National Asset Management Agency - Annual Report 2013

Group

Note
2013
€'000
2012
€'000
Foreign exchange translation (losses) / gains on loans and receivables 20 (193,043) 216,051
Unrealised foreign exchange gain / (losses) on derivative financial instruments 208,206 (61,708)
Realised foreign exchange losses on currency derivative financial instruments (104,623) (255,374)
Foreign exchange gains on cash 172 1,467
Other foreign exchange (losses) / gains (48) 132
Total foreign exchange (losses) / gains (89,336) (99,432)

Foreign exchange translation gains on loans and receivables arise on the revaluation of foreign currency denominated loans and receivables. Foreign currency translation amounts are recognised in accordance with accounting policy 2.5.

Foreign exchange gains and losses on derivatives arise from market movements that affect the value of foreign currency derivatives at the reporting date. On a cumulative basis since 2010, NAMA has recorded a realised foreign exchange loss on these derivatives of €220m (2012: €115m). This cumulative net cost is akin to an "insurance" cost of protecting NAMA from the impact of foreign exchange rate fluctuations.

Following the transfer of assets from Participating Institutions, the Group entered into currency derivatives to reduce its exposure to exchange rate fluctuations arising on foreign currency denominated loans and receivables acquired. The gain or loss on derivative products comprises realised and unrealised gains and losses. Realised and unrealised gains are recognised in accordance with accounting policy 2.15. Currency derivatives are explained in more detail in Note 19.