HSBC 2015 Annual Report Download - page 124

Report of the Directors: Risk (continued)
Credit risk
HSBC HOLDINGS PLC
122
Gross loans and impairment allowances on loans and advances to customers and banks reported in ‘Assets held for sale’
(Audited)
Brazil Other Total
$m $m $m
Gross loans
Loans and advances to customers 18,103 2,042 20,145
–
personal 5,571 40 5,611
–
corporate and commercial 12,532 2,002 14,534
Financial 4,399
–
4,399
–
non-bank financial institutions 331
–
331
–
banks 4,068
–
4,068
At 31 December 2015 22,502 2,042 24,544
Impairment allowances
Loans and advances to customers (1,433) (21) (1,454)
–
personal (664)
–
(664)
–
corporate and commercial (769) (21) (790)
Financial
–
–
–
–
non-bank financial institutions
–
–
–
–
banks
–
–
–
bk
At 31 December 2015 (1,433) (21) (1,454)
The table below analyses the amount of LICs arising from
assets held for sale. The held for sale assets primarily relate
to the Brazilian operations.
Loan impairment charges and other credit risk provisions
(Audited)
2015
$m
LICs arising from:
–
assets held for sale 965
–
assets not held for sale 2,757
Year ended 31 December 3,722
Credit exposure
Maximum exposure to credit risk
(Audited)
The table on page 123 provides information on balance sheet
items, offsets and loan and other credit-related commitments.
Commentary on balance sheet movements is provided on page 62.
The offset in derivatives decreased in line with the
decrease in maximum exposure amounts.
The offset on corporate and commercial loans to customers
decreased by $15bn. This reduction was mainly related to
corporate overdraft balances where a small number of
clients benefited from the use of net interest arrangements
across overdrafts and deposits. As a result, while net risk
exposures are generally stable, gross balances can be
volatile.
‘Maximum exposure to credit risk’ table (page 123)
The table presents our maximum exposure to credit risk from
balance sheet and off-balance sheet financial instruments
before taking account of any collateral held or other credit
enhancements (unless such enhancements meet accounting
offsetting requirements). For financial assets recognised on the
balance sheet, the maximum exposure to credit risk equals their
carrying amount; for financial guarantees and similar contracts
granted, it is the maximum amount that we would have to pay
if the guarantees were called upon. For loan commitments and
other credit-related commitments, it is generally the full amount
of the committed facilities.
The offset in the table relates to amounts where there is a legally
enforceable right of offset in the event of counterparty default
and where, as a result, there is a net exposure for credit risk
purposes. However, as there is no intention to settle these
balances on a net basis under normal circumstances, they do
not qualify for net presentation for accounting purposes. No
offset has been applied to off-balance sheet collateral. In the
case of derivatives the offset column also includes collateral
received in cash and other financial assets.
Other credit risk mitigants
While not disclosed as an offset in the ‘Maximum exposure
to credit risk’ table, other arrangements are in place which
reduce our maximum exposure to credit risk. These include
a charge over collateral over borrowers’ specific assets
such as residential properties. Other credit risk mitigants
include short positions in securities and financial assets
held as part of linked insurance/investment contracts
where the risk is predominantly borne by the policyholder.
In addition, we hold collateral in the form of financial
instruments that are not recognised on the balance sheet.
See Note 32 and from page 139 and page 147 respectively on the
Financial Statements for further details on collateral in respect of
certain loans and advances and derivatives.