HSBC 2015 Annual Report Download - page 487

HSBC HOLDINGS PLC
485
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Term Definition
Cross-border revenue Client revenue generated from serving the international subsidiaries of clients outside of the market where the
parent is based; tracked using HSBC internal client data.
Customer deposits Money deposited by account holders. Such funds are recorded as liabilities.
Customer remediation Activities carried out by HSBC to compensate customers for losses or damages associated with a failure to comply
with regulations. Customer remediation is initiated by HSBC in response to customer complaints, and not
specifically initiated by regulatory action.
Customer risk rating (‘CRR’) A scale of 23 grades measuring obligor PD.
CVA risk capital charge A capital charge under CRDIV to cover the risk of mark-to-market losses on expected counterparty risk to derivatives.
D
Debit valuation adjustment
(‘DVA’)
An adjustment made by an entity to the valuation of OTC derivative liabilities to reflect within fair value the entity’s
own credit risk.
Debt restructuring A restructuring by which the terms and provisions of outstanding debt agreements are changed. This is often done in
order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the
repayment schedule as well as debt or interest charge reduction.
Debt securities Financial assets on the Group’s balance sheet representing certificates of indebtedness of credit institutions, public
bodies or other undertakings, excluding those issued by central banks.
Debt securities in issue Transferable certificates of indebtedness of the Group to the bearer of the certificates. These are liabilities of the
Group and include certificates of deposits.
Deed-in-lieu An arrangement in which a borrower surrenders the deed for a property to the lender without going through
foreclosure proceedings and is subsequently released from any further obligations on the loan.
Defined benefit obligation The present value of expected future payments required to settle the obligations of a defined benefit plan resulting
from employee service.
Deposits by banks All deposits received from domestic and foreign banks, excluding deposits or liabilities in the form of debt securities
or for which transferable certificates have been issued.
Down-shock Term given to the effect on our future net interest income of an incremental parallel fall in all yield curves worldwide
at the beginning of each quarter during the 12 months from 1 January 2015, assuming no management response.
An equivalent rise in yield curves is referred to as an up-shock.
E
Economic capital The internally calculated capital requirement which is deemed necessary by HSBC to support the risks to which it is
exposed.
Economic profit The difference between the return on financial capital invested by shareholders and the cost of that capital.
Economic profit may be expressed as a whole number or as a percentage.
Economic Value of Equity
(‘EVE’) sensitivity
Considers all re-pricing mismatches in the current balance sheet and calculates the change in market value that
would result from a set of defined interest rate shocks.
Encumbered assets Assets on our balance sheet which have been pledged as collateral against an existing liability.
Enhanced Variable Net Asset
Value Fund (‘ENAV’)
A fund that prices its assets on a fair value basis. Consequently, process may change from one day to the next.
Equator Principles The Equator Principles are used by financial institutions to reduce the potential impact of large projects, which they
finance, on people or on the environment.
Equity risk The risk arising from positions, either long or short, in equities or equity-based instruments, which create exposure
to a change in the market price of the equities or equity instruments.
Eurozone The 18 European Union countries using the euro as their common currency. The 18 countries are Austria, Belgium,
Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, Netherlands,
Portugal, Slovakia, Slovenia and Spain.
Expected loss
(‘EL’)
A regulatory calculation of the amount expected to be lost on an exposure using a 12-month time horizon and
downturn loss estimates. EL is calculated by multiplying the PD (a percentage) by the EAD (an amount) and LGD (a
percentage).
Exposure A claim, contingent claim or position which carries a risk of financial loss.
Exposure at default
(‘EAD’)
Under the standardised approach, the amount expected to be outstanding after any credit risk mitigation, if and
when the counterparty defaults. Under IRB, the amount outstanding if and when the counterparty defaults. EAD
reflects drawn balances as well as allowances for undrawn amounts of commitments and contingent exposures.
F
Fair value adjustment An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and
level 3) to include additional factors that would be considered by a market participant that are not incorporated
within the valuation model.
Fiduciary risk The risk to the Group of breaching its fiduciary duties where it acts in a fiduciary capacity as trustee, investment
manager or as mandated by law or regulation.
Financial Conduct Authority
(‘FCA’)
The Financial Conduct Authority regulates the conduct of financial firms and, for certain firms, prudential standards
in the UK. It has a strategic objective to ensure that the relevant markets function well.
Financial Policy Committee
(‘FPC’)
The Financial Policy Committee at the BoE is charged with a primary objective of identifying, monitoring and taking
action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK
financial system. The FPC has a secondary objective to support the economic policy of the UK Government.