2019 Universal registration document and annual financial report - BNP PARIBAS200
4 Consolidated finanCial statements for the year ended 31 deCemBer 2019
4
Notes to the financial statements
In millions of euros
31 December 2019
Positive market value Negative market value
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Interest rate derivatives 139 146,656 1,362 148,157 132 128,927 1,352 130,411
Foreign exchange derivatives 1 59,948 223 60,172 1 57,518 239 57,758
Credit derivatives 8,400 259 8,659 8,871 371 9,242
Equity derivatives 6,871 17,235 1,374 25,480 7,885 21,327 6,629 35,841
Other derivatives 426 4,140 253 4,819 319 4,079 235 4,633
DERIVATIVE FINANCIAL INSTRUMENTS NOT USED FOR HEDGING PURPOSES 7,437 236,379 3,471 247,287 8,337 220,722 8,826 237,885
DERIVATIVE FINANCIAL INSTRUMENTS USED FOR HEDGING PURPOSES - 12,452 - 12,452 - 14,116 - 14,116
In millions of euros
31 December 2018
Positive market value Negative market value
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Interest rate derivatives 158 115,046 1,234 116,438 118 101,967 1,367 103,452
Foreign exchange derivatives 1 69,182 331 69,514 1 68,520 240 68,761
Credit derivatives 6,527 346 6,873 6,616 455 7,071
Equity derivatives 11,724 19,057 2,643 33,424 11,092 22,633 5,694 39,419
Other derivatives 990 5,468 188 6,646 1,133 5,628 340 7,101
DERIVATIVE FINANCIAL INSTRUMENTS NOT USED FOR HEDGING PURPOSES 12,873 215,280 4,742 232,895 12,344 205,364 8,096 225,804
DERIVATIVE FINANCIAL INSTRUMENTS USED FOR HEDGING PURPOSES - 9,810 - 9,810 - 11,677 - 11,677
Transfers between levels may occur when an instrument fulfils the criteria defined, which are generally market and product dependent. The main factors influencing transfers are changes in the observation capabilities, passage of time, and events during the transaction lifetime. The timing of recognising transfers is determined at the beginning of the reporting period.
During the year ended 2019, transfers between Level 1 and Level 2 were not significant.
Description of main instruments in each level
The following section provides a description of the instruments in each level in the hierarchy. It describes notably instruments classified in Level 3 and the associated valuation methodologies.
For main trading book instruments and derivatives classified in Level 3, further quantitative information is provided about the inputs used to derive fair value.
Level 1 This level encompasses all derivatives and securities that are listed on exchanges or quoted continuously in other active markets.
Level 1 includes notably equity securities and liquid bonds, shortselling of these instruments, derivative instruments traded on organised markets (futures, options ). It includes shares of funds and UCITS, for which the net asset value is calculated on a daily basis, as well as debt representative of shares of consolidated funds held by third parties.
Level 2 The Level 2 stock of securities is composed of securities which are less liquid than the Level 1 bonds. They are predominantly government bonds, corporate debt securities, mortgage backed securities, fund shares and short-term securities such as certificates of deposit. They are classified in Level 2 notably when external prices for the same security can be regularly observed from a reasonable number of market makers that are active in this security, but these prices do not represent directly tradable prices. This comprises amongst other, consensus pricing services with a reasonable number of contributors that are active market makers as well as indicative runs from active brokers and/or dealers. Other sources such as primary issuance market, collateral valuation and counterparty collateral valuation matching may also be used where relevant.
Repurchase agreements are classified predominantly in Level 2. The classification is primarily based on the observability and liquidity of the repo market, depending on the underlying collateral and the maturity of the repo transaction.
