HSBC 2014 Annual Report Download - page 156

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HSBC BANK PLC
Notes on the Financial Statements (continued)
154
Fair value hedges
HSBC’s fair value hedges principally consist of interest rate swaps that are used to protect against changes in the fair value
of fixed-rate long-term financial instruments due to movements in market interest rates.
Fair value of derivatives designated as fair value hedges
2014
2013
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
The group
Foreign exchange
–
(1)
3
–
Interest rate
196
(1,841)
453
(1,250)
At 31 December
196
(1,842)
456
(1,250)
The bank
Interest rate
272
(1,321)
493
(995)
At 31 December
272
(1,321)
493
(995)
Gains or losses arising from fair value hedges
The group
The bank
2014
2013
2014
2013
£m
£m
£m
£m
Gains/(losses):
– on hedging instruments
(1,013)
472
(673)
514
– on the hedged items attributable to the hedged risk
1,033
(439)
687
(480)
Year ended 31 December
20
33
14
34
The gains and losses on ineffective portions of fair value hedges are recognised immediately in ‘Net trading income’.
Cash flow hedges
HSBC’s cash flow hedges consist principally of interest rate swaps, futures and cross-currency swaps that are used to
protect against exposures to variability in future interest cash flows on non-trading assets and liabilities which bear
interest at variable rates or which are expected to be re-funded or reinvested in the future. The amounts and timing of
future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and
liabilities on the basis of their contractual terms and other relevant factors, including estimates of prepayments and
defaults. The aggregate principal balances and interest cash flows across all portfolios over time form the basis for
identifying gains and losses on the effective portions of derivatives designated as cash flow hedges of forecast
transactions.
Fair value of derivatives designated as cash flow hedges
2014
2013
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
The group
Foreign exchange
378
(52)
242
(159)
Interest rate
841
(227)
544
(559)
At 31 December
1,219
(279)
786
(718)
The bank
Foreign exchange
336
(43)
192
(159)
Interest rate
408
(81)
253
(128)
At 31 December
744
(124)
445
(287)