Notes to the Consolidated Financial Statements

Notes to the Consolidated Balance Sheet (Assets)

 

Cash and balances with central banks (Amortised Cost) Due from other banks (Amortised Cost) Loans (Amortised Cost) Debt investments (Amortised Cost) Securitised loans (Amortised Cost) Loans (Available for Sale) Equity investments (Available for Sale) Debt investments (Available for Sale) Loans (designated at Fair Value through Profit or Loss) Residential mortgages own book (designated at Fair Value through Profit or Loss) Securitised residential mortgages (designated at Fair Value through Profit or Loss) Debt investments at Fair Value through Profit or Loss (including trading)

Structured investments (designated at Fair Value through Profit or Loss) Investments in associates (designated at Fair Value through Profit or Loss) Derivative financial instruments Investments in associates (equity method) Intangible assets Property, plant and equipment Investment property Current tax Deferred tax Other assets

 

 

	Cash and balances with central banks (Amortised Cost)
14

 

In EUR millions		2008		2007
Cash and balances with central banks		1,113		874
		1,113		874

 

The amounts included in this item are available on demand. Cash and balances with central banks are interest bearing.

 

The fair value of this balance sheet item does not materially deviate from its face value, due to the short-term nature of the underlying assets.

 

	Due from other banks (Amortised Cost)
15

 

In EUR millions		2008		2007
Current accounts		625		457
Deposits with other banks		1,145		2,688
		1,770		3,145

 

In EUR millions		2008		2007
Receivable on demand		613		684
Not receivable on demand		1,157		2,461
		1,770		3,145

 

In EUR millions		2008		2007
The legal maturity analysis of the items not receivable on demand is analysed as follows:
In three months or less		1,042		2,418
In more than three months but not more than one year		12		5
In more than one year but not more than five years		103		38
Longer than five years		-		-
		1,157		2,461

 

Subordinated loans included in this item amount to EUR 0 million (2007: EUR 5 million).

 

The fair value of this balance sheet item does not materially deviate from its face value, due to the short-term nature of the underlying assets and the credit quality of the counterparties.

 

No impairments were recorded in 2008 and 2007 on the amounts Due from other banks at Amortised Cost.

 

	Loans (Amortised Cost)
16

 

In EUR millions		2008		2007
Loans to corporate entities		6,265		1,490
Public sector		38		-
		6,303		1,490

 

In EUR millions		2008		2007
The legal maturity analysis of the loans is analysed as follows:
In three months or less		335		266
In more than three months but not more than one year		175		97
In more than one year but not more than five years		2,530		423
Longer than five years		3,263		704
		6,303		1,490

 

In EUR millions		2008		2007
Impairment losses on loans:
Balance at 1 January		-		-
Impairment losses recognised:
Additional allowances		48		-
Write-offs		(7)		-
Amounts released		(14)		-
Unwinding of discount adjustment		(1)		-
		26		-
Differences due to foreign currency translation		(1)		-
Balance at 31 December		25		-

 

Impairment losses are measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate when the asset was reclassified.

 

If NIBC had fair valued the loans classified as Amortised Cost using the valuation methodology applied to Loans designated as Available for Sale as per 31 December 2008, then the balance sheet amount would decrease at the balance sheet date by EUR 432 million (2007: EUR 10 million). This decrease reflects both changes due to interest rates and credit spreads. NIBC hedges its interest rate risk from these assets.

 

The maximum credit risk exposure including undrawn credit facilities arising on Loans at Amortised Cost amounts to EUR 7,313 million (2007: EUR 2,030 million).

 

The total amount of subordinated loans in this item amounts to EUR 27 million in 2008 (2007: EUR 196 million).

 

In 2008, EUR 38 million (2007: nil) is guaranteed by the State of the Netherlands.

 

At the reclassification date 1 July 2008, the fair value of the financial assets reclassified to Loans at Amortised Cost is disclosed in the following table:

 

 

In EUR millions		Fair value on date of reclassification		Carrying value as per 31 December 2008		Fair value as per 31 December 2008
Loan portfolio reclassified from Available for Sale category		4,285		3,632		3,356

 

The effective interest rates on financial assets reclassified into Loans at Amortised Cost as at the date of reclassification - 1 July 2008 - fell approximately into the following ranges:

 

 

		Range
Loan portfolio reclassified from Available for Sale category		5% - 9%

 

Presented below are the estimated amounts of undiscounted cash flows NIBC expects to recover from the reclassified financial assets as at 1 July 2008:

 

 

In EUR millions		Less than one year		Between one and two years		Between two and five years		More than five years		Total
Loan portfolio reclassified from Available for Sale category		746		668		3,684		-		5,098

 

In the current year before reclassification (that is per 1 July 2008), NIBC recognised in the revaluation reserve in equity a fair value loss in the amount of EUR 34 million on financial assets reclassified out of the Available for Sale category into the Loans and Receivables category (the loss recognised in the revaluation reserve in equity in 2007 on Available for Sale assets reclassified in  the current period was EUR 117 million).

 

	Debt investments (Amortised Cost)
17

 

In EUR millions		2008		2007
Debt investments		738		-
		738		-

 

In EUR millions		2008		2007
Government		-		-
Other		738		-
		738		-

 

In EUR millions		2008		2007
Listed		738		-
Unlisted		-		-
		738		-

 

In EUR millions		2008		2007
The legal maturity analysis of debt investments is analysed as follows:
In three months or less		1		-
In more than three months but not more than one year		39		-
In more than one year but not more than five years		223		-
Longer than five years		475		-
		738		-

 

In EUR millions		2008		2007
The movement in debt investments may be summarised as follows:
Balance at 1 January		-		-
IAS 39 - reclassifications		838		-
Disposals (sale and redemption)		(92)		-
Exchange differences and amortisation		(8)		-
Balance at 31 December		738		-

 

No impairments were recorded in 2008 on Debt investments at Amortised Cost.

 

If NIBC had fair valued the Debt investments classified as Amortised Cost using the valuation methodology applied to Debt investments at Held for Trading or Available for Sale as per 31 December 2008, the balance sheet amount would decrease at the balance sheet date by EUR 167 million (2007: nil). This decrease reflects both changes due to interest rates and credit spreads. NIBC hedges its interest rate risk from these assets.

 

At the reclassification date 1 July 2008, the fair value of financial assets reclassified to Debt investments at Amortised Cost is disclosed in the following table:

 

 

In EUR millions		Fair value on date of reclassification		Carrying value as per 31 December 2008		Fair value as per 31 December 2008
Debt investments reclassified from:
Held for Trading category		696		601		458
Available for Sale category		142		137		112

 

The effective interest rates on financial assets reclassified into Debt investments at Amortised Cost as at the date of reclassification - 1 July 2008 - fell approximately into the following ranges:

 

 

		Range
Debt investments reclassified from:
Held for Trading category		1% - 20%
Available for Sale category		5% - 8%

 

Presented below are the estimated amounts of undiscounted cash flows NIBC expects to recover from the reclassified financial assets as at 1 July 2008:

 

 

In EUR millions		Less than one year		Between one and two years		Between two and five years		More than five years		Total
Debt investments reclassified from:
Held for Trading category		33		67		270		590		960
Available for Sale category		6		24		43		124		197

 

	Securitised loans (Amortised Cost)
18

 

In EUR millions		2008		2007
Loans to corporate entities		630		638
		630		638

 

In EUR millions		2008		2007
The legal maturity analysis of the securitised loans is analysed as follows:
In three months or less		7		-
In more than three months but not more than one year		-		-
In more than one year but not more than five years		-		-
Longer than five years		623		638
		630		638

 

In EUR millions		2008		2007
The movement in securitised loans may be summarised as follows:
Balance at 1 January		638		-
Additions		6		638
Disposals (sale and redemption)		(14)		-
Balance at 31 December		630		638

 

If NIBC had fair valued the Securitised loans classified as Amortised Cost using the valuation methodology applied to Loans designated as Available for Sale as per 31 December 2008, then the balance sheet amount would decrease at the balance sheet date by EUR 136 million (2007: EUR 25 million). The fair value reflects movements due to both interest rate changes and credit spread changes. NIBC hedges its interest rate risk from these assets.

 

The maximum credit risk exposure including undrawn credit facilities arising on Securitised loans at Amortised Cost amounts to EUR 630 million (2007: EUR 638 million).

 

No impairments were recorded in 2008 and 2007 on Securitised loans at Amortised Cost.

 

	Loans (Available for Sale)
19

 

In EUR millions		2008		2007
Loans to corporate entities		-		5,409
Loans to public sector		-		59
		-		5,468

 

In EUR millions		2008		2007
The legal maturity analysis of the loans is analysed as follows:
In three months or less		-		535
In more than three months but not more than one year		-		337
In more than one year but not more than five years		-		2,144
Longer than five years		-		2,452
		-		5,468

 

In EUR millions		2008		2007
Impairment losses on loans:
Balance at 1 January		66		83
Impairment losses recognised:
Additional allowances		34		15
Write-offs		(4)		(8)
Amounts released		(11)		(14)
Unwinding of discount adjustment		(3)		(5)
		82		71
Differences due to foreign currency translation		(3)		(5)
Impact IAS 39 amendments		(79)		-
Balance at 31 December		-		66

 

Impairment losses are defined as the difference between the fair value of loans that exhibit indicators of impairment and original cost.

 

The maximum credit risk exposure including undrawn credit facilities arising on Loans recognised as Available for Sale amounts to EUR 0 million (2007: EUR 6,622 million).

 

The total amount of subordinated loans in this item amounts to EUR 0 million (2007: EUR 141 million), of which EUR 0 million (2007: EUR 59 million) is guaranteed by the State of the Netherlands.

 

The total amount of Loans in the Available for Sale category has been reclassified to the Loans category at Amortised Cost as at 1 July 2008.

 

	Equity investments (Available for Sale)
20

 

In EUR millions		2008		2007
Equity investments		108		144
		108		144

 

In EUR millions		2008		2007
Listed		15		18
Unlisted		93		126
		108		144

 

In EUR millions		2008		2007
The movement in equity investments may be summarised as follows:
Balance at 1 January		144		185
Additions		72		37
Disposals (sale and capital repayments)		(14)		(49)
Changes in fair value		(35)		(28)
Impairment		(59)		(1)
Balance at 31 December		108		144

 

In EUR millions		2008		2007
Impairment losses on equity investments:
Balance at 1 January		15		17
Impairment losses recognised:
Additional allowances		65		1
Foreign currency revaluation		(5)		-
Write-offs		(1)		(3)
Balance at 31 December		74		15

 

Impairment losses are defined as the difference between the fair value of equity investments that exhibit indicators of impairment and original cost.

 

	Debt investments (Available for Sale)
21

 

In EUR millions		2008		2007
Debt investments		35		311
		35		311

 

In EUR millions		2008		2007
Government		-		-
Other		35		311
		35		311

 

In EUR millions		2008		2007
Listed		27		273
Unlisted		8		38
		35		311

 

In EUR millions		2008		2007
The legal maturity analysis of debt investments is analysed as follows:
In three months or less		-		-
In more than three months but not more than one year		-		-
In more than one year but not more than five years		7		15
Longer than five years		28		296
		35		311

 

In EUR millions		2008		2007
The movement in debt investments may be summarised as follows:
Balance at 1 January		311		-
Additions		54		323
Disposals (sale and redemption)		(178)		(4)
IAS 39 - reclassifications		(113)		-
Impairments		(7)		-
Changes in fair value		(32)		(8)
Balance at 31 December		35		311

 

The changes in fair value in the table above reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the Balance Sheet.

 

At the reclassification date 1 July 2008 the fair value of financial assets reclassified to Debt investments at Available for Sale is disclosed in the following table:

 

 

In EUR millions		Fair value on date of reclassification		Carrying value as per 31 December 2008		Fair value as per 31 December 2008
Debt investments reclassified from Held for Trading category		28		9		9

 

The effective interest rates on financial assets reclassified into Debt investments at Available for Sale as at the date of reclassification - 1 July 2008 - fell approximately into the following ranges:

 

 

		Range
Debt investments reclassified from Held for Trading category		13% - 26%

 

Presented below are the estimated amounts of undiscounted cash flows NIBC expects to recover from the reclassified financial assets as at 1 July 2008:

 

 

In EUR millions		Less than one year		Between one and two years		Between two and five years		More than five years		Total
Debt investments reclassified from Held for Trading category		7		6		24		24		61

	Loans (designated at Fair Value through Profit or Loss)
22

 

In EUR millions		2008		2007
Loans to corporate entities		1,136		1,374
		1,136		1,374

 

In EUR millions		2008		2007
The legal maturity analysis of loans is analysed as follows:
In three months or less		9		-
In more than three months but not more than one year		-		8
In more than one year but not more than five years		728		53
Longer than five years		399		1,313
		1,136		1,374

 

In EUR millions		2008		2007
The movement in loans may be summarised as follows:
Balance at 1 January		1,374		952
Additions		-		450
Disposals		(190)		-
Changes in fair value		(48)		(28)
Balance at 31 December		1,136		1,374

 

The changes in fair value in the table above reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the Balance Sheet.

 

Interest income from loans is recognised in Interest and similar income based on the effective interest rate. Fair value movements excluding interest are recognised in Net trading income.

 

The portion of fair value changes in 2008 included in the balance sheet amount (designated at Fair Value through Profit or Loss) as at 31 December 2008 relating to the movement in credit spreads amounts to EUR 49 million credit, being a reduction in the balance sheet carrying amount (2007: EUR 28 million).

 

The maximum credit risk exposure including undrawn credit facilities amounts to EUR 1,136 million (2007: EUR 1,740 million).

 

	Residential mortgages own book (designated at Fair Value through Profit or Loss)
23

 

In EUR millions		2008		2007
Residential mortgages own book		6,201		5,285
		6,201		5,285

 

In EUR millions		2008		2007
The legal maturity analysis of the residential mortgages own book is analysed as follows:
In three months or less		15		11
In more than three months but not more than one year		18		14
In more than one year but not more than five years		107		87
Longer than five years		6,061		5,173
		6,201		5,285

 

In EUR millions		2008		2007
The movement in the residential mortgages own book may be summarised as follows:
Balance at 1 January		5,285		4,438
Additions (including repurchases from consolidated SPEs)		1,547		2,633
Disposals (sale and redemption, including replenishment of consolidated SPEs)		(902)		(1,746)
Changes in fair value		271		(40)
Balance at 31 December		6,201		5,285

 

The changes in fair value in the table above reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the Balance Sheet.

 

Interest income from Residential mortgages own book is recognised in Interest and similar income based on the effective interest rate. Fair value movements (excluding interest) are recognised in Net trading income.

 

The maximum credit exposure including committed but undrawn facilities is EUR 6,283 million (2007: EUR 5,524 million).

 

At 31 December 2008, EUR 797 million (2007: EUR 964 million) of credit protection by means of a guarantee structured in a synthetic securitisation (Provide Orange) was in place in connection with NIBC’s Residential mortgages own book.

 

	Securitised residential mortgages (designated at Fair Value through Profit or Loss)
24

 

In EUR millions		2008		2007
Securitised residential mortgages		5,250		6,356
		5,250		6,356

 

In EUR millions		2008		2007
The legal maturity analysis of the securitised residential mortgages is analysed as follows:
In three months or less		1		2
In more than three months but not more than one year		1		2
In more than one year but not more than five years		10		17
Longer than five years		5,238		6,335
		5,250		6,356

 

In EUR millions		2008		2007
The movement in the securitised residential mortgages may be summarised as follows:
Balance at 1 January		6,356		6,988
Additions		50		1,160
Disposals (sale and redemption including sales to own book)		(1,389)		(1,603)
Changes in fair value		233		(189)
Balance at 31 December		5,250		6,356

 

The changes in fair value in the table above reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the Balance Sheet.

 

At 31 December 2008, Securitised residential mortgages in the amount of EUR 5,250 million (2007: EUR 6,356 million) were pledged as collateral for NIBC’s own liabilities (see note 50).

 

Interest income from Securitised residential mortgages is recognised in Interest and similar income at the effective interest rate. Fair value movements (excluding interest) are recognised in Net trading income.

 

The maximum credit exposure is EUR 5,250 million (2007: EUR 6,356 million).

 

The portion of fair value changes in 2008 included in the balance sheet amount (designated as Fair Value through Profit or Loss) as at 31 December 2008 relating to the movement in credit spreads on Residential mortgages own book (note 23) and Securitised residential mortgages (note 24) amounts to EUR 58 million credit, being a reduction in the balance sheet carrying amount (2007: EUR 112 million credit).

 

The change in fair value in 2008 was determined by a discount spread basis point value calculation, which is based on a number of parameters such as the composition of the mortgage portfolio sorted by loan to value class and fixed rate period, the spread widening observed in the mortgage offer rates, the prepayment rates and the level of the interest rates.

 

The aggregate difference yet to be recognised in the profit or loss between transaction prices at initial recognition and the fair value determined by a valuation model at 31 December 2008 amounts to a liability of EUR 28 million (2007: nil).

 

Securitised residential mortgages are retained on NIBC’s Balance Sheet based on the risks and rewards NIBC retains in the SPEs issuing the mortgage backed notes. Risks and rewards can be retained by NIBC by (amongst others) retaining issued notes, providing overcollateralisation to the SPEs or implementing reserve accounts in the SPEs. At the balance sheet date, NIBC retained EUR 48 million (2007: EUR 75 million) of notes issued by the SPEs, overcollateralisation provided to the SPEs amounted to
EUR 34 million (2007: EUR 28 million) and reserve accounts amounted to EUR 9 million (2007: EUR 15 million).

 

	Debt investments at Fair Value through Profit or Loss (including trading)
25

 

In EUR millions		2008		2007
Held for Trading (non-government)		98		1,374
Designated as Fair Value through Profit or Loss		634		955
		732		2,329

 

In EUR millions		2008		2007
Debt investments held for trading can be categorised as follows:
Listed		98		1,325
Unlisted		-		49
		98		1,374

 

In 2008, EUR 696 million has been reclassified out of the Held for Trading category to Debt investments at Amortised Cost and EUR 29 million has been reclassified to Debt investments at Available for Sale.

 

 

In EUR millions		2008		2007
Debt investments designated at fair value through profit or loss can be categorised as follows:
Government		-		356
Other		634		599
		634		955

 

In EUR millions		2008		2007
Listed		606		771
Unlisted		28		184
		634		955

 

In EUR millions		2008		2007
The legal maturity analysis of the debt investments designated as fair value through profit or loss is analysed as follows:
In three months or less		-		155
In more than three months but not more than one year		12		133
In more than one year but not more than five years		583		439
Longer than five years		39		228
		634		955

 

In EUR millions		2008		2007
The movement of the debt investments designated as fair value through profit or loss may be summarised as follows:
Balance at 1 January		955		1,723
Additions		249		675
Disposals (sale and redemption)		(532)		(1,344)
Exchange differences		(8)		(36)
Changes in fair value		(30)		(63)
Balance at 31 December		634		955

 

The changes in fair value in the table above reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the Balance Sheet.

 

The portion of fair value changes in 2008 included in the balance sheet amount (designated as Fair Value through Profit or Loss) relating to the movement in credit spreads amounts to EUR 2 million credit, being a reduction in the balance sheet carrying amount (2007: EUR 4 million credit).

 

Interest income from Debt investments is recognised in Interest and similar income at the effective interest rate until the date of reclassification. Fair value movements (excluding interest) have been recognised in Net trading income.

 

	Structured investments (designated at Fair Value through Profit or Loss)
26

 

In EUR millions		2008		2007
Structured investments		1,079		1,212
		1,079		1,212

 

In EUR millions		2008		2007
The legal maturity analysis of the structured investments is analysed as follows:
In three months or less		67		70
In more than three months but not more than one year		555		371
In more than one year but not more than five years		457		618
Longer than five years		-		153
		1,079		1,212

 

In EUR millions		2008		2007
The movement of the structured investments may be summarised as follows:
Balance at 1 January		1,212		914
Additions		491		587
Disposals		(640)		(290)
Changes in fair value		13		18
Exchange differences		3		(17)
Balance at 31 December		1,079		1,212

 

The changes in fair value in the table above reflect movements due to both interest rate changes and credit spread changes. As NIBC hedges its interest rate risk from these assets, the movement due to interest rate changes is compensated elsewhere in the Balance Sheet.

 

All Structured investments are unlisted instruments.

 

Dividends received from Structured investments are recognised in Dividend income. Fair value movements (excluding interest) are recognised in Net trading income.

 

The portion of fair value changes in 2008 included in the balance sheet amount (designated as Fair Value through Profit or Loss) relating to the movement in credit spreads amounts to EUR 2 million debit, being an increase in the balance sheet carrying amount (2007: EUR 5 million credit).

 

	Investments in associates (designated at Fair Value through Profit or Loss)
27

 

In EUR millions		2008		2007
Investments in associates		188		147
		188		147

 

In EUR millions		2008		2007
The movement in investments in associates may be summarised as follows:
Balance at 1 January		147		-
Additions		83		69
Disposals		(18)		-
Changes in fair value		(24)		78
Balance at 31 December		188		147

 

All of these associates are unlisted instruments and are held by the venture capital organisation within the operating segment Merchant Banking.

 

	Derivative financial instruments
28

 

In EUR millions		2008		2007
Derivative financial assets
Derivative financial assets Held for Trading (trading portfolios)		2,508		2,041
Derivative financial assets Held for Trading (other portfolios)		629		600
Derivative financial assets used for hedging		215		85
		3,352		2,726
Derivative financial liabilities
Derivative financial liabilities Held for Trading (trading portfolios)		2,914		1,786
Derivative financial liabilities Held for Trading (other portfolios)		525		588
Derivative financial liabilities used for hedging		42		53
		3,481		2,427

 

Derivative financial instruments - Held for Trading (trading portfolios) at 31 December 2008
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
Interest rate derivatives
OTC-products:
Forward rate agreements		750		-		-		750		3		16
Interest rate swaps		10,993		10,639		59,757		81,389		1,940		2,382
Interest rate options (purchase)		-		42		685		727		13		-
Interest rate options (sale)		11		91		619		721		-		12
Subtotal		11,754		10,772		61,061		83,587		1,956		2,410
Currency derivatives
OTC-products:
Currency/cross currency swaps		-		1,180		2,308		3,488		504		460
Subtotal		-		1,180		2,308		3,488		504		460
Other derivatives (including credit derivatives)
OTC-products:
Other swaps		-		14		967		981		12		23
Other options (purchase)		-		10		153		163		36		-
Other options (sale)		-		10		153		163		-		21
Subtotal		-		34		1,273		1,307		48		44
Total derivatives held for trading (trading portfolios)		11,754		11,986		64,642		88,382		2,508		2,914

 

Derivative financial instruments - Held for Trading (trading portfolios) at 31 December 2007
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
Interest rate derivatives
OTC-products:
Forward rate agreements		8,925		12,975		-		21,900		35		39
Interest rate swaps		14,463		11,353		58,623		84,439		959		918
Interest rate options (purchase)		-		33		749		782		9		-
Interest rate options (sale)		2		28		675		705		-		13
Subtotal		23,390		24,389		60,047		107,826		1,003		970
Currency derivatives
OTC-products:
Currency/cross currency swaps		1		3,546		2,894		6,441		937		742
Subtotal		1		3,546		2,894		6,441		937		742
Other derivatives (including credit derivatives)
OTC-products:
Other swaps		131		20		1,742		1,893		5		8
Other options (purchase)		103		52		267		422		96		-
Other options (sale)		36		24		176		236		-		66
Subtotal		270		96		2,185		2,551		101		74
Total derivatives held for trading (trading portfolios)		23,661		28,031		65,126		116,818		2,041		1,786

 

Derivative financial instruments - Held for Trading (other portfolios) at 31 December 2008
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
Interest rate derivatives
OTC-products:
Interest rate swaps		133		265		3,754		4,152		335		474
Subtotal		133		265		3,754		4,152		335		474
Currency derivatives
OTC-products:
Forward rate agreements		45		61		89		195		6		6
Interest currency rate swaps		2,538		77		300		2,915		280		39
Other currency contracts		32		57		111		200		-		3
Subtotal		2,615		195		500		3,310		286		48
OTC-products:
Credit default swaps (guarantees given)		18		22		89		129		1		2
Credit default swaps (guarantees received)		-		-		27		27		-		1
Other currency contracts		5		12		78		95		7		-
Subtotal		23		34		194		251		8		3
Total derivatives held for trading (other portfolios)		2,771		494		4,448		7,713		629		525

 

Derivative financial instruments - Held for Trading (other portfolios) at 31 December 2007
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
Interest rate derivatives
OTC-products:
Interest rate swaps		1,033		1,276		13,285		15,594		373		372
Subtotal		1,033		1,276		13,285		15,594		373		372
Currency derivatives
OTC-products:
Forward rate agreements		18		374		145		537		85		85
Interest currency rate swaps		2,883		705		2,009		5,597		117		99
Other currency contracts		4		48		183		235		-		5
Subtotal		2,905		1,127		2,337		6,369		202		189
OTC-products:
Credit default swaps (guarantees given)		39		104		316		459		20		1
Credit default swaps (guarantees received)		17		103		255		375		5		26
Subtotal		56		207		571		834		25		27
Total derivatives held for trading (other portfolios)		3,994		2,610		16,193		22,797		600		588

 

Fair value hedges of interest rate risk

The following table discloses the fair value of the swaps designated in fair value hedging relationships.

 

 

In EUR millions			2008		2007
Fair value pay - fixed swaps (hedging assets)	assets		12		11
Fair value pay - fixed swaps (hedging assets)	liabilities		(29)		(18)
			(17)		(7)
Fair value pay - floating swaps (hedging liabilities)	assets		97		38
Fair value pay - floating swaps (hedging liabilities)	liabilities		(13)		(36)
			84		2

Cash flow hedges of interest rate risk

The following table discloses the fair value of the swaps designated in cash flow hedging relationships.

 

 

In EUR millions			2008		2007
Fair value receive - fixed swaps	assets		107		36
Fair value receive - fixed swaps	liabilities		-		-
			107		36
Fair value receive - floating swaps	assets		-		-
Fair value receive - floating swaps	liabilities		-		-
			-		-

 

The average remaining maturity (in which the related cash flows are expected to enter into the determination of profit or loss) is 4 years (2007: 4 years).

 

Derivative financial instruments - Used for hedging at 31 December 2008
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
Derivatives accounted for as fair value hedges of interest rate risk
OTC-products:
Interest rate swaps		285		1,374		4,912		6,571		69		41
Interest currency rate swaps		807		99		731		1,637		39		1
Subtotal		1,092		1,473		5,643		8,208		108		42
Derivatives accounted for as cash flow hedges of interest rate risk
OTC-products:
Interest rate swaps		-		-		429		429		107		-
Subtotal		-		-		429		429		107		-
Total derivatives used for hedging		1,092		1,473		6,072		8,637		215		42

 

Derivative financial instruments - Used for hedging at 31 December 2007
in EUR millions		Notional amount with remaining life of						Total		Assets		Liabilities
		Less than three months		Between three months and one year		More than one year
Derivatives accounted for as fair value hedges of interest rate risk
OTC-products:
Interest rate swaps		430		173		2,326		2,929		33		33
Interest currency rate swaps		7		65		243		315		16		20
Subtotal		437		238		2,569		3,244		49		53
Derivatives accounted for as cash flow hedges of interest rate risk
OTC-products:
Interest rate swaps		-		-		407		407		36		-
Subtotal		-		-		407		407		36		-
Total derivatives used for hedging		437		238		2,976		3,651		85		53

 

Hedging activities

 

Portfolio fair value hedge of plain vanilla funding

According to NIBC’s Hedging Policy, NIBC should not be exposed to interest rate risk from its fixed rate plain vanilla funding activities above certain limits prescribed by the ALCO. Consequently, NIBC uses interest rate swaps to hedge the fair value interest rate risk arising on this fixed rate funding. To mitigate any accounting mismatches, NIBC has defined a portfolio fair value hedge for the fixed rate plain vanilla funding and corresponding hedging transactions.

 

The hedged risk is the benchmark interest rate (interbank offered rates up to one year and swap rates for periods longer than one year) for the currency in question.

 

The net fair value of the derivative financial instruments designated as hedging instruments in these relationships at 31 December 2008 was EUR 45 million debit (2007: EUR 6 million debit). The gains on the hedging instruments were EUR 39 million (2007: EUR 1 million). The losses on the hedged item attributable to the hedged risk were EUR 42 million (2007: EUR 2 million).

 

Micro fair value hedge of plain vanilla funding

According to NIBC’s Hedging Policy, NIBC should not be exposed to interest rate and foreign exchange risk from its fixed rate plain vanilla funding activities above certain limits prescribed by ALCO. Consequently, NIBC uses cross currency interest rate swaps to hedge the fair value interest rate risk and foreign exchange risk arising on this fixed rate funding. To mitigate any accounting mismatches, NIBC has defined a micro fair value hedge for fixed rate plain vanilla funding and corresponding hedging transactions.

 

The hedged risk is the benchmark interest rate (interbank offered rates up to one year and swap rates for periods longer than one year) for the currency in question.

 

The net fair value of the derivative financial instruments designated as hedging instruments in these relationships at 31 December 2008 was EUR 38 million debit (2007: EUR 3 million credit). The gains on the hedging instruments were EUR 38 million (2007: loss of EUR 1 million). The losses on the hedged item attributable to the hedged risk were EUR 39 million (2007: gain of EUR 1 million).

 

Portfolio fair value hedge of loans

According to NIBC’s Hedging Policy, NIBC should not be exposed to interest rate risk from its corporate loan activities above certain limits as set by ALCO. Consequently, NIBC uses interest rate swaps to hedge the fair value interest rate risk arising from these fixed rate loans. To mitigate any accounting mismatches, NIBC has defined a portfolio fair value hedge for the fixed rate loan and corresponding hedging transactions.

 

The hedged risk is the benchmark interest rate (interbank offered rates up to one year and swap rates for periods longer than one year) for the currency in question.

 

The net fair value of the derivative financial instruments designated as hedging instruments in these hedge relationships at 31 December 2008 was EUR 17 million credit (2007: EUR 7 million credit). The losses on the hedging instruments were EUR 7 million (2007: gain of EUR 3 million). The gains on the hedged item attributable to the hedged risk were EUR 6 million (2007: loss of EUR 4 million).

 

Cash flow hedges

NIBC has classified a large part of its corporate loans as Loans and Receivables at Amortised Cost and previously at Available for Sale. Therefore, variability in the cash flows of the floating rate corporate loans is accounted for in future periods, when the coupons are recorded in the Income Statement on an amortised cost basis. Interest rate swaps are used to hedge the floating cash flows of its floating corporate loans. These swaps are classified at Fair Value through Profit or Loss. This  accounting mismatch creates volatility in the Income Statement of NIBC. Therefore NIBC applies hedge accounting on these positions. Hedge accounting is applied to all swaps that are used to hedge the cash flow risk of the floating corporate loans by defining a macro cash flow hedge relationship with the floating corporate loans.

 

The variability in interest cash flows arising on floating rate corporate loans is hedged on a portfolio basis with interest rate swaps that receive fixed and pay floating (generally 1, 3 and 6 months floating rates). The highly probable cash flows being hedged relate both to the highly probable cash flows on outstanding corporate loans and to the future reinvestment of these cash flows. NIBC does not hedge the variability of future cash flows of corporate loans arising from changes in credit spreads.

 

Interest rate swaps with a net fair value of EUR 107 million debit (2007: EUR 36 million debit) were designated in a cash flow hedge relationship. The cash flow on the hedged item will be reported in income over the next 10 years. In 2008, the ineffectiveness recognised in the Income Statement that arose from cash flow hedges was a gain of EUR 7 million (2007: gain of EUR 3 million).

 

There were no transactions in respect of which cash flow hedge accounting had to be ceased in 2008 or 2007 as a result of the highly probable cash flows no longer being expected to occur.

 

The amount that was recognised in equity during the year 2008 is EUR 67 million credit (2007: EUR 1 million credit). The amount that was removed from equity and included in the Income Statement in 2008 was a EUR 13 million gain (2007: gain of EUR 16 million).

 

Net investment hedge

NIBC hedges part of the currency translation risk arising on its net investments in foreign operations by using foreign currency debt as a hedging instrument. Debt amounting to USD 236 million (2007: USD 231 million) was designated as a  hedging instrument, and gave rise to currency losses for the year 2008 of EUR 6 million (2007: EUR 18 million), which were recognised in the translation reserve component of equity. No ineffectiveness was recognised in the Income Statement arising from hedges of net investments in foreign operations. No amounts were withdrawn from equity during the year (2007: nil), as there were no disposals of foreign operations that were included in the net investment hedge.

 

Derivative financial instruments

The following tables present the derivative financial instruments that will be settled on a net basis into relevant maturity classes based on the contractual maturity date as at 31 December 2008 and 2007. The amounts disclosed in the tables are the contractual undiscounted cash flows.

 

Derivatives, as per 31 December 2008
in EUR millions		Less than three months		Between three months and one year		One to five years		Five years or more		Total
DERIVATIVES HELD FOR TRADING
FX forward
Inflow		-		-		-		-		-
Outflow		-		-		-		-		-
Interest rate derivatives
Inflow		1,295		2,452		6,855		4,567		15,169
Outflow		(1,387)		(2,529)		(6,896)		(4,072)		(14,884)
Credit derivatives
Inflow		1		4		8		-		13
Outflow		(1)		(4)		(7)		-		(12)
DERIVATIVES USED FOR HEDGING
FX forward
Inflow		2,451		84		91		-		2,626
Outflow		(2,263)		(84)		(91)		-		(2,438)
Interest rate derivatives
Inflow		153		89		295		202		739
Outflow		(134)		(71)		(205)		(155)		(565)
Credit derivatives
Inflow		-		-		-		-		-
Outflow		-		-		-		-		-
Total Inflow		3,900		2,629		7,249		4,769		18,547
Total Outflow		(3,785)		(2,688)		(7,199)		(4,227)		(17,899)

 

Derivatives, as per 31 December 2007
in EUR millions		Less than three months		Between three months and one year		One to five years		Five years or more		Total
DERIVATIVES HELD FOR TRADING
FX forward
Inflow		-		-		-		-		-
Outflow		-		-		-		-		-
Interest rate derivatives
Inflow		877		5,919		9,840		5,984		22,620
Outflow		(847)		(5,786)		(9,710)		(5,566)		(21,909)
Credit derivatives
Inflow		2		9		29		5		45
Outflow		(3)		(11)		(36)		(10)		(60)
DERIVATIVES USED FOR HEDGING
FX forward
Inflow		3,122		376		145		-		3,643
Outflow		(3,091)		(375)		(145)		-		(3,611)
Interest rate derivatives
Inflow		23		57		365		164		609
Outflow		(24)		(57)		(328)		(152)		(561)
Credit derivatives
Inflow		-		-		-		-		-
Outflow		-		-		-		-		-
Total Inflow		4,024		6,361		10,379		6,153		26,917
Total Outflow		(3,965)		(6,229)		(10,219)		(5,728)		(26,141)

 

	Investments in associates (equity method)
29

 

In EUR millions		2008		2007
Investments in associates		40		44
		40		44

 

In EUR millions		2008		2007
the movement in investments in associates may be summarised as follows:
Balance at 1 January		44		23
Purchases and additional payments		1		25
Disposals		(6)		(2)
Share in result of associates		7		1
Dividend received		(6)		-
Impairments		-		(3)
Balance at 31 December		40		44

 

At the end of 2008 and 2007, all investments in associates were unlisted.

 

There are no significant restrictions on the ability of associates to transfer funds to the investor in the form of cash dividends, or repayment of loans.

 

There is no unrecognised share of losses of an associate, both for the period and cumulatively.

 

See note 54 for further details on Investments in associates.

 

	Intangible assets
30

 

In EUR millions		2008		2007
Intangible assets		44		-
		44		-

 

In EUR millions		2008		2007
Intangible assets related to non-financial companies included in the consolidation may be summarised as follows:
Cost		47		-
Accumulated amortisation		(3)		-
		44		-

 

In EUR millions		Goodwill		Trademarks and licences		Customer relationships		Order backlog		Total
The movement in intangible assets may be summarised as follows:
Balance at 1 January 2008		-		-		-		-		-
Acquisition of subsidiaries		20		4		19		4		47
Amortisation		-		(1)		(1)		(1)		(3)
Balance at 31 December 2008		20		3		18		3		44

 

The accumulated amortisation as at 31 December 2008 is EUR 3 million (2007: nil). Amortisation of EUR 3 million is included in Depreciation and amortisation in the Income Statement.

 

Intangible assets pledged as security for liabilities are nil for both 2008 and 2007.

 

Goodwill acquired in business combinations is reviewed annually at 31 December for impairment or more frequently when there are indications that impairments may have occurred, by comparing the recoverable amount of each cash generating unit to which goodwill has been allocated with its carrying value. NIBC recognised goodwill of EUR 20 million and other intangible assets of EUR 27 million following the preliminary allocation of fair values arising on new business combinations in 2008. For further information see note 49.

 

 

In EUR millions		2008		2007
Goodwill has been allocated to the group of cash generating units as follows:
Non-financial companies included in the consolidation		20		-
		20		-

 

No impairments were recorded in 2008 on Intangible assets.

 

	Property, plant and equipment
31

 

In EUR millions		2008		2007
Land and buildings		61		65
Other fixed assets		5		7
		66		72
Land and buildings from non-financial companies		6		-
Other fixed assets from non-financial companies		30		-
		36		-
		102		72

 

In EUR millions		2008		2007
The movement in property, plant and equipment may be summarised as follows:
Balance at 1 January		72		81
Additions		7		8
Acquired in business combinations		37		-
Depreciation		(14)		(17)
Balance at 31 December		102		72

 

In 2008, EUR 8 million in the depreciation line relates to non-financial companies included in the consolidation 2007: nil).

 

 

In EUR millions		2008		2007
The accumulated deprecation of property, plant and equipment can be categorised as follows:
Land and buildings		32		28
Other fixed assets		17		14
		49		42
Land and buildings from non-financial companies		-		-
Other fixed assets from non-financial companies		8		-
		8		-
		57		42

 

Buildings in use by NIBC are insured for EUR 81 million (2007: EUR 63 million). Other fixed assets are insured for EUR 90 million (2007: EUR 26 million). Other fixed assets of the non-financial companies included in the consolidation are insured for EUR 55 million.

 

In 2008, EUR 36 million of Land and buildings and Other fixed assets from the non-financial companies included in the consolidation are pledged as security for liabilities (2007: not applicable).

 

In 2008, capital expenditure contracted for related to non-financial companies included in the consolidation amounts to EUR 5 million (2007: not applicable). An amount of EUR 2 million is recognised in the carrying amount of Property, plant and equipment in the course of construction at 31 December 2008.

 

NIBC’s Land and buildings in own use were last revalued as of 31 December 2006 based on an external appraisal carried out in January 2007.  

 

	Investment property
32

 

In EUR millions		2008		2007
Land and buildings		30		1
		30		1

 

In 2008, Investment property is insured for EUR 12.5 million (2007: nil).

 

 

In EUR millions		2008		2007
The movement in investment property may be summarised as follows:
Balance at 1 January		1		8
Additions resulting from acquisition		30		1
Disposals		(1)		(8)
Balance at 31 December		30		1

 

Investment property is stated at fair value. The fair value at 31 December 2008 is based upon various external appraisals, which were made prior to the acquisition of the properties in the fourth quarter of 2007 and in 2008 on the basis that there have been no material changes in the fair value of the investment property since the acquisition date. This balance sheet item also includes acquired property of EUR 2 million (2007: EUR 1 million) from work-out and restructuring activities related to residential mortgages.

 

The amount recognised in profit or loss is EUR 1 million (2007: nil), concerning rental income. 

 

	Current tax
33

 

In EUR millions		2008		2007
Current tax		6		40
		6		40

 

It is expected that the Current Tax balance will be settled within 12 months.

 

	Deferred tax
34

 

Deferred tax is calculated on all temporary differences under the liability method using a nominal tax rate of 25.5% in 2008 (2007: 25.5%).

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

 

 

In EUR millions		2008		2007
The offset amounts are as follows:
Deferred tax assets		-		-
Deferred tax liabilities		39		4

 

In EUR millions		2008		2007
The amounts of deferred income tax assets, without taking into consideration the offsetting of balances within the same jurisdiction, is as follows:
Loans (Available for Sale)		21		18
Debt investments (Available for Sale)		6		2
		27		20
The amounts of deferred income tax liabilities, without taking into consideration the offsetting of balances within the same jurisdiction, is as follows:
Equity investments (Available for Sale)		3		3
Cash flow hedges		26		12
Property		9		9
Temporary differences as a result of internal securitisations		28		-
		66		24
		(39)		(4)

 

Internal securitisations mainly relate to SPEs, which are consolidated in the Financial Statements, but not included in the fiscal unity of NIBC.

 

 

in EUR millions		2008		2007
The gross movement on the deferred income tax account may be summarised as follows:
Balance at 1 January		(4)		(57)
Employee benefit obligations
(Charged)/credited to the Income Statement		-		(3)
Loans (Reported as Available for Sale)
Fair value remeasurement (charged)/credited to revaluation reserve		4		44
Fair value hedges through revaluation reserve		(1)		(1)
Changes in tax rates		-		2
Debt investments (Reported as Available for Sale)
Fair value remeasurement (charged)/credited to revaluation reserve		4		2
Property reported at fair value:
(Charged)/credited to the Income Statement		-		1
Changes in tax rate		-		1
Equity investments (reported as Available for Sale)
Fair value remeasurement (charged)/credited to revaluation reserve		-		2
Cash flow hedges
Fair value remeasurement (charged)/credited to hedging reserve		(14)		4
Changes in tax rate		-		1
Temporary differences as a result of internal securitisations		(28)		-
Balance at 31 December		(39)		(4)

 

The recovery period for the deferred tax assets is estimated at 3.5 years.

 

Tax losses of EUR 3 million (2007: EUR 5 million) have not been tax recognised because it is not probable that these losses can be utilised. These unrecognised tax losses have no expiry date.

 

	Other assets
35

 

In EUR millions		2008		2007
Interest		20		84
Other accruals and receivables		37		69
Other assets related to non financial companies included in the consolidation		23		-
		80		153

 

The decrease of interest in 2008 reflects the transfer of interest accrued on loans to the relevant items in the Balance Sheet.

 

The fair value of this balance sheet item does not materially deviate from its face value, due to the short-term nature of its related assets. 

 

 

In EUR millions		2008		2007
Other assets related to non-financial companies included in the consolidation can be categorised as follows:
Inventories (less provision for obsolence)		18		-
Trade receivables (less provisions for doubtful debt)		4		-
Other		1		-
		23		-