HSBC 2012 Annual Report Download - page 188

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Credit risk > Securitisation exposures and other structured products
186
Movement in the available-for-sale reserve
(Audited)
2012 2011
Directly
held/
Solitaire28 SPEs Total
Directly
held/
Solitaire28 SPEs Total
US$m US$m US$m US$m US$m US$m
Available-for-sale reserve at 1 January .............. (3,085) (2,061) (5,146) (4,102) (2,306) (6,408)
Increase/(decrease) in fair value of securities .... 1,195 914 2,109 622 (137) 485
Effect of impairments29 ...................................... 339 394 733 383 339 722
Repayment of capital .......................................... 164 174 338 162 183 345
Other movements ................................................ (86) (141) (227) (150) (140) (290)
Available-for-sale reserve at 31 December ........ (1,473) (720) (2,193) (3,085) (2,061) (5,146)
For footnotes, see page 249.
Securities investment conduits
(Unaudited)
The total carrying amount of ABSs held through
SPEs in the above table represents holdings in
which significant first loss protection is provided
through capital notes issued by SICs, excluding
Solitaire.
At each reporting date, we assess whether
there is any objective evidence of impairment in
the value of the ABSs held by SPEs. Impairment
charges incurred on these assets are offset by a
credit to the impairment line for the amount of the
loss allocated to capital note holders, subject to
the carrying amount of the capital notes being
sufficient to offset the loss. During the year
impairment charges in one SPE, Mazarin Funding
Ltd (‘Mazarin’), exceeded the carrying value of the
capital notes liability and a charge of US$119m
(2011: US$26m) was borne by HSBC as shown in
the table below. In respect of the SICs, the capital
notes held by third parties are expected to absorb
the cash losses in the vehicles.
Available-for-sale reserve and economic first loss protection in SICs, excluding Solitaire
(Unaudited)
SICs excluding Solitaire at
31 December
2012 2011
US$m US$m
Available-for-sale reserve .............................................................................................................................. (787) (2,701)
– related to asset-backed securities ............................................................................................................ (720) (2,061)
Economic first loss protection ........................................................................................................................ 2,286 2,286
Carrying amount of capital notes liability ...................................................................................................... 249 154
Impairment charge for the year:
– borne by HSBC ....................................................................................................................................... 119 26
– allocated to capital note holders .............................................................................................................. – 313
Impairment methodologies
(Audited)
The accounting policy for impairment and
indicators of impairment is set out in Note 2 on the
Financial Statements.
A summary of our impairment
methodologies is provided in the Appendix
to Risk on page 260.
Analysis of exposures and significant
movements
(Audited)
Sub-prime residential mortgage-related assets
The assets in the table below included US$2.2bn
(2011: US$2.4bn) relating to US-originated assets
and US$1.3bn (2011: US$1.0bn) relating to UK
non-conforming residential mortgage-related
assets.
At 31 December 2012, 13% (US$0.5bn) of our
sub-prime residential mortgage-related assets were
rated AA or AAA (2011: 25% (US$0.9bn)).