Page 97 - 86395_CCB - 2024 Annual Report (web)

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20 Other assets and prepayments
£’000 2024 2023

Other debtors 173 184
Cash Ratio Deposit * – 1,311
Prepayments 1,270 1,031

Corporation tax 689 –
Total 2,132 2,526
* The cash ratio deposit is no longer required

21 Derivatives

Derivatives include all derivative assets and liabilities
that are not classified as trading assets or liabilities.
The Bank has designated its derivatives as fair value
hedges to reduce volatility in the income statement.
Where a derivative financial instrument meets
the requirements of a fair value hedge, changes
in the fair value of the hedged item are taken to
the income statement offsetting the effect of the
related movements in the fair value of the derivative.
As at 31 December 2024, the Bank had £64.8m
nominal value of derivatives (2023: £9m), all related
to the hedging of fixed rate loans (2023: fixed rate
deposit balances).
Nominal value Fair value

£’000 2024 2023 2024 2023
• Fair value hedges
Instrument
type Where a derivative financial instrument is
designated as a hedge of the variability in fair
Interest rate value of a recognised asset or liability, or an
derivatives 64,798 9,000 149 (652) unrecognised firm commitment, all changes in
the fair value of the derivative are recognised
Designated
in fair value immediately in the income statement. To the
hedges extent to which the hedge is effective, the
carrying value of the hedged item is adjusted by
Total interest the change in fair value that is attributable to the
rate derivatives 64,798 9,000 149 (652) risk being hedged (even if it is normally carried at
cost or amortised cost) and any gains or losses
Under IFRS 9 the Bank is not required to undertake on measurement are recognised immediately in
a monthly retrospective test for hedge effectiveness the income statement (even if those gains would
as it can demonstrate the critical terms of the hedge normally be recognised directly in reserves).
instrument and the hedged item are matched.
On the discontinuance of a hedge, any adjustment
On initial designation of the hedge, the Bank
made to the carrying amount of the hedged item
documents the relationship between the hedging
because of the fair value hedge relationship, is
instruments and the hedged items, including the
recognised in the income statement over the
risk management objective, together with the
remaining life of the hedged item.
method that will be used to assess the effectiveness
of the hedging relationship. The Bank makes an The Bank uses interest rate swaps to minimise
assessment, at inception of whether the hedging Interest Rate Risk exposure in specific periods
instruments are expected to be highly effective in by hedging the Interest Rate Risk associated
offsetting the changes in the fair value or cash flows with fixed rate loans and in prior periods fixed
of the hedged items during the period in which the rate deposit balances. The terms of the hedged
hedge is designated. On a monthly basis the Bank items and hedging instrument are aligned to
must be able to continue to demonstrate that the minimise hedge ineffectiveness arising. Hedge
critical terms of the derivative and the hedged item ineffectiveness, the difference between the
continue to be closely aligned to conclude that the hedging gains or losses of the hedging instrument
relationship remains highly effective. All the Bank’s and the hedged item recognised in the income
hedging relationships are currently fair value hedges. statement was £nil (2023: £nil charge).