NOTE 7. (LOSSES) / GAINS ON DERIVATIVE FINANCIAL INSTRUMENTS
Group |
2012 €'000 |
2011 €'000 |
|---|---|---|
| Fair value (losses) / gains on derivatives acquired from borrowers | (52,525) | 90,479 |
| Fair value gains / (losses) on other derivatives | 8,538 | (81,689) |
| Hedge ineffectiveness adjustment (Note 34) | 7,721 | 15,908 |
| Valuation adjustment on due diligence completion | (1,673) | (386) |
| Total (losses) / gains on derivative financial instruments | (37,939) | 24,312 |
Fair value movements on derivatives are driven by market movements that occurred during the year. The fair value of these swaps are impacted by changes in Euribor rates and borrower derivatives performance levels. Further information on derivative financial instruments is provided in Note 18.
(Losses) / gains on derivatives acquired from borrowers comprise fair value movements on derivatives acquired from borrowers that were associated with the loans acquired. Other derivatives hedge NAMA's interest rate risk exposure arising from derivatives acquired from debtors. Hedge accounting has not been applied on these derivatives.
In 2010 a fair value loss of €30.4m in respect of derivatives that are now designated in hedge relationships was included in fair value losses on other derivatives. This loss is amortised to the cash flow hedge reserve as hedge ineffectiveness over the remaining life of the derivatives. At the reporting date cumulative hedge ineffectiveness of €23.6m is recognised in the cashflow hedge reserve, current year hedge ineffectiveness is €7.7m (2011: €15.9m).
There are no derivatives in the Agency.