HSBC 2014 Annual Report Download - page 63

HSBC BANK PLC
Report of the Directors: Risk (continued)
61
Advances to core funding ratios1
(Audited)
At 31 December
2014
(%)
2013
(%)
HSBC UK2
Year end
97
100
Maximum
102
107
Minimum
97
100
Average
100
104
HSBC France
Year end
101
108
Maximum
108
114
Minimum
100
98
Average
103
106
Total of other principal group entities3
Year end
82
93
Maximum
92
97
Minimum
76
92
Average
84
94
1 This ratio measures loans and advances to customers as a percentage of the total of core customer deposits and term funding with a remaining
term to maturity in excess of one year. The lower the percentage, the stronger the funding position.
2 The HSBC UK entity shown comprises: HSBC Bank plc (including all overseas branches), Marks and Spencer Financial Services Limited, HFC Bank
Limited and HSBC Trust Company (UK) Limited and from 1 April 2013 Private Bank (UK) Limited. It is managed as a single operating entity, in
line with the application of UK liquidity regulation as agreed with the PRA.
3 Other principal entities are: HSBC Trinkaus & Burkhardt AG, HSBC Bank Malta plc and HSBC Bank A.S. (Turkey).
Core funding represents the core component of
customer deposits and any term wholesale funding with
a residual contractual maturity beyond one year. Capital
is excluded from our definition of core funding.
Stressed coverage ratios
(Audited)
Stressed coverage ratios are derived from stressed cash
flow scenario analyses and express stressed cash inflows
as a percentage of stressed cash outflows over one-
month and three-month time horizons.
The stressed cash inflows include:
• inflows (net of assumed haircuts) expected to be
generated from the realisation of liquid assets; and
• contractual cash inflows from maturing assets that
are not already reflected as a utilisation of liquid
assets.
In line with the approach adopted for the advances to
core funding ratio, customer loans are generally
assumed not to generate any cash inflows under stress
scenarios and are therefore excluded from the
numerator of the stressed coverage ratio, irrespective of
the contractual maturity date.
A stressed coverage ratio of 100 per cent or higher
reflects a positive cumulative cash flow under the stress
scenario being monitored. Group operating entities are
required to maintain a ratio of 100 per cent or greater
out to three months under the combined market-wide
and HSBC-specific stress scenario defined by the
inherent liquidity risk categorisation of the operating
entity concerned.
Compliance with operating entity limits is monitored by
Asset Liability and Capital Management (‘ALCM’) teams
and reported monthly to the RMM for the main
operating entities and to the European Asset Liability
Committee (‘ALCO’) for the smaller operating entities.
The stressed coverage ratios tabulated below express
stressed cash inflows as a percentage of stressed cash
outflows over a one-month and three-month time
horizon.
Inflows included in the numerator of the stressed
coverage ratio are generated from liquid assets net of
assumed haircuts, and cash inflows related to assets
contractually maturing within the time period.
At 31 December 2014, the one-month and three-month
stressed coverage ratios for the principal entities shown
in the table below were in excess of the 100 per cent
target.