FOREIGN TRADE BANK OF LATIN AMERICA, INC. | CIK:0000890541 |

Filed: 4/30/2018

Entity registrant name: FOREIGN TRADE BANK OF LATIN AMERICA, INC. (CIK: 0000890541)

Generator: DataTracks

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ifrs-full:DisclosureOfFinancialInstrumentsExplanatory

5.	Financial instruments

5.1

Financial instruments at FVTPL - Fair value through profit or loss

The fair value of financial liabilities at FVTPL is as follows:

	December 31, 2017		December 31, 2016
Liabilities
Foreign exchange forward		-		24
Total		-		24

The information on the nominal amounts of derivative financial instruments at FVTPL is as follows:

	December 31, 2017						December 31, 2016
	Nominal		Fair value				Nominal		Fair value
	amount		Asset		Liability		amount		Asset		Liability
Foreign exchange forward		-		-		-		1,274		-		24
Total		-		-		-		1,274		-		24

5.2

Financial instruments at fair value through other comprehensive income

The amortized cost, related unrealized gross gain (loss) and fair value of financial instruments at fair value through other comprehensive income by country risk and type of debt are as follows:

Equity Investment at FVOCI

	December 31, 2017
			Unrealized
	Amortized cost		Gain		Loss		Fair value
Equity investments ⁽¹⁾
Brazil		8,630		-		228		8,402
		8,630		-		228		8,402

Securities at FVOCI

	December 31, 2017
			Unrealized
	Amortized cost		Gain		Loss		Fair value
Sovereign debt:
Brazil		2,937		29		12		2,954
Chile		5,182		-		35		5,147
Trinidad and Tobago		8,843		-		211		8,632
		16,962		29		258		16,733
		25,592		29		486		25,135

⁽¹⁾

Equity instruments were initially recognized at fair value. These equity instruments correspond to equity securities classified with the irrevocable option of changes in OCI.

	December 31, 2016
			Unrealized
	Amortized cost		Gain		Loss		Fair value
Corporate debt:
Brazil		3,144		-		62		3,082
Venezuela		10,810		20		3		10,827
		13,954		20		65		13,909

Sovereign debt:
Brazil		2,926		-		140		2,786
Chile		5,229		-		59		5,170
Trinidad and Tobago		9,283		-		541		8,742
		17,438		-		740		16,698
		31,392		20		805		30,607

As of December 31, 2017 and 2016, there were no securities at fair value through OCI guaranteeing repurchase transactions.

The following table discloses those securities that had unrealized losses for a period less than 12 months and for 12 months or longer:

	December 31, 2017
	Less than 12 months				12 months or longer				Total
	Fair value		Unrealized gross losses		Fair value		Unrealized gross losses		Fair value		Unrealized gross losses
Sovereign debt		5,147		35		9,616		223		14,763		258
Total		5,147		35		9,616		223		14,763		258

	December 31, 2016
	Less than 12 months				12 months or longer				Total
	Fair value		Unrealized gross losses		Fair value		Unrealized gross losses		Fair value		Unrealized gross losses
Corporate debt		1,805		3		3,082		62		4,887		65
Sovereign debt		5,170		59		11,528		681		16,698		740
Total		6,975		62		14,610		743		21,585		805

The following table presents the realized gains and losses on sale of securities at fair value through other comprehensive income:

	December 31, 2017		December 31, 2016		December 31, 2015
Realized gain on sale of securities		766		221		469
Realized loss on sale of securities		(517)		(577)		(106)
Net gain (loss) on sale of securities at fair value through other comprehensive income		249		(356)		363

Securities at fair value through other comprehensive income classified by issuer’s credit quality indicators are as follows:

Rating⁽¹⁾	December 31, 2017		December 31, 2016
1-4		16,733		30,607
5-6		-		-
7		-		-
8		-		-
9		-		-
10		-		-
Total		16,733		30,607

⁽¹⁾ Current ratings as of December 31, 2017 and 2016, respectively.

The amortized cost and fair value of securities at fair value through other comprehensive income by contractual maturity are shown in the following tables:

	December 31, 2017				December 31, 2016
	Amortized cost		Fair value		Amortized cost		Fair value

Due within 1 year		-		-		-		-
After 1 year but within 5 years		16,962		16,733		17,656		16,994
After 5 years but within 10 years		-		-		13,736		13,613
		16,962		16,733		31,392		30,607

The allowance for expected credit losses relating to securities at fair value through other comprehensive income, which is recorded in equity under accumulated other comprehensive income (loss), is as follow:

	Stage 1 ⁽¹⁾		Stage 2 ⁽²⁾		Stage 3 ⁽³⁾		Total
Allowance for expected credit losses as of December 31, 2016		42		263		-		305
Transfer to lifetime expected credit losses		-		-		-		-
Transfer to credit-impaired financial assets		-		-		-		-
Transfer to 12-month expected credit losses		-		-		-		-
Net effect of changes in reserve for expected credit losses		(6)		(65)		-		(71)
Financial assets that have been derecognized during the year		(12)		-		-		(12)
Changes due to financial instruments recognized as of December 31, 2016:		(18)		(65)		-		(83)
New financial assets originated or purchased		-		-		-		-
Write-offs		-		-		-		-
Allowance for expected credit losses as of December 31, 2017		24		198		-		222

	Stage 1 ⁽¹⁾		Stage 2 ⁽²⁾		Stage 3 ⁽³⁾		Total
Allowance for expected credit losses as of December 31, 2015		234		178		6,737		7,149
Transfer to lifetime expected credit losses		(31)		456		-		425
Transfer to credit-impaired financial assets		-		-		-		-
Transfer to 12-month expected credit losses		-		-		-		-
Net effect of changes in reserve for expected credit losses		(15)		(168)		-		(183)
Financial assets that have been derecognized during the year		(174)		(203)		-		(377)
Changes due to financial instruments recognized as of December 31, 2015:		(220)		85		-		(135)
New financial assets originated or purchased		28		-		-		28
Write-offs		-		-		(6,737)		(6,737)
Allowance for expected credit losses as of December 31, 2016		42		263		-		305

⁽¹⁾

12-month expected credit losses.

⁽²⁾

Lifetime expected credit losses.

⁽³⁾

Credit-impaired financial assets (lifetime expected credit losses).

5.3

Investment securities- at amortized cost

The amortized cost, related unrealized gross gain (loss) and fair value of these securities by country risk and type of debt are as follows:

	December 31, 2017
			Unrealized
	Amortized cost ⁽¹⁾		Gross gain		Gross loss		Fair value
Corporate debt:
Brazil		1,485		3		-		1,488
Panama		9,978		-		-		9,978
		11,463		3		-		11,466

Sovereign debt:
Colombia		29,006		67		16		29,057
Mexico		20,203		-		167		20,036
Panama		8,458		-		11		8,447
		57,667		67		194		57,540
		69,130		70		194		69,006

	December 31, 2016
			Unrealized
	Amortized cost ⁽²⁾		Gross gain		Gross loss		Fair value
Corporate debt:
Brazil		4,614		-		146		4,468
Panama		3,000		-		-		3,000
		7,614		-		146		7,468
Sovereign debt:
Brazil		11,179		37		194		11,022
Colombia		29,812		34		280		29,566
Mexico		20,541		-		1,059		19,482
Panama		8,670		198		-		8,868
		70,202		269		1,533		68,938
		77,816		269		1,679		76,406

⁽¹⁾

Amounts do not include allowance for expected credit losses of US196.

⁽²⁾

Amounts do not include allowance for expected credit losses of US$602.

The amortized cost and fair value of securities at amortized cost by contractual maturity are shown in the following tables:

	December 31, 2017				December 31, 2016
	Amortized cost		Fair value		Amortized cost		Fair value

Due within 1 year		7,978		7,978		3,988		4,025
After 1 year but within 5 years		61,152		61,028		68,537		67,358
After 5 years but within 10 years		-		-		5,291		5,023
		69,130		69,006		77,816		76,406

As of December 31, 2017 and 2016, there were no securities at amortized cost, guaranteeing repurchase transactions.

Securities at amortized cost classified by issuer’s credit quality indicators are as follows:

Rating⁽¹⁾	December 31, 2017		December 31, 2016
1-4		57,667		76,333
5-6		11,463		1,483
7		-		-
8		-		-
9		-		-
10		-		-
Total		69,130		77,816

⁽¹⁾

Current ratings as of December 31, 2017 and 2016, respectively.

The allowance for expected credit losses relating to securities at amortized cost is as follow:

	Stage 1 ⁽¹⁾		Stage 2 ⁽²⁾		Stage 3 ⁽³⁾		Total
Allowance for expected credit losses as of December 31, 2016		99		503		-		602
Transfer to lifetime expected credit losses		-		-		-		-
Transfer to credit-impaired financial assets		-		-		-		-
Transfer to 12-month expected credit losses		-		-		-		-
Net effect of changes in reserve for expected credit losses		(16)		(29)		-		(45)
Financial assets that have been derecognized during the year		(18)		(422)		-		(440)
Changes due to financial instruments recognized as of December 31, 2016:		(34)		(451)		-		(485)
New financial assets originated or purchased		79		-		-		79
Allowance for expected credit losses as of December 31, 2017		144		52		-		196

	Stage 1 ⁽¹⁾		Stage 2 ⁽²⁾		Stage 3 ⁽³⁾		Total
Allowance for expected credit losses as of December 31, 2015		348		178		-		526
Transfer to lifetime expected credit losses		(43)		444		-		401
Transfer to credit-impaired financial assets		-		-		-		-
Transfer to 12-month expected credit losses		-		-		-		-
Net effect of changes in reserve for expected credit losses		(5)		(91)		-		(96)
Financial assets that have been derecognized during the year		(317)		(28)		-		(345)
Changes due to financial instruments recognized as of December 31, 2015:		(365)		325		-		(40)
New financial assets originated or purchased		116		-		-		116
Allowance for expected credit losses as of December 31, 2016		99		503		-		602

⁽¹⁾

12-month expected credit losses.

⁽²⁾

Lifetime expected credit losses.

⁽³⁾

Credit-impaired financial assets (lifetime expected credit losses).

5.4

Recognition and derecognition of financial assets

During the years ended December 31, 2017, 2016 and 2015, the Bank sold loans at amortized cost in the secondary market. These sales were made on the basis of compliance with the Bank's strategy to optimize the loan portfolio.

The amounts and gains arising from the derecognition of these financial instruments are presented in the following table. These gains are presented within the line “gain on sale of loans at amortized cost” in the consolidated statement of profit or loss.

	Assignments and participations		Gains

For the year ended December 31, 2017		77,400		181
For the year ended December 31, 2016		157,242		730
For the year ended December 31, 2015		92,438		422

During the years ended December 31, 2016 and 2015 the Bank entered into a master participation agreement with the International Finance Corp. to sale participation in credit facilities which resulted in revenues of $76 and $425, respectively.

5.5

Loans – at amortized cost

The following table set forth details of the Bank’s gross loan portfolio:

	December 31, 2017		December 31, 2016
Corporations:
Private		1,882,846		2,655,910
State-owned		723,267		786,900
Banking and financial institutions:
Private		2,083,795		1,738,999
State-owned		573,649		544,877
Middle-market companies:
Private		242,101		294,045
Total		5,505,658		6,020,731

The composition of the gross loan portfolio by industry is as follows:

	December 31, 2017		December 31, 2016
Banking and financial institutions		2,657,444		2,283,876
Industrial		772,238		1,242,441
Oil and petroleum derived products		735,413		788,186
Agricultural		501,241		1,007,139
Services		430,717		419,440
Mining		231,687		54,000
Others		176,918		225,649
Total		5,505,658		6,020,731

Loans are reported at their amortized cost considering the principal outstanding amounts net of unearned interest, deferred fees and allowance for expected credit losses.

The amortization of net unearned interest and deferred fees are recognized as an adjustment to the related loan yield using the effective interest rate method.

The unearned discount interest and deferred commission amounted to $4,985 and $7,249 at December 31, 2017 and 2016, respectively.

Loans classified by borrower’s credit quality indicators are as follows:

December 31, 2017
	Corporations				Banking and financial institutions				Middle-market companies
Rating⁽¹⁾	Private		State-owned		Private		State-owned		Private		Total
1-4		1,336,032		563,877		1,729,592		361,236		147,212		4,137,949
5-6		523,055		159,390		354,203		212,413		59,889		1,308.950
7		-		-		-		-		-		-
8		23,759		-		-		-		-		23,759
9		-		-		-		-		-		-
10		-		-		-		-		35,000		35,000
Total		1,882,846		723,267		2,083,795		573,649		242,101		5,505,658

December 31, 2016
	Corporations				Banking and financial institutions				Middle-market companies
Rating⁽¹⁾	Private		State-owned		Private		State-owned		Private		Total
1-4		1,714,936		646,797		1,457,984		259,981		174,107		4,253,805
5-6		863,937		140,103		281,015		284,896		84,938		1,654,889
7		58,673		-		-		-		-		58,673
8		4,000		-		-		-		-		4,000
9		-		-		-		-		35,000		35,000
10		14,364		-		-		-		-		14,364
Total		2,655,910		786,900		1,738,999		544,877		294,045		6,020,731

⁽¹⁾

Current ratings as of December 31, 2017 and 2016, respectively.

The following table provides a breakdown of gross loans by country risk:

	December 31, 2017		December 31, 2016
Country:
Argentina		294,613		325,321
Belgium		11,368		4,180
Bolivia		15,000		18,318
Brazil		1,019,466		1,163,825
Chile		170,827		69,372
Colombia		829,136		653,012
Costa Rica		356,459		400,371
Dominican Republic		249,926		243,696
Ecuador		94,315		129,269
El Salvador		55,110		104,723
Germany		37,500		50,000
Guatemala		309,024		315,911
Honduras		74,476		72,319
Jamaica		24,435		7,399
Luxembourg		19,924		14,722
Mexico		850,463		927,041
Nicaragua		29,804		36,949
Panama		500,134		498,651
Paraguay		59,536		108,068
Peru		211,846		467,408
Singapore		54,500		70,204
Switzerland		3,687		46,000
Trinidad and Tobago		175,000		184,389
United States of America		44,109		73,083
Uruguay		15,000		36,500

Total		5,505,658		6,020,731

The remaining loan maturities are summarized as follows:

	December 31, 2017		December 31, 2016
Current:
Up to 1 month		846,993		896,310
From 1 month to 3 months		1,079,793		1,300,675
From 3 months to 6 months		1,175,801		1,267,194
From 6 months to 1 year		922,711		551,794
From 1 year to 2 years		392,456		631,629
From 2 years to 5 years		989,222		1,211,847
More than 5 years		39,923		95,918
		5,446,899		5,955,367

Impaired		58,759		65,364

Total		5,505,658		6,020,731

As of December 31, 2017 and 2016, the range of interest rates on loans fluctuates from 1.35% and 11.52% (2016: 1.21% y 12.69%).

The fixed and floating interest rate distribution of the loan portfolio is as follows:

	December 31, 2017		December 31, 2016

Fixed interest rates		2,378,509		2,709,555
Floating interest rates		3,127,149		3,311,176
Total		5,505,658		6,020,731

As of December 31, 2017 and 2016, 85% and 93%, of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

An analysis of credit-impaired balances is detailed as follows:

	December 31, 2017						2017
	Recorded investment		Past due principal balance		Related allowance Stage 3		Average principal loan balance		Balance interest recognized
With an allowance recorded:
Private corporations		23,759		-		7,468		5,988		229
Middle-market companies		35,000		35,000		20,527		35,000		3,028
Total		58,759		35,000		27,995		40,988		3,257

	December 31, 2016						2016
	Recorded investment		Past due principal balance		Related allowance Stage 3		Average principal loan balance		Balance interest recognized
With an allowance recorded:
Private corporations		30,364		18,364		23,174		12,500		408
Middle-market companies		35,000		35,000		12,179		17,705		1,679
Total		65,364		53,364		35,353		30,205		2,087

The following is a summary of information of interest amounts recognized on an effective interest basis on net carrying amount for those financial assets in Stage 3:

		December 31, 2017			December 31, 2016			December 31, 2015
Interest revenue calculated on the net carrying amount (net of credit allowance)			1,170			1,808			91

The following table presents an aging analysis of the loan portfolio:

December 31, 2017
	91-120 days		121-150 days		151-180 days		Greater than 180 days		Total Past due		Delinquent		Current		Total
Corporations		-		-		-		-		-		-		2,606,113		2,606,113
Banking and financial institutions		-		-		-		-		-		-		2,657,444		2,657,444
Middle-market companies		-		-		-		35,000		35,000		-		207,101		242,101
Total		-		-		-		35,000		35,000		-		5,470,658		5,505,658

December 31, 2016
	91-120 days		121-150 days		151-180 days		Greater than 180 days		Total Past due		Delinquent		Current		Total
Corporations		-		-		4,000		14,364		18,364		-		3,424,446		3,442,810
Banking and financial institutions		-		-		-		-		-		-		2,283,876		2,283,876
Middle-market companies		-		-		-		35,000		35,000		-		259,045		294,045
Total		-		-		4,000		49,364		53,364		-		5,967,367		6,020,731

As of December 31, 2017 and 2016, the Bank had credit transactions in the normal course of business with 21% and 16%, respectively, of its Class “A” and “B” stockholders. All transactions were made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and were subject to all of the Bank’s Corporate Governance and control procedures. As of December 31, 2017 and 2016, approximately 14% and 10%, respectively, of the outstanding loan portfolio was placed with the Bank’s Class “A” and “B” stockholders and their related parties. As of December 31, 2017, the Bank was not directly or indirectly owned or controlled by another corporation or any foreign government, and no Class “A” or “B” shareholder was the registered owner of more than 3.5% of the total outstanding shares of the voting capital stock of the Bank.

Modified financial assets

The following table refer to modified financial assets, where modification does not result in de-recognition:

Modified financial assets (with loss allowance based on lifetime ECL) modified during the period	December 31, 2017		December 31, 2016

Gross carrying amount before modification		8,855		-
Loss allowance before modification		(3,344)		-
Net amortized cost before modification		5,511		-

Gross carrying amount after modification		4,484		-
Loss allowance after modification		(4,484)		-
Net amortized cost after modification		-		-

For the modified financial assets during the year 2017, were received other real estate owned for $ 5,119.

During the year 2017, a financial asset with a nominal value of $ 37,817 was restructured. As part of the restructuration The Bank received Equity Instrument with a fair value of $8,630 and a new originated credit impaired loans with a fair value of $19,274. The remaining balance was written off against allowance for loans losses.

The significant changes in the gross carrying amount of financial assets during the period that contributed to changes in the loss allowance, is provided at the table below:

Loans

	Stage 1		Stage 2		Stage 3		Total
Gross carrying amount as of December 31, 2016		5,019,368		935,999		65,364		6,020,731
Transfer in book value to stage 2		(41,167)		41,167		-		-
Transfer to lifetime expected credit losses - credit-impaired		-		(46,673)		46,673		-
Transfer in book value to stage 1		8,000		(8,000)		-		-
Financial assets that have been derecognised during the year		(4,214,697)		(313,394)		(21,667)		(4,549,758)
Changes due to financial instruments recognized as of December 31, 2016		(4,247,864)		(326,900)		25,006		(4,549,758)
New financial assets originated or purchased		4,067,723		-		-		4,067,723
Write-offs		-		(1,427)		(31,611)		(33,038)
Gross carrying amount as of December 31, 2017		4,839,227		607,672		58,759		5,505,658

Loans

	Stage 1		Stage 2		Stage 3		Total
Gross carrying amount as of December 31, 2015		6,282,752		356,668		52,329		6,691,749
Transfer in book value to stage 2		(828,589)		828,589		-		-
Transfer to lifetime expected credit losses – not credit-impaired		(12,000)		(45,056)		57,056		-
Transfer in book value to stage 1		90,770		(90,770)		-		-
Financial assets that have been derecognized during the year		(4,577,890)		(113,432)		(25,214)		(4,716,536)
Changes due to financial instruments recognized as of December 31, 2015		(5,327,709)		579,331		31,842		(4,716,536)
New financial assets originated or purchased		4,064,325		-		-		4,064,325
Write-offs		-		-		(18,807)		(18,807)
Gross carrying amount as of December 31, 2016		5,019,368		935,999		65,364		6,020,731

The allowances for expected credit losses related to loans at amortized cost are as follows:

	Stage 1 ⁽¹⁾		Stage 2 ⁽²⁾		Stage 3 ⁽³⁾		Total
Allowance for expected credit losses as of December 31, 2016		29,036		41,599		35,353		105,988
Transfer to lifetime expected credit losses – not credit-impaired		(672)		672		-		-
Transfer to lifetime expected credit losses - credit-impaired		-		(12,845)		12,845		-
Transfer to 12-month expected credit losses		1,428		(1,428)		-		-
Net effect of changes in reserve for expected credit losses		(2,900)		18,227		20,257		35,584
Financial assets that have been derecognized during the year		(24,434)		(11,321)		(8,333)		(44,088)
Changes due to financial instruments recognized as of December 31, 2016		(26,578)		(6,695)		24,769		(8,504)
New financial assets originated or purchased		17,363		-		-		17,363
Write-offs		-		(1,427)		(32,126)		(33,553)
Recoveries of amounts previously written off		-		-		-		-
Allowance for expected credit losses as of December 31, 2017		19,821		33,477		27,996		81,294

	Stage 1 ⁽¹⁾		Stage 2 ⁽²⁾		Stage 3 ⁽³⁾		Total
Allowance for expected credit losses as of December 31, 2015		59,214		9,609		21,151		89,974
Transfer to lifetime expected credit losses – not credit-impaired		(9,117)		9,119		-		2
Transfer to lifetime expected credit losses – not credit-impaired		(7)		(6,317)		6,324		-
Transfer to 12-month expected credit losses		2,038		(2,077)		38		(1)
Net effect of changes in reserve for expected credit losses		(39,621)		48,021		26,491		34,891
Financial assets that have been derecognized during the year		(65,640)		(16,756)		-		(82,396)
Changes due to financial instruments recognized as of December 31, 2015		(112,347)		31,990		32,853		(47,504)
New financial assets originated or purchased		82,169		-		-		82,169
Write-offs		-		-		(18,807)		(18,807)
Recoveries of amounts previously written off		-		-		156		156
Allowance for expected credit losses as of December 31, 2016		29,036		41,599		35,353		105,988

⁽¹⁾

12-month expected credit losses.

⁽²⁾

Lifetime expected credit losses.

⁽³⁾

Credit-impaired financial assets (lifetime expected credit losses).

5.6

Derivative financial instruments for hedging purposes

Quantitative information on derivative financial instruments held for hedging purposes is as follows:

	December 31, 2017
	Nominal		Carrying amount of the hedging instrument				Changes in fair value used for calculating hedge
	Amount		Asset		Liability		ineffectiveness
Fair value hedges:
Interest rate swaps		367,500		-		(4,361)		(2,394)
Cross-currency swaps		306,961		3,672		(30,154)		15,900
Cash flow hedges:
Interest rate swaps		595,000		127		(428)		995
Cross-currency swaps		23,025		879		-		2,132
Foreign exchange forward		225,388		8,610		-		11,835
Net investment hedges:
Foreign exchange forward		9,243		50		-		181
Total		1,527,117		13,338		(34,943)		28,649

	December 31, 2016
	Nominal		Carrying amount of the hedging instrument				Changes in fair value used for calculating hedge
	Amount		Asset		Liability		ineffectiveness
Fair value hedges:
Interest rate swaps		796,202		40		(2,005)		(2,199)
Cross-currency swaps		291,065		2,561		(44,944)		(19,316)
Cash flow hedges:
Interest rate swaps		752,000		323		(1,699)		696
Cross-currency swaps		23,025		-		(1,254)		(1,313)
Foreign exchange forward		352,553		6,428		(9,653)		(5,093)
Net investment hedges:
Foreign exchange forward		3,780		-		(131)		(415)
Total		2,218,625		9,352		(59,686)		(27,640)

The hedging instruments presented in the tables above are located in the line item in the statement of financial position at fair value - Derivative financial instruments used for hedging – receivable or at fair value – Derivative financial instruments used for hedging – payable.

The gains and losses resulting from activities of derivative financial instruments and hedging recognized in the consolidated statements of profit or loss are presented below:

	December 31, 2017
	Gain (loss) recognized in OCI (effective portion)		Classification of gain (loss)	Gain (loss) reclassified from accumulated OCI to the consolidated statement of profit or loss		Gain (loss) recognized on derivatives (ineffective portion)
Derivatives – cash flow hedge
Interest rate swaps		(834)	Gain (loss) on interest rate swap		-		242
Cross-currency swaps		(1,924)	Gain (loss) on foreign currency exchange		-		26
			Interest income – loans		7,611		-
Foreign exchange forward		(2,708)	Interest income – securities at FVOCI		-		-
			Interest income – loans		3,991		-
			Interest expense – borrowings and debt		-		-
			Interest expenses – deposits		(190)		-
			Gain (loss) on foreign currency exchange
Total		(5,466)			11,412		268

Derivatives – net investment hedge
Forward foreign exchange		(277)
Total		(277)

	December 31, 2016
	Gain (loss) recognized in OCI (effective portion)		Classification of gain (loss)	Gain (loss) reclassified from accumulated OCI to the consolidated statement of profit or loss		Gain (loss) recognized on derivatives (ineffective portion)
Derivatives – cash flow hedge
Interest rate swaps		627	Gain (loss) on interest rate swap		-		(1,258)
Cross-currency swaps		(1,299)	Gain (loss) on foreign currency exchange		-		16
			Interest income – loans		-		(110)
Foreign exchange forward		233	Interest income – securities at FVOCI		-		-
			Interest income – loans		(4,751)		-
			Interest expense – borrowings and debt		-		-
			Interest expenses – deposits		1,672		-
			Gain (loss) on foreign currency exchange		9,097		-
Total		(439)			6,018		(1,352)

Derivatives – net investment hedge
Forward foreign exchange		-
Total		-

	December 31, 2015
	Gain (loss) recognized in OCI (effective portion)		Classification of gain (loss)	Gain (loss) reclassified from accumulated OCI to the consolidated statement of profit or loss		Gain (loss) recognized on derivatives (ineffective portion)
Derivatives – cash flow hedge
Interest rate swaps		35	Gain (loss) on interest rate swap		-		(229)
Cross-currency swaps		5,367	Gain (loss) on foreign exchange		-		84
			Interest income – loans		-		-
Forward foreign exchange		3,511	Interest income – securities at FVOCI		(694)		-
			Interest income – loans		(1,821)		-
			Interest expense – borrowings and debt		-		-
			Interest expenses – deposits		166		-
			Gain (loss) on foreign currency exchange		12,539		-
Total		8,913			10,190		(145)

Derivatives – net investment hedge
Forward foreign exchange		(901)
Total		(901)

The Bank recognized in the consolidated statement of profit or loss the gain (loss) on derivative financial instruments and the gain (loss) of the hedged asset or liability related to qualifying fair value hedges, as follows:

	December 31, 2017
	Classification in consolidated statement of profit or loss	Gain (loss) on derivatives		Gain (loss) on hedge item		Net gain (loss)
Derivatives – fair value hedge
Interest rate swaps	Interest income – securities at FVOCI		(126)		476		350
	Interest income – loans		(12)		160		148
	Interest expenses – borrowings and debt		1,387		(16,233)		(14,846)
	Derivative financial instruments and hedging		(2,270)		2,371		101

Cross-currency swaps	Interest income – loans		(1,496)		2,442		946
	Interest expenses – borrowings and debt		1,848		(10,265)		(8,417)
	Derivative financial instruments and hedging		14,950		(16,709)		(1,759)
Total			14,281		(37,758)		(23,477)

	December 31, 2016
	Classification in consolidated statement of profit or loss	Gain (loss) on derivatives		Gain (loss) on hedge item		Net gain (loss)
Derivatives – fair value hedge
Interest rate swaps	Interest income – securities at FVOCI		(617)		1,593		976
	Interest income – loans		(25)		2,023		1,998
	Interest expenses – borrowings and debt		4,558		(28,261)		(23,703)
	Derivative financial instruments and hedging		(2,077)		2,178		101

Cross-currency swaps	Interest income – loans		(372)		928		556
	Interest expenses – borrowings and debt		195		(6,183)		(5,988)
	Derivative financial instruments and hedging		17,673		(16,752)		921
Total			19,335		(44,474)		(25,139)

	December 31, 2015
	Classification in consolidated statement of profit or loss	Gain (loss) on derivatives		Gain (loss) on hedge item		Net gain (loss)

Derivatives – fair value hedge
Interest rate swaps	Interest income – securities at FVOCI		(1,047)		1,514		467
	Interest income at amortized cost		(376)		3,987		3,611
	Interest expenses – borrowings and debt		6,268		(24,026)		(17,758)
	Derivative financial instruments and hedging		(1,841)		1,688		(153)

Cross-currency swaps	Interest income loans at amortized cost		(135)		348		213
	Interest expenses – borrowings and debt		744		(3,785)		(3,041)
	Derivative financial instruments and hedging		(19,522)		20,550		1,028
Total			(15,909)		276		(15,633)

Derivatives financial position and performance

The following tables details the changes of the market value of the underlying item in the statement of financial position related to fair value hedges:

	December 31, 2017
Fair value hedges	Carrying amount		Thereof accumulated fair value adjustments		Line item in the statement of financial position
Interest rate risk
Loans		-		-	Loans
Issuances		355,000		(4,411)	Short and long term borrowings and debt

Foreign exchange rate risk and FX
Securities at FVOCI		12,369		(32)	Financial instruments at FVOCI
Loans		25,027		744	Loans
Issuances		(249,328)		(2,301)	Short and long term borrowings and debt

	December 31, 2016
Fair value hedges	Carrying amount		Thereof accumulated fair value adjustments		Line item in the statement of financial position
Interest rate risk
Loans		18,502		12	Loans
Issuances		755,000		2,089	Short and long term borrowings and debt

Foreign exchange rate risk and FX
Securities at FVOCI		22,188		(232)	Financial instruments at FVOCI
Loans		9,252		706	Loans
Issuances		(308,739)		(49)	Short and long term borrowings and debt

The following tables detail the profile of the timing of the nominal amount of the hedging instrument:

	December 31, 2017
Risk type	Foreign Exchange risk		Interest rate risk		Foreign exchange and Interest rate risk		Total
Up to 1 month		69,459		-		-		69,459
31 to 60 days		26,104		-		-		26,104
61 to 90 days		1,729		185,000		16,821		203,550
91 to 180 days		16,567		137,500		-		154,067
181 to 365 days		68,952		202,500		8,127		279,579
1 to 2 years		178,331		21,500		73,193		273,024
2 to 5 years		4,413		416,000		24,872		445,285
More than 5 years		-		-		76,049		76,049
Total		365,555		962,500		199,062		1,527,117

Analysis of maturity of the derivatives by type of risk covered:

	December 31, 2016
Risk type	Foreign Exchange risk		Interest rate risk		Foreign exchange and Interest rate risk		Total
Up to 1 month		66,149		-		-		66,149
31 to 60 days		33,393		85,000		-		118,393
61 to 90 days		24,093		60,000		-		84,093
91 to 180 days		71,533		745,080		-		816,613
181 to 365 days		109,228		160,422		189		269,839
1 to 2 years		92,115		50,000		24,948		167,063
2 to 5 years		73,311		434,500		96,218		604,029
More than 5 years		-		13,200		79,246		92,446
Total		469,822		1,548,202		200,601		2,218,625

The following tables detail the sources of ineffectiveness for our cash flow hedge positions:

	December 31, 2017
Type of risk hedge	USD-OIS		Tenor		Xccy basis		Credit spread		Total Ineffectiveness
Interest rate risk		22		296		-		(16)		302
Foreign exchange risk		(8)		-		17		(1)		8
Total		14		296		17		(17)		310

	December 31, 2016
Type of risk hedge	USD-OIS		Tenor		Xccy basis		Credit spread		Total Ineffectiveness
Interest rate risk		19		-		-		604		623
Foreign exchange risk		25		-		(4)		(5)		16
Total		44		-		(4)		599		639

For control purposes, derivative instruments are recorded at their nominal amount (“notional amount”) in memorandum accounts. Interest rate swaps are made either in a single currency or cross currency for a prescribed period to exchange a series of interest rate flows, which involve fixed for floating interest payments, and vice versa. The Bank also engages in certain foreign exchange trades to serve customers’ transaction needs and to manage foreign currency risk. All such positions are hedged with an offsetting contract for the same currency.

The Bank manages and controls the risks on these foreign exchange trades by establishing counterparty credit limits by customer and by adopting policies that do not allow for open positions in the credit and investment portfolio. The Bank also uses foreign currency exchange contracts to hedge the foreign exchange risk associated with the Bank’s equity investment in a non-U.S. dollar functional currency foreign subsidiary. Derivative and foreign exchange instruments negotiated by the Bank are executed mainly over-the-counter (OTC). These contracts are executed between two counterparties that negotiate specific agreement terms, including notional amount, exercise price and maturity.

The maximum length of time over which the Bank has hedged its exposure to the variability in future cash flows on forecasted transactions is 6.19 years.

The Bank estimates that approximately $610 reported as losses in OCI as of December 31, 2017, related to foreign exchange forward contracts, are expected to be reclassified into interest income as an adjustment to yield of hedged loans during the twelve-month year ending December 31, 2018.

The Bank estimates that approximately $645 of losses reported in OCI as of December 31, 2017, related to forward foreign exchange contracts are expected to be reclassified into interest expense as an adjustment to yield of hedged available-for-sale securities during the twelve-month year ending December 31, 2018.

Types of Derivatives and Foreign Exchange Instruments

Interest rate swaps are contracts in which a series of interest rate flows in a single currency are exchanged over a prescribed period. The Bank has designated a portion of these derivative instruments as fair value hedges and a portion as cash flow hedges. Cross currency swaps are contracts that generally involve the exchange of both interest and principal amounts in two different currencies. The Bank has designated a portion of these derivative instruments as fair value hedges and a portion as cash flow hedges. Foreign exchange forward contracts represent an agreement to purchase or sell foreign currency at a future date at agreed-upon terms. The Bank has designated these derivative instruments as cash flow hedges and net investment hedges.

In addition to hedging derivative financial instruments, the Bank has derivative financial instruments held for trading purposes as disclosed in Note 5.1.

5.7

Offsetting of financial assets and liabilities

In the ordinary course of business, the Bank enters into derivative financial instrument transactions and securities sold under repurchase agreements under industry standards agreements. Depending on the collateral requirements stated in the contracts, the Bank and counterparties can receive or deliver collateral based on the fair value of the financial instruments transacted between parties. Collateral typically consists of cash deposits and securities. The master netting agreements include clauses that, in the event of default, provide for close-out netting, which allows all positions with the defaulting counterparty to be terminated and net settled with a single payment amount.

The International Swaps and Derivatives Association master agreement (“ISDA”) and similar master netting arrangements do not meet the criteria for offsetting in the consolidated statement of financial position. This is because they create for the parties to the agreement a right of set-off of recognized amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Bank or the counterparties or following other predetermined events.

The following tables summarize financial assets and liabilities that have been offset in the consolidated statement of financial position or are subject to master netting agreements:

Derivative financial instruments – assets

December 31, 2017
			Gross amounts offset in the consolidated		Net amount of assets presented in the		Gross amounts not offset in the consolidated statement of financial position
Description	Gross amounts assets		statement of financial position		consolidated statement of financial position		Financial instruments		Cash collateral received		Net Amount
Derivative financial instruments used for hedging – receivable – at fair value		13,338		-		13,338		-		(22,304)		(8,966)
Total		13,338		-		13,338		-		(22,304)		(8,966)

December 31, 2016
			Gross amounts offset in the consolidated		Net amount of assets presented in the		Gross amounts not offset in the consolidated statement of financial position
Description	Gross amounts assets		statement of financial position		consolidated statement of financial position		Financial instruments		Cash collateral received		Net Amount
Derivative financial instruments used for hedging – receivable – at fair value		9,352		-		9,352		-		-		9,352
Total		9,352		-		9,352		-		-		9,352

The following table presents the reconciliation of assets that have been offset or are subject to master netting agreements to individual line items in the consolidated statement of financial position:

	December 31, 2017
Description	Gross amounts of assets		Gross amounts offset in the consolidated statement of financial position		Net amount of assets presented in the consolidated statement of financial position
Derivative financial instruments used for hedging – receivable – at fair value		13,338		-		13,338
Total		13,338		-		13,338

	December 31, 2016
Description	Gross amounts of assets		Gross amounts offset in the consolidated statement of financial position		Net amount of assets presented in the consolidated statement of financial position
Derivative financial instruments used for hedging – receivable – at fair value		9,352		-		9,352
Total		9,352		-		9,352

Financial liabilities and derivative financial instruments – liabilities

December 31, 2017
			Gross amounts offset in the		Net amount of liabilities presented in the		Gross amounts not offset in the consolidated statement of financial position
Description	Gross amounts of liabilities		consolidated statement of financial position		consolidated statement of financial position		Financial instruments		Cash collateral pledged		Net Amount
Derivative financial instruments used for hedging – payable – at fair value		34,943		-		34,943		-		(50,241)		(15,298)
Total		34,943		-		34,943		-		(50,241)		(15,298)

December 31, 2016
			Gross amounts offset in the		Net amount of liabilities presented in the		Gross amounts not offset in the consolidated statement of financial position
Description	Gross amounts of liabilities		consolidated statement of financial position		consolidated statement of financial position		Financial instruments		Cash collateral pledged		Net Amount

Financial liabilities at FVTPL		24		-		24		-		-		24
Derivative financial instruments used for hedging – payable – at fair value		59,686		-		59,686		-		(59,012)		674
Total		59,710		-		59,710		-		(59,012)		698

The following table presents the reconciliation of liabilities that have been offset or are subject to master netting agreements to individual line items in the consolidated statement of financial position:

	December 31, 2017
Description	Gross amounts of liabilities		Gross amounts offset in the consolidated statement of financial position		Net amount of liabilities presented in the consolidated statement of financial position

Derivative financial instruments:
Derivative financial instruments used for hedging – payable – at fair value		34,943		-		34,943
Total derivative financial instruments		34,943		-		34,943

	December 31, 2016
Description	Gross amounts of liabilities		Gross amounts offset in the consolidated statement of financial position		Net amount of liabilities presented in the consolidated statement of financial position

Derivative financial instruments:
Financial liabilities at FVTPL		24		-		24
Derivative financial instruments used for hedging – payable – at fair value		59,686		-		59,686
Total derivative financial instruments		59,710		-		59,710