HSBC 2012 Annual Report Download - page 516

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
44 – Related party transactions / 45 – Events after the balance sheet date
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that would be sufficient to replace the swaps in the event of default by HSBC Bank plc. With the exception of the
special collateral arrangements detailed above, all other aspects of the swap transactions between HSBC and the
scheme are on substantially the same terms as comparable transactions with third-party counterparties.
In December 2011, HSBC Bank plc made a £184m (US$286m) contribution to the HSBC Bank (UK) Pension
Scheme. Following the contribution the Scheme purchased asset-backed securities from HSBC at an arm’s length
value, determined by the Scheme’s independent third-party advisers.
In December 2011 HSBC International Staff Retirements Benefits Scheme (‘ISRBS’) purchased asset-backed
securities from HSBC at an arm’s length value of US$34m, determined by the Scheme’s independent third party
advisers. This followed an agreement by HSBC Asia Holdings BV to make a contribution of the same amount to
ISRBS. No gain or loss arose on the transaction.
ISRBS entered into swap transactions with HSBC to manage the inflation and interest rate sensitivity of the liabilities
and selected assets. At 31 December 2012, the gross notional value of the swaps was US$1.8bn (2011: US$1.7bn)
and the swaps had a net positive fair value of US$328m to the scheme (2011: US$297m). All swaps were executed at
prevailing market rates and within standard market bid/offer spreads.
HSBC Holdings
Details of HSBC Holdings’ principal subsidiaries are shown in Note 25. Transactions and balances during the year
with subsidiaries were as follows:
2012 2011
Highest
balance during
the year1
Balance at
31 December1
Highest
balance during
the year1
Balance at
31 December1
US$m US$m US$m US$m
Assets
Cash at bank .................................................................................. 429 353 471 316
Derivatives .................................................................................... 4,122 3,768 4,220 3,568
Loans and advances ...................................................................... 41,675 41,675 28,821 28,048
Financial investments ................................................................... 1,208 1,208 2,093 1,078
Investments in subsidiaries ........................................................... 92,234 92,234 93,008 90,621
Total related party assets .............................................................. 139,668 139,238 128,613 123,631
Liabilities
Amounts owed to HSBC undertakings ........................................ 12,856 12,856 3,129 2,479
Derivatives .................................................................................... 1,536 760 1,181 1,067
Subordinated liabilities:
– at amortised cost .................................................................... 2,493 1,696 2,609 2,437
– designated at fair value .......................................................... 4,271 4,260 4,627 3,955
Total related party liabilities ......................................................... 21,156 19,572 11,546 9,938
Guarantees .................................................................................... 49,560 49,402 49,527 49,402
Commitments ................................................................................ 1,811 1,200 2,753 1,810
1 The disclosure of the year-end balance and the highest month-end balance during the year is considered the most meaningful
information to represent transactions during the year. The above outstanding balances arose in the ordinary course of business
and were on substantially the same terms, including interest rates and security, as for comparable transactions with third-party
counterparties. There were no exceptions (2011: US$63m) in respect of loans to HSBC subsidiaries from HSBC Holdings made at
an agreed zero per cent interest rate.
Some employees of HSBC Holdings are members of the HSBC Bank (UK) Pension Scheme, which is sponsored by a
separate Group company. HSBC Holdings incurs a charge for these employees equal to the contributions paid into
the scheme on their behalf. Disclosure in relation to the scheme is made in Note 7.