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Derivative instruments and hedging activities (Tables)

12 Months Ended

Mar. 31, 2013

Concentration of exposures to credit risk in OTC derivatives

The following tables present Nomura’s significant concentration of exposures to credit risk in OTC derivatives with financial institutions. The gross fair value of derivative assets represents the maximum amount of loss due to credit risk that Nomura would incur if the counterparties of Nomura failed to perform in accordance with the terms of the instruments and any collateral or other security Nomura held in relation to those instruments proved to be of no value.


		Billions of yen
		March 31, 2012
		Gross fair value of derivative assets				Impact of master netting agreements				Impact of collateral				Net exposure to credit risk
Financial institutions		¥	18,881			¥	(17,553	)		¥	(797	)		¥	531

		Billions of yen
		March 31, 2013
		Gross fair value of derivative assets				Impact of master netting agreements				Impact of collateral				Net exposure to credit risk
Financial institutions		¥	20,169			¥	(18,415	)		¥	(981	)		¥	773

Volume of derivative activity in statement of financial position

The following table quantifies the volume of Nomura’s derivative activity through a disclosure of notional amounts, in comparison with the fair value of those derivatives. All amounts are disclosed on a gross basis, prior to counterparty netting of derivative assets and liabilities and cash collateral netting against net derivatives.


		Billions of yen
		March 31, 2012
		Derivative assets								Derivative liabilities
		Notional				Fair value				Notional⁽¹⁾				Fair value⁽¹⁾
Derivatives used for trading and non-trading purposes⁽²⁾⁽³⁾:
Equity contracts		¥	16,079			¥	1,603			¥	14,497			¥	1,687
Interest rate contracts			636,833				18,843				592,413				18,597
Credit contracts			37,067				1,864				41,785				1,952
Foreign exchange contracts			59,296				1,356				62,999				1,407
Commodity contracts			50				4				45				5

Total		¥	749,325			¥	23,670			¥	711,739			¥	23,648

Derivatives designated as hedging instruments:
Interest rate contracts		¥	1,855			¥	78			¥	—			¥	—
Foreign exchange contracts			190				4				97				1

Total		¥	2,045			¥	82			¥	97			¥	1

Total derivatives		¥	751,370			¥	23,752			¥	711,836			¥	23,649


		Billions of yen
		March 31, 2013
		Derivative assets								Derivative liabilities
		Notional				Fair value				Notional⁽¹⁾				Fair value⁽¹⁾
Derivatives used for trading and non-trading purposes⁽²⁾⁽³⁾:
Equity contracts		¥	14,130			¥	1,857			¥	14,550			¥	2,017
Interest rate contracts			727,129				21,685				711,914				21,452
Credit contracts			44,582				1,839				42,889				1,979
Foreign exchange contracts			81,002				2,104				80,280				2,007
Commodity contracts			29				1				39				2

Total		¥	866,872			¥	27,486			¥	849,672			¥	27,457

Derivatives designated as hedging instruments:
Interest rate contracts		¥	1,748			¥	88			¥	162			¥	0
Foreign exchange contracts			92				1				24				1

Total		¥	1,840			¥	89			¥	186			¥	1

Total derivatives		¥	868,712			¥	27,575			¥	849,858			¥	27,458

(1)	Includes the amount of embedded derivatives bifurcated in accordance with ASC 815.

(2)

Each derivative classification includes derivatives referencing multiple risk components. For example, interest rates contracts include complex derivatives referencing interest rate risk as well as foreign exchange risk or other factors such as prepayment rates. Credit contracts include credit default swaps as well as derivatives referencing corporate and government securities.

(3)	As of March 31, 2012 and 2013, the amounts reported include derivatives used for non-trading purposes which are not designated as fair value or net investment hedges. These amounts have not been separately presented since such amounts were not significant.

Derivative amounts included in consolidated statements of income

The following table presents amounts included in the consolidated statements of income related to derivatives used for trading and non-trading purposes by type of underlying derivative contract.


		Billions of yen
		Year ended March 31
		2011				2012				2013
Derivatives used for trading and non-trading purposes⁽¹⁾⁽²⁾:
Equity contracts		¥	206			¥	(137	)		¥	(69	)
Interest rate contracts			132				42				65
Credit contracts			88				(73	)			(18	)
Foreign exchange contracts			(171	)			(67	)			(329	)
Commodity contracts			(10	)			(4	)			(0	)

Total		¥	245			¥	(239	)		¥	(351	)

(1)

Each derivative classification includes derivatives referencing multiple risk components. For example, interest rates contracts include complex derivatives referencing interest rate risk as well as foreign exchange risk or other factors such as prepayment rates. Credit contracts include credit default swaps as well as derivatives referencing corporate and government securities.

(2)

Includes net gains (losses) on derivatives used for non-trading purposes which are not designated as fair value or net investment hedges. For the years ended March 31, 2011, 2012 and 2013, these amounts have not been separately presented as net gains (losses) for these non-trading derivatives were not significant.

Fair value hedges

The following table presents amounts included in the consolidated statements of income related to derivatives designated as fair value hedges by type of underlying derivative contract and the nature of the hedged item.


		Billions of yen
		Year ended March 31
		2011				2012				2013
Derivatives designated as hedging instruments:
Interest rate contracts		¥	22			¥	76			¥	33

Total		¥	22			¥	76			¥	33

Hedged items:
Long-term borrowings		¥	(22	)		¥	(76	)		¥	(33	)

Total		¥	(22	)		¥	(76	)		¥	(33	)

Net investment hedges

The following table presents gains (losses) from derivatives and non-derivatives designated as net investment hedges included in the consolidated statements of comprehensive income.


		Billions of yen
		Year ended March 31
		2011				2012				2013
Hedging instruments:
Foreign exchange contracts		¥	0			¥	(1	)		¥	(14	)
Long-term borrowings			17				4				(15	)

Total		¥	17			¥	3			¥	(29	)

(1)

The portion of the gains (losses) representing the amount of hedge ineffectiveness and the amount excluded from the assessment of hedge effectiveness are recognized within Revenue—Other in the consolidated statements of income. The amount of gains (losses) was not significant during the years ended March 31, 2011, 2012 and 2013.

Written credit derivatives and purchased credit protection

The following tables present information about Nomura’s written credit derivatives and purchased credit protection with identical underlyings as of March 31, 2012 and March 31, 2013.


		Billions of yen
		March 31, 2012
						Maximum potential payout/Notional																				Notional
										Years to maturity																Purchased credit protection
		Carrying value (Asset) / Liability⁽¹⁾				Total				Less than 1 year				1 to 3 years				3 to 5 years				More than 5 years				Purchased credit protection
Single-name credit default swaps		¥	562			¥	20,159			¥	2,902			¥	6,750			¥	8,510			¥	1,997			¥	18,692
Credit default indices			124				10,738				1,667				2,089				5,807				1,175				9,334
Other credit risk related portfolio products			223				3,298				1,084				1,201				441				572				2,138
Credit risk related options and swaptions			(1	)			781				0				—				439				342				651

Total		¥	908			¥	34,976			¥	5,653			¥	10,040			¥	15,197			¥	4,086			¥	30,815


		Billions of yen
		March 31, 2013
						Maximum potential payout/Notional																				Notional
										Years to maturity																Purchased credit protection
		Carrying value (Asset) / Liability⁽¹⁾				Total				Less than 1 year				1 to 3 years				3 to 5 years				More than 5 years				Purchased credit protection
Single-name credit default swaps		¥	210			¥	24,659			¥	4,575			¥	7,961			¥	9,877			¥	2,246			¥	22,431
Credit default indices			(16	)			12,722				1,482				3,555				6,815				870				11,592
Other credit risk related portfolio products			230				2,586				666				1,112				215				593				1,710
Credit risk related options and swaptions			0				51				—				—				27				24				42

Total		¥	424			¥	40,018			¥	6,723			¥	12,628			¥	16,934			¥	3,733			¥	35,775

(1)	Carrying value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

Written credit derivatives by external credit rating of underlying asset

The following tables present information about Nomura’s written credit derivatives by external credit rating of the underlying asset. Ratings are based on Standard & Poor’s Financial Services LLC (“S&P”), or if not rated by S&P, based on Moody’s Investors Service, Inc. If ratings from either of these agencies are not available, the ratings are based on Fitch Ratings Ltd. or Japan Credit Rating Agency, Ltd. For credit default indices, the rating is determined by taking the weighted average of the external credit ratings given for each of the underlying reference entities comprising the portfolio or index.


		Billions of yen
		March 31, 2012
		Maximum potential payout/Notional
		AAA				AA				A				BBB				BB				Other⁽¹⁾				Total
Single-name credit default swaps		¥	2,196			¥	1,749			¥	5,878			¥	5,550			¥	2,974			¥	1,812			¥	20,159
Credit default indices			140				711				5,358				2,905				1,619				5				10,738
Other credit risk related portfolio products			20				18				3				111				212				2,934				3,298
Credit risk related options and swaptions			0				0				137				532				112				—				781

Total		¥	2,356			¥	2,478			¥	11,376			¥	9,098			¥	4,917			¥	4,751			¥	34,976


		Billions of yen
		March 31, 2013
		Maximum potential payout/Notional
		AAA				AA				A				BBB				BB				Other⁽¹⁾				Total
Single-name credit default swaps		¥	2,400			¥	1,594			¥	5,945			¥	8,208			¥	4,073			¥	2,439			¥	24,659
Credit default indices			14				589				6,360				3,516				1,910				333				12,722
Other credit risk related portfolio products			77				17				9				127				243				2,113				2,586
Credit risk related options and swaptions			—				—				18				—				33				—				51

Total		¥	2,491			¥	2,200			¥	12,332			¥	11,851			¥	6,259			¥	4,885			¥	40,018

(1)	“Other” includes credit derivatives where the credit rating of the underlying reference asset is below investment grade or where a rating is unavailable.

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

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