HSBC 2011 Annual Report Download - page 168

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Market risk > Structured FX / Sensitivity of NII / DBS / Additional market risk measures
166
securities, see ‘Securitisation exposures and other
structured products’ on page 149.
Structural foreign exchange exposures
(Unaudited)
Our policies and procedures for managing structural
foreign exchange exposures are described on
page 201.
For details of structural foreign exchange
exposures see Note 36 on the Financial Statements.
Sensitivity of net interest income
(Unaudited)
The table below sets out the effect on our future net
interest income of an incremental 25 basis points
parallel rise or fall in all yield curves worldwide at
the beginning of each quarter during the 12 months
from 1 January 2012. Assuming no management
actions, a sequence of such rises would increase
planned net interest income for 2012 by US$1,571m
(2011: US$882m), while a sequence of such falls
would decrease planned net interest income by
US$1,909m (2011: US$1,525m). These figures
incorporate the effect of any option features in the
underlying exposures.
Sensitivity of projected net interest income65
(Unaudited)
US dollar
bloc
US$m
Rest of
Americas
bloc
US$m
Hong Kong
dollar
bloc
US$m
Rest of
Asia
bloc
US$m
Sterling
bloc
US$m
Euro
bloc
US$m
Total
US$m
Change in 2012 projected net
interest income arising from
a shift in yield curves of:
+25 basis points at the
beginning of each quarter ..... 209 62 263 232 729 76 1,571
–25 basis points at the
beginning of each quarter ..... (465) (59) (443) (166) (708) (68) (1,909)
Change in 2011 projected net
interest income arising from
a shift in yield curves of:
+25 basis points at the
beginning of each quarter ..... 164 72 191 245 292 (82) 882
–25 basis points at the
beginning of each quarter ..... (550) (68) (280) (143) (546) 62 (1,525)
For footnote, see page 185.
The interest rate sensitivities set out in the
table above are illustrative only and are based on
simplified scenarios. The limitations of this analysis
are discussed in the Appendix to Risk on page 188.
The main drivers of the year-on-year changes in
the sensitivity of the Group’s net interest income to
the change in rates shown in the table above were
lower implied yield curves, the potential for wider
margins in a rising interest rate scenario, and a
reduction in the funding requirement of the HSBC
Bank plc trading book. Net interest income and its
associated sensitivity as reflected in the table above
include the expense of internally funding trading
assets, while related revenue is reported in ‘Net
trading income’.
We monitor the sensitivity of reported reserves
to interest rate movements on a monthly basis by
assessing the expected reduction in valuation of
available-for-sale portfolios and cash flow hedges
due to parallel movements of plus or minus 100
basis points in all yield curves. The table below
describes the sensitivity of our reported reserves to
these movements and the maximum and minimum
month-end figures during the year: