HSBC 2009 Annual Report Download - page 244

HSBC HOLDINGS PLC
Report of the Directors: Risk (continued)
Credit risk > Risk elements
242
principal and/or interest are classified as unimpaired
loans when the Group expects to recover the
contractual cash flows in full.
Troubled debt restructurings
The SEC requires separate disclosure of any loans
whose terms have been modified by the lender
because of the borrower’s financial difficulties, as
a concession that the lender would not otherwise
consider. These are classified as troubled debt
restructurings (‘TDR’s). The definition of TDRs
differs from the definition of renegotiated loans as
disclosed under IFRSs, see page 224, as follows.
After restructuring, TDRs may continue to be
classified as impaired, as past due but not impaired
or, where appropriate, as neither past due nor
impaired. Under IFRSs, disclosure is required of
loans that would otherwise have been classified
as past due or impaired whose terms have been
renegotiated.
Furthermore, a loan is no longer classified as
a TDR after the end of the first year following the
restructuring if the loan performs in accordance with
the new terms, and the interest rate at the time of
restructuring was a market rate for a loan with
comparable risk.
Potential problem loans
Credit risk elements also cover potential problem
loans. These are loans where information on
possible credit problems among borrowers causes
management to seriously doubt their ability to
comply with the loan repayment terms. There are no
potential problem loans other than those identified
in the table of risk elements set out below, and as
discussed in ‘Areas of special interest’ on page 214.
‘Areas of special interest’ includes further disclosure
about certain homogeneous groups of loans which
are collectively assessed for impairment, and
represent the Group’s most significant exposures to
potential problem loans, including ARMs and stated-
income products. Collectively assessed loans and
advances, as set out on page 231, although not
classified as impaired until more than 90 days, are
assessed collectively for losses that have been
incurred but have not yet been individually
identified. This policy is further described on
page 203.