Liquidity risk
Liquidity risk is the risk that insufficient funds are available to meet financial commitments. FMO's policy is to have matched funding, that is the tenor of its funding is matched to its assets, in order to reduce liquidity risk. The liquidity policy is based on a three pillar approach. This policy ensures: (i) that the maturity mismatch is limited to €500 million (cash outflow) per bucket and that the refinancing risk is limited to €250 million per bucket; (ii) that FMO has sufficient cash, liquidity buffers and access to emergency lines to survive a stress period, where the funding market is totally closed for 6 months and; (iii) that FMO's funding sources are well diversified in terms of geography and instrument type. The policy is managed by a model which places forecasted cash flows into time buckets. The net cash flows per bucket are tested against the limits.
FMO traditionally has a conservative liquidity policy and funding strategy that is well suited to the business it does. Stress tests are conducted on FMO's liquidity position at least once a month to ensure this conservative position is maintained. In the case of a crisis there are various sources of emergency liquidity available. FMO's first buffer for liquidity is its bond portfolio. This can be used as collateral to obtain short-term loans from the ECB. Secondly a committed facility from a highly rated bank is available.
The liquidity position is well within FMO's limits and even under various stress tests the liquidity position is still within limits. Nevertheless liquidity remains a key point for the ALCO, Risk Management and Treasury. A continuous review is performed on the liquidity position, FMO's assumptions, internal expectations and external market conditions to ensure that FMO's liquidity overview remains relevant and accurate.
The following table shows the categorization of the balance sheet per maturity bucket. For those instruments that have a fixed cash flow schedule, undiscounted cash flows are shown, including interest cash flows. For all other instruments the balance sheet amounts are shown. Expected cash flows resulting from irrevocable facilities being drawn are not included in the liquidity gap. In the aforementioned stress scenario the irrevocable facilities are included.
Categorization of the balance sheet per maturity bucket
|
At December 31, 2011
|
< 3 months
|
3-12 months
|
1-5 years
|
>5 years
|
Maturity undefined
|
Total
|
Assets
|
|
|
|
|
|
|
|
Banks
|
42,114
|
-
|
-
|
-
|
-
|
42,114
|
|
Short-term deposits
|
482,883
|
-
|
-
|
-
|
15,750
|
498,633
|
|
Derivative financial instruments
|
-900
|
21,571
|
259,194
|
63,722
|
-
|
343,587
|
|
Loans to the private sector
|
104,392
|
368,810
|
1,733,578
|
737,735
|
-
|
2,944,515
|
|
Loans guaranteed by the State
|
6,022
|
10,549
|
53,665
|
4,084
|
-
|
74,320
|
|
Equity investments
|
-
|
-
|
-
|
-
|
753,366
|
753,366
|
|
Investments in associates
|
-
|
-
|
-
|
-
|
42,073
|
42,073
|
|
Interest-bearing securities
|
50,857
|
89,864
|
479,456
|
109,535
|
-
|
729,712
|
|
Tangible fixed assets
|
-
|
-
|
-
|
-
|
9,383
|
9,383
|
|
Deferred income tax assets
|
-
|
-
|
-
|
-
|
3,682
|
3,682
|
|
Current income tax receivables
|
4,560
|
-
|
-
|
-
|
-
|
4,560
|
|
Other receivables
|
32,896
|
-
|
-
|
-
|
-
|
32,896
|
|
Accrued income
|
82,116
|
-
|
-
|
-
|
-
|
82,116
|
Total assets
|
804,940
|
490,794
|
2,525,893
|
915,076
|
824,254
|
5,560,957
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
Short-term credits
|
20,780
|
243,493
|
-
|
-
|
296,880
|
561,153
|
|
Derivative financial instruments
|
-967
|
9,491
|
65,073
|
3,263
|
-
|
76,860
|
|
Debt securities
|
3,459
|
24,595
|
1,318,998
|
-
|
-
|
1,347,052
|
|
Debentures and notes
|
62,564
|
179,428
|
961,070
|
214,457
|
-
|
1,417,519
|
|
Other liabilities
|
-
|
-
|
-
|
-
|
14,188
|
14,188
|
|
Current accounts with State funds and other programs
|
624
|
-
|
-
|
-
|
-
|
624
|
|
Wage tax liabilities
|
1,846
|
-
|
-
|
-
|
-
|
1,846
|
|
Deferred income tax liabilities
|
-
|
-
|
-
|
-
|
4,501
|
4,501
|
|
Accrued liabilities
|
55,099
|
-
|
-
|
-
|
-
|
55,099
|
|
Provisions
|
-
|
-
|
-
|
-
|
16,193
|
16,193
|
|
Shareholders' equity
|
-
|
-
|
-
|
-
|
1,664,590
|
1,664,590
|
Total liabilities and shareholders' equity
|
143,405
|
457,007
|
2,345,141
|
217,720
|
1,996,352
|
5,159,625
|
Liquidity gap 2011
|
661,535
|
33,787
|
180,752
|
697,356
|
-1,172,098
|
401,332
|
|
At December 31, 2010
|
< 3 months
|
3-12 months
|
1-5 years
|
>5 years
|
Maturity undefined
|
Total
|
|
Total assets
|
597,158
|
466,976
|
2,340,809
|
820,399
|
703,066
|
4,928,408
|
|
Total liabilities and shareholders' equity
|
159,970
|
278,002
|
1,858,552
|
369,270
|
1,794,204
|
4,459,998
|
Liquidity gap 2010
|
437,188
|
188,974
|
482,257
|
451,129
|
-1,091,138
|
468,410
|
The tables below are based on the final availability date of the contingent liabilities and irrevocable facilities.
Contractual maturity of contingent liabilities and irrevocable facilities
|
At December 31, 2011
|
< 3 months
|
3-12 months
|
1-5 years
|
>5 years
|
Maturity undefined
|
Total
|
|
Contingent liabilities
|
36,515
|
-14,340
|
3,721
|
6,186
|
-
|
32,082
|
|
Irrevocable facilities
|
145,371
|
249,442
|
403,666
|
390,277
|
-
|
1,188,756
|
Total off-balance1)
|
181,886
|
235,102
|
407,387
|
396,463
|
-
|
1,220,838
|
|
At December 31, 2010
|
< 3 months
|
3-12 months
|
1-5 years
|
>5 years
|
Maturity undefined
|
Total
|
|
Contingent liabilities2)
|
60,126
|
1,390
|
2,576
|
19,146
|
-
|
83,238
|
|
Irrevocable facilities2)
|
145,840
|
307,461
|
290,051
|
393,564
|
-
|
1,136,918
|
Total off-balance1)
|
205,966
|
308,851
|
292,627
|
412,710
|
-
|
1,220,156
|