37. FINANCIAL EXPENSES

These are broken down as follows:

(in thousands of euro)
  2011 2010
Interest to banks 74,741 47,098
Other financial expenses 34,561 36,449
Net losses on exchange rates 33,113 14
Fair value measurement of securities held for trading 3,698 1,916
Fair value measurement of currency derivatives - 8,376
Fair value measurement of other derivative instruments - 5,704
  146,113 99,557

 

Interest to banks includes euro 22,790 thousand for the bond issued by PIRELLI & C. S.p.A.

The item other financial expenses mainly consists of euro 10,542 thousand for the effect of adopting inflation accounting by PIRELLI de Venezuela C.A. (also see note 42) and euro 4,142 thousand for the adjustment of the bond, following fair value hedge accounting in consequence of the interest rate swaps made to hedge the risk of change in fair value.

The net losses on exchange rates of euro 33,113 thousand (exchange rate losses of euro 659,774 thousand and exchange rate gains of euro 626,661 thousand) refer to adjustment to year-end exchange rates of items expressed in currencies other than the functional currency outstanding at the reporting date and the net losses realised on items closed during the financial year. Comparison of these net losses with the fair value measurement of the foreign exchange component of foreign exchange derivatives negotiated as part of the Group foreign exchange risk management strategy (net gain of euro 29,197 thousand, as indicated in the item “financial income”) shows that net foreign exchange gains/(losses) are substantially in balance.