HSBC 2015 Annual Report Download - page 241

HSBC HOLDINGS PLC
239
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Leverage ratio
Leverage ratio
EU Delegated Act basis
at 31 December
2015 2014
$bn $bn
Total assets per accounting balance sheet 2,410 2,634
Deconsolidation of insurance/other entities (95) (102)
Consolidation of banking associates 213 194
Total assets per regulatory/accounting balance sheet 2,528 2,726
Adjustments to reverse netting of loans and deposits allowable under IFRS 32 38
Reversal of accounting values including assets classified as held for sale: (456) (525)
–
derivatives (290) (345)
–
repurchase agreement and securities finance (166) (180)
Replaced with the regulatory rules:
Derivatives including assets classified as held for sale: 149 166
–
mark-to-market 69 81
–
deductions of receivables assets for cash variation margin (65) (82)
–
add-on amounts for potential future exposure 125 148
–
exposure amount resulting from the additional treatment for written credit derivatives 20 19
Repurchase agreement and securities finance including assets classified as held for sale: 173 188
–
gross securities financing transactions assets 243 269
–
netted amounts of cash payables and cash receivables of gross securities financing transactions assets (78) (89)
–
measurement of counterparty risk 8 8
Addition of off-balance sheet commitments and guarantees 401 396
–
guarantees and contingent liabilities 67 67
–
commitments 326 321
–
others 8 8
Exclusion of items already deducted from the capital measure (33) (36)
Exposure measure after regulatory adjustments 2,794 2,953
Tier 1 capital under CRD IV (end point) 140 142
Leverage ratio 5.0% 4.8%
The numerator of the leverage ratio is calculated using
the final CRD IV end point tier 1 capital definition while
the exposure measure is now calculated based on the
Commission Delegated Regulation (EU) 2015/62, published
in January 2015.
Regulatory developments
Regulatory capital requirements
The regulatory capital requirements comprise a Pillar 1
minimum, individual capital guidance (‘ICG’) set by the
PRA in the form of Pillar 2A, a number of capital buffers
established by CRD IV and any PRA buffer that the PRA
may set in addition to ICG.
The Pillar 1 minimum ratio and the capital conservation
buffer (‘CCB’) rates are certain. The macro-prudential tools,
Pillar 2A, the PRA buffer and the systemic buffers are time-
varying elements. This uncertainty is reflected in the
regulatory and management buffer we have included in the
12% to 13% CET1 range that is used to model our medium-
term target for return on equity of more than 10% by 2017.
This buffer is currently in the range of 1% to 2%.
In December 2015, the FPC published its end point view of
the calibration of the capital framework as applicable to UK
banks. This set out the FPC’s final expectations in relation
to the levels of capital across the industry, while specific
requirements for individual banks will vary at the PRA’s
determination. These expectations do not include time-
varying additional requirements such as the countercyclical
capital buffer (‘CCyB’) and are based on the assumption
that existing deficiencies in the definition and measurement
of RWAs under Pillar 1 requirements will be addressed over
time. These deficiencies in Pillar 1 are currently compensated
through additional Pillar 2 requirements. The FPC stated its
expectation that by 2019, once such deficiencies were
corrected, Pillar 2A requirements would reduce.
In addition to the above, consideration of the finalised
Financial Stability Board (‘FSB’) proposals in relation to
total loss absorbing capacity (‘TLAC’) requirements, and the
UK implementation of the EU minimum requirement for
own funds and eligible liabilities (‘MREL’) will also be
required.
Based on the known and quantifiable requirements to
date, including the announced CCyB rates and current ICG,
the overall capital requirements applicable to the Group on
an end-point basis (at 1 January 2019) are presented in the
table below.