HSBC 2007 Annual Report Download - page 194

HSBC HOLDINGS PLC
Report of the Directors: The Management of Risk
Regulation and supervision
192
Page
Regulation and supervision1 ....................... 192
Risk management1 ...................................... 197
Credit risk ................................................... 198
Credit risk management2 ........................ 198
Credit exposure3 ..................................... 203
Areas of special interest1 .....................
.
216
Credit quality3 ......................................... 223
Impairment allowances and charges3...... 229
HSBC Holdings2 ..................................... 240
Risk elements in the loan portfolio1 ........ 241
Liquidity and funding management ............ 243
Policies and procedures2 ........................
.
243
Primary sources of funding2 ................... 243
HSBC Holdings2 ..................................... 247
Market risk management ............................ 248
Value at risk3 .......................................... 249
Trading portfolios2 .................................. 251
Non-trading portfolios2 ........................... 252
Sensitivity of net interest income1 ........... 254
Structural foreign exchange exposures1 . 256
HSBC Holdings3 ..................................... 256
Areas of special interest2 ........................
.
257
Residual value risk management1 ............... 260
Operational risk management1 ................... 260
Legal risk1 ............................................... 261
Global security and fraud1 ......................
.
262
Pension risk1 ............................................... 262
Reputational risk management1 .................. 263
Sustainability risk management1 ................ 263
Risk management of insurance
operations2 .............................................. 264
Life insurance business2 ..........................
.
264
Non-life insurance business2 ...................
.
265
Insurance risk2 ........................................ 265
Financial risks2 ....................................... 271
Present value of in-force long-term
insurance business2 ............................. 280
Capital management and allocation ............ 282
Capital management2 .............................. 282
Capital measurement and allocation3 ..... 282
Risk-weighted assets by principal
subsidiary1 ...........................................
.
286
1 Unaudited.
2 Audited.
3 Audited where indicated.
Regulation and supervision
(Unaudited)
With listings of its ordinary shares in London, Hong
Kong, New York, Paris and Bermuda, HSBC
Holdings complies with the relevant requirements
for listing and trading on each of these exchanges. In
the UK, these are the Listing Rules of the Financial
Services Authority (‘FSA’); in Hong Kong, The
Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited (‘HKSE’);
in the US, where the shares are traded in the form of
ADSs, HSBC Holdings’ shares are registered with
the US Securities and Exchange Commission
(‘SEC’). As a consequence of its US listing, HSBC
Holdings is also subject to the reporting and other
requirements of the US Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as
amended, and the New York Stock Exchange’s
(‘NYSE’) Listed Company Manual, in each case as
applied to foreign private issuers. In France and
Bermuda, HSBC Holdings is subject to the listing
rules of Euronext, Paris and the Bermuda Stock
Exchange respectively, applicable to companies with
secondary listings.
A statement of HSBC’s compliance with the
code provisions of the Combined Code on Corporate
Governance issued by the Financial Reporting
Council and with the Code on Corporate Governance
Practices in Appendix 14 to the Rules Governing the
Listing of Securities on The Stock Exchange of
Hong Kong Limited is set out in the ‘Report of the
Directors: Governance’ on page 289.
HSBC’s operations throughout the world are
regulated and supervised by approximately
510 different central banks and regulatory authorities
in those jurisdictions in which HSBC has offices,
branches or subsidiaries. These authorities impose a
variety of requirements and controls designed to
improve financial stability and the transparency of
financial markets and their contribution to economic
growth. These regulations and controls cover, inter
alia, capital adequacy, depositor protection, market
liquidity, governance standards, customer protection
(for example, fair lending practices, product design,
and marketing and documentation standards), and
social responsibility obligations (for example, anti-
money laundering and anti-terrorist financing
measures). In addition, a number of countries in
which HSBC operates impose rules that affect, or
place limitations on, foreign or foreign-owned or
controlled banks and financial institutions. The rules
include restrictions on the opening of local offices,
branches or subsidiaries and the types of banking
and non-banking activities that may be conducted by
those local offices, branches or subsidiaries;