HSBC 2010 Annual Report Download - page 146

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Liquidity and funding > HSBC Holdings // Market risk > Monitoring exposure / Sensitivity analysis
144
HSBC Holdings
(Audited)
HSBC Holdings’ primary sources of cash are
dividends received from subsidiaries, interest on and
repayment of intra-group loans and interest earned
on its own liquid funds. HSBC Holdings also raises
ancillary funds in the debt capital markets through
subordinated and senior debt issuance. Cash is
primarily used for the provision of capital to
subsidiaries, interest payments to debt holders
and dividend payments to shareholders.
HSBC Holdings is also subject to contingent
liquidity risk by virtue of loan and other credit-
related commitments and guarantees and similar
contracts issued. Such commitments and guarantees
are only issued after due consideration of HSBC
Holdings’ ability to finance the commitments and
guarantees and the likelihood of the need arising.
HSBC Holdings actively manages the cash
flows from its subsidiaries to optimise the amount of
cash held at the holding company level. The ability
of subsidiaries to pay dividends or advance monies
to HSBC Holdings depends on, among other things,
their respective regulatory capital requirements,
statutory reserves, and financial and operating
performance. The wide range of our activities means
that HSBC Holdings is not dependent on a single
source of profits to fund its dividend payments to
shareholders. During 2010, HSBC Holdings
continued to have full access to debt capital markets
at market rates and issued US$5.0bn of capital
instruments (2009: US$5.3bn).
Cash flows payable by HSBC Holdings under financial liabilities by remaining contractual maturities
(Audited)
On
demand
Due
within 3
months
Due
between
3 and 12
months
Due
between
1 and 5
years
Due
after 5
years
US$m US$m US$m US$m US$m
At 31 December 2010
Amounts owed to HSBC undertakings ................... – 163 1,332 1,453 –
Financial liabilities designated at fair value ............ – 219 658 5,810 24,215
Derivatives ............................................................... 827 – – – –
Debt securities in issue ............................................ – 35 106 2,110 1,559
Subordinated liabilities ............................................ – 219 657 3,504 28,670
Other financial liabilities ......................................... – 1,782 – – –
827 2,418 2,753 12,877 54,444
Loan commitments .................................................. 2,720 – – – –
Financial guarantees and similar contracts ............. 46,988 – – – –
50,535 2,418 2,753 12,877 54,444
At 31 December 2009
Amounts owed to HSBC undertakings ................... – 292 25 3,477 –
Financial liabilities designated at fair value ............ – 229 687 6,205 26,152
Derivatives ............................................................... 362 – – – –
Debt securities in issue ............................................ – 37 112 2,346 1,698
Subordinated liabilities ............................................ – 243 728 3,881 32,232
Other financial liabilities ......................................... – 1,239 – – –
362 2,040 1,552 15,909 60,082
Loan commitments .................................................. 3,240 – – – –
Financial guarantees and similar contracts ............. 35,073 – – – –
38,675 2,040 1,552 15,909 60,082
The balances in the above table will not agree
directly with those in the balance sheet of HSBC
Holdings as the table incorporates, on an
undiscounted basis, all cash flows relating to
principal and future coupon payments (except
for trading derivatives).
In addition, loan and other credit-related
commitments and financial guarantees and similar
contracts are generally not recognised on the balance
sheet. Trading derivatives are included in the ‘On
demand’ time bucket, and not by contractual
maturity, because trading derivatives are typically
held for short periods of time. The undiscounted
cash flows potentially payable under financial
guarantees and similar contracts are classified on the
basis of the earliest date they can be called.