HSBC 2015 Annual Report Download - page 491

HSBC HOLDINGS PLC
489
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Term Definition
R
Refi rate The refi (or refinancing) rate is set by the European Central Bank (‘ECB’) and is the price banks pay to borrow from
ECB.
Regulatory capital The capital which HSBC holds, determined in accordance with CRDIV as implemented by the PRA for the
consolidated Group and by local regulators for individual Group companies.
Regulatory matters Investigations, reviews and other actions carried out by, or in response to the actions of, regulators or law
enforcement agencies in connection with alleged wrongdoing by HSBC.
Renegotiated loans Loans for which the contractual payment terms have been changed because of significant concerns about the
borrower’s ability to meet the contractual payments when due.
Repo/reverse repo
(or sale and repurchase
agreement)
A short-term funding agreement that allows a borrower to create a collateralised loan by selling a financial asset to a
lender. As part of the agreement the borrower commits to repurchase the security at a date in the future repaying
the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to
sell in the future) it is reverse repurchase agreement or a reverse repo.
Reputational risk The risk that illegal, unethical or inappropriate behaviour by the Group itself, members of staff or clients or
representatives of the Group will damage HSBC’s reputation, leading, potentially, to a loss of business, fines or
penalties.
Restricted Shares Awards that define the number of HSBC Holdings ordinary shares to which the employee will become entitled,
generally between one and three years from the date of the award, and normally subject to the individual
remaining in employment. The shares to which the employee becomes entitled may be subject to retention
requirement.
Retail loans Money lent to individuals rather than institutions. This includes both secured and unsecured loans such as mortgages
and credit card balances.
Return on equity Profit attributable to ordinary shareholders of the parent company divided by average ordinary shareholders’ equity.
Return on tangible equity
(‘ROTE’)
Profit attributable to ordinary shareholders of the parent company, adjusted for movements in PVIF and
impairments of goodwill divided by average ordinary shareholders’ equity, adjusted for PVIF, goodwill and other
intangibles (net of deferred tax).
Risk appetite The aggregate level and types of risk a firm is willing to assume within its risk capacity to achieve its strategic
objectives and business plan.
Risk capacity The maximum level of risk the firm can assume before breaching constraints determined by regulatory capital and
liquidity needs and its obligations, also from a conduct perspective, to depositors, policyholders, other customers
and shareholders.
Risk-weighted assets (‘RWAs’) Calculated by assigning a degree of risk expressed as a percentage (risk weight) to an exposure value.
Run-off portfolios Legacy credit in GB&M, the US CML portfolio and other US run-off portfolios, including the treasury services related
to the US CML businesses and commercial operations in run-off. Origination of new business in the run-off
portfolios has been discontinued and balances are being managed down through attrition and sale.
S
Sale and repurchase agreement See repo above.
Second lien A security interest granted over an item of property to secure the repayment of a debt that is issued against the
same collateral as a first lien but that is subordinate to it. In the case of default, repayment for this debt will only
be received after the first lien has been repaid.
Securitisation A transaction or scheme whereby the credit risk associated with an exposure, or pool of exposures, is tranched and
where payments to investors in the transaction or scheme are dependent upon the performance of the exposure
or pool of exposures. A traditional securitisation involves the transfer of the exposures being securitised to a SPE
which issues securities. In a synthetic securitisation, the tranching is achieved by the use of credit derivatives and
the exposures are not removed from the balance sheet of the originator.
Securitisation swap An interest rate or cross currency swap with notional linked to the size of the outstanding asset portfolio in a
securitisation. Securitisation swaps are typically executed by securitisation vehicles to hedge interest rate risk
arising from mismatches between the interest rate risk profile of the asset portfolio and that of the securities
issued by the vehicle.
Short sale In relation to credit risk management, a ‘short sale’ is an arrangement in which a bank permits the borrower to sell
the property for less than the amount outstanding under a loan agreement. The proceeds are used to reduce the
outstanding loan balance and the borrower is subsequently released from any further obligations on the loan.
Single-issuer liquidity facility A liquidity or stand-by line provided to a corporate customer which is different from a similar line provided to a
conduit funding vehicle.
Social security financing
contribution (‘COFINS’)
A federal tax imposed monthly on gross revenue earned by legal entities in Brazil. It is a contribution to finance the
social security system.
Sovereign exposures Exposures to governments, ministries, departments of governments, embassies, consulates and exposures on
account of cash balances and deposits with central banks.
Special Purpose Entity (‘SPE’) A corporation, trust or other non-bank entity, established for a narrowly defined purpose, including for carrying on
securitisation activities. The structure of the SPE and its activities are intended to isolate its obligations from those
of the originator and the holders of the beneficial interests in the securitisation.