Liquidity risk is the risk that the Group is unable to meet all of its financial obligations as and when they fall due. Liquidity risk arises from differences in timing between cash inflows and outflows.

23.1 Liquidity risk management process

The Group's liquidity risk management process, as carried out within the Group and monitored by a separate team in NAMA Treasury, includes:

• Management of NAMA's day-to-day liquidity and funding requirements so as to ensure that it will meet all obligations as they fall due: these include future lending commitments, interest on liabilities, collateral posting, day-to-day operating costs fees and expenses.
• Asset and Liability management; by monitoring the maturity profile within the Group's statement of financial position to ensure that sufficient cash resources are retained and or funding established where mismatches are likely to occur, thereby minimising the impact of liquidity outflows.

Monitoring and reporting takes the form of cash flow measurement and projections for periods of one week to one year with the planning process covering periods beyond one year. The NTMA Risk unit independently produces liquidity forecasts that are provided monthly to the Risk Management Committee and Board. All projections include a 'stressed' forecast to cater for prolonged periods of uncertainty. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected repayment date of the financial assets.

The key liquidity risk for the Group is the funding of the senior debt securities (securities) issued by NAMA as consideration for 95% of the value of acquired assets. The securities in issue permit the issuer (where the issuer has not received a Holder Physical Delivery Rejection Notice) to physically settle all, or some only, of the securities at maturity by issuing a new security on the same terms as the existing security (other than as to maturity which may be up to 364 days from the date of issue, notwithstanding that the existing security may have had a shorter maturity).

In May 2011, the Board, on receipt of a direction, issued under Section 14 of the Act, from the Minister, resolved to remove the extendible maturity option from the NAMA senior debt securities (see Note 28).

All of the securities which matured on 1 March 2012 were physically settled by issuing new securities with a maturity of 1 March 2013 and subsequent to the reporting date, all securities which matured on 1 March 2013 were physically settled by issuing new securities with a maturity of 1 March 2014.

23.2 Non-derivative cash flows

The following table presents the cash flows payable by the Group and the Agency on foot of its non-derivative financial liabilities by remaining contractual maturities at the reporting date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative cash flows Group 31 December 2012	0-6 months €'000	6-12 months €'000	Total €'000
Liabilities
Amounts due to Participating Institutions	36,423	-	36,423
Senior debt securities in issue	25,485,747	-	25,485,747
Other liabilities	31,696	-	31,696
Tax payable	1,627	-	1,627
Total liabilities	25,555,493	-	25,555,493
Assets held for managing liquidity risk	3,643,754	-	3,643,754

Non-derivative cash flows Group 31 December 2011	0-6 months €'000	6-12 months €'000	Total €'000
Liabilities
Amounts due to Participating Institutions	60,224	-	60,224
Senior debt securities in issue	29,275,298	-	29,275,298
Other liabilities	51,491	-	51,491
Tax payable	2,147	-	2,147
Total liabilities	29,389,160	-	29,389,160
Assets held for managing liquidity risk	3,846,733	-	3,846,733

Non-derivative cash flows Agency 31 December 2012	0-6 months €'000	6-12 months €'000	Total €'000
Liabilities
Interest bearing loans and borrowings	53,320	-	53,320
Other liabilities	10,027	-	10,027
Total liabilities	63,347	-	63,347

Non-derivative cash flows Agency 31 December 2011	0-6 months €'000	6-12 months €'000	Total €'000
Liabilities
Interest bearing loans and borrowings	52,720	-	52,720
Other liabilities	4,040	-	4,040
Total liabilities	56,760	-	56,760

Assets available to meet all of the liabilities and to cover outstanding loan commitments include cash and cash equivalents, term deposits and financial assets available for sale.

23.3 Derivative cash flows

The Group's derivatives that will be settled on a net basis include:

Interest rate derivatives:

• interest rate swaps,
• forward rate agreements,
• over the counter (OTC) interest rate options,
• other interest rate contracts.

The following table analyses the Group's derivative financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Group 31 December 2012	0-6 months €'000	6-12 months €'000	1-5 years €'000	Over 5 years €'000	Total €'000
Interest rate derivatives – where hedge accounting does not apply	22,415	50,957	64,855	65,480	203,707
Interest rate derivatives – where hedge accounting is applied	14,630	(243,986)	(569,396)	-	(798,752)
Total	37,045	(193,029)	(504,541)	65,480	(595,045)

Group 31 December 2011	0-6 months €'000	6-12 months €'000	1-5 years €'000	Over 5 years €'000	Total €'000
Interest rate derivatives – where hedge accounting does not apply	28,047	16,703	117,714	96,744	259,208
Interest rate derivatives – where hedge accounting is applied	95,958	(121,537)	(281,729)	491	(306,817)
Total	124,005	(104,834)	(164,015)	97,235	(47,609)

(b) Derivatives settled on a gross basis

The Group's derivatives that will be settled on a gross basis include:

• Foreign exchange derivatives: currency forwards, currency swaps; and
• Cross currency interest rate swaps.

The following table analyses the Group's derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Group 31 December 2012	0-6 months €'000	6-12 months €'000	1-5 years €'000	Total €'000
Foreign exchange derivatives:
− Outflow	(278,839)	-	-	(278,839)
− Inflow	286,418	-	-	286,418
Cross-currency interest rate derivatives:
− Outflow	(1,476,882)	(1,274,185)	(3,376,786)	(6,127,853)
− Inflow	1,355,716	1,201,691	3,225,750	5,783,157
Total outflow	(113,587)	(72,494)	(151,036)	(337,117)

Group 31 December 2011	0-6 months €'000	6-12 months €'000	1-5 years €'000	Total €'000
Foreign exchange derivatives:
− Outflow	(2,647,026)	-	-	(2,647,026)
− Inflow	2,526,741	-	-	2,526,741
Cross-currency interest rate derivatives:
− Outflow	(393,182)	(920,238)	(4,841,907)	(6,155,327)
− Inflow	387,560	907,200	4,663,260	5,958,020
Total outflow	(125,907)	(13,038)	(178,647)	(317,592)

23.4 Loan commitments

The dates of the contractual amounts of the Group's financial instruments that commit it to extend credit to customers and other credit facilities, are summarised in the following table. This amount includes commitments already in existence at acquisition of the loans and further commitments given since transfer of loan assets to the Group.

Group 31 December 2012	No later than 1 year €'000	1-5 years €'000	Over 5 years €'000	Total €'000
Commitments to lend	45,927	424,375	13,199	483,501
Overdrafts	12,009	-	-	12,009
Guarantees and letters of credit acquired	3,790	-	-	3,790
Total	61,726	424,375	13,199	499,300

Group 31 December 2011	No later than 1 year €'000	1-5 years €'000	Over 5 years €'000	Total €'000
Commitments to lend	93,077	100,229	36,131	229,437
Overdrafts	6,495	-	-	6,495
Guarantees and letters of credit acquired	11	3,864	-	3,875
Total	99,583	104,093	36,131	239,807

The Agency has no loan commitments.