HSBC 2015 Annual Report Download - page 154

Report of the Directors: Risk (continued)
Credit risk
HSBC HOLDINGS PLC
152
The above tables analyse loans and advances by industry
sector and by the location of the principal operations of the
lending subsidiary or, in the case of the operations of The
Hongkong and Shanghai Banking Corporation, HSBC Bank,
HSBC Bank Middle East and HSBC Bank USA, by the location
of the lending branch.
HSBC Holdings
(Audited)
Risk in HSBC Holdings is overseen by the HSBC Holdings
Asset and Liability Management Committee (‘HALCO’).
The major risks faced by HSBC Holdings are credit risk,
liquidity risk and market risk (in the form of interest
rate risk and foreign exchange risk), of which the most
significant is credit risk.
Credit risk in HSBC Holdings primarily arises from
transactions with Group subsidiaries and from guarantees
issued in support of obligations assumed by certain Group
operations in the normal conduct of their business. It is
reviewed and managed within regulatory and internal
limits for exposures by our Global Risk function, which
provides high-level centralised oversight and management
of credit risks worldwide.
HSBC Holdings’ maximum exposure to credit risk at
31 December 2015 is shown below. Its financial assets
principally represent claims on Group subsidiaries in
Europe and North America.
All the derivative transactions are with HSBC undertakings
that are banking counterparties (2014: 100%) and for
which HSBC Holdings has in place master netting
arrangements. Since 2012, the credit risk exposure has
been managed on a net basis and the remaining net
exposure is specifically collateralised in the form of cash.
HSBC Holdings – maximum exposure to credit risk
(Audited)
2015 2014
Maximum
exposure Offset
Exposure to
credit risk
(net)
Maximum
exposure Offset
Exposure to
credit risk
(net)
$m $m $m $m $m $m
Cash at bank and in hand:
–
balances with HSBC undertakings 242
–
242 249
–
249
Derivatives 2,467 (2,467)
–
2,771 (2,610) 161
Loans and advances to HSBC undertakings 44,350
–
44,350 43,910
–
43,910
Financial investments in HSBC undertakings 4,285
–
4,285 4,073
–
4,073
Other assets 109
–
109
Financial guarantees and similar contracts 68,333
–
68,333 52,023
–
52,023
Loan and other credit-related commitments
–
–
–
16
–
16
At 31 December 119,786 (2,467) 117,319 103,042 (2,610) 100,432
The credit quality of loans and advances and financial
investments, both of which consist of intra-Group lending,
is assessed as ‘strong’ or ‘good’, with 100% of the exposure
being neither past due nor impaired (2014: 100%).
Securitisation exposures and other
structured products
The following table summarises the carrying amount of our
ABS exposure by categories of collateral and includes
assets held in the GB&M legacy credit portfolio with a
carrying value of $15bn (2014: $23bn).
At 31 December 2015, the available-for-sale reserve in
respect of ABSs was a deficit of $1,021m (2014: deficit of
$777m). For 2015, the impairment write-back in respect of
ABSs was $85m (2014: write-back of $276m).