HSBC 2012 Annual Report Download - page 506

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
42 – Special purpose entities
504
Conduits
HSBC sponsors and manages two types of conduits: securities investment conduits (‘SIC’s) and multi-seller conduits.
Securities investment conduits
Solitaire, HSBC’s principal SIC, holds asset-backed securities (‘ABS’s) on behalf of HSBC. At 31 December 2012,
Solitaire held US$10.0bn of ABSs (2011: US$10.6bn). These are included within the disclosures of ABS ‘held
through consolidated SPEs’ on page 187. HSBC’s other SICs, Mazarin, Barion Funding Limited (‘Barion’) and
Malachite Funding Limited (‘Malachite’), evolved from the restructuring of HSBC’s sponsored structured investment
vehicles (‘SIV’s) in 2008.
Solitaire
During the year Solitaire redeemed the commercial paper (‘CP’) held by third parties, and is currently funded entirely
by CP issued to HSBC. Although HSBC continues to provide a liquidity facility, Solitaire has no need to draw on it
so long as HSBC purchases the CP issued, which it intends to do for the foreseeable future. Accordingly, there were
no amounts drawn under the liquidity facility provided by HSBC at 31 December 2012 (2011: US$9.3bn).
At 31 December 2012, HSBC held US$13.0bn of CP, which represented HSBC’s maximum exposure. At
31 December 2011, maximum exposure of US$15.6bn was represented by liquidity facility including undrawn
amounts.
Mazarin
HSBC is exposed to the par value of Mazarin’s assets through the provision of a liquidity facility equal to the lower
of the amortised cost of issued senior debt and the amortised cost of non-defaulted assets. At 31 December 2012, this
amounted to US$8.4bn (2011: US$9.5bn). First loss protection is provided through the capital notes issued by
Mazarin, which are substantially all held by third parties.
At 31 December 2012, HSBC held 1.3% of Mazarin’s capital notes (2011: 1.3%) which have a par value of US$17m
(2011: US$17m) and a carrying amount of nil (2011: nil).
Barion and Malachite
HSBC’s primary exposure to these SICs is represented by the amortised cost of the debt required to support the
non-cash assets of the vehicles. At 31 December 2012, this amounted to US$7.4bn (2011: US$8.4bn). First loss
protection is provided through the capital notes issued by these vehicles, which are substantially all held by third
parties.
At 31 December 2012, HSBC held 3.7% of the capital notes issued by these vehicles (2011: 3.7%) which have a par
value of US$36m (2011: US$35m) and a carrying amount of US$1.7m (2011: US$1.1m).
Multi-seller conduits
These vehicles were established for the purpose of providing access to flexible market-based sources of finance for
HSBC’s clients.
HSBC’s maximum exposure is equal to the transaction-specific liquidity facilities offered to the multi-seller conduits.
First loss protection is provided by the originator of the assets, and not by HSBC, through transaction-specific credit
enhancements. A layer of secondary loss protection is provided by HSBC in the form of programme-wide
enhancement facilities.
The following table sets out the weighted average life of the asset portfolios for the above mentioned conduits.
Weighted average life of portfolios
Solitaire Other SICs Total SICs
Total multi-
seller conduits
Weighted average life (years)
At 31 December 2012 ....................................................... 6.1 4.5 5.2 2.8
At 31 December 2011 ........................................................ 5.9 4.1 4.9 2.0