CITIC Limited Half-Year Report 2020

64 CITIC Limited Half-Year Report 2020 For the six months ended 30 June 2020 Notes to the Consolidated Financial Statements 15 Cash and deposits (continued) Notes: (i) The balances with central banks represent deposits placed with central banks by China CITIC Bank Corporation Limited (“CITIC Bank”) and CITIC Finance Company Limited (“CITIC Finance”). (ii) CITIC Bank and CITIC Finance place statutory deposit reserves funds with the People’s Bank of China and overseas central banks where they have operations. The statutory deposit reserves funds are not available for use in their daily business. As at 30 June 2020, the statutory deposit reserve funds placed by CITIC Bank with the People’s Bank of China was calculated at 9% (31 December 2019: 9.5%) of eligible RMB deposits for domestic branches of CITIC Bank and at 9% (31 December 2019: 9.5%) of eligible RMB deposits from overseas financial institutions respectively. In addition, CITIC Bank is required to deposit an amount equivalent to 5% (31 December 2019: 5%) of its foreign currency deposits from domestic branch customers as statutory deposit reserve funds as at 30 June 2020. As at 30 June 2020, the statutory RMB deposit reserve rate applicable to Zhejiang Lin’an CITIC Rural Bank Corporation Limited, a subsidiary of CITIC Bank, was at 6% (31 December 2019: 7.5%). The amounts of statutory deposit reserve funds placed with the central banks of overseas countries are determined by respective jurisdictions. The statutory deposit reserve funds are interest bearing except for the foreign currency reserve funds deposits placed with the People’s Bank of China. As at 30 June 2020, the statutory deposit reserve funds placed by CITIC Finance with the People’s Bank of China was calculated at 6% (31 December 2019: 6%) of eligible RMB deposits from the customers of CITIC Finance. CITIC Finance is also required to deposit an amount equivalent to 5% (31 December 2019: 5%) of its foreign currency deposits from the customers as statutory deposit reserve funds. (iii) The surplus deposit reserve funds are maintained with the People’s Bank of China for the purposes of clearing. (iv) Fiscal deposits placed with the People’s Bank of China are not available for use in the Group’s daily operations, and are non-interest bearing. (v) The foreign exchange reserve is maintained with the People’s Bank of China in accordance with the related notice issued by the People’s Bank of China. The reserve is payable on a monthly basis at 20% of the total contract amount of customers driven forward transactions in the previous month. Such foreign exchange reserve is non-interest bearing and will be repayable in 12 months according to the notice. (vi) In addition to the statutory deposit reserve funds, fiscal deposits and foreign exchange reserves, HK$4,144 million (31 December 2019: HK$2,635 million) included in cash and deposits as at 30 June 2020 were restricted in use, mainly including pledged bank deposits and guaranteed deposits. 16 Derivative financial instruments The Group’s subsidiaries under the financial services segment act as an intermediary to offer derivative products including forwards, swaps and option transactions. These derivative positions are managed through entering back-to-back deals with external parties to ensure the remaining exposures are within acceptable risk levels. Meanwhile, derivatives are also used for proprietary trading purposes to manage its own asset and liability and structural positions. Derivatives, except for those which are designated as hedging instruments, are held for trading. Derivatives classified as held for trading are for trading and customer initiated transactions purpose, and those for risk management purposes but do not meet the criteria for hedge accounting. Subsidiaries under non-financial services segment of the Group enter into forward and swap contracts to hedge their exposure to fluctuations in foreign exchange rates, commodity prices and interest rates.