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HALF-YEAR REPORT 2016
Notes to the Consolidated Financial Statements
For the six months ended 30 June 2016
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17 Derivative financial instruments
The Group’s subsidiaries under the financial services segment act as an intermediary to offer derivative
products including forwards and swap of interest rate and currency to its customers. These derivative
positions are managed through entering back-to-back deals with external parties to ensure the remaining
exposures are within acceptable risk levels. Meanwhile, derivatives are also used for proprietary trading
purposes.
Subsidiaries under non-financial services segment of the Group enter into forward and swap contracts to
hedge their exposure to fluctuations in foreign exchange rates, commodity prices and interest rates.
The following tables and notes provide an analysis of the nominal amounts of derivatives and the
corresponding fair values as at the balance sheet date. The nominal amounts of the derivatives indicate the
volume of transactions outstanding as at the balance sheet date; they do not represent amounts at risk.
Hedging instruments are derivatives qualified for hedge accounting, and non-hedging instruments are
derivatives not qualified for hedge accounting.
30 June 2016
31 December 2015
Nominal
amount
Assets
Liabilities
Nominal
amount
Assets
Liabilities
HK$ million HK$ million HK$ million
HK$ million HK$ million HK$ million
Hedging instruments
Fair value hedge (note (c)(i)):
– Interest rate derivatives
13,224
398
177
13,302
283
46
– Currency derivatives
1,469
5
–
3,939
48
–
Cash flow hedge (note (c)(ii)):
– Interest rate derivatives
17,416
–
3,380
14,246
–
2,608
– Currency derivatives
1,242
3
4
113
–
2
– Other derivatives
1,380
23
835
24
–
908
Non-hedging instruments
– Interest rate derivatives
816,932
1,296
786
716,684
1,258
1,467
– Currency derivatives
2,344,669
23,293
20,509
1,911,069
13,717
12,082
– Precious metals derivatives
92,108
1,958
7,113
22,396
1,203
362
– Other derivatives
1,528
–
43
6,234
–
–
3,289,968
26,976
32,847
2,688,007
16,509
17,475
(a) Nominal amount analysed by remaining maturity
30 June
2016
31 December
2015
HK$ million
HK$ million
Within 3 months
1,369,112
974,188
Between 3 months and 1 year
1,677,818
1,560,625
Between 1 year and 5 years
229,407
144,900
Over 5 years
13,631
8,294
3,289,968
2,688,007
The remaining term to maturity of derivatives does not represent the Group’s intended holding
period.