HSBC 2011 Annual Report Download - page 402

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
41 – Contingent liabilities, contractual commitments and guarantees / 42 – Lease commitments / 43 – Special purpose entities
400
Financial Services Compensation Scheme
The Financial Services Compensation Scheme (‘FSCS’) has provided compensation to consumers following the
collapse of a number of deposit takers. The compensation paid out to consumers is currently funded through loans
from the Bank of England and HM Treasury. HSBC Bank could be liable to pay a proportion of the outstanding
borrowings that the FSCS has borrowed from HM Treasury which at 31 December 2011 stood at approximately
£18.5bn (US$28.6bn). Currently, the Management Expenses Levy paid by the bank represents its share of the interest
on these borrowings.
The interest rate to be applied on HM Treasury loans for the period from 1 April 2012, on which the Management
Expenses Levy for Scheme Year 2012/2013 will be based, has yet to be formally agreed by the FSCS and HM
Treasury. HSBC Bank’s accrual for the Scheme Year 2012/2013 levy is based on an estimated funding rate which
considers rates levied in prior years as well as previous public announcements.
The accrual at 31 December 2011 reflects an estimate of US$87m in respect of expected Management Expenses Levy
due in Scheme Year 2012/2013 (2010: US$144m in respect of the Scheme Years 2010/11 and 2011/12). However
until negotiations are complete and the funding rate is finalised there exists the possibility that the levy for Scheme
Year 2012/2013 will be based on a higher rate and that the bank’s liability will be consequently higher. In addition,
an agreement by the FSCS not to charge Compensation Cost Levy for three years is also at an end and there exists the
possibility that compensation for losses suffered could be levied in the Scheme Year commencing 1 April 2012.
The ultimate FSCS levy to the industry as a result of the collapses cannot currently be estimated reliably as it is
dependent on various uncertain factors including the potential recoveries of assets by the FSCS and changes in the
interest rate, and the level of protected deposits at the time.
Commitments
In addition to the commitments disclosed on page 399, at 31 December 2011 HSBC had US$715m (2010:
US$1,071m) of capital commitments contracted but not provided for and US$272m (2010: US$287m) of capital
commitments authorised but not contracted for.
Associates
HSBC’s share of associates’ contingent liabilities amounted to US$34,311m at 31 December 2011 (2010:
US$25,640m). No matters arose where HSBC was severally liable.
42 Lease commitments
Finance lease commitments
HSBC leases land and buildings (including branches) and equipment from third parties under finance lease
arrangements to support its operations.
At 31 December 2011 At 31 December 2010
Total future
minimum
payments
Future
interest
charges
Present value
of finance
lease
commitments1
Total future
minimum
payments
Future
interest
charges
Present value
of finance
lease
commitments
US$m US$m US$m US$m US$m US$m
Lease commitments:
– no later than one year ................ 98 (26) 72 107 (20) 87
– later than one year and no later
than five years ........................... 216 (99) 117 187 (92) 95
– later than five years ................... 362 (92) 270 390 (118) 272
676 (217) 459 684 (230) 454
1 Lease commitments include US$31m of finance leases which are shown as part of liabilities of disposal groups held for sale in Note 31.
At 31 December 2011, future minimum sublease payments of US$413m (2010: US$436m) are expected to be
received under non-cancellable subleases at the balance sheet date.