HSBC 2009 Annual Report Download - page 251

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within the Group, continued to enjoy committed
financing facilities, albeit at a lower level, and access
to CP markets at competitive interest rates. By
reducing the size of its balance sheet, issuing cost-
effective retail debt, receiving capital infusions from
the HSBC Group and utilising alternative sources of
funding, including from other members of the HSBC
Group, HSBC Finance eliminated the need to issue
institutional term debt in 2008 and 2009. Funding
plans are in place which would enable HSBC
Finance to deal with a recurrence of stress in the
credit markets. As part of liquidity management,
asset portfolios totalling US$15.3 billion were
transferred from HSBC Finance to HSBC Bank USA
in January 2009, resulting in US$8.0 billion of net
funding benefit to HSBC Finance.
The scheme set up by the US Federal Reserve in
2008 to provide support to US issuers in the CP
market was extended to 1 February 2010. Under this
scheme, HSBC Finance was eligible to issue a
maximum of US$12.0 billion. At 31 December 2009,
HSBC Finance did not have any outstanding CP
under this programme (31 December 2008:
US$520 million).
The effect of the market turmoil on liquidity and
funding elsewhere in HSBC was largely restricted to
the Group’s activities that historically depended
upon the asset-backed CP markets for funding,
specifically SIVs and conduits, and certain money
market funds. This is discussed in detail on
page 182.
HSBC Holdings
(Audited)
HSBC Holdings’ primary sources of cash are the
receipt of dividends from subsidiaries, interest on
and repayment of, intra-group loans, and interest
earned on its own liquid funds. HSBC Holdings also
received cash from its rights issue in April 2009 and,
on an ongoing basis, raises ancillary funds in the
debt capital markets through subordinated and senior
debt issuance. Primary uses of cash are investments
in subsidiaries, interest payments to debt holders and
dividend payments to shareholders.
HSBC Holdings is also subject to contingent
liquidity risk by virtue of loan and other credit-
related commitments and guarantees and similar
contracts issued. Such commitments and guarantees
are only issued after due consideration of HSBC
Holdings’ ability to finance the commitments and
guarantees and the likelihood of the need arising.
HSBC Holdings actively manages the cash
flows from its subsidiaries to optimise the amount of
cash held at the holding company level. The ability
of its subsidiaries to pay dividends or advance
monies to HSBC Holdings depends on, among other
things, their respective regulatory capital
requirements, statutory reserves, and financial and
operating performance. The wide range of HSBC’s
activities means that HSBC Holdings is not
dependent on a single source of profits to fund its
dividend payments to shareholders. During 2009
HSBC Holdings continued to have full access to
debt capital markets at market rates and issued
US$5.3 billion of capital instruments and senior debt
(2008: US$8.8 billion).