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Interest rate risk

Interest rate risk

Interest rate risk results from the exposure of the Group’s financial performance and equity to adverse changes in interest rates.

The Group’s interest rate risk is managed at the level of the Bank as the risk assumed by the subsidiaries is immaterial considering the nature of their business.

The interest rate risk arises from:

The Bank adapts its interest rate risk management to the type and scale of its business. Interest rate risk in the Bank may be related to the banking book and to the trading book.

The objective of interest rate risk management is to build a structure of assets and liabilities ensuring protection of the present value and net interest income of the Bank for the banking book and to obtain financial benefits through transactions on interest rate instruments concluded on own account in the trading book, with the accepted interest rate risk level.

Interest rate risk management in the Bank is based on written policies and procedures, which define the methods of:

Interest rate risk related to the banking book is measured and monitored with the use of such risk measures as:

Interest rate risk related to the Trading Book is measured and monitored with the use of such risk measures as:

Additionally, the Bank performs stress tests involving sensitivity analysis and examining the effects of interest rate changes on the present value of risk-exposed items based on specified changes in the yield curve, and the effects of changes in interest rates on net interest income of the Group. Under stress tests, the Bank measures its exposure using a variety of interest rate risk scenarios, among others assuming:

For the purpose of calculating the Banking Book risk measures, the current value of loans and deposits is determined based on reference rates arising from revaluation dates and liquidity adjustment excluding the commercial margin realized on each product. Additionally, stress tests for downward curve shift purposes are based on the assumption that interest on items sensitive to interest rate risk shall not drop below 0%.

The following tables present the interest rate risk level for the banking book (BPV and stress tests).



The following table presents a change in annual net interest income with the rate change by +/-100 b.p. and balance sheet assumed to be stable. The analysis is based on the following assumptions:


In 2016, Bank’s trading activities regarding interest rates were limited to transactions on Polish treasury securities denominated in PLN. The Bank did not conclude speculative derivative transactions on its own behalf or derivative transactions with its clients. In 2016 the Bank held no open speculative interest rate positions at day closing.

The following table presents BPV for the trading book.