HSBC 2012 Annual Report Download - page 537

535
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Term Definition
Renegotiated loans Loans for which the contractual terms have been changed because of significant concerns about the
borrower’s ability to meet the contractual payments when due.
Repo
(or Sale and repurchase
agreement)
A repo is a short-term funding agreement that allows a borrower to create a collateralised loan by selling
a financial asset to a lender. As part of the agreement the borrower commits to repurchase the security
at a date in the future repaying the proceeds of the loan. For the party on the other end of the
transaction (buying the security and agreeing to sell in the future) it is reverse repurchase agreement
or a reverse repo.
Reputational risk The risk that illegal, unethical or inappropriate behaviour by the Group itself, members of staff or clients
or representatives of the Group will damage HSBC’s reputation, leading, potentially, to a loss of
business, fines or penalties.
Residential mortgage A loan to purchase a residential property which is then used as collateral to guarantee repayment of the
loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the
property if the borrower does not repay the loan per the agreed terms.
Restricted Shares Awards that define the number of HSBC Holdings ordinary shares to which the employee will become
entitled, generally between one and three years from the date of the award, and normally subject to the
individual remaining in employment. The shares to which the employee becomes entitled may be
subject to retention requirement.
Retail loans Money lent to individuals rather than institutions. This includes both secured and unsecured loans such as
mortgages and credit card balances.
Return on equity Profit attributable to shareholders of the parent company divided by average ordinary shareholders’
equity.
Risk appetite An assessment of the types and quantum of risks to which HSBC wishes to be exposed.
Risk-weighted assets
(‘RWA’s)
Calculated by assigning a degree of risk expressed as a percentage (risk weight) to an exposure in
accordance with the applicable Standardised or IRB approach rules.
Run-off portfolios Legacy credit in GB&M, the US CML portfolio and other US run-off portfolios, including the treasury
services related to the US CML businesses and commercial operations in run-off. Origination of new
business in the run-off portfolios has been discontinued and balances are being managed down through
attrition and sale.
S
Sale and repurchase agreement See repo above.
Seasoning The emergence of credit loss patterns in portfolios over time.
Second lien A security interest granted over an item of property to secure the repayment of a debt that is issued
against the same collateral as a first lien but that is subordinate to it. In the case of default, repayment
for this debt will only be received after the first lien has been repaid.
Securitisation A transaction or scheme whereby the credit risk associated with an exposure, or pool of exposures, is
tranched and where payments to investors in the transaction or scheme are dependent upon the
performance of the exposure or pool of exposures. A traditional securitisation involves the transfer of
the exposures being securitised to an SPE which issues securities. In a synthetic securitisation, the
tranching is achieved by the use of credit derivatives and the exposures are not removed from the
balance sheet of the originator.
Short sale In relation to credit risk management, a ‘short sale’ is an arrangement in which a bank permits the
borrower to sell the property for less than the amount outstanding under a loan agreement. The
proceeds are used to reduce the outstanding loan balance and the borrower is subsequently released
from any further obligations on the loan.
Single-issuer liquidity facility A liquidity or stand-by line provided to a corporate customer which is different from a similar line
provided to a conduit funding vehicle.
Six filters An internal measure designed to improve capital deployment across the Group. This examines the
strategic relevance of each business in each country, in terms of connectivity and economic
development, and the current returns, in terms of profitability, cost efficiency and liquidity. The
sixth filter requires adherence to global risk standards.
Sovereign exposures Exposures to governments, ministries, departments of governments, embassies, consulates and exposures
on account of cash balances and deposits with central banks.
Special purpose entities
(‘SPE’s)
A corporation, trust or other non-bank entity, established for a narrowly defined purpose, including for
carrying on securitisation activities. The structure of the SPE and its activities are intended to isolate its
obligations from those of the originator and the holders of the beneficial interests in the securitisation.
Standardised approach In relation to credit risk, a method for calculating credit risk capital requirements using External Credit
Assessment Institutions (‘ECAI’) ratings and supervisory risk weights. In relation to operational risk, a
method of calculating the operational capital requirement by the application of a supervisory defined
percentage charge to the gross income of eight specified business lines.
Stressed VAR A market risk measure based on potential market movements for a continuous one-year period of stress
for a trading portfolio