HSBC 2015 Annual Report Download - page 164

Report of the Directors: Risk (continued)
Liquidity and funding
HSBC HOLDINGS PLC
162
Wholesale term debt maturity profile
The maturity profile of our wholesale term debt obligations
is set out in the table on page 161, ‘Wholesale funding
principal cash flows payable by HSBC under financial
liabilities by remaining contractual maturities’.
The balances in the table do not agree directly with those
in the consolidated balance sheet as the table presents
gross cash flows relating to principal payments and not the
balance sheet carrying value, which includes debt securities
and subordinated liabilities measured at fair value.
Analysis of on-balance sheet encumbered
and unencumbered assets and off-balance
sheet collateral
On-balance sheet encumbered and unencumbered
assets
The table on page 163, ‘Analysis of on-balance sheet
encumbered and unencumbered assets’, summarises
the total on-balance sheet assets that are capable of
supporting future funding and collateral needs and shows
the extent to which these assets are currently pledged for
this purpose. The objective of this disclosure is to facilitate
an understanding of available and unrestricted assets that
could be used to support potential future funding and
collateral needs.
Under ‘Off-balance sheet collateral’ below we discuss the
off-balance sheet collateral received and re-pledged, and
the level of available unencumbered off-balance sheet
collateral.
The disclosure is not designed to identify assets which
would be available to meet the claims of creditors or to
predict assets that would be available to creditors in the
event of a resolution or bankruptcy.
The table has been significantly updated since 2014
following the issuance of a ‘Dear CFO’ letter by the PRA,
and acknowledgement by the Enhanced Disclosure Task
Force that its Recommendation 19 and Figure 5 could be
met without providing disclosure that has the potential to
reveal the use or non-use of emergency liquidity assistance
provided by central banks on a confidential basis. There are
two key changes. The first is to segregate out any assets
positioned with central banks for the specific purpose of
emergency liquidity provision irrespective of whether any
liquidity has actually been drawn and assets encumbered.
The second is to include an analysis of the source of
encumbrance for those assets reported as encumbered.
An asset is defined as encumbered if it has been pledged
as collateral against an existing liability and, as a result,
is no longer available to the Group to secure funding,
satisfy collateral needs or be sold to reduce our funding
requirement. An asset is therefore categorised as
unencumbered if it has not been pledged against an
existing liability. Unencumbered assets are further
analysed into four separate sub-categories: ‘Readily
realisable assets’, ‘Other realisable assets’, ‘Reverse
repo/stock borrowing receivables and derivative assets’
and ‘Cannot be pledged as collateral’.
For a summary of our policy on collateral management and
definition of encumbrance, see the Appendix to Risk on page 209.
Off-balance sheet collateral
Off-balance sheet collateral received and pledged for
reverse repo, stock borrowing and derivative transactions
The fair value of assets accepted as collateral that we are
permitted to sell or repledge in the absence of default was
$228bn at 31 December 2015 (2014: $257bn). The fair value
of any such collateral actually sold or repledged was
$150bn (2014: $176bn). We are obliged to return
equivalent securities. These transactions are conducted
under terms that are usual and customary to standard
reverse repo, stock borrowing and derivative transactions.
The fair value of collateral received and repledged in relation
to reverse repos, stock borrowing and derivatives is reported
on a gross basis. The related balance sheet receivables and
payables are reported on a net basis where required under
IFRSs offset criteria.
As a consequence of reverse repo, stock borrowing and
derivative transactions where the collateral received could
be but had not been sold or repledged, we held $78bn
(2014: $81bn) of unencumbered collateral available to
support potential future funding and collateral needs at
31 December 2015.