HSBC 2009 Annual Report Download - page 249

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Advances to deposits ratios
Ratio of net liquid assets
to customer liabilities Net liquid assets
2009 2008 2009 2008 2009 2008
% % % % US$bn US$bn
Total of HSBC’s other
principal banking entities37
Year-end ............................ 80.8 85.2 29.4 26.5 94.7 83.5
Maximum ......................... 85.2 92.3 29.4 26.5 94.7 83.5
Minimum .......................... 80.8 82.7 24.7 19.4 73.2 66.1
Average ............................. 82.2 88.1 27.3 22.5 84.8 73.9
For footnote, see page 291.
The reduction in the quantum of net liquid
assets in HSBC Bank USA between 2008 and 2009
reflects the temporary high level of net liquid assets
maintained at the end of 2008 in anticipation of
funding requirements for the credit card portfolios
transferred to HSBC Bank USA from HSBC Finance
in early 2009.
Projected cash flow scenario analysis
The Group uses a number of standard projected cash
flow scenarios designed to model both Group-
specific and market-wide liquidity crises, in which
the rate and timing of deposit withdrawals and
drawdowns on committed lending facilities are
varied, and the ability to access interbank funding
and term debt markets and to generate funds from
asset portfolios is restricted. The scenarios are
modelled by all Group banking entities and by
HSBC Finance. The appropriateness of the
assumptions under each scenario is regularly
reviewed. In addition to the Group’s standard
projected cash flow scenarios, individual entities
are required to design their own scenarios to reflect
specific local market conditions, products and
funding bases.
Limits for cumulative net cash flows under
stress scenarios are set for each banking entity and
for HSBC Finance. Both ratio and cash flow limits
reflect the local market place, the diversity of
funding sources available and the concentration risk
from large depositors. Compliance with entity level
limits is monitored centrally by Group Finance and
reported regularly to the RMM.
HSBC Finance
As HSBC Finance is unable to accept standard
retail customer deposits, it takes funding from the
professional markets. HSBC Finance uses a range
of measures to monitor funding risk, including
projected cash flow scenario analysis and caps
placed on the amount of unsecured term funding
that can mature in any rolling three-month and
rolling 12-month periods. HSBC Finance also
maintains access to committed sources of secured
funding and has in place committed backstop lines
for short-term refinancing CP programmes.
HSBC Finance – funding
(Audited)
At 31 December
2009 2008
US$bn US$bn
Maximum amounts of unsecured term
funding maturing in any rolling:
3 month period ................................. 5.2 6.0
12 month period ............................... 12.3 17.4
Unused committed sources of secured
funding38 ........................................... 0.4 2.4
Committed backstop lines from
non-Group entities in support of
CP programmes ................................ 5.3 7.3
For footnote, see page 291.
The need for HSBC Finance to refinance
maturing term funding is mitigated by the continued
run-down of its balance sheet.
Contingent liquidity risk
(Audited)
In the normal course of business, Group entities
provide customers with committed facilities,
including committed backstop lines to conduit
vehicles sponsored by the Group and standby
facilities to corporate customers. These facilities
increase the funding requirements of the Group
when customers choose to raise drawdown levels
over and above their normal utilisation rates. The
liquidity risk consequences of increased levels of
drawdown are analysed in the form of projected cash
flows under different stress scenarios. The RMM
also sets limits for non-cancellable contingent
funding commitments by Group entity after due
consideration of each entity’s ability to fund them.
The limits are split according to the borrower, the
liquidity of the underlying assets and the size of the
committed line.