in EUR 30 Securities measured at amortized cost (5) 10
 Security in EUR 62 Securities measured at fair value through other comprehensive income (2) 11
 Security in PLN – Securities measured at fair value through other comprehensive income (15) 12
Portfolio of financial liabilities
in PLN		 8,051 Amounts due to customers (403) 17
Portfolio of financial liabilities
in EUR		 1,001 Amounts due to customers (2) 18
Portfolio of financial liabilities
in USD		 60 Amounts due to customers (1) 18
*in a cash flow hedge, the change in fair value of the hedged item reflects the change in value of the hedged item used as the basis for recognising hedge ineffectiveness for the period
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HEDGED ITEM CARRYING AMOUNT OF THE HEDGED ITEM ITEM OF THE STATEMENT OF FINANCIAL POSITION CHANGE IN THE FAIR VALUE OF THE HEDGED ITEM* STRATEGY NO
31.12.2022
Cash flow hedges
Loans in CHF 225 Loans and advances to customers 19 5
Financial liability in USD 249 Amounts due to customers
Loans in PLN 74,721 Loans and advances to customers 5,969 2
Loans in EUR 1,314 Loans and advances to customers 64 3; 4
Loans in PLN 2,101 Loans and advances to customers (195) 9
Financial liability in EUR 499 Securities in issue
Loans in PLN 4,622 Loans and advances to customers (8) 14
Financial liability in EUR 999 Securities in issue
Fair value hedges
Security in EUR 30 Securities measured at amortized cost (6) 10
Security in EUR 202 Securities measured at fair value through other comprehensive income (8) 11
Security in USD 81 Securities measured at fair value through other comprehensive income (3) 11
Loans in EUR 13 Loans and advances to customers (1) 8
Security in PLN – Securities measured at fair value through other comprehensive income (21) 12
Portfolio of financial liabilities in PLN 2,841 Amounts due to customers (38) 17
Portfolio of financial liabilities in EUR 729 Amounts due to customers 20 18
* in a cash flow hedge, the change in fair value of the hedged item reflects the change in value of the hedged item used as the basis for recognising hedge ineffectiveness for the period
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