HSBC 2008 Annual Report Download - page 178

HSBC HOLDINGS PLC
Report of the Directors: Impact of Market Turmoil (continued)
SPEs > SIVs and conduits
176
Composition of asset portfolio (continued)
Solitaire
Other
SICs
Total
SICs
Total
multi-seller
conduits1
Total
SIVs
US$bn
US$bn US$bn
US$bn
US$bn
Finance
Commercial bank securities and deposits ... – 4.4 4.4 0.4 –
Investment bank debt securities ................... – 0.5 0.5 – –
Investment bank securities ........................... – – – – –
Finance company debt securities ................. – 0.4 0.4 – 0.3
Other assets .................................................. 0.9 0.3 1.2 0.1 0.1
0.9 5.6 6.5 0.5 0.4
12.1 20.2 32.3 13.9 0.4
US sub-prime mortgages ................................ 0.6 0.7 1.3 – –
US Alt-A ......................................................... 2.3 2.2 4.5 – –
2.9 2.9 5.8 – –
Asset class at 31 December 2007
Structured finance
Vehicle loans and equipment leases ............ – – – 3.6 –
Consumer receivables .................................. – – – 0.8 –
Credit card receivables ................................ – – – 1.5 –
Residential MBSs ........................................ 9.3 – 9.3 2.0 14.5
Commercial MBSs ....................................... 3.7 – 3.7 0.1 5.0
Auto floor plan ............................................. – – – 2.0 –
Trade receivables ......................................... – – – 3.1 –
Student loan securities ................................. 3.5 – 3.5 – 2.6
Vehicle finance loan securities .................... 0.1 – 0.1 – 0.3
Leverage loan securities .............................. 2.2 – 2.2 – 2.8
Other ABSs .................................................. 2.2 – 2.2 2.3 6.9
21.0 – 21.0 15.4 32.1
Finance
Commercial bank securities and deposits ... 0.6 – 0.6 – 7.3
Investment bank debt securities ................... – – – – 0.8
Investment bank securities ........................... – – – 0.4 –
Finance company debt securities ................. – – – – 0.5
0.6 – 0.6 0.4 8.6
21.6 – 21.6 15.8 40.7
US sub-prime mortgages ................................ 1.9 – 1.9 0.1 3.5
US Alt-A .......................................................... 5.3 – 5.3 – 5.9
7.2 – 7.2 0.1 9.4
1 Assets within multi-seller conduits are classified as collateralised loans. Under IFRSs, the conduits cannot recognise the underlying
assets.
During 2008, the credit ratings of various
securities held by the SICs, many with exposures
to US sub-prime and Alt-A mortgages, were
downgraded by rating agencies. At 31 December
2008, 44.7 per cent of the SICs’ exposures to US
sub-prime and Alt-A mortgages remained AAA
rated (2007: 100 per cent), while 81.4 per cent
remained investment grade.
It should be noted that securities purchased by
SICs typically benefit from substantial transaction-
specific credit enhancements such as subordinated
tranches and/or excess spread, which absorb any
credit losses before they would fall on the tranche
held by the SPE.
As noted above, by 31 December 2008, all the
original assets held by the SIVs were transferred to
the new SICs. However, during the second half of
2008, the SIVs purchased CP issued by certain SICs
set up by HSBC and, at 31 December 2008, the
SIVs’ holdings amounted to US$0.3 billion. The
cash flows of the CP issued by the new SICs are
referenced to bonds which include those backed by
US sub-prime and US Alt-A MBSs. In early 2009,
the CP matured, and the cash received by the SIVs
has been transferred to the respective SICs.