HSBC 2008 Annual Report Download - page 238

HSBC HOLDINGS PLC
Report of the Directors: Risk (continued)
Liquidity and funding > Primary sources of funding
236
The main operating subsidiary that does not
accept deposits is HSBC Finance, which has
historically funded itself principally by taking term
funding in the professional markets and by
securitising assets. At 31 December 2008,
US$111 billion (2007: US$142 billion) of HSBC
Finance’s liabilities were drawn from professional
markets, utilising a range of products, maturities and
currencies.
Cash flows payable by HSBC under financial liabilities by remaining contractual maturities
(Audited)
On
demand
US$m
Due
within 3
months
US$m
Due
between
3 and 12
months
US$m
Due
between
1 and 5
years
US$m
Due
after 5
years
US$m
At 31 December 2008
Deposits by banks ......................................................... 45,884 82,514 8,734 4,875 2,356
Customer accounts ........................................................ 698,187 332,207 69,721 34,537 5,798
Trading liabilities .......................................................... 247,652 – – – –
Financial liabilities designated at fair value ................. 5,365 2,713 6,969 34,855 64,853
Derivatives .................................................................... 482,039 373 1,479 2,634 1,003
Debt securities in issue ................................................. 481 56,590 53,174 68,169 22,920
Subordinated liabilities ................................................. 92 686 1,646 9,718 41,701
Other financial liabilities .............................................. 19,474 26,180 5,473 1,472 1,022
1,499,174 501,263 147,196 156,260 139,653
Loan commitments ....................................................... 239,753 105,952 153,774 72,111 32,432
1,738,927 607,215 300,970 228,371 172,085
At 31 December 2007
Deposits by banks ......................................................... 42,793 78,429 11,445 4,208 5,199
Customer accounts ........................................................ 629,227 391,659 56,294 29,445 6,614
Trading liabilities .......................................................... 314,580 – – – –
Financial liabilities designated at fair value ................. 11,730 2,083 8,286 43,147 68,726
Derivatives .................................................................... 181,009 113 873 1,663 613
Debt securities in issue ................................................. 635 90,718 59,626 109,054 38,782
Subordinated liabilities ................................................. 3 277 1,951 10,181 34,841
Other financial liabilities .............................................. 20,516 29,812 5,177 977 1,273
1,200,493 593,091 143,652 198,675 156,048
Loan commitments ....................................................... 312,146 155,142 155,565 113,072 28,532
1,512,639 748,233 299,217 311,747 184,580
The balances in the above table will not agree
directly with the balances in the consolidated
balance sheet as the table incorporates, on an
undiscounted basis, all cash flows relating to
principal and all future coupon payments (except for
trading liabilities and trading derivatives). Also, loan
commitments are generally not recognised on the
balance sheet. Trading liabilities and trading
derivatives have been included in the ‘On demand’
time bucket, and not by contractual maturity,
because trading liabilities are typically held for short
periods of time. The undiscounted cash flows
payable under hedging derivative liabilities are
classified according to their contractual maturity.
Cash flows payable in respect of customer
accounts are primarily contractually repayable on
demand or at short notice. However, in practice, short-
term deposit balances remain stable as inflows and
outflows broadly match and a significant portion of
loan commitments expire without being drawn upon.
Advances to deposits ratio
(Audited)
HSBC emphasises the importance of core current
accounts and savings accounts as a source of funds
to finance lending to customers, and discourages
reliance on short-term professional funding. This is
achieved by placing limits on Group banking entities
which restrict their ability to increase loans and
advances to customers without corresponding
growth in current accounts and savings accounts.
This measure is referred to as the ‘advances to
deposits’ ratio.
Advances to deposits ratio limits are set by the
RMM and monitored by Group Finance. The ratio
describes loans and advances to customers as a
percentage of the total of core customer current and
savings accounts and term funding with a remaining
term to maturity in excess of one year. Loans and
advances to customers which are part of reverse
repurchase arrangements, and where HSBC receives