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Derivatives | 12 Months Ended
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Dec. 31, 2021
Derivatives |
Derivatives | 14 Derivatives Derivative is a term covering a wide range of financial instruments that derive their fair value from an underlying rate or price, for example interest rates or exchange rates (the underlying). NatWest Group uses derivatives as a part of its trading activities, to manage its own risks such as interest rate, foreign exchange, or credit risk and in certain customer transactions. This note shows contracted volumes of derivatives, how they are used for hedging purposes and more specifically the effects of the application of hedge accounting. ​ For accounting policy information see Accounting policies note 10 and 15. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2021 | ​ | 2020
​ | ​ | Notional | ​ | Assets | ​ | Liabilities | ​ | Notional | ​ | Assets | ​ | Liabilities
​ |  | £bn |  | £m |  | £m |  | £bn |  | £m |  | £m
Exchange rate contracts | ​ | 3,167 | ​ | 38,517 | ​ | 39,286 | ​ | 3,328 | ​ | 52,239 | ​ | 55,107
Interest rate contracts |  | 8,919 |  | 67,458 |  | 61,206 |  | 10,703 |  | 114,115 |  | 105,214
Credit derivatives |  | 14 |  | 154 |  | 343 |  | 15 |  | 161 |  | 376
Equity and commodity contracts |  | — |  | 10 |  | — |  | 1 |  | 8 |  | 8
​ |  | ​ |  | 106,139 |  | 100,835 |  |  |  | 166,523 |  | 160,705
​ NatWest Group applies hedge accounting to reduce the accounting mismatch caused in the income statement by using derivatives to hedge the following risks: interest rate, foreign exchange and net investment in foreign operations. NatWest Group’s interest rate hedging relates to the management of NatWest Group’s non-trading structural interest rate risk, caused by the mismatch between fixed interest rates and floating interest rates on its financial instruments. NatWest Group manages this risk within approved limits. Residual risk positions are hedged with derivatives, principally interest rate swaps. Suitable larger fixed rate financial instruments are subject to fair value hedging; the remaining exposure, where possible, is hedged by derivatives designated as cash flow hedges. Cash flow hedges of interest rate risk relate to exposures to the variability in future interest payments and receipts due to the movement of benchmark interest rates on forecast transactions and on financial assets and financial liabilities. This variability in cash flows is hedged by interest rate swaps, which convert variable cash flows into fixed. For these cash flow hedge relationships, the hedged items are actual and forecast variable interest rate cash flows arising from financial assets and financial liabilities with interest rates linked to the relevant benchmark rates, most notably LIBOR, EURIBOR, SONIA and the Bank of England Official Bank Rate. The variability in cash flows due to movements in the relevant benchmark rate is hedged; this risk component is identified using the risk management systems of NatWest Group and encompasses the majority of cash flow variability risk. Fair value hedges of interest rate risk involve interest rate swaps transforming the fixed interest rate risk in financial assets and financial liabilities to floating. The hedged risk is the risk of changes in the hedged item’s fair value attributable to changes in the benchmark interest rate risk component of the hedged item. The significant benchmarks identified as risk components are LIBOR, EURIBOR and SONIA. These risk components are identified using the risk management systems of NatWest Group and encompass the majority of the hedged item’s fair value risk. NatWest Group hedges the exchange rate risk of its net investment in foreign currency denominated operations with currency borrowings and forward foreign exchange contracts. NatWest Group reviews the value of the investments’ net assets, executing hedges where appropriate to reduce the sensitivity of capital ratios to foreign exchange rate movement. Hedge accounting relationships will be designated where required. Exchange rate risk also arises in NatWest Group where payments are denominated in currencies other than the functional currency. Residual risk positions are hedged with forward foreign exchange contracts, fixing the exchange rate the payments will be settled in. The derivatives are documented as cash flow hedges. For all cash flow hedging and fair value hedge relationships, and net investment hedging, NatWest Group determines that there is an adequate level of offsetting between the hedged item and hedging instrument at inception and on an ongoing basis. This is achieved by comparing movements in the fair value of the expected highly probable forecast interest cash flows/fair value of the hedged item attributable to the hedged risk with movements in the fair value of the expected changes in cash flows from the hedging interest rate swap. Hedge effectiveness is assessed on a cumulative basis over a time period management determines to be appropriate. NatWest Group uses either the actual ratio between the hedged item and hedging instrument(s) or one that minimises hedge ineffectiveness to establish the hedge ratio for hedge accounting. Hedge ineffectiveness is measured and recognised in the income statement as it arises. IBOR reform - NatWest Group in the year continued to apply, for relationships directly affected by interest rate benchmark reform, Interest Rate Benchmark Reform Amendments to IAS 39 and IFRS 7 issued September 2019 (“Phase 1 relief”) and Interest Rate Benchmark Reform – Phase 2 Amendments to IAS 39 and IFRS 7 issued August 2020 (“Phase 2 relief”). Significant transitions in the year were the GBP, JPY and CHF derivatives subject to cash flow and fair value hedging transitioned as part of the LCH ‘big bang’ conversion in December 2021. The swaps were restructured to reprice off the appropriate risk free rate from the next repricing date post 31 December 2021 plus a spread adjustment. All impacted hedge accounting relationships had their designations updated to reflect this transition. USD cash flow and fair value hedges of interest rate risk that mature post 30 June 2023 continue to be directly affected by interest rate benchmark reform. 14 Derivatives continued Included in the table below are derivatives held for hedging purposes as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2021 | ​ | 2020
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Changes in fair | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Changes in fair
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | value used for | ​ | ​ | ​ | ​ | ​ | ​ | ​ | value used for
​ | ​ | Notional | ​ | Assets | ​ | Liabilities | ​ | hedge ineffectiveness (1) | ​ | Notional | ​ | Assets | ​ | Liabilities | ​ | hedge ineffectiveness (1)
​ |  | £bn |  | £m |  | £m |  | £m |  | £bn |  | £m |  | £m |  | £m
Fair value hedging |  |  |  |  |  |  | ​ | ​ |  | ​ | ​ |  |  |  | ​ | ​
Interest rate contracts |  | 65.6 |  | 1,176 |  | 2,057 | ​ | 897 |  | 65.5 | ​ | 1,878 |  | 3,844 | ​ | (875)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedging |  | ​ |  | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​
Interest rate contracts |  | 133.1 |  | 952 |  | 1,149 | ​ | (931) |  | 128.8 | ​ | 2,035 |  | 1,210 | ​ | 217
Exchange rate contracts |  | 7.3 |  | 30 |  | 109 | ​ | 27 |  | 10.8 | ​ | 37 |  | 116 | ​ | (55)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net investment hedging |  | ​ |  | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​
Exchange rate contracts |  | 0.5 |  | 11 |  | 1 | ​ | 7 |  | 0.2 | ​ | — |  | 9 | ​ | 11
​ | ​ | 206.5 | ​ | 2,169 | ​ | 3,316 | ​ | — | ​ | 205.3 | ​ | 3,950 | ​ | 5,179 | ​ | (702)
IFRS netting/Clearing house settlements | ​ | ​ | ​ | (2,125) | ​ | (3,196) | ​ | ​ | ​ | ​ | ​ | (3,857) | ​ | (5,049) | ​ | ​
​ |  | ​ |  | 44 |  | 120 | ​ | ​ |  | ​ | ​ | 93 |  | 130 | ​ | ​
​
(1) | The change in fair value used for hedge ineffectiveness includes instruments that were decrecognised in the year.
​ The notional of hedging instruments affected by interest rate benchmark reform is as follows: ​
​ | ​ | ​ | ​ | ​
​ |  | 2021 | ​ | 2020
​ |  | £bn |  | £bn
Fair value hedging |  | ​ | ​ |
EURIBOR (1) |  | — | ​ | 13.6
GBP LIBOR |  | — | ​ | 11.2
USD LIBOR (2) | ​ | 20.2 | ​ | 26.6
Other currency LIBOR |  | — | ​ | 1.1
Cash flow hedging |  | ​ | ​ | ​
EURIBOR (1) |  | — | ​ | 5.2
GBP LIBOR |  | — | ​ | 51.7
SOFR (3) | ​ | 0.2 | ​ | —
USD LIBOR (2) |  | 3.1 | ​ | 2.7
​
(1) | In 2021 management concluded that EURIBOR is not expected to be significantly reformed further and therefore any uncertainty due to interest benchmark rate reform for EURIBOR has ended.
(2) | In 2021 the FCA declared that USD LIBOR will be non-representative post 30 June 2023; at the time of preparing the 2020 disclosures this date was expected to be 31 December 2021.
(3) | Hedge relationships subject to reform are those where either the hedged item or the hedging instrument is subject to the IBOR reform.
(4) | Notional of £1 billion cross currency derivative contracts in cash flow hedge relationships will convert to repricing off the relevant risk-free rate at the first repricing date post cessation.
​ 14 Derivatives continued The following table shows the period in which the notional of hedging contract ends: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 0-3 months |  | 3-12 months |  | 1-3 years |  | 3-5 years |  | 5-10 years |  | 10-20 years |  | 20+ years |  | Total
2021 | ​ | £bn | ​ | £bn | ​ | £bn | ​ | £bn | ​ | £bn | ​ | £bn | ​ | £bn | ​ | £bn
Fair value hedging | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Hedging assets - interest rate risk | ​ | 0.9 | ​ | 2.5 | ​ | 5.5 | ​ | 5.7 | ​ | 6.2 | ​ | 4.9 | ​ | 4.5 | ​ | 30.2
Hedging liabilities - interest rate risk | ​ | 1.1 | ​ | 4.2 | ​ | 11.8 | ​ | 9.3 | ​ | 8.4 | ​ | 0.6 | ​ | 0.0 | ​ | 35.4
Cash flow hedging | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Hedging assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate risk | ​ | 5.4 | ​ | 8.1 | ​ | 14.3 | ​ | 24.5 | ​ | 11.4 | ​ | — | ​ | — | ​ | 63.7
Average fixed interest rate (%) | ​ | 1.40 | ​ | 1.19 | ​ | 1.35 | ​ | 0.65 | ​ | 0.82 | ​ | — | ​ | — | ​ | 0.97
Hedging liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate risk | ​ | 8.8 | ​ | 21.1 | ​ | 33.0 | ​ | 3.3 | ​ | 2.5 | ​ | 0.7 | ​ | — | ​ | 69.4
Average fixed interest rate (%) | ​ | 0.50 | ​ | 0.24 | ​ | 0.41 | ​ | 0.47 | ​ | 1.01 | ​ | 4.55 | ​ | — | ​ | 0.44
Hedging assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Exchange rate risk | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | —
Hedging liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Exchange rate risk | ​ | 0.1 | ​ | 2.4 | ​ | 3.5 | ​ | 1.3 | ​ | — | ​ | — | ​ | — | ​ | 7.3
Net investment hedging | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Exchange rate risk | ​ | 0.5 | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | 0.5
2020 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value hedging | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Hedging assets - interest rate risk | ​ | 1.2 | ​ | 2.3 | ​ | 6.3 | ​ | 7.4 | ​ | 8.9 | ​ | 5.1 | ​ | 4.2 | ​ | 35.4
Hedging liabilities - interest rate risk | ​ | — | ​ | 0.6 | ​ | 10.1 | ​ | 11.6 | ​ | 7.1 | ​ | 0.5 | ​ | 0.2 | ​ | 30.1
Cash flow hedging | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Hedging assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate risk | ​ | 0.7 | ​ | 10.5 | ​ | 19.3 | ​ | 13.9 | ​ | 10.5 | ​ | 0.1 | ​ | — | ​ | 55.0
Average fixed interest rate (%) | ​ | 1.28 | ​ | 1.22 | ​ | 1.51 | ​ | 1.06 | ​ | 0.92 | ​ | 3.12 | ​ | — | ​ | 1.23
Hedging liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate risk | ​ | 1.6 | ​ | 28.9 | ​ | 36.8 | ​ | 3.4 | ​ | 2.4 | ​ | 0.7 | ​ | — | ​ | 73.8
Average fixed interest rate (%) | ​ | 1.14 | ​ | 0.78 | ​ | 0.37 | ​ | 1.25 | ​ | 0.65 | ​ | 4.55 | ​ | — | ​ | 0.64
Hedging assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Exchange rate risk | ​ | — | ​ | — | ​ | 0.1 | ​ | — | ​ | — | ​ | — | ​ | — | ​ | 0.1
Hedging liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Exchange rate risk | ​ | — | ​ | 3.3 | ​ | 5.3 | ​ | 1.0 | ​ | 1.1 | ​ | — | ​ | — | ​ | 10.7
Net investment hedging | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Exchange rate risk | ​ | 0.1 | ​ | 0.1 | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | 0.2
​ For cash flow hedging of exchange rate risk, the average foreign exchange rates applicable across the relationships were as below for the main currencies hedged. ​
​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020
INR/GBP |  | 106.58 |  | 95.29
USD/GBP |  | 1.38 |  | 1.36
CHF/GBP |  | 1.25 |  | n/a
JPY/GBP |  | 132.93 |  | 132.93
JPY/EUR |  | n/a |  | 120.21
CNH/GBP |  | 8.74 |  | n/a
​ For net investment hedging of exchange rate risk, the average foreign exchange rates applicable were as below for the main currencies hedged. ​
​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020
SEK/GBP |  | 11.74 |  | 11.15
DKK/GBP |  | 8.85 |  | 8.28
NOK/GBP |  | 12.12 |  | 12.73
AED/USD |  | 3.67 |  | n/a
USD/GBP |  | 1.32 |  | n/a
​ 14 Derivatives continued The table below analyses assets and liabilities subject to hedging derivatives. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Impact on
​ |  | ​ |  | ​ |  | Changes in fair |  | hedged items
​ | ​ | Carrying value | ​ | Impact on | ​ | value used as | ​ | ceased to be
​ | ​ | of hedged | ​ | hedged items | ​ | a basis to | ​ | adjusted for
​ | ​ | assets and | ​ | included in | ​ | determine | ​ | hedging
​ | ​ | liabilities | ​ | carrying value | ​ | ineffectiveness (1) | ​ | gains or losses
2021 | ​ | £m | ​ | £m | ​ | £m | ​ | £m
Fair value hedging - interest rate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans to banks and customers - amortised cost | ​ | 6,603 | ​ | 701 | ​ | (478) | ​ | 69
Other financial assets - securities | ​ | 30,882 | ​ | 518 | ​ | (1,576) | ​ | —
Total | ​ | 37,485 | ​ | 1,219 | ​ | (2,054) | ​ | 69
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other financial liabilities - debt securities in issue | ​ | 34,371 | ​ | 454 | ​ | 953 | ​ | —
Subordinated liabilities | ​ | 6,235 | ​ | (9) | ​ | 255 | ​ | —
Total | ​ | 40,606 | ​ | 445 | ​ | 1,208 | ​ | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedging - interest rate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans to banks and customers - amortised cost | ​ | 63,025 | ​ | ​ | ​ | 1,984 | ​ | ​
Other financial assets - securities | ​ | 714 | ​ | ​ | ​ | 26 | ​ | ​
Total | ​ | 63,739 | ​ | ​ | ​ | 2,010 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedging - interest rate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Bank and customer deposits | ​ | 68,383 | ​ | ​ | ​ | (1,084) | ​ | ​
Other financial liabilities - debt securities in issue | ​ | 1,006 | ​ | ​ | ​ | (21) | ​ | ​
Total | ​ | 69,389 | ​ | ​ | ​ | (1,105) | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedging - exchange rate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans to banks and customer - amortised cost | ​ | 21 | ​ | ​ | ​ | — | ​ | ​
Other financial assets - securities | ​ | 2 | ​ | ​ | ​ | — | ​ | ​
Total | ​ | 23 | ​ | ​ | ​ | — | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other financial liabilities - debt securities in issue | ​ | 6,337 | ​ | ​ | ​ | (5) | ​ | ​
Subordinated liabilities | ​ | 742 | ​ | ​ | ​ | (12) | ​ | ​
Other | ​ | 200 | ​ | ​ | ​ | (10) | ​ | ​
Total | ​ | 7,279 | ​ | ​ | ​ | (27) | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
2020 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value hedging - interest rate |  |  |  |  |  | ​ | ​ |
Loans to banks and customers - amortised cost |  | 6,858 |  | 1,228 |  | 323 | ​ | 77
Other financial assets - securities |  | 35,754 |  | 2,268 |  | 1,568 | ​ | —
Total |  | 42,612 |  | 3,496 |  | 1,891 | ​ | 77
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other financial liabilities - debt securities in issue |  | 29,317 |  | 1,336 |  | (746) | ​ | —
Subordinated liabilities |  | 6,441 |  | 293 |  | (268) | ​ | 10
Total |  | 35,758 |  | 1,629 |  | (1,014) | ​ | 10
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedging - interest rate |  |  |  | ​ |  | ​ | ​ | ​
Loans to banks and customers - amortised cost |  | 53,335 |  | ​ |  | (601) | ​ | ​
Other financial assets - securities |  | 1,550 |  | ​ |  | (16) | ​ | ​
Total |  | 54,885 |  | ​ |  | (617) | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedging - interest rate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Bank and customer deposits | ​ | 72,880 | ​ | ​ | ​ | 409 | ​ | ​
Other financial liabilities - debt securities in issue | ​ | 1,014 | ​ | ​ | ​ | 13 | ​ | ​
Total | ​ | 73,894 | ​ | ​ | ​ | 422 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedging - exchange rate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans to banks and customer - amortised cost | ​ | 112 | ​ | ​ | ​ | 1 | ​ | ​
Other financial assets - securities | ​ | 30 | ​ | ​ | ​ | — | ​ | ​
Total | ​ | 142 | ​ | ​ | ​ | 1 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash flow hedging - exchange rate | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other financial liabilities - debt securities in issue |  | 6,272 |  | ​ |  | 20 | ​ | ​
Subordinated liabilities |  | 4,194 |  | ​ |  | 36 | ​ | ​
Other | ​ | 152 | ​ | ​ | ​ | (2) | ​ | ​
Total |  | 10,618 |  | ​ |  | 54 | ​ | ​
​
(1) | The change in fair value used for hedge ineffectiveness includes instruments that were derecognised in the year.
14 Derivatives continued The following risk exposures will be affected by interest rate benchmark reform (notional, hedged adjustment): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2021 | ​ | 2020
​ | ​ | ​ | ​ | Hedged | ​ | ​ | ​ | Hedged
​ |  | Notional | ​ | adjustment | ​ | Notional |  | adjustment
​ |  | £bn |  | £m |  | £bn |  | £m
Fair value hedging |  | ​ | ​ | ​ | ​ |  |  |
EURIBOR (1) |  | — | ​ | — | ​ | 15.1 |  | 27
GBP LIBOR |  | — | ​ | — | ​ | 11.4 |  | 1,178
USD LIBOR (2) | ​ | 21.8 | ​ | 7 | ​ | 28.1 | ​ | (427)
Other currency LIBOR |  | — | ​ | — | ​ | 1.1 |  | 1
Cash flow hedging |  | ​ | ​ | ​ | ​ | ​ | ​ | ​
EURIBOR (1) |  | — | ​ | — | ​ | 4.1 |  | (76)
GBP LIBOR |  | — | ​ | — | ​ | 10.5 |  | (473)
USD LIBOR (2) | ​ | 3.3 | ​ | 21 | ​ | 2.7 | ​ | (61)
BOE Base rate (3) |  | — | ​ | — | ​ | 40.7 |  | (156)
ECB REFI rate (3) |  | — | ​ | — | ​ | 1.2 |  | —
SONIA (3) |  | — | ​ | — | ​ | 0.6 |  | 4
​
(1) | In 2021 management concluded that EURIBOR is not expected to be significantly reformed further and therefore any uncertainty due to interest benchmark rate reform for EURIBOR has ended.
(2) | In 2021 the FCA declared that USD LIBOR will be non-representative post 30 June 2023; at the time of preparing the 2020 disclosures this date was expected to be 31 December 2021.
(3) | Hedge relationships subject to reform are those where either the hedged item or the hedging instrument is subject to the IBOR reform.
(4) | Notional of £6.5 billion GBP LIBOR hedged items in cash flow hedge relationships will convert to repricing off SONIA at the first repricing date post cessation.
​ 14 Derivatives continued The following table shows an analysis of the pre-tax cash flow hedge reserve and foreign exchange hedge reserve. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2021 | ​ | 2020
​ | ​ | ​ | ​ | Foreign | ​ | ​ | ​ | Foreign
​ | ​ | Cash flow | ​ | exchange | ​ | Cash flow | ​ | exchange
​ | ​ | hedge reserve | ​ | hedge reserve | ​ | hedge reserve | ​ | hedge reserve
​ |  | £m |  | £m |  | £m |  | £m
Continuing |  | ​ |  | ​ |  | ​ |  | ​
Interest rate risk |  | (295) |  | — |  | 695 |  | —
Foreign exchange risk |  | 23 | ​ | 53 | ​ | 22 | ​ | (13)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
De-designated |  | ​ |  | ​ |  | ​ | ​ | ​
Interest rate risk |  | (297) |  | — |  | (424) |  | —
Foreign exchange risk |  | 10 |  | (759) |  | (1) |  | (775)
Total |  | (559) |  | (706) |  | 292 |  | (788)
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2021 | ​ | 2020
​ | ​ | ​ | ​ | Foreign | ​ | ​ | ​ | Foreign
​ | ​ | Cash flow | ​ | exchange hedge | ​ | Cash flow | ​ | exchange hedge
​ |  | hedge reserve |  | reserve |  | hedge reserve |  | reserve
​ |  | £m |  | £m |  | £m |  | £m
Amount recognised in equity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate risk |  | (700) | ​ | — |  | 318 |  | —
Foreign exchange risk |  | 13 |  | 88 |  | 3 |  | (57)
Total |  | (687) |  | 88 |  | 321 |  | (57)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amount transferred from equity to earnings | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate risk to net interest income |  | (181) |  | — |  | (19) |  | —
Interest rate risk to non-interest income (1) | ​ | 20 | ​ | — | ​ | — | ​ | —
Foreign exchange risk to net interest income |  | (4) |  | 2 |  | (35) |  | —
Foreign exchange risk to non-interest income |  | 1 |  | (2) |  | — |  | 2
Foreign exchange risk to operating expenses | ​ | 3 | ​ | — | ​ | 4 | ​ | —
Total |  | (161) |  | — |  | (50) |  | 2
​
(1) | There was £20 million reclassified from the cash flow reserve to earnings due to forecasted cash flows that are no longer expected to occur.
Hedge ineffectiveness recognised in other operating income comprises: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |  | 2019
​ | ​ | £m | ​ | £m | ​ | £m
Fair value hedging |  | ​ |  |  |  |
(Losses)/gains on hedged items attributable to the hedged risk |  | (846) |  | 877 |  | 610
Gains/(losses) on the hedging instruments |  | 897 |  | (875) |  | (585)
Fair value hedging ineffectiveness |  | 51 |  | 2 |  | 25
Cash flow hedging | ​ | ​ | ​ | ​ | ​ | ​
Interest rate risk | ​ | (26) | ​ | 22 | ​ | 23
Cash flow hedging ineffectiveness |  | (26) |  | 22 |  | 23
Total |  | 25 |  | 24 |  | 48
​ The main sources of ineffectiveness for interest rate risk hedge accounting relationships are:
- | The effect of the counterparty credit risk on the fair value of the interest rate swap which is not reflected in the fair value of the hedged item attributable to the change in interest rate (fair value hedge).
- | Differences in the repricing basis between the hedging instrument and hedged cash flows (cash flow hedge); and
Upfront present values on the hedging derivatives where hedge accounting relationships have been designated after the trade date (cash flow hedge and fair value hedge).

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Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration