HSBC 2011 Annual Report Download - page 414

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
45 – Related party transactions / 46 – Events after the balance sheet date
412
Collateral is posted to the scheme by HSBC at an amount that provides the Trustee with a high level of confidence
that would be sufficient to replace the swaps in the event of default by HSBC Bank plc. With the exception of the
special collateral arrangements detailed above, all other aspects of the swap transactions between HSBC and the
scheme are on substantially the same terms as comparable transactions with third-party counterparties.
In June 2010 the HSBC Bank (UK) Pension Scheme used a special contribution by HSBC Bank plc of £1,760m
(US$2,638m) which was made to accelerate the reduction of the deficit of the Scheme to acquire debt securities from
HSBC in a transaction at an arm’s length value determined by the Scheme’s independent third-party advisers. In
December 2011, HSBC Bank plc made a £184m (US$286m) contribution to the HSBC Bank (UK) Pension Scheme.
Following the contribution the Scheme purchased asset-backed securities from HSBC at an arm’s length value,
determined by the Scheme’s independent third-party advisers.
In December 2011 HSBC International Staff Retirements Benefits Scheme (‘ISRBS’) purchased asset-backed
securities from HSBC at an arm’s length value of US$34m, determined by the Scheme’s independent third party
advisers. This followed an agreement by HSBC Asia Holdings BV to make a contribution of the same amount to
ISRBS. No gain or loss arose on the transaction.
ISRBS entered into swap transactions with HSBC to manage the inflation and interest rate sensitivity of the liabilities
and selected assets. At 31 December 2011, the gross notional value of the swaps was US$1.7bn (2010: US$1.8bn)
and the swaps had a net positive fair value of US$297m to the scheme (2010: US$77m). No gain or loss arose on the
transaction, which was conducted at an arm’s length value determined by the Scheme’s independent third-party
advisers.
HSBC Holdings
Details of HSBC Holdings’ principal subsidiaries are shown in Note 26. Transactions and balances during the year
with subsidiaries were as follows:
2011 2010
Highest
balance during
the year1
Balance at
31 December1
Highest
balance during
the year1
Balance at
31 December1
US$m US$m US$m US$m
Assets
Cash at bank .................................................................................. 471 316 459 459
Derivatives .................................................................................... 4,220 3,568 3,219 2,327
Loans and advances ...................................................................... 28,821 28,048 23,212 21,238
Financial investments ................................................................... 2,093 1,078 2,606 2,025
Investments in subsidiaries ........................................................... 93,008 90,621 92,899 92,899
Total related party assets .............................................................. 128,613 123,631 122,395 118,948
Liabilities
Amounts owed to HSBC undertakings ........................................ 3,129 2,479 4,580 2,932
Derivatives .................................................................................... 1,181 1,067 1,677 827
Subordinated liabilities:
– at amortised cost .................................................................... 2,609 2,437 3,907 2,464
– designated at fair value .......................................................... 4,627 3,955 4,507 4,259
Total related party liabilities ......................................................... 11,546 9,938 14,671 10,482
Guarantees .................................................................................... 49,527 49,402 46,988 46,988
Commitments ................................................................................ 2,753 1,810 3,240 2,720
1 The disclosure of the year-end balance and the highest month-end balance during the year is considered the most meaningful
information to represent transactions during the year. The above outstanding balances arose in the ordinary course of business and are
on substantially the same terms, including interest rates and security, as for comparable transactions with third-party counterparties,
with the exception of US$63m (2010: US$160m) in respect of loans to HSBC subsidiaries from HSBC Holdings and nil (2010:
US$506m) in respect of loans from HSBC subsidiaries to HSBC Holdings made at an agreed zero per cent interest rate.
Some employees of HSBC Holdings are members of the HSBC Bank (UK) Pension Scheme, which is sponsored by a
separate Group company. HSBC Holdings incurs a charge for these employees equal to the contributions paid into
the scheme on their behalf. Disclosure in relation to the scheme is made in Note 7 to the accounts.