HSBC 2012 Annual Report Download - page 291

289
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
national discretion. However, capital buffers such
as those for countercyclical and capital conservation
are in the Directive and are subject to transposition
into national law by member states. CRD IV
implementation has been delayed and the timetable
for finalisation is uncertain.
In October 2012, the FSA wrote to large firms
to set out the disclosures they are required to make
of capital resources on a first year transitional basis
under CRD IV. We have made these disclosures in
appendix III of the Pillar 3 Disclosures 2012 report.
Following the FSA’s setting of a Capital
Resources Floor, and in order to manage our
transition to Basel III under CRD IV, we provide
below some insight for investors of the possible
effects of these rules on our capital position. We have
estimated our pro-forma CET1 ratio by applying
our interpretation of the CRD IV draft July 2011
text post the transition period (end point CRD IV)
to our balance sheet position at 31 December 2012.
In managing our capital position to meet our
internal CET1 target, we consider management
actions resulting from our six filters strategy that
we either have already taken or would take, if the
CRD IV rules were to be finalised in the July 2011
form. These are reflected in the table below under
‘Estimated regulatory impact of management
actions’. Other management actions could be taken
depending upon the finalised rules and timing of
implementation but, as such, have not been included.
The application of the CRD IV rules on this
basis would translate into an estimated CET1 ratio
of 9.0% before management actions and 10.3% after
such actions, as detailed in the table below.
Estimated effect of CRD IV end point rules applied to the 31 December 2012 position
(Unaudited)
At 31 December 2012
RWAs
US$m
Capital
US$m
Reported core tier 1 capital under the current regime .................................................................................... 138,789
Regulatory adjustments applied to core tier 1 in respect of amounts subject to CRD IV treatment
Investments in own shares through the holding of composite products of which HSBC is a component
(exchange traded funds, derivatives, and index stock)...........................................................................
(1,322)
Surplus non-controlling interest disallowed in CET1 ............................................................................... (2,299)
Removal of filters under current regime
– Unrealised gains/(losses) on available-for-sale debt securities ............................................................. (1,223)
– Unrealised gains on available-for-sale equities ...................................................................................... 2,088
– Reserves arising from revaluation of property ...................................................................................... 1,202
– Defined benefit pension fund liabilities ................................................................................................. (1,596)
Excess of expected losses over impairment allowances deducted 100% from CET1 .............................. (3,084)
Removal of 50% of tax credit adjustment for expected losses .................................................................. (111)
Securitisations positions risk-weighted under CRD IV.............................................................................. 1,776
Deferred tax liabilities on intangibles ........................................................................................................ 267
Deferred tax assets that rely on future profitability (excluding those arising from temporary differences) (456)
Additional valuation adjustment (referred to as PVA) .............................................................................. (1,720)
Debit valuation adjustment ........................................................................................................................ (372)
Individually immaterial holdings in CET1 capital of banks, financial institutions and insurance in
aggregate above 10% of HSBC CET1 ..................................................................................................
(5,994)
Deductions under threshold approach
Amount exceeding the 10% threshold:
– Significant investments in CET1 capital of banks, financial institutions and insurance ...................... (6,697)
Amount in aggregate exceeding the 15% threshold:
– Significant investments in CET1 capital of banks, financial institutions and insurance ...................... (2,265)
– Deferred tax assets ................................................................................................................................. (1,532)
Estimated CET1 capital under CRD IV .................................................................................................... 115,451
Reported total RWAs ..................................................................................................................................... 1,123,943
Changes to capital requirements introduced by CRD IV
Credit valuation adjustment ....................................................................................................................... 60,360
Counterparty credit risk (other than credit valuation adjustment) ............................................................. 25,682
Amounts in aggregate below 15% threshold and therefore subject to 250% risk weight ......................... 43,295
Securitisation positions and free deliveries risk-weighted under CRD IV ............................................... 44,513
Investments in commercial entities now risk-weighted ............................................................................ 393
Deferred tax assets moved to threshold deduction under CRD IV ........................................................... (8,976)
Estimated total RWAs under CRD IV ....................................................................................................... 1,289,210
Estimated CET1 ratio .................................................................................................................................. 9.0%