2020 Universal registration document and annual financial report - BNP PARIBAS 219
4Consolidated finanCial statements for the year ended 31 deCemBer 2020
4
Notes to the financial statements
In estimating sensitivities, BNP Paribas either remeasured the financial instruments using reasonably possible inputs, or applied assumptions based on the valuation adjustment policy.
For the sake of simplicity, the sensitivity on cash instruments that are not relating to securitised instruments was based on a uniform 1% shift in the price. More specific shifts were however calibrated for each class of the Level 3 securitised exposures, based on the possible ranges of the unobservable inputs.
For derivative exposures, the sensitivity measurement is based on the credit valuation adjustment (CVA), the explicit funding valuation adjustment (FVA) and the parameter and model uncertainty adjustments related to Level 3.
Regarding the credit valuation adjustment (CVA) and the explicit funding valuation adjustment (FVA), the uncertainty was calibrated based on prudent valuation adjustments described in the technical standard Prudent Valuation published by the European Banking Authority. For other valuation adjustments, two scenarios were considered: a favourable scenario where all or portion of the valuation adjustment is not considered by market participants, and an unfavourable scenario where market participants would require twice the amount of valuation adjustments considered by BNP Paribas for entering into a transaction.
In millions of euros
31 December 2020 31 December 2019
Potential impact on income
Potential impact on equity
Potential impact on income
Potential impact on equity
Debt securities +/-5 +/-3 +/-6 +/-3
Equities and other equity securities +/-48 +/-8 +/-46 +/-9
Loans and repurchase agreements +/-13 +/-11
Derivative financial instruments +/-620 +/-621
Interest rate and foreign exchange derivatives +/-360 +/-394
Credit derivatives +/-49 +/-53
Equity derivatives +/-199 +/-171
Other derivatives +/-12 +/-3
SENSITIVITY OF LEVEL 3 FINANCIAL INSTRUMENTS +/-686 +/-11 +/-684 +/-12
Deferred margin on financial instruments measured using techniques developed internally and based on inputs partly unobservable in active markets
Deferred margin on financial instruments ( Day One Profit ) primarly concerns the scope of financial instruments eligible for Level 3 and to a lesser extent some financial instruments eligible for level 2 where
valuation adjustments for uncertainties regarding parameters or models are not negligible compared to the initial margin.
The day one profit is calculated after setting aside valuation adjustments for uncertainties as described previously and released to profit or loss over the expected period for which the inputs will be unobservable. The unamortised amount is included under Financial instruments at fair value through profit or loss as a reduction in the fair value of the relevant transactions.
In millions of euros Deferred margin at
31 December 2019
Deferred margin on transactions
during the period
Margin taken to the profit and loss account
during the period Deferred margin at 31 December 2020
Interest rate and foreign exchange derivatives 269 79 (104) 244
Credit derivatives 126 189 (141) 174
Equity derivatives 380 554 (520) 414
Other instruments 14 42 (45) 11
Financial instruments 789 864 (810) 843
