HSBC 2015 Annual Report Download - page 193

HSBC HOLDINGS PLC
191
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Function. For example, we raised standards of risk analysis
and policy implementation; updated internal instruction
manuals; and improved the way sustainability risk is
recorded in our information management system.
Footnotes to Risk
Managing risk
1 The sum of balances presented does not agree to consolidated amounts because inter-company eliminations are not presented here.
Credit risk
2 The amount of the loan commitments reflects, where relevant, the expected level of take-up of pre-approved loan offers made by mailshots
to personal customers. In addition to those amounts, there is a further maximum possible exposure to credit risk of $59bn (2014: $71bn),
reflecting the full take-up of loan commitments. The take-up of such offers is generally at low levels. At 31 December 2015, the credit quality
of loan and other credit-related commitments was: $348bn strong, $180bn good, $129bn satisfactory, $9bn sub-standard and $1bn
impaired.
3 ‘Other personal lending’ includes second lien mortgages and other property-related lending.
4 ‘Other commercial loans and advances’ includes advances in respect of agriculture, transport, energy utilities and ABS reclassified to ‘Loans
and advances’.
5 Impairment allowances are not reported for financial instruments, for which the carrying amount is reduced directly for impairment and not
through the use of an allowance account.
6 Impairment is not measured for assets held in trading portfolios or designated at fair value as assets in such portfolios are managed
according to movements in fair value, and the fair value movement is taken directly to the income statement. Consequently, we report all
such balances under ‘Neither past due nor impaired’.
7 Loans and advances to customers’ includes asset-backed securities that have been externally rated as strong (2015: $504m; 2014: $1.2bn),
good (2015: $95m; 2014: $256m), satisfactory (2015: $107m; 2014: $332m), sub-standard (2015: $19m; 2014: $94m) and impaired
(2015: $73m; 2014: $128m).
8 ‘Collection re-age’ includes loans that are reset to ‘current’ and any arrears are reset but does not involve any changes to the original terms
and conditions of the loan, where the account is brought up-to-date without fully paying the outstanding arrears but after the demonstration of
ongoing payment ability.
9 ‘Modification re-age’ includes loans where there are changes to the original terms and conditions of the loan, either temporarily or
permanently, and also resets the contractual delinquency status of an account to current.
10 ‘Collectively assessed impairment allowances’ are allocated to geographical segments based on the location of the office booking
the allowances or provisions.
11 Included within ‘Exchange and other movements’ is $2.1bn of impairment allowances reclassified to held for sale (2014: $0.4bn).
12 Of the $2,134m (2014: $2,724m) of renegotiated loans, $477m (2014: $608m) were neither past due nor impaired, $1m (2014: $1m) was
past due but not impaired and $1,656m (2014: $2,115m) were impaired.
13 Includes balances in Middle East and North Africa that are impaired and past due and therefore considered due on demand.
14 French Banking Federation Master Agreement Relating to Transactions on Forward Financial Instruments plus CSA equivalent.
15 The German Master Agreement for Financial Derivative Transactions.
16 HSBC Finance lending is on a management basis and includes loans transferred to HSBC USA Inc. which are managed by HSBC Finance.
17 Included in this category are loans of $1.2bn (2014: $1.5bn) that have been re-aged once and were less than 60 days past due at the point
of re-age. These loans are not classified as impaired following re-age due to the overall expectation that these customers will perform on
the original contractual terms of their borrowing in the future.
18 ‘Currency translation’ is the effect of translating the results of subsidiaries and associates for the previous year at the average rates of
exchange applicable in the current year.
Liquidity and funding
19 The HSBC UK Liquidity Group shown comprises four legal entities; HSBC Bank plc (including all overseas branches, and SPEs consolidated by
HSBC Bank plc for Financial Statement purposes), Marks and Spencer Financial Services plc, HSBC Private Bank (UK) Ltd and HSBC Trust
Company (UK) Limited, managed as a single operating entity, in line with the application of UK liquidity regulation as agreed with the UK
PRA.
20 The Hongkong and Shanghai Banking Corporation – Hong Kong branch and The Hongkong and Shanghai Banking Corporation – Singapore
branch represent the material activities of the Hongkong and Shanghai Banking Corporation. Each branch is monitored and controlled for
liquidity and funding risk purposes as a stand-alone operating entity.
21 The HSBC USA principal entity shown represents the HSBC USA Inc consolidated group; predominantly HSBC USA Inc and HSBC Bank USA,
NA. The HSBC USA Inc consolidated group is managed as a single operating entity.
22 HSBC France and HSBC Canada represent the consolidated banking operations of the Group in France and Canada respectively. HSBC France
and HSBC Canada are each managed as single distinct operating entities for liquidity purposes.
23 The most favourable metrics are smaller advances to core funding and larger stressed one-month and three-month coverage ratios.
24 The total shown for other principal HSBC operating entities represents the combined position of all the other operating entities overseen
directly by the Risk Management Meeting of the GMB. This coverage changed during 2015 and so comparative figures for 2014 have been
re-stated to enable a like-for-like comparison.
25 Estimated liquidity value represents the expected realisable value of assets prior to management assumed haircuts.
26 The undrawn balance for the five largest committed liquidity facilities provided to customers other than facilities to conduits.
27 The undrawn balance for the total of all committed liquidity facilities provided to the largest market sector, other than facilities to conduits.
28 The residual contractual maturity profile of the balance sheet is set out on in Note 31 on the Financial Statements.