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- strategy (insurance, health, investments, finances);
- sustainable development (sales, employees, social responsibility, natural environment and ethics).
The above-mentioned areas were additionally supplemented with related GRI indicators, within each selected issue.
In the CHAPTER
GRI
- 102-7 Scale of the reporting organization
- 103-2 Approach to management and its elements
- 103-3 Evaluation of the approach to management
- 201-1 Direct economic value generated and distributed
- 102-13 Membership in associations and organizations
- 102-40 List of stakeholder groups engaged by the reporting organization
- 102-42 Basis for identification and selection of stakeholders engaged by the organization
- 102-43 Approach do engaging stakeholders, including the frequency of engagement by stakeholder type and group
- 102-44 Key issues and concerns raised by stakeholders and the organization’s response, also by reporting them
In the CHAPTER
GRI
- 102-8 Data pertaining to employees and other persons working for the organization
- 103-2 Approach to management and its elements
- 103-3 Evaluation of the approach to management
- 404-1 Average number of hours of training per year per employee
- 404-2 Managerial skill development and continuing education programs supporting continuity of employment of employees and facilitating the retirement process
- 404-3 Percentage of employees subject to regular assessments of work quality and professional development reviews, by gender and employment category
- G4-FS16 Initiatives to enhance financial literacy by type of beneficiary
In the CHAPTER
In the CHAPTER
GRI
- 103-3 Evaluation of the approach to management
- 307-1 Cash value of penalties and total number of non-financial sanctions for non-compliance with the law and/or regulations on environmental protection
- 301-1 Raw materials/materials used by weight and volume
- 302-1 Energy consumption by the organization, taking into account the types of raw materials
- 302-4 Reduction of consumption of energy
In the CHAPTER
GRI
- 102-9 Description of the supply chain
- 102-11 Explanation of whether and how the precautionary principle is addressed by the organization
- 102-15 Description of key impacts, opportunities and risks
- 102-16 Organization’s values, code of ethics, principles and norms of behavior
- 102-17 Internal and external mechanisms making it possible to obtain advice regarding the behaviors in ethical and legal issues and issues associated with the organization’s integrity
- 103-2 Approach to management and its elements
- 103-3 Evaluation of the approach to management
- 102-5 Organization’s form of ownership and legal form
- 102-18 Organization’s supervisory structure along with the commissions that report to the highest supervisory body
- 205-1 Actions assessed in terms of threats associated with corruption
- 205-2 Communication and training on anti-corruption policies and procedures in the organization
- 206-1 Legal steps taken against the organization for cases of violating the principles of free competition and monopolistic practices
- 405-1 Composition of supervisory bodies and employees broken down into employee groups by gender, age and other diversity factors
- 406-1 Total number of discrimination cases and corrective measures taken in this regard
- 419-1 Non-compliance with the law and socio- economic regulations
In the CHAPTER
GRI
- 103-2 Approach to management and its elements
- G4-FS13 Access points to sparsely populated areas that are less economically developed
- G4-FS14 Initiatives undertaken to improve access to financial services for disfavored persons
- G4-FS15 Policies for the fair design and sale of financial products and services
- 417-1 Internal requirements concerning the labeling of products and services and information regarding them
- 417-2 Incidents of non-compliance with regulations and voluntary codes concerning the labeling of products and services and information regarding them
- 417-3 Incidents of non-compliance with regulations and voluntary codes concerning marketing communications
Read more:
- Client at the center of attention
- Innovations
- Responsible sales
- Insurance
- Banking and strategic partnerships
- Working conditions
- Employee development
- Knowledge sharing
- Enhancing safety
- Health
- Improvement of living conditions in local communities
- Our impact on the natural environment
- Practical challenges in managing direct impact
- Products and adaptation to climate change
Business model
Employee
CSR
Environment
- Ethical foundations of business operations
- Preventing corruption and conflict of interests
- Diversity and respecting human rights
- Whistleblowing system
- Transaction security
- Risk management, taking into account non-financial risk
- Risk appetite
- PZU Group’s risk profile
- Reinsurance operations
- Polish and Baltic States insurance sector compared to Europe
- Regulations pertaining to the insurance market and the financial markets in Poland
- Non-life insurance (PZU, LINK4 and TUW PZUW)
- Life insurance (PZU Życie)
- International operations
- Contribution made by the market segments to the consolidated result
Risk and ethics
Market
Business
Financial results
Read more:
- Client at the center of attention
- Employee development
- Health
- Cultural patronage
- Practical challenges in managing direct impact
- Ethical foundations of business operations
- Diversity and respecting human rights
- Whistleblowing system
- Transaction security
- Risk appetite
- PZU Group’s risk profile
- Risk vulnerability
- Capital management
Business model
Employee
CSR
Environment
Risk and ethics
Read more:
- New approach to sales
- Working conditions
- Employee development
- Diversity and respecting human rights
Business model
Employee
Risk and ethics
Read more:
- Client at the center of attention
- Medical services (Health)
- Working conditions
- Enhancing safety
- Health
Business model
Employee
CSR
- Our impact on the natural environment
- Practical challenges in managing direct impact
- Diversity and respecting human rights
- Medical services (Health)
Environment
Risk and ethics
Business
34.2 Types of hedging strategies
34.2.1. Fair value hedges
Changes in the fair value measurement of financial instruments designated as hedged items are recognized, in the part related to the hedged risk, in the profit and loss account. The remaining part of changes in the carrying amount are recognized in accordance with the general rules applicable to a given class of financial instruments.
Changes in the fair value measurement of derivatives designated as hedges in hedge accounting are recognized in full in profit and loss, in the same line item where the effect of changes in the measurement of the hedged item are recognized.
The PZU Group ceases to apply hedge accounting if the hedging instrument expires or is sold, terminated or exercised (for this purpose, the replacement or rollover of a hedging instrument into another hedging instrument is not an expiration or termination if such replacement or rollover is part of the hedging strategy), if the hedge no longer meets the hedge accounting criteria or the hedging designation is revoked.
Adjustment for hedged risk on the hedged interest item is amortized to profit and loss no later than at the moment when hedge accounting is discontinued.
Fair value hedge of fixed-coupon debt securities denominated in PLN, EUR and USD
Pekao hedges some of its interest rate risk arising from changes in the fair value of the hedged item caused by volatility of market interest rates through IRS transactions.
The table presents nominal values and interest rate of hedging instruments
Currency |
31 December 2018 Maturity | 31 December 2017 Maturity | |||||||||
| Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | ||
| Par value | PLN | - | - | 280 | 200 | 480 | 115 | - | 511 | 200 | 826 |
| Average interest rate of the fixed- rate part | - | - | 1.8 | 1.8 | 1.8 | 1.8 | - | 1.8 | 1.8 | 1.8 | |
| Par value | EUR | 262 | - | 884 | 836 | 1,982 | - | - | 1,028 | 895 | 1,923 |
| Average interest rate of the fixed- rate part | 0.2 | - | 0.9 | 0.1 | 0.5 | - | - | 0.6 | 0.2 | 0.4 | |
| Par value | USD | - | 128 | 244 | 499 | 871 | - | - | 205 | 601 | 806 |
| Average interest rate of the fixed- rate part | - | 6.9 | 4.9 | 3.7 | 4.5 | - | - | 5.6 | 2.7 | 3.4 | |
| Total | 262 | 128 | 1,408 | 1,535 | 3,333 | 115 | - | 1,744 | 1,696 | 3,555 | |
| Impact of the hedge relationship on the statement of financial position and the financial result | 31 December 2018 | 31 December 2017 | ||||
| Hedges of securities measured at | Total | Hedges of securities measured at | Total | |||
| amortized cost | fair value | amortized cost | fair value | |||
| Hedging instruments | ||||||
| Par value | 200 | 3,133 | 3,333 | 255 | 3,300 | 3,555 |
| Carrying amount – assets | - | 21 | 21 | - | 16 | 16 |
| Carrying amount – liabilities | 10 | 134 | 144 | 2 | 184 | 186 |
| Change in the fair value of the hedging instrument, on the basis of which hedge inefficiency is estimated | (8) | 49 | 41 | - | 67 | 67 |
| Hedge inefficiency amount recognized in the profit and loss account | - | 3 | 3 | - | 5 | 5 |
| Hedged items | ||||||
| Carrying amount – assets | 208 | 3,336 | 3,544 | 257 | 3,607 | 3,864 |
| Accumulated adjustment to fair value of the hedged item included in the carrying amount of the hedged item recognized in the balance sheet – assets | 9 | 125 | 134 | 1 | 221 | 222 |
| Change in value of the hedged item used as the basis for estimating hedge inefficiency | 8 | (46) | (38) | - | (63) | (63) |
| Accumulated adjustment to fair value of a hedged item remaining in the balance sheet, for those hedged items for which the balance sheet item is no longer adjusted to fair value | ||||||
34.2.2 Cash flow hedges
Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable planned transaction and could affect profit or loss.
The result of measurement of the effective part of cash flow hedges is recognized in other comprehensive income. The ineffective part of the hedge is recognized in profit or loss.
Where the interest rate risk and currency risk are hedged in’s credit and deposit portfolios, the approach to managing these portfolios allows new transactions to be added to the hedge relationship or transactions to be removed following repayment or transfer to non-performing items. As a result, the exposure of these portfolios to interest rate risk and currency risk changes constantly. Since the age structure of the portfolios changes frequently, the hedged items are designated dynamically and the hedging items are allowed to adjust to these changes.
In cash flow hedge relationships, the main identified potential sources of inefficiencies include:
- the impact of counterparty credit risk and own credit risk on the fair value of hedging instruments, i.e. interest rate swaps (IRSs), basis swaps and FX swaps, which is not reflected in the fair value of the hedged item,
- differences between the frequencies of restatement of hedging instruments and hedged loans and deposits.
34.2.2.1. Hedging of the portfolio of loan receivables from clients and variable-interest securities denominated in PLN
Pekao hedges its interest rate risks associated with the volatility of market reference rates (WIBOR) generated by the portfolio of loan receivables from clients and variable-interest securities denominated in PLN, by using interest rate swaps (IRS).
| 31 December 2018 | Currency | 31 December 2018 Maturity | 31 December 2017 Maturity | ||||||||
| Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | ||
| Par value | PLN | 1,400 | 200 | 2,800 | 4,200 | 8,600 | - | - | 3,600 | - | 3,600 |
| Average interest rate of the fixed- rate part | 3.7 | 3.5 | 3.4 | 2.6 | 3.0 | - | - | 3.7 | - | 3.7 | |
| Impact of the hedge relationship on the statement of financial position and the financial result | 31 December 2018 | 31 December 2017 |
| Hedging instruments | ||
| Par value | 8,600 | 3,600 |
| Carrying amount – assets | 262 | 200 |
| Carrying amount – liabilities | - | - |
| Change in the fair value of the hedging instrument, on the basis of which hedge inefficiency is estimated | (102) | (59) |
| Profit or loss arising out of net position hedge, captured in a separate line item of other comprehensive income | - | - |
| Hedge inefficiency amount recognized in the profit and loss account | - | - |
| Amount transferred from cash flow hedge accounting capital to the profit and loss account as reclassification adjustment | - | - |
| Hedged items | ||
| Amount equal to the change in the fair value of a hypothetical derivative representing the hedged item, which forms the basis for estimating hedge inefficiency in the period | 102 | 59 |
| Balance of the hedge accounting capital item for relations, for which hedge accounting will be continued after the end of the reporting period | 150 | 102 |
| Balance remaining in the hedge accounting capital item for those relations, to which hedge accounting is no longer applied | - | - |
34.2.2.2. Hedging of the deposit portfolio in the Polish zloty and in the Euro
Pekao hedges its interest rate risk associated with the volatility of market reference rates (WIBOR, EURIBOR) generated by the portfolios of deposits denominated in the Polish zloty and the Euro, which are economically equivalent to a long-term liability with variable interest rate, by using interest rate swaps (IRS).
| Currency | 31 December 2018 Maturity |
31 December 2017 Maturity |
|||||||||
| Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | ||
| Par value | PLN | - | - | 242 | 207 | 449 | - | 15 | - | 197 | 212 |
| Average interest rate of the fixed- rate part | - | - | 1.8 | 1.8 | 1.8 | - | 1.8 | - | 1.8 | 1.8 | |
| Par value | EUR | - | - | 659 | - | 659 | - | - | 364 | - | 364 |
| Average interest rate of the fixed- rate part | - | - | (0.3) | - | (0.3) | - | - | (0.3) | - | (0.3) | |
| Impact of the hedge relationship on the statement of financial position and the financial result | 31 December 2018 | 31 December 2017 |
| Hedging instruments | ||
| Par value | 1,108 | 576 |
| Carrying amount – assets | - | 1 |
| Carrying amount – liabilities | 16 | 2 |
| Change in the fair value of the hedging instrument, on the basis of which hedge inefficiency is estimated | (11) | 1 |
| Profit or loss arising out of net position hedge, captured in a separate line item of other comprehensive income | - | - |
| Hedge inefficiency amount recognized in the profit and loss account | - | - |
| Amount transferred from cash flow hedge accounting capital to the profit and loss account as reclassification adjustment | - | - |
| Hedged items | ||
| Amount equal to the change in the fair value of a hypothetical derivative representing the hedged item, which forms the basis for estimating hedge inefficiency in the period | 11 | (1) |
| Balance of the hedge accounting capital item for relations, for which hedge accounting will be continued after the end of the reporting period | (12) | 1 |
| Balance remaining in the hedge accounting capital item for those relations, to which hedge accounting is no longer applied | - | - |
34.2.2.3. Hedging for a variable interest rate loan portfolio in Swiss francs and a deposit portfolio in Polish zloty
Pekao hedges its exposure to interest rate risk associated with the volatility of market reference rates (WIBOR, LIBOR CHF) and its exposure to currency risk generated by portfolios of variable interest rate loans denominated in Swiss francs and deposits in Polish zloty, which are economically equivalent to long-term variable interest rate liabilities, by using cross currency basis swaps. CIRS transactions are decomposed into a component hedging the asset portfolio and a component hedging the liability portfolio.
| Currency | 31 December 2018 Maturity | 31 December 2017 Maturity | |||||||||
| Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | ||
| Par value | CHF/ PLN | - | 3,759 | 916 | 1,691 | 6,366 | - | 888 | 4,191 | 1,759 | 6,838 |
| Impact of the hedge relationship on the statement of financial position and the financial result | 31 December 2018 | 31 December 2017 |
| Hedging instruments | ||
| Par value | 6,366 | 6,838 |
| Carrying amount – assets | - | - |
| Carrying amount – liabilities | 745 | 675 |
| Change in the fair value of the hedging instrument, on the basis of which hedge inefficiency is estimated | 9 | 23 |
| Profit or loss arising out of net position hedge, captured in a separate line item of other comprehensive income | - | - |
| Hedge inefficiency amount recognized in the profit and loss account | - | - |
| Amount transferred from cash flow hedge accounting capital to the profit and loss account as reclassification adjustment | - | - |
| Hedged items | ||
| Amount equal to the change in the fair value of a hypothetical derivative representing the hedged item, which forms the basis for estimating hedge inefficiency in the period | (13) | (44) |
| Balance of the hedge accounting capital item for relations, for which hedge accounting will be continued after the end of the reporting period | (86) | (96) |
| Balance remaining in the hedge accounting capital item for those relations, to which hedge accounting is no longer applied | - | - |
34.2.2.4. Hedging of a portfolio of variable interest rate loans in EUR and term and negotiated deposits in USD
Pekao hedges its exposure to interest rate risk associated with the volatility of market reference rates (EURIBOR) and its exposure to currency risk generated by portfolios of variable interest rate loans denominated in the Euro and term and negotiated deposits in the American dollar, which are economically equivalent to long-term variable interest rate liabilities, by using FX swaps.
| Currency | 31 December 2018 Maturity | 31 December 2017 Maturity | |||||||||
| Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | ||
| Par value | EUR/ PLN | 1,634 | 688 | - | - | 2,322 | 480 | 501 | - | - | 981 |
| Average rate | 4.3 | 4.4 | - | - | 4.4 | 4.4 | 4.4 | - | - | 4.4 | |
| Par value | EUR/ USD | 804 | - | - | - | 804 | - | - | - | - | - |
| Average rate | 1.2 | - | - | - | 1.2 | - | - | - | - | - | |
| Impact of the hedge relationship on the statement of financial position and the financial result | 31 December 2018 | 31 December 2017 |
| Hedging instruments | ||
| Par value | 3,126 | 981 |
| Carrying amount – assets | 31 | 42 |
| Carrying amount – liabilities | 1 | - |
| Change in the fair value of the hedging instrument, on the basis of which hedge inefficiency is estimated | - | 2 |
| Profit or loss arising out of net position hedge, captured in a separate line item of other comprehensive income | - | - |
| Hedge inefficiency amount recognized in the profit and loss account | - | - |
| Amount transferred from cash flow hedge accounting capital to the profit and loss account as reclassification adjustment | - | - |
| Hedged items | ||
| Amount equal to the change in the fair value of a hypothetical derivative representing the hedged item, which forms the basis for estimating hedge inefficiency in the period | - | (2) |
| Balance of the hedge accounting capital item for relations, for which hedge accounting will be continued after the end of the reporting period | - | - |
| Balance remaining in the hedge accounting capital item for those relations, to which hedge accounting is no longer applied | - | - |
34.2.2.5. Hedging of a portfolio of variable interest rate loans and subordinated bonds
Alior Bank hedges its interest rate risk associated with the volatility of market reference rates (WIBOR) generated by the portfolio of loans and subordinated bonds denominated in the Polish zloty, by using interest rate swaps (IRS).
| Currency | 31 December 2018 Maturity | 31 December 2017 Maturity | |||||||||
| Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | Up to 3 months | Over 3 months up to 1 year | Over 1 year to 5 years | Over 5 years | Total | ||
| Par value | PLN | 1,750 | 275 | 5,719 | 225 | 7,969 | 2,950 | 750 | 4,694 | 225 | 8,619 |
| Average interest rate of the fixed- rate part | 1.80 | 2.74 | 2.13 | 2.84 | 2.10 | 1.76 | 2.69 | 1.96 | 2.84 | 1.98 | |
| Impact of the hedge relationship on the statement of financial position and the financial result | 31 December 2018 | 31 December 2017 |
| Hedging instruments | ||
| Par value | 7,969 | 8,619 |
| Carrying amount – assets | 112 | 88 |
| Carrying amount – liabilities | 9 | 5 |
| Change in the fair value of the hedging instrument, on the basis of which hedge inefficiency is estimated | 28 | (1) |
| Profit or loss arising out of net position hedge, captured in a separate line item of other comprehensive income | 27 | - |
| Hedge inefficiency amount recognized in the profit and loss account | 1 | (1) |
| Amount transferred from cash flow hedge accounting capital to the profit and loss account as reclassification adjustment | 15 | 7 |
| Hedged items | ||
| Amount equal to the change in the fair value of a hypothetical derivative representing the hedged item, which forms the basis for estimating hedge inefficiency in the period | (50) | (2) |
| Balance of the hedge accounting capital item for relations, for which hedge accounting will be continued after the end of the reporting period | 31 | (11) |
| Balance remaining in the hedge accounting capital item for those relations, to which hedge accounting is no longer applied | - | - |
