HSBC 2010 Annual Report Download - page 98

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Credit risk > Credit exposure
96
Maximum exposure to credit risk
(Audited)
At 31 December 2010 At 31 December 2009
Maximum
exposure
Offset
Exposure
to credit
risk (net)
Maximum
exposure
Offset
Exposure
to credit
risk (net)
US$m US$m US$m US$m US$m US$m
Cash and balances at central banks .................... 57,383 – 57,383 60,655 – 60,655
Items in the course of collection from other
banks ............................................................... 6,072 – 6,072 6,395 – 6,395
Hong Kong Government certificates of
indebtedness ................................................... 19,057 – 19,057 17,463 – 17,463
Trading assets ..................................................... 343,966 (4,189) 339,777 386,070 (8,496) 377,574
Treasury and other eligible bills ..................... 25,620 –25,620 22,346 – 22,346
Debt securities ................................................ 168,268 –168,268 201,598 – 201,598
Loans and advances to banks ......................... 70,456 –70,456 78,126 – 78,126
Loans and advances to customers .................. 79,622 (4,189) 75,433 84,000 (8,496) 75,504
Financial assets designated at fair value ............ 19,593 – 19,593 22,198 – 22,198
Treasury and other eligible bills ..................... 159 –159 223 – 223
Debt securities ................................................ 18,248 –18,248 20,718 – 20,718
Loans and advances to banks ......................... 315 –315 354 – 354
Loans and advances to customers .................. 871 –871 903 – 903
Derivatives .......................................................... 260,757 (197,501) 63,256 250,886 (189,606) 61,280
Loans and advances held at amortised cost ........ 1,166,637 (91,966) 1,074,671 1,076,012 (91,127) 984,885
– to banks ........................................................ 208,271 (3,099) 205,172 179,781 (116) 179,665
– to customers ................................................. 958,366 (88,867) 869,499 896,231 (91,011) 805,220
Financial investments ......................................... 392,772 – 392,772 360,034 – 360,034
Treasury and other similar bills ...................... 57,129 –57,129 58,434 – 58,434
Debt securities ................................................ 335,643 –335,643 301,600 – 301,600
Other assets ......................................................... 30,371 (29) 30,342 36,373 (4) 36,369
Endorsements and acceptances ...................... 10,116 (29) 10,087 9,311 (4) 9,307
Other ............................................................... 20,255 –20,255 27,062 – 27,062
Financial guarantees and similar contracts ........ 49,436 – 49,436 53,251 – 53,251
Loan and other credit-related commitments1 ..... 602,513 – 602,513 558,050 – 558,050
2,948,557 (293,685) 2,654,872 2,827,387 (289,233) 2,538,154
For footnote, see page 174.
Collateral and other credit enhancements
(Audited)
Collateral held against financial instruments
presented in the above table is described in more
detail below.
Loans and advances
Although collateral can be an important mitigant of
credit risk, it is our policy to lend on the basis of the
customer’s capacity to repay rather than to rely on
the value of security offered. Depending on the
customer’s standing and the type of product,
facilities may be provided unsecured.
We employ the following principal collateral
types:
• in the personal sector, mortgages over
residential properties;
• in the commercial and industrial sector, charges
over business assets such as premises, stock and
debtors;
• in the commercial real estate sector, charges
over the properties being financed; and
• in the financial sector, charges over financial
instruments such as cash, debt securities and
equities in support of trading facilities.
In addition, credit derivatives and securitisation
structures are used to hedge or transfer credit risk
within our loan portfolio.
The loans and advances offset adjustment in the
table above primarily relates to customer loans and
deposits, and balances arising from repo and reverse
repo transactions. The offset relates to balances
where there is a legally enforceable right of offset
in the event of counterparty default, and where,
as a result, there is a net exposure for credit risk
management purposes. However, as there is no
intention to settle these balances on a net basis under
normal circumstances, they do not qualify for net
presentation for accounting purposes.