CFM INDOSUEZ Wealth Management - 2019 annual report

The fair value is the price that would be received to sell an asset or paid to transfer a liability in a standard arm’s length transaction between market participants at the measurement date. The fair value is based on the exit price (notional exit price). The fair value amounts shown below represent the estimates made at the reporting date primarily using observable market data. These may change in other periods due to changing market conditions or other factors. The calculations made represent the best estimate that can be made. They are based on a number of assumptions. It is assumed that market participants act in their best economic interest. To the extent that these models involve uncertainties, the fair values used may not materialise during the actual sale or immediate payment of the financial instruments in question. The fair value hierarchy of financial assets and liabilities is broken down according to the general criteria of observability of the inputs used in the valuation, in accordance with the principles established by IFRS 13. Level 1 of the hierarchy applies to the fair value of financial assets and liabilities quoted on an active market. Level 2 of the hierarchy applies to the fair value of financial assets and liabilities for which observable data are available. These include inputs related to interest rate risk or credit risk when this can be reassessed based on Credit Default Swap (CDS) spread prices. Securities received under reverse repurchase agreements with underlying assets quoted on an active market are also included in level 2, as are financial assets with a demand component for which the fair value is the unadjusted amortised cost. Level 3 of the hierarchy shows the fair value of financial assets and liabilities for which there are no observable data or for which certain inputs can be re-assessed based on internal models that use historical data. These are primarily related to credit risk or prepayment risk. In a number of cases, market values are close to the book value. These notably include: - variable rate assets or liabilities for which changes in interest rates do not have a significant influence on fair value, since the rates of these instruments frequently adjust to market rates; - instruments traded in a regulated market (e.g. regulated savings products), whose prices are set by the public authorities; - short-term assets or liabilities for which the redemption value is deemed to be close to market value; - assets or liabilities repayable on demand; - transactions for which there are no reliable observable data. N o t e 10 : F a i r v a l u e o f f i n a n c i a l i n s t r u m e n t s Financial instruments pledged and received as collateral (in thousands of euros) 31/12/2019 31/12/2018 Book value of financial assets pledged as collateral (including transferred assets) (1) Securities and receivables pledged as collateral for refinancing arrangements (Banque de France, CRH, etc.) Loaned securities Security deposits on market transactions 41,490 Other security deposits (3) Securities sold under repurchase agreements Total book value of financial assets pledged as collateral 41,490 0 Book value of financial assets received as collateral Other security deposits Fair value of assets received as collateral that may be and are repledged (2) Securities borrowed Securities received under reverse repurchase agreements 1,683,876 Securities sold short Total fair value of assets received as collateral that may be and are repledged 1,683,876 0 127 Annual Financial Statements 2019