HSBC 2003 Annual Report Download - page 184

HSBC HOLDINGS PLC
Other information (continued)
182
Short-term borrowings
HSBC includes short-term borrowings within customer accounts, deposits by banks and debt securities in issue and
does not show short-term borrowings separately on the balance sheet. Short-term borrowings are defined by the SEC
as Federal funds purchased and securities sold under agreements to repurchase, commercial paper and other short-
term borrowings. HSBC’ s only significant short-term borrowings are securities sold under agreements to repurchase
and debt securities in issue. Additional information on these is provided in the tables below.
Year ended 31 December
2003 2002 2001
Securities sold under agreements to repurchase US$m US$m US$m
Outstanding at 31 December ........................................................................... 27,427 21,397 16,882
Average amount outstanding during the year .................................................. 25,883 21,089 23,850
Maximum quarter-end balance outstanding during the year ............................ 30,938 21,468 24,901
Weighted average interest rate during the year ................................................ 2.0% 4.0% 4.9%
Weighted average interest rate at the year-end ................................................ 1.9% 3.9% 5.1%
Year ended 31 December
2003 2002 2001
Short term bonds US$m US$m US$m
Outstanding at 31 December ........................................................................... 29,979 2,775 2,351
Average amount outstanding during the year .................................................. 17,445 3,093 2,771
Maximum quarter-end balance outstanding during the year ............................ 29,979 4,422 3,167
Weighted average interest rate during the year ................................................ 2.5% 4.3% 4.7%
Weighted average interest rate at the year-end ................................................ 2.5% 4.7% 6.1%
Off-balance sheet arrangements
HSBC enters into certain off-balance sheet arrangements with customers in the ordinary course of business, as
described below.
(i) Financial guarantees, letters of credit and similar undertakings
Note 39(a) of the ‘Notes on the Financial Statements’ describes various types of guarantees and discloses the
maximum potential future payments under such arrangements.
(ii) Commitments to lend
Undrawn credit lines are disclosed in Note 39(a) of the ‘Notes on Financial Statements’ . HSBC generally has
the right to change or terminate any conditions of a customer’ s overdraft, credit card or other credit line upon
notification to the customer.
(iii) Credit derivatives
HSBC enters into credit derivatives through the dealing operations of certain Group companies, acting as an
intermediary between a broad range of users, structuring deals to produce risk management products for its
customers. Virtually all risk is offset through entering into a credit derivative contract with another counterparty.
For a more detailed description of credit derivatives and information regarding their carrying amounts in 2003
and 2002 refer to Note 38(a) of the ‘Notes on Financial Statements’ .
(iv) Special purpose and variable interest entities
HSBC uses special purpose entities (‘SPEs’ ), or variable interest entities (‘VIEs’ ), to securitise loans and
advances it has originated where such a source of funding is cost effective. Such loans and advances generally
remain on-balance sheet under UK GAAP.
HSBC also administers SPEs that have been established for the purpose of providing alternative sources of
financing to HSBC's customers. Such arrangements also enable HSBC to provide tailored investment
opportunities for investors.