HSBC 2013 Annual Report Download - page 111

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109
25 Assets charged as security for liabilities and collateral accepted as security for assets
a Assets charged as security for liabilities and contingent obligations
In the ordinary course of business, we pledge assets recorded on our consolidated statement of financial position
in relation to securitization activity, mortgages sold with recourse, securities lending and securities sold under
repurchase agreements. These transactions are conducted under terms that are usual and customary to standard
securitization, mortgages sold with recourse, securities lending and repurchase agreements. In addition, we also
pledge assets to secure our obligations within payment and depository clearing systems.
Financial assets pledged to secure recognized liabilities on the statement of financial position and obligations within
payment and depository clearing systems:
2013
$m
2012
$m
Cash.......................................................................................................................... 263 35
Residential mortgages .............................................................................................. 4,418 5,725
Debt securities .......................................................................................................... 3,246 5,835
7,927 11,595
The bank is required to pledge assets to secure its obligations in the Large Value Transfer System (‘LVTS’), which
processes electronically in real-time large value and time-critical payments in Canada. In the normal course of
business, pledged assets are released upon settlement of the bank’s obligations at the end of each business day. Only
in very rare circumstances are we required to borrow from the Bank of Canada to cover any settlement obligations.
Under those circumstances, the pledged assets would be used to secure the borrowing. No amounts were outstanding
under this arrangement at 31 December 2013 or 2012. Consequently, the assets pledged with respect to the bank’s
LVTS obligations have not been included in the table above.
b Collateral accepted as security for assets
The fair value of financial assets accepted as collateral that the bank is permitted to sell or repledge in the absence
of default is $6,727m (2012: $4,328m). The fair value of financial assets accepted as collateral that have been sold
or repledged is $2,651m (2012: $2,651m). The bank is obliged to return equivalent assets.
These transactions are conducted under terms that are usual and customary to standard securities borrowing and
reverse repurchase agreements.