HSBC 2012 Annual Report Download - page 207

205
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Global Banking and Markets
Customer accounts increased by 8% year on year.
After excluding repo balances with customers,
GB&M deposits increased by 10% year on year,
with the majority of this rise resulting from increases
in Payments and Cash Management accounts. The
growth in these customer accounts and the strong
growth in payment volumes demonstrated a funding
source that is strongly linked to the operational
services that HSBC provides to the GB&M customer
base.
Wholesale funding markets
Wholesale funding markets gradually improved
during 2012, although the volume of term debt
issued by banks was low by recent standards,
influenced to a significant extent by reduced bank
funding requirements. Globally, market conditions
across public wholesale funding markets were
predominantly driven by sovereign-related and more
general events in the eurozone.
HSBC continued to have good access to debt
capital markets throughout 2012 with Group entities
issuing US$10.5bn of public transactions of which
US$9.8bn was senior unsecured debt.
In January 2013 the Group repaid €5bn
(US$6.6bn) of funding raised through the ECB’s
Long Term Repo Operations (‘LTRO’), leaving only
€473m (US$624m) outstanding.
Management of liquidity and funding risk
(Audited)
Our liquidity and funding risk management
framework (‘LFRF’) employs two key measures to
define, monitor and control the liquidity and funding
risk of each of our operating entities. The advances
to core funding ratio is used to monitor the structural
long-term funding position, and the stressed
coverage ratio, incorporating Group-defined stress
scenarios, is used to monitor the resilience to severe
liquidity stresses.
The three principal entities listed in the tables
below represented 62% (2011: 61%) of the Group’s
customer accounts (excluding repos). Including other
principal entities, the percentage was 94% (2011:
96%).
Advances to core funding ratio
The table below shows the extent to which loans
and advances to customers in our principal banking
entities were financed by reliable and stable sources
of funding.
Advances to core funding limits set for
operating entities at 31 December 2012 ranged
between 70% and 115%, except for one operating
entity reported within the total of HSBC’s other
principal entities which operated with a limit of
125% during 2012. This limit has been reduced to
115% for 2013.
Advances to core funding ratios39
(Audited)
At 31 December
2012 2011
% %
HSBC UK40
Year-end .................................. 106 100
Maximum ................................ 106 103
Minimum ................................. 100 98
Average .................................... 103 101
The Hongkong and Shanghai
Banking Corporation41
Year-end .................................. 73 75
Maximum ................................ 75 79
Minimum ................................. 71 70
Average .................................... 73 76
HSBC USA42
Year-end .................................. 78 86
Maximum ................................ 86 90
Minimum ................................. 68 80
Average .................................... 78 85
Total of HSBC’s other
principal entities43
Year-end .................................. 91 86
Maximum ................................ 92 90
Minimum ................................. 85 86
Average .................................... 88 89
For footnotes, see page 249.
Stressed coverage ratios
The stressed coverage ratios tabulated below express
stressed cash inflows as a percentage of stressed cash
outflows over both one-month and three-month time
horizons. Operating entities are required to maintain
a ratio of 100% or greater out to three months.
Inflows included in the numerator of the
stressed coverage ratio are those that are assumed to
be generated from liquid assets net of assumed
haircuts, and cash inflows related to assets
contractually maturing within the time period.
In general, customer advances are assumed to be
renewed and as a result do not generate a cash
inflow.