2019 Universal registration document and annual financial report - BNP PARIBAS 181

4Consolidated finanCial statements for the year ended 31 deCemBer 2019

4

Notes to the financial statements

3.c NET GAIN ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Net gain on financial instruments measured at fair value through profit or loss includes all profit and loss items relating to financial instruments held for trading, non-trading equity instruments that the Group did not choose to measure at fair value through equity, financial instruments that the Group has designated as at fair value through profit or loss, as well as debt instruments whose cash flows are not solely repayments of principal

and interest on the principal or whose business model is not to collect cash flows nor to collect cash flows and sell the assets.

These income items include dividends on these instruments and exclude interest income and expense from financial instruments designated as at fair value through profit or loss and instruments whose cash flows are not only repayments of principal and interest on the principal or whose business model is not to collect cash flows nor to collect cash flows and sell the assets, which are presented in Net interest income (note 3.a).

In millions of euros Year to

31 Dec. 2019 Year to

31 Dec. 2018

Financial instruments held for trading 11,768 (1,470)

Interest rate and credit instruments 7,489 1,975

Equity financial instruments 3,562 (2,926)

Foreign exchange financial instruments 2,203 1,432

Loans and repurchase agreements (1,573) (1,126)

Other financial instruments 87 (825)

Financial instruments designated as at fair value through profit or loss (5,217) 6,756

Other financial instruments at fair value through profit or loss 585 533

Debt instruments 5 (38)

Equity instruments 580 571

Impact of hedge accounting (25) (11)

Fair value hedging derivatives 1,014 134

Hedged items in fair value hedge (1,039) (145)

NET GAIN ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 7,111 5,808

Gains and losses on financial instruments designated as at fair value through profit or loss are mainly related to instruments which changes in value may be compensated by changes in the value of economic hedging derivative financial instruments in the trading book.

Net gains on the trading book in 2019 and 2018 include a non-material amount related to the ineffective portion of cash flow hedges.

Potential sources of ineffectiveness can be the differences between hedging instruments and hedged items, notably generated by mismatches in the terms of hedged and hedging instruments, such as

the frequency and timing of interest rates resetting, the frequency of payment and the discounting factors, or when hedging derivatives have a non-zero fair value at inception date of the hedging relationship. Credit valuation adjustments applied to hedging derivatives are also sources of ineffectiveness.

Cumulated changes in fair value related to discontinued cash flow hedge relationships, previously recognised in equity and included in 2019 profit and loss account were not material, whether the hedged item ceased to exist or not.