HSBC 2007 Annual Report Download - page 250

HSBC HOLDINGS PLC
Report of the Directors: The Management of Risk (continued)
Liquidity and funding > HSBC Holdings / Market risk management > VAR
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regulatory capital requirements, statutory reserves,
and financial and operating performance.
HSBC actively manages the cash flows from its
subsidiaries to optimise the amount of cash held at
the holding company level, and expects to continue
doing so in the future. The wide range of HSBC’s
activities means that HSBC Holdings is not
dependent on a single source of profits to fund
its dividends. HSBC Holdings is also subject to
contingent liquidity risk by virtue of loan
commitments and guarantees given. Such
commitments are only provided after due
consideration of HSBC Holdings’ ability to finance
these commitments and the likelihood of the need
arising. Together with its accumulated liquid assets,
HSBC Holdings believes that planned dividends
and interest from subsidiaries will enable it to
meet anticipated cash obligations. Also, in usual
circumstances, HSBC Holdings has full access
to capital markets on normal terms.
Cash flows payable by HSBC Holdings under financial liabilities by remaining contractual maturities
(Audited)
On
demand
Due
within 3
months
Due
between
3 and 12
months
Due
between
1 and 5
years
Due
after 5
years
US$m US$m US$m US$m US$m
At 31 December 2007
Amounts owed to HSBC undertakings ................... – 109 1,801 1,192 –
Financial liabilities designated at fair value ............ – 258 776 8,152 28,639
Derivatives ............................................................... 44 – – – –
Subordinated liabilities ............................................ – 160 482 2,568 23,069
Other financial liabilities ......................................... – 1,398 – – –
44 1,925 3,059 11,912 51,708
Loan commitments .................................................. 3,638 – – – –
3,682 1,925 3,059 11,912 51,708
At 31 December 2006
Amounts owed to HSBC undertakings ................... 109 221 88 3,025 5
Financial liabilities designated at fair value ............ – 177 532 4,039 21,029
Derivatives ............................................................... 177 – – – –
Subordinated liabilities ............................................ – 158 473 2,525 23,327
Other financial liabilities ......................................... 13 1,608 – – 8
299 2,164 1,093 9,589 44,369
Loan commitments .................................................. 3,967 – – – –
4,266 2,164 1,093 9,589 44,369
At 31 December 2007, the short-term liabilities
of HSBC Holdings totalled US$3.3 billion (2006:
US$1.8 billion), including US$1.4 billion in
respect of the third interim dividend for 2007
(2006: US$1.5 billion) which was paid on
16 January 2008. Short-term assets of US$8.1 billion
(2006: US$7.6 billion) consisted mainly of cash at
bank of US$360 million (2006: US$729 million)
and loans and advances to HSBC undertakings of
US$7.4 billion (2006: US$6.9 billion). Derivatives
have been included in the ‘On demand’ time bucket,
and not by contractual maturity. The undiscounted
cash flows on hedging derivative liabilities are
classified according to their contractual maturity.
Market risk management
(Audited)
The objective of HSBC’s market risk management is
to manage and control market risk exposures in order
to optimise return on risk while maintaining a market
profile consistent with the Group’s status as one of
the world’s largest banking and financial services
organisations.
Market risk is the risk that movements in market
risk factors, including foreign exchange rates and
commodity prices, interest rates, credit spreads and
equity prices will reduce HSBC’s income or the
value of its portfolios.
HSBC separates exposures to market risk into
trading and non-trading portfolios. Trading portfolios
include those positions arising from market-making,
proprietary position-taking and other marked-to-
market positions so designated.