HSBC 2009 Annual Report Download - page 154

HSBC HOLDINGS PLC
Report of the Directors: Impact of Market Turmoil (continued)
Background and disclosure policy / Overview of exposure > Reclassification of financial assets
152
Specifically, HSBC has considered the
recommendations relating to disclosure contained
within the following reports:
• the Financial Stability Forum: ‘Enhancing
market and institutional resilience’;
• the Committee of European Banking
Supervisors: ‘Banks’ transparency on activities
and products affected by the recent market
turmoil’ and ‘Consultation Paper 30: Disclosure
guidelines: Lessons learnt from the financial
crisis’; and
• the IASB Expert Advisory Panel: ‘Measuring
and disclosing the fair value of financial
instruments in markets that are no longer
active’.
The particular topics covered in respect of
HSBC’s securitisation activities and exposure to
structured products are as follows:
• overview of exposure;
• business model;
• risk management;
• accounting policies;
• nature and extent of HSBC’s exposures;
• fair values of financial instruments; and
• special purpose entities.
Overview of exposure
(Audited)
At 31 December 2009, the aggregate carrying
amount of HSBC’s exposure to ABSs, trading loans
held for securitisation and exposure to leveraged
finance transactions was US$79 billion (2008:
US$91 billion), summarised in the table below. The
majority of these exposures arose in Global Banking
and Markets.
HSBC’s holdings of available-for-sale ABSs
fell by US$8.2 billion to US$48.1 billion in
2009. The associated AFS reserve deficit
improved by US$6.5 billion or 35 per cent
to US$12.2 billion.
Within the total carrying amount of ABSs on the
balance sheet, ABS holdings of US$14.0 billion
(2008: US$14.6 billion) are held through vehicles
discussed on page 155, where significant first loss
protection is provided by external investors on a
fully collateralised basis. This includes
US$3.3 billion (2008: US$3.5 billion) in respect of
sub-prime and Alt-A residential mortgage exposure.
Overall exposure of HSBC
At 31 December 2009 At 31 December 2008
Carrying
amount
Including
sub-prime
and Alt-A
Carrying
amount
Including
sub-prime
and Alt-A
US$bn US$bn US$bn US$bn
ABSs .................................................................................................... 71 11 81 12
– fair value through profit or loss ................................................... 12 1 14 1
– available for sale1 ......................................................................... 48 8 56 9
– held to maturity1 ........................................................................... 3–3 –
– loans and receivables .................................................................... 828 2
Loans at fair value through profit or loss ............................................ 2 2 4 3
Leveraged finance loans ...................................................................... 6 – 6 –
– loans and receivables .................................................................... 6–6 –
79 13 91 15
For footnote, see page 195.
Reconciliation of movement in carrying amount of ABSs
2009
US$bn
Balance at 1 January 2009.................................................................................................................................................... 81.0
Net ABS sales (principally of US Government agency and sponsored enterprises) .......................................................... (5.4)
Principal amortisation of available-for-sale ABSs (repayment at par) ............................................................................... (6.1)
Movement on fair values of available-for-sale ABSs ......................................................................................................... 4.1
Net sales, principal amortisation and write-downs of ABSs classified as trading ............................................................. (2.1)
Exchange differences and other movements ....................................................................................................................... (0.9)
Balance at 31 December 2009 ............................................................................................................................................. 70.6