HSBC 2002 Annual Report Download - page 136

HSBC HOLDINGS PLC
Financial Review (continued)
134
• maintenance of strong balance sheet liquidity
ratios;
• monitoring of depositor concentration both in
terms of the overall funding mix and to avoid
undue reliance on large individual depositors;
and
• maintenance of liquidity contingency plans.
These plans include the identification of early
indicators of liquidity problems and actions
which are to be taken to improve the liquidity
position at this stage, together with the actions
which the entity can take to maintain liquidity in
a crisis situation while minimising the long-term
impact on its business.
Current accounts and savings deposits payable
on demand or at short notice form a significant part
of HSBC’s overall funding. HSBC places
considerable importance on the stability of these
deposits, which is achieved through HSBC’s diverse
geographical retail banking activities and by
maintaining depositor confidence in HSBC’ s capital
strength. Professional markets are accessed for the
purposes of providing additional funding,
maintaining a presence in local money markets and
optimising asset and liability maturities.
HSBC
HSBC funds itself essentially by raising customer
deposits in local markets and makes limited use of
wholesale market funding, indeed HSBC is a
liquidity provider to financial markets placing
significantly more funds with other banks than it
borrows.
While consolidated figures are not useful for
management purposes, they do provide a broad
overview of the nature of HSBC's liquidity position.
Of total liabilities of US$759 billion, funding
from customers amounted to US$495 billion, of
which US$485 billion was contractually repayable
within one year. However in practice, although many
customer accounts are contractually repayable on
demand or at short notice, deposit balances remain
stable as in the normal course of business deposits
and withdrawals will offset each other as long as
customers have no doubts that their funds will be
available when required. Other liabilities include
US$53 billion deposits by banks (US$50 billion
repayable within one year), US$22 billion of short
positions in securities and US$35 billion of securities
in issue. Assets available to meet these liabilities,
and to cover outstanding commitments to lend
(US$51 billion), include cash, central bank balances,
items in course of collection and treasury and other
bills (US$31 billion); loans to banks (US$95 billion
– including US$92 billion repayable within one year)
and loans to customers (US$352 billion – including
US$164 billion repayable within one year). A
proportion of customer loans contractually repayable
within one year will be extended in the normal
course of business. In addition, HSBC held US$176
billion of debt securities marketable at a value
US$2.0 billion in excess of that carrying value. Of
these assets, some US$41 billion of debt securities
and treasury and other bills have been pledged to
secure liabilities. HSBC’s ability to sell securities
together with its access to alternative funding sources
such as inter-bank markets or securitisation, would
be the routes through which HSBC would meet
unexpected outflows in excess of available liquid
assets.
Asset, deposits and advances (US$bn)
Debt securities and loans Customer accounts
Loans and advances to customer Total assets
HSBC’s strong liquidity is demonstrated by the
surplus of its lending to other banks over its
borrowings from banks. As HSBC is a net lender to
the inter-bank market, which is much more sensitive
than customers to credit ratings, a limited credit
rating downgrade of HSBC should not significantly
impair its liquidity.
HSBC does not use securitisations as a material
source of off-balance-sheet funding for its ongoing
businesses.
Other than in respect of its operations in
Argentina, HSBC is not aware of any conditions that
are reasonably likely to negatively affect the liquidity
of individual group companies.
271.2
352.3
495.4
759.3
265.2 308.6
450.0
696.2
258.8 289.8
427.1
674.3
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