HSBC 2012 Annual Report Download - page 204

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Eurozone exposures > Redenomination risk // Liquidity and funding
202
rise to a balance sheet exposure. It is to be noted that
this analysis can only be an indication as it does not
include euro-denominated exposures booked by
HSBC outside the countries at risk which are
connected with those countries (see ‘external
contracts’ below).
External contracts redenomination risk:
contracts entered into between HSBC businesses
based outside a country exiting the euro with in-
country counterparties or those otherwise closely
connected with the relevant country, may be affected
by redenomination. The effect remains subject to a
high level of uncertainty. Factors such as the country
law under which the contract is documented, the
HSBC entity involved and the payment mechanism
may all be relevant to this assessment, as will the
precise exit scenario as the consequences for
external contracts of a disorderly exit or one
sanctioned under EU law may be different. In
addition, capital controls could be introduced which
may affect the ability to repatriate funds including
currencies not affected by the redenomination event.
We continue to identify and monitor potential
redenomination risks and, where possible, take steps
to mitigate them and/or reduce our overall exposure
to losses that might arise in the event of a
redenomination. We continue to emphasise,
however, that a euro exit could take different forms
in a number of different scenarios. These give rise to
distinct legal consequences which could significantly
alter the potential effectiveness of any steps taken,
and it is accordingly not possible to predict how
effective particular measures may be until they are
tested against the precise circumstances of a
redenomination event.
In-country funding exposure
(Unaudited)
Denominated in:
euros US dollars
other
currencies Total
US$bn US$bn US$bn US$bn
At 31 December 2012
Greece In-country assets ...................................................... 2.1 0.1 – 2.2
In-country liabilities ................................................. (1.5) (0.8) (0.1) (2.4)
Net in-country funding exposure ............................. 0.6 (0.7) (0.1) (0.2)
Off-balance sheet exposure ..................................... (0.3) 0.2 0.2 0.1
Italy In-country assets ...................................................... 1.0 – – 1.0
In-country liabilities38 .............................................. (2.0) – – (2.0)
Net in-country funding exposure ............................. (1.0) – – (1.0)
Off-balance sheet exposure ..................................... 0.8 – – 0.8
Spain In-country assets ...................................................... 2.4 0.8 – 3.2
In-country liabilities ................................................. (1.7) (0.1) – (1.8)
Net in-country funding exposure ............................. 0.7 0.7 – 1.4
Off-balance sheet exposure ..................................... 0.7 0.2 – 0.9
At 31 December 2011
Greece In-country assets ...................................................... 2.9 2.2 0.1 5.2
In-country liabilities ................................................. (2.1) (1.6) (0.1) (3.8)
Net in-country funding exposure ............................. 0.8 0.6 – 1.4
Off-balance sheet exposure ..................................... 0.2 – – 0.2
Italy In-country assets ...................................................... 2.1 – – 2.1
In-country liabilities38 .............................................. (2.6) – – (2.6)
Net in-country funding exposure ............................. (0.5) – – (0.5)
Off-balance sheet exposure ..................................... 0.8 – – 0.8
Spain In-country assets ...................................................... 4.4 0.6 0.1 5.1
In-country liabilities ................................................. (1.7) (0.1) – (1.8)
Net in-country funding exposure ............................. 2.7 0.5 0.1 3.3
Off-balance sheet exposure ..................................... 2.4 0.5 – 2.9
For footnote, see page 249.