Derivatives
(i) Forward Rate Agreement/ Interest Rate Swap: Following details are required to be disclosed with respect to Forward Rate Agreement/Interest Rate Swap:
a) Notional principal of swap agreements,
b) Losses which would be incurred if counterparties failed to fulfill their obligations under the agreements,
c) Collateral required by the bank upon entering into swaps,
d) Concentration of credit risk arising from the swaps (for e.g. exposures to particular industries or swaps with highly geared companies) and,
e) Fair value of the swap book.
(ii) Nature and terms of the swaps including information on credit and market risk and the accounting policies adopted for recording the swaps should be disclosed.
(iii) Examples of concentration could be exposures to particular industries or swaps with highly geared companies.
(iv) If the swaps are linked to specific assets, liabilities, or commitments, the fair value would be the estimated amount that the bank would receive or pay to terminate the swap agreements as on the balance sheet date. For a trading swap the fair value would be its mark to market value.
(v) Exchange Traded Interest Rate Derivatives: With respect to Exchange Traded Interest Rate Derivatives instrument-wise disclosure of Notional principal amount of Exchange Traded Interest Rate Derivatives undertaken during the year, derivatives outstanding as on March 31, derivatives outstanding and not “highly effective” should be disclosed. Mark-to-market value of exchange traded interest rate derivatives outstanding and not “highly effective instrument-wise should also be disclosed.