HSBC 2015 Annual Report Download - page 234

Report of the Directors: Capital (continued)
RWAs / Capital
HSBC HOLDINGS PLC
232
and the implementation of a 1.06 scaling factor on
securitisation positions risk-weighted at 1,250% which
increased RWAs by $2.1bn.
Standardised approach
For portfolios treated under the standardised approach,
credit risk RWAs decreased by $24bn, which included
a reduction of $27bn due to foreign exchange movements.
• RWAs increased by $23bn across all regions as a result
of higher lending. Growth in our associate, BoCom,
accounted for $15bn.
• This was offset by RWA initiatives reducing RWAs by
$29bn, mainly comprising portfolios moving to an
IRB approach (reducing the standardised approach by
$10.2bn and increasing the IRB approach by $7.2bn)
and partial disposal of our investment in Industrial Bank
reducing RWAs by $12.4bn.
Counterparty credit risk and market risk
RWAs
Counterparty credit risk RWAs
2015 2014
$bn $bn
Advanced approach 50.1 65.5
–
CCR IRB approach 46.8 62.0
–
credit valuation adjustment 3.3 3.5
Standardised approach 19.1 25.2
– CCR standardised approach 4.7 4.4
– credit valuation adjustment 12.2 18.0
– central counterparty 2.2 2.8
At 31 December 69.2 90.7
RWA movement by key driver – counterparty credit risk –
advanced approach
2015 2014
$bn $bn
RWAs at 1 January 65.5 42.2
Book size (10.2) 1.6
Book quality (0.8) (0.6)
Model updates – 0.1
Methodology and policy (4.4) 22.2
–
internal updates (4.4) (3.8)
–
external updates
–
regulatory
–
9.0
–
CRD IV impact
–
17.0
Total RWA movement (15.4) 23.3
RWAs at 31 December 50.1 65.5
Market risk RWAs
2015 2014
$bn $bn
Internal model based 34.9 44.6
– VaR 7.7 7.3
– stressed VaR 9.8 10.4
– incremental risk charge 11.4 20.1
– other VaR and stressed VaR 6.0 6.8
Standardised approach 7.6 11.4
At 31 December 42.5 56.0
RWA movement by key driver – market risk – internal
model based
2015 2014
$bn $bn
RWAs at 1 January 44.6 52.2
Acquisitions and disposals – (2.2)
Movement in risk levels (5.5) (4.2)
Methodology and policy (4.2) (1.2)
–
internal updates (4.2) (3.8)
–
external updates
–
regulatory
–
2.6
Total RWA movement (9.7) (7.6)
RWAs at 31 December 34.9 44.6
Counterparty credit risk RWAs
Counterparty credit risk RWAs reduced by $21bn during
2015.
Standardised approach
A reduction of $6.1bn in RWAs in the standardised
portfolio was mostly due to the impact of market
movements and position reductions for derivatives held
with counterparties eligible for the standardised credit
value adjustment (‘CVA’) charge.
Advanced approach
The book size reduced by $10bn, mainly driven by market
movements, particularly in foreign exchange derivatives,
trade compression and portfolio management activities.
Further reductions in ‘Methodology and policy’ were mainly
driven by savings from RWA initiatives.
Market risk RWAs
Total market risk RWAs decreased by $13bn in 2015.
Standardised approach
The market risk RWAs in the standardised portfolio fell by
$3.8bn, mainly driven by the reduction in the legacy credit
portfolio.
Internal model based
The reduction in RWAs due to movements in risk levels of
$5.5bn was driven by a combination of active management
of the book and market movements, in particular within the
incremental risk charge. In addition to these movements,
there were savings of $4.2bn in ‘Methodology and policy’
due to the refinement of models used for the calculation of
the incremental risk charge and risks not in VaR.
Operational risk RWAs
The reduction in operational risk RWAs of $2.4bn was
mainly the result of currency exchange differences and a
decline in income in Latin America.