The Board has authorized the use of derivative instruments for the purpose of supporting the strategic and operational business activities of the Group and reducing the risk of loss arising from changes in interest rates and exchange rates. All use of derivative instruments within the Group is to hedge risk exposure, and the Group takes no trading positions in derivatives.
For the purpose of reducing interest rate risk and currency risk, the Group uses a number of derivative instruments. These comprise interest rate swaps, interest rate options, forward rate agreements, interest rate and bond futures, currency swaps and forward foreign exchange contracts.
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The benefits of using off-balance sheet derivative instruments are measured by examining the anticipated consequences of not hedging the perceived risk in terms of revenue or capital loss.
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So, not only are derivatives a good thing, there are even more benefits to having them off the balance sheet …
