HSBC 2004 Annual Report Download - page 303

301
2004 2003
Mark-to-
market values
at year end
Average
mark-to-
market values
for the year
Mark-to-
market values
at year end
Average
mark-to-
market values
for the year
US$m US$m US$m US$m
Exchange rate assets .................. 33,590 28,765 26,961 20,893
liabilities ............. (35,414) (30,000) (27,226) (22,033)
Interest rate assets .................. 36,041 33,861 25,394 33,913
liabilities ............. (36,874) (32,848) (26,824) (32,622)
Equities assets .................. 2,784 3,197 3,252 2,405
liabilities ............. (3,280) (3,029) (2,503) (2,802)
Credit derivatives assets .................. 1,341 948 623 409
liabilities ............. (1,394) (888) (559) (346)
Total assets .................. 73,756 66,771 56,230 57,620
liabilities ............. (76,962) (66,765) (57,112) (57,803)
Netting ......................................................... 41,568 29,926 28,578 26,146
The above amounts are stated after deducting cash collateral meeting the offset criteria of FRS 5 ‘Reporting
the substance of transactions’ as follows:
Offset against assets ..................................... 4,891 3,454
Offset against liabilities ................................ 1,806 1,221
Hedging derivatives
HSBC uses derivatives (principally interest rate swaps) for hedging purposes in the management of its own
asset and liability portfolios and structural positions. This enables HSBC to optimise the all-in cost to the
Group of accessing debt capital markets and to mitigate market risk which would otherwise arise from
structural imbalances between the profile of its assets and liabilities.
The following table summarises the contract amount and replacement cost of derivatives used for risk
management purposes by product type. The replacement cost represents the accounting loss HSBC would
incur if the counterparty to a derivative contract failed to perform according to the terms of the contract and
the collateral, if any, for the amount due proved to be of no value.
2004 2003
Contract
amount
Replacement
cost1
Contract
amount
Replacement
cost1
US$m US$m US$m US$m
Spot and forward foreign exchange .............. 69,421 111 67,370 142
Currency swaps, futures and options
purchased ................................................. 40,344 810 40,130 1,342
Total exchange rate contracts ....................... 109,765 921 107,500 1,484
Interest rate swaps ........................................ 426,081 1,070 358,491 906
Interest rate futures, forward rate agreements
and options purchased .............................. 10,734 1 27,288 3
Total interest rate contracts .......................... 436,815 1,071 385,779 909
Equities, futures and options purchased ....... 44 – 91 59
Other contracts ............................................. 50 – 71 –
Total equities contracts ................................. 94 – 162 59
1Third party contracts only.