HSBC 2014 Annual Report Download - page 186

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HSBC BANK PLC
Notes on the Financial Statements (continued)
184
At 31 December 2014, the group held 9.9% of the capital notes (2013: 3.8%) issued by these vehicles which have a par
value of £35 million (2013: £22 million) and a carrying amount of £6 million (2013: £2 million).
Multi-seller conduits
These vehicles were established for the purpose of providing access to flexible market-based sources of finance for the
group’s clients.
The group bears risk equal to the transaction-specific liquidity facilities offered to the multi-seller conduits. First loss
protection is provided by the originator of the assets, and not by the group, through transaction-specific credit
enhancements. A layer of secondary loss protection is provided by the group in the form of programme-wide
enhancement facilities.
Securitisations
The group uses structured entities to securitise customer loans and advances that it has originated in order to diversify its
sources of funding for asset origination and for capital efficiency purposes. The loans and advances are transferred by the
group to the structured entities for cash or synthetically through credit default swaps, and the structured entities issue
debt securities to investors.
Group managed funds
The group has established a number of money market, and non-money market funds. Where the group is deemed to be
acting as principal rather than agent in its role as investment manager, the group will control and hence consolidate these
funds.
Other
The group also enters into a number of transactions in the normal course of business, including asset and structured
finance transactions where it has control of the structured entity.
Unconsolidated structured entities
The term ‘unconsolidated structured entities’ refers to all structured entities that are not controlled by the group. The
group enters into transactions with unconsolidated structured entities in the normal course of business to facilitate
customer transactions and for specific investment opportunities.
The table below shows the total assets of unconsolidated structured entities in which the group has an interest at the
reporting date, and the group’s maximum exposure to loss in relation to those interests.
The maximum exposure to loss from the group’s interests in unconsolidated structured entities represents the maximum
loss that the group could incur as a result of its involvement with unconsolidated structured entities regardless of the
probability of the loss being incurred.
• For commitments and guarantees, and written credit default swaps, the maximum exposure to loss is the notional
amount of potential future losses.
• For retained and purchased investments in and loans to unconsolidated structured entities, the maximum exposure
to loss is the carrying value of these interests at the balance sheet reporting date.
The maximum exposure to loss is stated gross of the effects of hedging and collateral arrangements entered into to
mitigate the group’s exposure to loss.