HSBC 2012 Annual Report Download - page 208

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Liquidity and funding > Management of liquidity and funding risk
206
Stressed one-month and three-month coverage ratios39
(Audited)
Stressed one-month coverage
ratios at 31 December
Stressed three-month coverage
Ratios at 31 December
2012 2011 2012 2011
HSBC UK40 % % % %
Year-end ................................................................................... 114 116 103 102
Maximum ................................................................................. 117 118 103 102
Minimum .................................................................................. 108 109 101 99
Average .................................................................................... 112 113 102 100
The Hongkong and Shanghai Banking Corporation41
Year-end ................................................................................... 129 123 126 118
Maximum ................................................................................. 134 145 126 126
Minimum .................................................................................. 123 116 118 110
Average .................................................................................... 129 124 123 116
HSBC USA42
Year-end ................................................................................... 126 118 119 113
Maximum ................................................................................. 137 128 130 122
Minimum .................................................................................. 115 109 113 105
Average .................................................................................... 127 119 123 116
Total of HSBC’s other principal entities43
Year-end ................................................................................... 127 118 117 108
Maximum ................................................................................. 127 120 117 113
Minimum .................................................................................. 117 116 108 107
Average .................................................................................... 121 118 111 109
For footnotes, see page 249.
The stressed coverage ratios for HSBC UK
remained broadly unchanged.
The stressed coverage ratios for The Hongkong
and Shanghai Banking Corporation improved as the
increase in core deposits exceeded the increase in
loans and advances to customers. The resulting
surplus was deployed in liquid assets, thereby
improving the stressed coverage ratios.
The stressed coverage ratios for HSBC USA
improved as a result of the net effect of selling the
US Card and Retail Services business and non-
strategic branches during 2012, which resulted in a
reduction in core deposits that was lower than the
reduction in loans and advances to customers. The
resulting surplus was deployed in liquid assets,
thereby improving the stressed coverage ratios.
The three-month stressed coverage ratio for
the total of HSBC’s other principal entities remained
broadly unchanged. The one-month stressed
coverage ratio improved as a result of an increase
in contractual maturities between one month and
three months.
Liquid assets of HSBC’s principal operating
entities
The table below shows the estimated liquidity value
(before assumed haircuts) of assets categorised as
liquid used for the purposes of calculating the three-
month stressed coverage ratios, as defined under the
LFRF.
Any unencumbered asset held as a consequence
of a reverse repo transaction with a residual
contractual maturity within the stressed coverage
ratio time period and unsecured interbank loans
maturing within three months are not included in
liquid assets, as these assets are reflected as
contractual cash inflows.
Liquid assets are held and managed on a
standalone operating entity basis. Most of the liquid
assets shown are held directly by each operating
entity’s Balance Sheet Management function,
primarily for the purpose of managing liquidity risk,
in line with the LFRF.
Liquid assets also include any unencumbered
liquid assets held outside Balance Sheet
Management for any other purpose. The LFRF gives
ultimate control of all unencumbered assets and
sources of liquidity to Balance Sheet Management.