HSBC 2001 Annual Report Download - page 103

101
Analysis of loans and advances to banks by geographical region
Europe Hong Kong
Rest o
f
Asia-Pacific
Nort
h
America
Lati
n
America
Gross
loans an
d
advances to
b
anks
Provisions
for bad an
d
doubtful
debts
US$
m
US$
m
US$
m
US$
m
US$
m
US$
m
US$
m
31 December 2001........................................ 40,665 42,516 11,253 7,864 2,367 104,665 (22)
Suspended interes
t
......................................... (2)
Total.............................................................. 104,663
31 December 2000......................................... 45,072 57,154 11,197 9,279 3,362 126,064 (30)
Suspended interes
t
......................................... (2)
Total.............................................................. 126,062
31 December 1999......................................... 29,395 53,778 10,024 4,503 2,402 100,102 (24)
Suspended interes
t
......................................... (1)
Total.............................................................. 100,101
31 December 1998......................................... 22,713 44,938 11,433 4,523 1,740 85,347 (31)
Suspended interes
t
......................................... (1)
Total.............................................................. 85,346
31 December 1997......................................... 22,471 36,725 11,993 10,563 4,827 86,579 (46)
Suspended interes
t
......................................... (11)
Total.............................................................. 86,568
Provisions for bad and doubtful debts
It is HSBC’s policy that each operating company will
make provisions for bad and doubtful debts promptly
where required and on a prudent and consistent basis.
Generally this policy results in provisioning that
matches or exceeds the requirements of all relevant
regulatory bodies.
Loans are designated as non-performing as soon
as management has doubts as to the ultimate
collectability of principal or interest or when
contractual payments of principal or interest are 90
days overdue. When a loan is designated as non-
performing, interest will be suspended (see below)
and a specific provision raised if required.
However, the suspension of interest may be
deferred for up to 12 months in either of the
following situations:
• where cash collateral is held covering the total
of principal and interest due and the right to set-
off is legally sound; or
• where the value of net realisable tangible
security is considered more than sufficient to
cover the full repayment of all principal and
interest due and credit approval has been given
to the rolling-up or capitalisation of interest
payments. This exception is used infrequently.
There are two basic types of provision, specific
and general, each of which is considered in terms of
the charge and the amount outstanding.
Specific provisions
Specific provisions represent the quantification of
actual and expected losses from identified accounts
and are deducted from loans and advances in the
balance sheet.
Other than where provisions on smaller balance
homogenous loans are assessed on a portfolio basis,
the amount of specific provision raised is assessed on
a case-by-case basis. The amount of specific
provision raised is HSBC’s estimate of the amount
needed to reduce the carrying value of the asset to
the expected ultimate net realisable value and, in
reaching a decision, consideration is given, among
other things, to the following factors:
• the financial standing of the customer, including
a realistic assessment of the likelihood of
repayment of the loan within an acceptable
period and the extent of HSBC’ s other
commitments to the same customer;
• the realisable value of any security for the loan;
• the costs associated with obtaining repayment
and realisation of the security; and