HSBC 2007 Annual Report Download - page 453

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The above outstanding balances arose from the ordinary course of business and on substantially the same terms,
including interest rates and security, as for comparable transactions with third party counterparties.
Pension funds
At 31 December 2007, US$4.1 billion (2006: US$15.1 billion) of HSBC pension fund assets were under management
by HSBC companies. Fees of US$42 million (2006: US$49 million) were earned by HSBC companies for these
management services. HSBC’s pension funds had placed deposits of US$506 million (2006: US$348 million) with its
banking subsidiaries, on which interest payable to the schemes amounted to US$40 million (2006: US$15 million).
The above outstanding balances arose from the ordinary course of business and on substantially the same terms,
including interest rates and security, as for comparable transactions with third party counterparties.
HSBC Bank (UK) Pension Scheme entered into swap transactions with HSBC to manage the inflation and interest
rate sensitivity of the liabilities. At 31 December 2007, the gross notional value of the swaps was US$21.2 billion
(2006: US$14.5 billion), the swaps had a positive fair value of US$248 million (2006: negative fair value of
US$273 million) to the scheme and HSBC had delivered collateral of US$759 million (2006: US$265 million) to
the scheme in respect of these swaps. All swaps were executed at prevailing market rates and within standard market
bid offer spreads.
In order to satisfy diversification requirements, the Trustee has requested special collateral provisions for the swap
transactions between HSBC and the scheme. The collateral agreement stipulates that the scheme never posts
collateral to HSBC. Collateral is posted to the scheme by HSBC at an amount that the Trustee is highly confident
would be sufficient to replace the swaps in the event of default by HSBC Bank plc. With the exception of the special
collateral arrangements detailed above, all other aspects of the swap transactions between HSBC and the scheme are
on substantially the same terms as comparable transactions with third party counterparties.
HSBC International Staff Retirements Benefits Scheme entered into swap transactions with HSBC to manage the
inflation and interest rate sensitivity of the liabilities and selected assets. At 31 December 2007, the gross notional
value of the swaps was US$1.7 billion (2006: US$1.2 billion), and the swaps had a net positive fair value of
US$63 million to the scheme (2006: US$14 million).
HSBC Holdings
Details of HSBC Holdings’ principal subsidiaries are shown in Note 24. Transactions and balances during the year
with subsidiaries were as follows:
2007 2006
Highest
balance during
the year1
Balance at
31 December1
Highest
balance during
the year1
Balance at
31 December1
Subsidiaries US$m US$m US$m US$m
Assets
Cash at bank .................................................................. 729 360 784 729
Derivatives .................................................................... 2,660 2,660 1,599 1,599
Loans and advances ...................................................... 17,242 17,242 14,935 14,456
Financial investments ................................................... 3,389 2,676 3,426 3,316
Investments in subsidiaries2 .......................................... 69,411 69,411 63,265 63,265
Total related party assets .............................................. 93,431 92,349 84,009 83,365
Liabilities
Amounts owed to HSBC undertakings ........................ 3,191 2,969 4,279 3,100
Derivatives .................................................................... 290 44 385 177
Subordinated liabilities:
– cost ......................................................................... 4,109 4,109 3,991 3,991
– fair value ................................................................ 4,231 4,187 4,231 4,231
Total related party liabilities ......................................... 11,821 11,309 12,886 11,499
Guarantees .................................................................... 38,457 38,457 36,877 17,605
1 The disclosure of the year-end balance and the highest balance during the year is considered the most meaningful information to
represent transactions during the year.
2 On 1 January 2007, HSBC Holdings adopted IFRIC 11. Comparative information has been restated accordingly. See Note 1a.