HSBC 2012 Annual Report Download - page 502

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
40 – Contingent liabilities, contractual commitments and guarantees / 41– Lease commitments
500
The completed US branch network disposal represents the sale of 195 US branches that were held for sale at
31 December 2011. HSBC received a total cash consideration of US$20,905m during 2012, which is included in
the cash flow statement under the line ‘Net cash inflow from disposal of US branch network and US cards business
on page 375. For further details refer to page 471.
40 Contingent liabilities, contractual commitments and guarantees
HSBC HSBC Holdings
2012 2011 2012 2011
US$m US$m US$m US$m
Guarantees and contingent liabilities
Guarantees .................................................................................... 80,364 75,672 49,402 49,402
Other contingent liabilities ........................................................... 209 259 – –
80,573 75,931 49,402 49,402
Commitments
Documentary credits and short-term trade-related transactions ... 13,359 13,498 – –
Forward asset purchases and forward forward deposits placed ... 419 87 – –
Undrawn formal standby facilities, credit lines and other
commitments to lend ................................................................ 565,691 641,319 1,200 1,810
579,469 654,904 1,200 1,810
The above table discloses the nominal principal amounts of commitments excluding capital commitments, which
are separately disclosed below, and guarantees and other contingent liabilities, which are mainly credit-related
instruments including both financial and non-financial guarantees and commitments to extend credit. Contingent
liabilities arising from legal proceedings and regulatory matters against Group companies are disclosed in Note 43.
Nominal principal amounts represent the amounts at risk should the contracts be fully drawn upon and clients default.
The amount of the loan commitments shown above reflects, where relevant, the expected level of take-up of pre-
approved loan offers made by mailshots to personal customers. As a significant portion of guarantees and
commitments is expected to expire without being drawn upon, the total of the nominal principal amounts is not
indicative of future liquidity requirements.
Guarantees
HSBC provides guarantees and similar undertakings on behalf of both third-party customers and other entities within
the HSBC Group. These guarantees are generally provided in the normal course of HSBC’s banking business. The
principal types of guarantees provided, and the maximum potential amount of future payments which HSBC could be
required to make at 31 December 2012, were as follows:
At 31 December 2012 At 31 December 2011
Guarantees
in favour of
third parties
Guarantees
by HSBC
Holdings
in favour of
other HSBC
Group entities
Guarantees
in favour of
third parties
Guarantees
by HSBC
Holdings
in favour of
other HSBC
Group entities
US$m US$m US$m US$m
Guarantee type1
Financial guarantees2 .................................................................... 32,036 36,800 26,830 36,800
Credit-related guarantees3 ............................................................. 12,957 12,602 12,494 12,602
Other guarantees ........................................................................... 35,371 – 36,348 –
80,364 49,402 75,672 49,402
1 The balances have been grouped by major category of guarantee, revised from prior periods to present financial guarantees separately.
2 Financial guarantees are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred
because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.
3 Credit related guarantees are contracts that have similar features to financial guarantee contracts but fail to meet the definition of a
financial guarantee contracts under IAS 39.
The amounts disclosed in the above table are nominal principal amounts and reflect HSBC’s maximum exposure
under a large number of individual guarantee undertakings. The risks and exposures arising from guarantees are
captured and managed in accordance with HSBC’s overall credit risk management policies and procedures.