HSBC 2015 Annual Report Download - page 403

HSBC HOLDINGS PLC
401
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
18 Assets charged as security for liabilities, assets transferred and collateral accepted as
security for assets
Financial assets pledged to secure liabilities
2015 2014
$m $m
Treasury bills and other eligible securities 5,941 5,170
Loans and advances to banks 15,582 17,294
Loans and advances to customers 88,927 77,960
Debt securities 69,470 138,991
Equity securities 4,644 11,373
Other 213 6,079
Assets pledged at 31 December 184,777 256,867
The above table shows assets over which a charge has been granted to secure liabilities on a legal and contractual basis. The
total amount may be greater than the book value of assets utilised as collateral for funding purposes or to cover liabilities, for
example, in the case of securitisations and covered bonds where the amount of liabilities issued plus any mandatory over-
collateralisation is less than the book value of financial assets available for funding or collateral purposes in the relevant pool
of assets. This is also the case where financial assets are placed with a custodian or a settlement agent which has a floating
charge over all the financial assets placed to secure any liabilities under settlement accounts.
These transactions are conducted under terms that are usual and customary to collateralised transactions including, where
relevant, standard securities lending, repurchase agreements and derivative margining. HSBC places both cash and non-cash
collateral in relation to derivative transactions.
Assets transferred
Accounting policy
Derecognition of financial assets
Financial assets are derecognised when the contractual rights to receive cash flows from the assets have expired; or when HSBC has
transferred its contractual right to receive the cash flows of the financial assets, and either:
• substantially all the risks and rewards of ownership have been transferred; or
• HSBC has neither retained nor transferred substantially all the risks and rewards, but has not retained control.
The financial assets shown above include amounts transferred to third parties that do not qualify for derecognition, notably
debt securities held by counterparties as collateral under repurchase agreements and equity securities lent under securities
lending agreements. As the substance of these transactions is secured borrowings, the asset collateral continues to be
recognised in full and the related liability reflecting the Group’s obligation to repurchase the transferred assets for a fixed price
at a future date is also recognised on the balance sheet. As a result of these transactions, the Group is unable to use, sell or
pledge the transferred assets for the duration of the transaction. The Group remains exposed to interest rate risk and credit
risk on these pledged instruments. The counterparty’s recourse is not limited to the transferred assets.
Transferred financial assets not qualifying for full derecognition and associated financial liabilities
Carrying
amount of
assets before
transfer
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
Fair
value of
transferred
assets
Fair
value of
associated
liabilities
Net
position
$m $m $m $m $m $m
At 31 December 2015
Repurchase agreements 36,153 35,913
Securities lending agreements 5,275 5,704
Other sales (recourse to transferred asset only) 2,717 2,768 2,720 2,726 (6)
Securitisations recognised to the extent of continuing
involvement 17,427 52 5 2 3
At 31 December 2014
Repurchase agreements 78,541 79,141
Securities lending agreements 13,177 10,643
Other sales (recourse to transferred asset only) 3,775 4,049 4,007 4,018 (11)
Securitisations recognised to the extent of continuing
involvement 17,427 11 5 11 5 6