HSBC 2015 Annual Report Download - page 488

Shareholder information (continued)
Glossary
HSBC HOLDINGS PLC
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Term Definition
First lien A security interest granted over an item of property to secure the repayment of a debt that places its holder first in
line to collect repayment from the sale of the underlying collateral in the event of a default on the debt.
Forbearance strategies Employed in order to improve the management of customer relationships, maximise collection opportunities and, if
possible, avoid default, foreclosure or repossession. Such arrangements include extended payment terms, a
reduction in interest or principal repayments, approved external debt management plans, debt consolidations,
the deferral of foreclosures, other modifications and re-ages.
Funded exposure A situation where the notional amount of a contract is or has been exchanged.
Funding risk A form of liquidity risk arising when the liquidity needed to fund illiquid asset positions cannot be obtained at the
expected terms and when required.
G
Gap risk The risk of financial loss arising from a significant change in market price with no accompanying trading opportunity.
Global functions Global functions establish and manage all policies, processes and delivery platforms relevant to their activities. There
are 11: Global Communications; Global Company Secretary; Global Finance; Global HR; Global Internal Audit;
Global Legal; Global Marketing; Global Risk (including Compliance); Global Sustainability; HSBC Operations,
Services and Technology; and Strategy and Planning.
Global systemically important bank
(‘G-SIB’)
The FSB established in November 2011 a methodology to identify G-SIBs based on 12 principal indicators.
Designation will result in the application of a CET1 buffer between 1% and 3.5%, to be phased in by 1 January
2019.
The list of G-SIBs is re-assessed through annual re-scoring of banks and a triennial review of the methodology.
National regulators have discretion to introduce higher charges than the minima. In CRD IV this is implemented
via the Global Systemically Important Institutions (G-SII) Buffer.
The requirements, initially for those banks identified in November 2014 as G-SIBs, are being phased in from
1 January 2016, becoming fully effective on 1 January 2019. National regulators have discretion to introduce
higher thresholds than the minima.
Government-sponsored
enterprises (‘GSE’s)
A group of financial services enterprises created by the US Congress to reduce the cost of capital for certain
borrowing sectors of the economy, and to make them more efficient and transparent. Examples in the residential
mortgage borrowing segment are Freddie Mac and Fannie Mae. GSEs carry the implicit backing, but are not direct
obligations, of the US government.
GPSP Awards Awards that define the number of HSBC Holdings ordinary shares to which the employee will become entitled,
generally five years from the date of the award, and normally subject to individual remaining in employment. The
shares to which the employee becomes entitled are subject to a retention requirement until cessation of
employment.
Guarantee An undertaking by a party to pay a creditor should a debtor fail to do so.
H
Haircut A discount applied by management when determining the amount at which an asset can be realised. The discount
takes into account the method of realisation including the extent to which an active market for the asset exists.
With respect to credit risk mitigation, a downward adjustment to collateral value to reflect any currency or
maturity mismatches between the credit risk mitigant and the underlying exposure to which it is being applied.
Also a valuation adjustment to reflect any fall in value between the date the collateral was called and the date of
liquidation or enforcement.
Historical rating transition
matrices
The probability of a counterparty with a particular rating moving to a different rating over a defined time horizon.
Home equity lines of credit
(‘HELoC’s)
A form of revolving credit facility provided to US customers, which is supported in the majority of cases by a second
lien or lower ranking charge over residential property. Holdings of HELoCs are classified as sub-prime.
I
Impaired loans Loans where the Group does not expect to collect all the contractual cash flows or expects to collect them later than
they are contractually due.
Impairment allowances Management’s best estimate of losses incurred in the loan portfolios at the balance sheet date.
Individually assessed
impairment
Exposure to loss is assessed on all individually significant accounts and all other accounts that do not qualify for
collective assessment.
Insurance manufacturing The writing of contracts that fall within the scope of insurance regulation by a Group subsidiary authorised to write
such business. The risks and rewards of writing the insurance business are retained by HSBC (or reinsured in line
with our reinsurance strategy). The balance sheet analysis presented in the Risk Management of Insurance
Operations section shows the aggregated full balance sheets of these entities.
Insurance risk A risk, other than a financial risk, transferred from the holder of a contract to the insurance provider. The principal
insurance risk is that, over time, the cost of the contract, including claims and benefits may exceed the total
amount of premiums and investment income received.
Internal Capital Adequacy
Assessment Process
The Group’s own assessment of the levels of capital that it needs to hold through an examination of its risk profile
from regulatory and economic capital viewpoints.
Internal Model Method One of three approaches defined in the Basel Framework to determine exposure values for counterparty credit risk.
Internal ratings-based approach
(‘IRB’)
A method of calculating credit risk capital requirements using internal, rather than supervisory, estimates of risk
parameters.