HSBC 2015 Annual Report Download - page 485

HSBC HOLDINGS PLC
483
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Glossary
Term Definition
A
Adjustable-rate mortgages
(‘ARM’s)
Mortgage loans in the US on which the interest rate is periodically changed based on a reference price. These are
included within ‘affordability mortgages’.
Affordability mortgages Mortgage loans where the customer’s monthly payments are set out at a low initial rate, either variable or fixed,
before resetting to a higher rate once the introductory period is over.
Agency exposures Exposures to near or quasi-government agencies including public sector entities fully owned by government carrying
out non-commercial activities, provincial and local government authorities, development banks and funds set up
by government.
Alt-A A US description for loans regarded as lower risk than sub-prime, but with higher risk characteristics than lending
under normal criteria.
Arrears Customers are said to be in arrears (or in a state of delinquency) when they are behind in fulfilling their obligations,
with the result that an outstanding loan is unpaid or overdue. When a customer is in arrears, the total outstanding
loans on which payments are overdue are described as delinquent.
Asset-backed securities (‘ABS’s) Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise
any assets which attract a set of associated cash flows but are commonly pools of residential or commercial
mortgages.
B
Back-testing A statistical technique used to monitor and assess the accuracy of a model, and how that model would have
performed had it been applied in the past.
Bail-inable debt Bail-in refers to imposition of losses at the point of non-viability (but before insolvency) on bank liabilities (bail-inable
debt) that are not exposed to losses while the institution remains a viable, going concern. Whether by way of
write-down or conversion into equity, this has the effect of recapitalising the bank (although it does not provide
any new funding).
Bank levy A levy that applies to UK banks, building societies and the UK operations of foreign banks from 1 January 2011. The
amount payable is based on a percentage of the group’s consolidated liabilities and equity as at 31 December
after deducting certain items the most material of which are those related to insured deposit balances, tier 1
capital, insurance liabilities, high quality liquid assets and items subject to a legally enforceable net settlement
agreement.
Bank Recovery and Resolution
Directive (‘BRRD’)
A European legislative package issued by the European Commission and adopted by EU Member States. This
directive was finalised in July 2014 and the majority of provisions came into effect on 1 January 2015. This
introduces a common EU framework for how authorities should intervene to address banks which are failing or
are likely to fail. The framework includes early intervention and measures designed to prevent failure and in the
event of bank failure for authorities to ensure an orderly resolution.
Basel II The capital adequacy framework issued by the Basel Committee on Banking Supervision in June 2006 in the form of
the ‘International Convergence of Capital Measurement and Capital Standards’, amended by subsequent changes
to the capital requirements for market risk and re-securitisations, commonly known as Basel 2.5, which took
effect from 31 December 2011.
Basel III In December 2010, the Basel Committee issued ‘Basel III rules: a global regulatory framework for more resilient
banks and banking systems’ and ‘International framework for liquidity risk measurement, standards and
monitoring’. Together these documents present the Basel Committee’s reforms to strengthen global capital and
liquidity rules with the goal of promoting a more resilient banking sector. In June 2011, the Basel Committee
issued a revision to the former document setting out the finalised capital treatment for counterparty credit risk in
bilateral trades.
Basis point (‘bps’) One hundredth of a per cent (0.01%), so 100 basis points is 1%. For example, this is used in quoting movements in
interest rates or yields on securities.
Business model A term describing how we organise our business activities to create value. HSBC has four global businesses serving
five geographical regions, supported by eleven global functions. Together these operations provide a
comprehensive range of banking and related financial services designed to meet the needs of customers ranging
from individuals to the largest of companies. HSBC operates in many countries, and its services are primarily
delivered by domestic banks, typically with local deposit bases.
C
Capital conservation buffer
(‘CCB’)
A capital buffer prescribed by regulators under Basel III and designed to ensure banks build up capital buffers outside
periods of stress which can be drawn down as losses are incurred. Should a bank’s capital levels fall within the
capital conservation buffer range, capital distributions will be constrained by the regulators.
Capital requirements directive
(‘CRD’)
A capital adequacy legislative package adopted by EU member states. The CRD IV package comprises a recast Capital
Requirements Directive and a new Capital Requirements Regulation. The package implements the Basel III capital
proposals together with transitional arrangements for some of its requirements. CRD IV came into force on 1
January 2014.
Capital securities Capital securities include perpetual subordinated capital securities and contingent convertible capital securities.
Central counterparty (‘CCP’) An intermediary between a buyer and a seller (generally a clearing house).
Clawback Remuneration already paid to an individual, which has to be returned to an organisation under certain
circumstances.