HSBC 2012 Annual Report Download - page 536

HSBC HOLDINGS PLC
Shareholder Information (continued)
Glossary
534
Term Definition
Mortgage-backed securities
(‘MBS’s)
Securities that represent interests in groups of mortgages, which may be on residential or commercial
properties. Investors in these securities have the right to cash received from future mortgage payments
(interest and/or principal). When the MBS references mortgages with different risk profiles, the MBS
is classified according to the highest risk class.
Mortgage-related assets Assets which are referenced to underlying mortgages.
Mortgage vintage The year a mortgage was originated.
N
Negative equity mortgages Equity is the value of the asset less the outstanding balance on the loan. Negative equity arises when the
value of the property purchased is below the balance outstanding on the loan.
Net asset value per share Total shareholders’ equity, less non-cumulative preference shares and capital securities, divided by the
number of ordinary shares in issue.
Net interest income The amount of interest received or receivable on assets net of interest paid or payable on liabilities.
Net interest income sensitivity Considers all re-pricing mismatches in the current balance sheet, with suitable assumptions for balance
sheet growth in the future, and calculates the change in net interest income that would result from a set
of defined interest rate shocks.
Net principal exposure The gross principal amount of a financial asset after taking account of credit protection purchased but
excluding the effect of any counterparty credit valuation adjustment to that protection. It includes
assets that benefit from monoline protection, except where this protection is purchased with a CDS.
Net stable funding ratio
(‘NSFR’)
The ratio of available stable funding to required stable funding over a one year time horizon, assuming a
stressed scenario. Available stable funding would include items such as equity capital, preferred stock
with a maturity of over one year and liabilities with an assessed maturity of over one year. The Basel
III rules require this ratio to be over 100% with effect from 2018. The NSFR is still subject to an
observation period and review to address any unintended consequences.
Non-conforming mortgages US mortgages that do not meet normal lending criteria. Examples include mortgages where the expected
level of documentation is not provided (such as with income self-certification), or where poor credit
history increases the risk and results in pricing at a higher than normal lending rate.
Non-trading portfolios Portfolios that comprise positions that primarily arise from the interest rate management of our retail and
commercial banking assets and liabilities, financial investments designated as available for sale and
held to maturity, and exposures arising from our insurance operations.
Non-trading risk The market risk arising from non-trading portfolios.
O
Offset mortgages A flexible type of mortgage where a borrower’s savings balance(s) held at the same institution can be
used to offset the mortgage balance owing. The borrower pays interest on the net balance which is
calculated by subtracting the credit balance(s) from the debit balance. As part of the offset mortgage a
total facility limit is agreed and the borrower may redraw past capital repayments up this agreed limit.
Overnight Index Swap (‘OIS’)
discounting
A method of valuing collateralised interest rate derivatives which uses a discount curve that reflects the
overnight interest rate typically earned or paid in respect of collateral received.
Operational risk The risk of loss resulting from inadequate or failed internal processes, people and systems or from
external events, including legal risk.
Over-the-counter (‘OTC’) A bilateral transaction (e.g. derivatives) that is not exchange traded and that is valued using valuation
models.
P
Pension risk The risk that contributions from Group companies and members fail to generate sufficient funds to meet
the cost of accruing benefits for the future service of active members, and the risk that the performance
of assets held in pension funds is insufficient to cover existing pension liabilities.
Performance Shares Awards of HSBC Holdings ordinary shares under employee share plans that are subject to the
achievement of corporate performance conditions.
Personal lending See ‘Retail loans’.
Prime A US description for mortgages granted to the most creditworthy category of borrowers.
Private equity investments Equity securities in operating companies not quoted on a public exchange, often involving the investment
of capital in private companies or the acquisition of a public company that results in its delisting.
Probability of default (‘PD’) The probability that an obligor will default within a one-year time horizon.
R
Refi rate The refi (or refinancing) rate is set by the European Central Bank (‘ECB’) and is the price banks pay to
borrow from ECB.
Regulatory capital The capital which HSBC holds, determined in accordance with rules established by the FSA for the
consolidated Group and by local regulators for individual Group companies.
Regulatory matters Regulatory matters refer to investigations, reviews and other actions carried out by, or in response to the
actions of, regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC.