HSBC 2003 Annual Report Download - page 310

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
308
39 Memorandum Items
(a) HSBC
Contingent liabilities and commitments
2003 2002
Contract
amount
Credit
equivalent
amount
Risk-
weighted
amount
Contract
amount
Credit
equivalent
amount
Risk-
weighted
amount
US$m US$m US$m US$m US$m US$m
Contingent liabilities
Acceptances and endorsements .................. 5,412 3,327 3,194 4,711 2,785 2,580
Guarantees and assets pledged as
collateral security:
guarantees and irrevocable
letters of credit ....................................... 54,439 42,792 31,110 46,527 36,333 28,190
Other contingent liabilities ......................... 29 29 28 17 17 15
59,880 46,148 34,332 51,255 39,135 30,785
Commitments
Documentary credits and short-term
trade-related transactions ....................... 7,511 2,750 1,616 6,131 2,221 1,157
Forward asset purchases and forward
forward deposits placed ......................... 1,437 1,437 618 1,464 1,463 268
Undrawn note issuing and revolving
underwriting facilities ............................ 671 605 66 85 43 42
Undrawn formal standby facilities, credit
lines and other commitments to lend
– over 1 year .......................................... 56,252 28,126 27,461 41,734 20,867 19,536
– 1 year and under ................................. 362,893 – – 176,215 – –
428,764 32,918 29,761 225,629 24,594 21,003
The table above gives the nominal principal amounts, credit equivalent amounts and risk-weighted amounts of
off-balance-sheet transactions. The credit equivalent amounts are calculated for the purposes of deriving the
risk-weighted amounts. These are assessed in accordance with the Financial Services Authority’ s guidelines
which implement the 1988 Basel Capital Accord on capital adequacy and depend on the status of the
counterparty and the maturity characteristics.
Contingent liabilities and commitments are credit-related instruments which include acceptances, letters of
credit, guarantees and commitments to extend credit. The contractual amounts represent the amounts at risk
should the contract be fully drawn upon and the client default. Since a significant portion of guarantees and
commitments are expected to expire without being drawn upon, the total of the contract amounts is not
representative 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 2003 were as follows: