HSBC 2012 Annual Report Download - page 225

223
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
the remainder held in short-term interbank and
central bank loans.
Analysis of third party assets in Balance Sheet
Management
(Unaudited)
At
31 December
2012
US$m
Cash and balances at central banks ............. 93,946
Trading assets .............................................. 8,724
Financial assets designated at fair value ..... 74
Loans and advances:
– to banks ..................................................... 72,771
– to customers .............................................. 22,052
Financial investments .................................. 293,421
Other ............................................................ 2,948
493,936
Central bank deposits are accounted for as cash
balances. Interbank loans and loans to central banks
are accounted for as loans and advances to banks.
BSM’s holdings of securities are accounted for as
available-for-sale or to a lesser extent, held to
maturity assets.
BSM is permitted to use derivatives as part of
its mandate to manage interest rate risk. Derivative
activity is predominantly through the use of vanilla
interest rate swaps which are part of cash flow
hedging and fair value hedging relationships.
Credit risk in BSM is predominantly limited
to short-term bank exposure created by interbank
lending and exposure to central banks as well as high
quality sovereigns, supranationals or agencies which
constitute the majority of BSM’s liquidity portfolio.
BSM does not manage the structural credit risk of
any Group entity balance sheets.
BSM is permitted to enter into single name and
index credit derivatives activity, but it does so to
manage credit risk on the exposure specific to its
securities portfolio in limited circumstances only.
The risk limits are extremely limited and closely
monitored. At 31 December 2012 and 31 December
2011 BSM had no open credit derivative index risk.
VAR is calculated on both trading and non-
trading positions held in BSM. It is calculated by
applying the same methodology used for the Global
Markets business and utilised as a tool for market
risk control purposes.
BSM holds trading portfolio instruments in
only very limited circumstances. Positions and the
associated VAR were not significant during 2012
and 2011.
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 2013. Assuming no management
actions, a sequence of such rises would increase
planned net interest income for 2013 by US$1,391m
(2012: US$1,571m), while a sequence of such falls
would decrease planned net interest income by
US$1,471m (2012: US$1,909m). These figures
incorporate the effect of any option features in the
underlying exposures.
Sensitivity of projected net interest income55
(Unaudited)
US dollar
bloc
US$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 2013 projected net
interest income arising from
a shift in yield curves of:
+25 basis points at the
beginning of each quarter ..... 133 64 246 237 679 44 1,403
–25 basis points at the
beginning of each quarter ..... (366) (52) (305) (168) (602) (57) (1,550)
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)
For footnote, see page 249.