2018 Registration document and annual fi nancial report - BNP PARIBAS 213
4CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
4
Notes to the fi nancial statements
In estimating sensitivities, BNP Paribas either remeasured the fi nancial 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 specifi c 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 2018 IFRS 9 & IFRS 15
1 January 2018 IFRS 9 & IFRS 15
Potential impact on income
Potential impact on equity
Potential impact on income
Potential impact on equity
Asset Backed Securities (ABS) +/-2
Other debt securities +/-9 +/-2 +/-10
Equities and other equity securities +/-40 +/-8 +/-41 +/-8
Loans and repurchase agreements +/-25 +/-19
Derivative fi nancial instruments +/-593 +/-552
Interest rate and foreign exchange derivatives +/-365 +/-357
Credit derivatives +/-59 +/-35
Equity derivatives +/-167 +/-155
Other derivatives +/-2 +/-5
SENSITIVITY OF LEVEL 3 FINANCIAL INSTRUMENTS +/-667 +/-10 +/-624 +/-8
Deferred margin on financial instruments measured using techniques developed internally and based on inputs partly unobservable in active markets
Deferred margin on fi nancial instruments ( Day One Profi t ) only concerns the scope of market activities eligible for Level 3.
The day one profi t is calculated after setting aside valuation adjustments for uncertainties as described previously and released to profi t 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 profi t or loss as a reduction in the fair value of the relevant transactions.
In millions of euros Deferred margin at
1 January 2018
Deferred margin on transactions during
the year
Margin taken to the proļ¬ t and loss account
during the year Deferred margin at
31 December 2018
Interest rate and foreign exchange derivatives 309 117 (124) 302
Credit derivatives 96 66 (70) 92
Equity derivatives 276 208 (217) 267
Other derivatives 5 15 (7) 13
Derivative fi nancial instruments 686 406 (418) 674
