HSBC 2010 Annual Report Download - page 177

175
Overview Operating & Financial Review Governance Financial Statements Shareholder Information
31 Collectively assessed loans and advances comprise homogeneous groups of loans that are not considered individually significant, and
loans subject to individual assessment where no impairment has been identified on an individual basis, but on which a collective
impairment allowance has been calculated to reflect losses which have been incurred but not yet identified.
32 Collectively assessed loans and advances not impaired are those classified as CRR1 to CRR8 and EL1 to EL8 but excluding retail loans
90 days past due.
33 Net of repo transactions, settlement accounts and stock borrowings.
34 As a percentage of loans and advances to banks and loans and advances to customers, as applicable.
35 Includes movement in impairment allowances against banks.
36 See table below ‘Net loan impairment charge to the income statement by geographical region’.
37 Collectively assessed impairment allowances are allocated to geographical segments based on the location of the office booking the
allowances or provisions. Consequently, the collectively assessed impairment allowances booked in Hong Kong may cover assets
booked in branches located outside Hong Kong, principally in Rest of Asia-Pacific, as well as those booked in Hong Kong.
38 Total includes holdings of ABSs issued by Freddie Mac and Fannie Mae.
39 ‘Directly held’ includes assets held by Solitaire where we provide first loss protection and assets held directly by the Group.
40 Impairment charges allocated to capital note holders represent impairments where losses would be borne by external third-party
investors in the structures.
41 Mortgage-backed securities (‘MBS’s), asset-backed securities (‘ABS’s) and collateralised debt obligations (‘CDO’s).
42 High grade assets rated AA or AAA.
43 Gains or losses on the net principal exposure (footnote 49) recognised in the income statement as a result of changes in the fair value of
the asset.
44 Fair value gains and losses on the net principal exposure (footnote 49) recognised in other comprehensive income as a result of the
changes in the fair value of available-for-sale assets.
45 Realised fair value gains and losses on the net principal exposure (footnote 49) recognised in the income statement as a result of the
disposal of assets or the receipt of cash flows from assets.
46 Reclassified from equity on impairment, disposal or payment. This includes impairment losses recognised in the income statement in
respect of the net principal exposure (footnote 49) of available-for-sale assets. Payments are the contractual cash flows received on the
assets.
47 The gross principal is the redemption amount on maturity or, in the case of an amortising instrument, the sum of the future redemption
amounts through the residual life of the security.
48 A credit default swap (‘CDS’) gross protection is the gross principal of the underlying instrument that is protected by CDSs.
49 Net principal exposure is the gross principal amount of assets that are not protected by CDSs. It includes assets that benefit from
monoline protection, except where this protection is purchased with a CDS.
50 Carrying amount of the net principal exposure.
51 Net exposure after legal netting and any other relevant credit mitigation prior to deduction of the credit risk adjustment.
52 Cumulative fair value adjustment recorded against exposures to OTC derivative counterparties to reflect their creditworthiness.
53 Funded exposures represent the loan amount advanced to the customer, less any fair value write-downs, net of fees held on deposit.
Unfunded exposures represent the contractually committed loan facility amount not yet drawn down by the customer, less any fair value
write-downs, net of fees held on deposit.
Liquidity and funding
54 2009 comparative data have been re-presented in line with the classification used in 2010. This resulted in an increase in the ‘On
demand’ time band of US$273,078m for ‘Loan and other credit-related commitments’ and US$10,450m for ‘Financial guarantees and
similar contracts’. There was an equivalent reduction across the other time bands.
55 Figures provided for HSBC Bank plc and The Hongkong and Shanghai Banking Corporation incorporate all overseas branches.
Subsidiaries of these entities are not included unless there is unrestricted transferability of liquidity between the subsidiaries and the
parent.
56 This comprises our other main banking subsidiaries and, as such, includes businesses spread across a range of locations, in many of
which we may require a higher ratio of net liquid assets to customer liabilities to reflect local market conditions.
57 Unused committed sources of secured funding for which eligible assets were held.
58 Client-originated asset exposures relate to consolidated multi-seller conduits (see page 363). These vehicles provide funding to our
customers by issuing debt secured by a diversified pool of customer-originated assets.
59 HSBC-managed asset exposures relate to consolidated securities investment conduits, primarily Solitaire and Mazarin (see page 362).
These vehicles issue debt secured by ABSs which are managed by HSBC. Of the total contingent liquidity risk under this category,
US$8.1bn was already funded on-balance sheet at 31 December 2010 (2009: US$7.6bn) leaving a net contingent exposure of
US$17.5bn (2009: US$21.5bn).
60 Other conduit exposures relate to third-party sponsored conduits (see page 364).
61 The five largest committed liquidity facilities provided to customers other than facilities to conduits.
62 The total of all committed liquidity facilities provided to the largest market sector, other than facilities to conduits.
Market risk
63 The structural foreign exchange risk is monitored using sensitivity analysis (see page 351). The reporting of commodity risk is
consolidated with foreign exchange risk and is not applicable to non-trading portfolios.
64 The interest rate risk on the fixed-rate securities issued by HSBC Holdings is not included in the Group VAR. The management of this
risk is described on page 148.
65 Credit spread sensitivity is reported separately for insurance operations (see page 165).
66 The standard deviation measures the variation of daily revenues about the mean value of those revenues.
67 The effect of any month-end adjustments, not attributable to a specific daily market move, is spread evenly over the days in the month in
question.
68 Trading intent portfolios include positions arising from market-making and position taking.
69 Trading credit spread VAR was previously reported in the Group trading credit VAR. See page 148.
70 The total VAR is non-additive across risk types due to diversification effects. It incorporates credit spread VAR.