HSBC 2011 Annual Report Download - page 186

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Other material risks > Pension risk / Sustainability risk // Footnotes
184
to a robust process of review of past sales which,
in appropriate cases, will lead to full and proper
customer compensation. We will take responsibility
for all NHFA Limited customers, including those
from before HSBC bought the company, which is
beyond the requirements of the terms agreed with the
FSA.
In addition, we have reviewed sales procedures
applicable to potentially vulnerable categories of
customers on a global basis and will apply a
consistent approach to such services to a global
minimum and a robust standard, which fully respects
the letter and spirit of all relevant regulatory
requirements.
We continue to work to resolve previously-
disclosed regulatory issues in the US relating to anti-
money laundering (‘AML’) and compliance controls
and foreclosure procedures in full co-operation with
our relevant regulators. We are committed to
maintaining robust AML and compliance controls
in all our businesses.
Pension risk
(Unaudited)
We operate a number of pension plans
throughout the world. Some are defined
benefit plans, of which the largest is the
HSBC Bank (UK) Pension Scheme (‘the
principal plan’).
There were no material changes to our policies and
procedures for the management of pension risk in
2011.
During 2011, the net liability under the Group’s
defined benefit pension plans reduced from
US$2.9bn to US$0.2bn. This was principally due to
growth in the value of the principal plan’s assets
outstripping the comparable growth in liabilities.
The principal plan holds a diversified portfolio
of investments to meet future cash flow liabilities
arising from accrued benefits as they fall due to be
paid. The trustee of the principal plan is required to
produce a written Statement of Investment Principles
which governs decision-making about how
investments are made.
In 2006, HSBC and the trustee of the principal
plan agreed to change the investment strategy in
order to reduce the investment risk. The target asset
allocations for this strategy at that time, at the last
year-end and as revised in 2011, demonstrating the
ongoing evolution of the strategy, are shown below.
The strategy is to hold the majority of assets in
bonds, with the remainder in a more diverse range
of investments, and includes a commitment to
undertake a programme of swap arrangements
(see Note 45 on the Financial Statements) by which
the principal plan makes LIBOR-related interest
payments in exchange for the receipt of cash flows
which are based on projected future benefit
payments to be made from the principal plan.
The DBS principal plan – asset allocation
2011 2010 2006
% % %
Equities ........................... 15.5 15.5 15.0
Bonds .............................. 60.5 56.5 50.0
Alternative assets83 ......... 9.5 10.5 10.0
Property ........................... 9.0 9.0 10.0
Cash ................................. 5.5 8.5 15.0
100.0 100.0 100.0
For footnote, see page 185.
Sustainability risk
(Unaudited)
Assessing the environmental and social
impacts of providing finance to our
customers is integral to our overall risk
management processes.
There were no material changes to our policies and
procedures for the management of sustainability risk
in 2011.
A summary of our current policies and
p
ractices regarding reputational risk, pension
risk and sustainability risk is provided in the
Appendix to Risk on page 188.