7.3.2.3. INTEREST RATE RISK

Interest rate risk is defined as the risk of the Group’s financial results being adversely affected by changes in interest rates.

 

The Group is exposed to interest rate risk primarily in connection with its:

Cash and cash equivalents (bank deposits) (Note 5.4.);

Financing liabilities (Note 5.2.);

• CCIRS and IRS not designated for hedge accounting (Note 7.2.).

Market risk (currency and interest rate risk) is monitored by the Group through sensitivity analysis and VaR measurement. VaR (value at sk) means that the maximum loss arising from a change in the market (fair) value will not exceed that value over the next n business days, given a specified probability level (e.g. 99%). VaR is estimated using the variance-covariance method. VaR is estimated using the variance-covariance method.

Items bearing variable-rate interest expose the Group to the risk of interest rate movements causing changes in cash flows associated with a given item by affecting interest income/expense recognised in profit or loss. Items bearing fixed-rate interest expose the Group to the risk of fair value changes. However, since the items are measured at amortised cost (save for derivatives), any such change has no impact on their carrying amounts or on profit or loss.

The table below presents key items exposed to interest rate risk, and an analysis of the Group’s sensitivity to interest rate movements affecting items bearing variable-rate interest, which the Group considers reasonably possible as at the reporting date.