HSBC 2012 Annual Report Download - page 538

HSBC HOLDINGS PLC
Shareholder Information (continued)
Glossary / Index
536
Term Definition
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.
Sustainability risk The risk that the environmental and social effects of providing financial services outweigh the economic
benefits.
Sustainable cost savings Permanent cost reductions at a given level of business activity. Sustainable cost savings exclude cost
avoidance and revenue and loan impairment charge benefits as these do not represent operational
expense reductions. Cost savings resulting from business disposals are not classified as sustainable.
Systems risk The risk of failure or other deficiency in the automated platforms that support the Group’s daily execution
and the systems infrastructure on which they reside, including data centres, networks and distributed
computers.
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.
Total compensation ratio The total compensation ratio represents the proportion of total employee expenses to operating income
net of impairment charges.
Trading portfolios Portfolios that comprise positions arising from market-making and warehousing of customer-derived
positions.
Trading risk The market risk arising from trading portfolios.
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
Unencumbered assets Assets on our balance sheet which have not been pledged as collateral against an existing liability.
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.