HSBC 2011 Annual Report Download - page 433

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Term Definition
Short sale In relation to credit risk management, a ‘short sale’ is an arrangement in which a bank permits the
borrower to sell the property for less than the amount outstanding under a loan agreement. The
proceeds are used to reduce the outstanding loan balance and the borrower is subsequently released
from any further obligations on the loan.
Single-issuer liquidity facility A liquidity or stand-by line provided to a corporate customer which is different from a similar line
provided to a conduit funding vehicle.
Sovereign exposures Exposures to governments, ministries, departments of governments, embassies, consulates and exposures
on account of cash balances and deposits with central banks.
Special purpose entities
(‘SPE’s)
A corporation, trust or other non-bank entity, established for a narrowly defined purpose, including for
carrying on securitisation activities. The structure of the SPE and its activities are intended to isolate its
obligations from those of the originator and the holders of the beneficial interests in the securitisation.
Standardised approach In relation to credit risk, a method for calculating credit risk capital requirements using External Credit
Assessment Institutions (‘ECAI’) ratings and supervisory risk weights. In relation to operational risk, a
method of calculating the operational capital requirement by the application of a supervisory defined
percentage charge to the gross income of eight specified business lines.
Structured finance / notes An instrument whose return is linked to the level of a specified index or the level of a specified asset. The
return on a structured note can be linked to equities, interest rates, foreign exchange, commodities or
credit. Structured notes may or may not offer full or partial capital protection in the event of a decline in
the underlying index or asset.
Structured Investment Vehicles
(‘SIV’s)
Special purpose entities which invest in diversified portfolios of interest-earning assets, generally funded
through issues of commercial paper, medium-term notes and other senior debt to take advantage of the
spread differentials between the assets in the SIV and the funding cost.
Student loan related assets Securities with collateral relating to student loans.
Subordinated liabilities Liabilities which rank after the claims of other creditors of the issuer in the event of insolvency or
liquidation.
Sub-prime A US description for customers with high credit risk, for example those who have limited credit histories,
modest incomes, high debt-to-income ratios, high loan-to-value ratios (for real estate secured products)
or have experienced credit problems caused by occasional delinquencies, prior charge-offs, bankruptcy
or other credit-related problems.
T
Tier 1 capital A component of regulatory capital, comprising core tier 1 and other tier 1 capital. Other tier 1 capital
includes qualifying capital instruments such as non-cumulative perpetual preference shares and hybrid
capital securities.
Tier 2 capital A component of regulatory capital, comprising qualifying subordinated loan capital, related non-
controlling interests, allowable collective impairment allowances and unrealised gains arising on the
fair valuation of equity instruments held as available-for-sale. Tier 2 capital also includes reserves
arising from the revaluation of properties.
Troubled debt restructuring A US description for restructuring a debt whereby the creditor for economic or legal reasons related to a
debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider.
U
Unfunded exposures An exposure where the notional amount of a contract has not been exchanged.
US Government agency and US
Government sponsored
enterprises mortgage-related
assets
Securities that are guaranteed by US Government agencies such as Ginnie Mae, or by US Government
sponsored entities including Fannie Mae and Freddie Mac.
V
Value-at-risk
(‘VAR’)
A measure of the loss that could occur on risk positions as a result of adverse movements in market risk
factors (e.g. rates, prices, volatilities) over a specified time horizon and to a given level of confidence.
W
Wholesale loans Money lent to sovereign borrowers, banks, non-bank financial institutions and corporate entities.
Write-down Reduction in the carrying value of an asset due to impairment or fair value movements.
Wrong-way risk An adverse correlation between the counterparty’s probability of default and the mark-to-market value of
the underlying transaction.