HSBC 2015 Annual Report Download - page 392

Notes on the Financial Statements (continued)
14 – Fair values of financial instruments not carried at fair value
HSBC HOLDINGS PLC
390
Inter-relationships between key unobservable inputs
Key unobservable inputs to Level 3 financial instruments may not be independent of each other. As described above, market
variables may be correlated. This correlation typically reflects the manner in which different markets tend to react to
macroeconomic or other events. Furthermore, the effect of changing market variables upon the HSBC portfolio will depend on
HSBC’s net risk position in respect of each variable.
HSBC Holdings
The following table provides an analysis of the basis for valuing financial assets and financial liabilities measured at fair value in
the financial statements:
Basis of valuing HSBC Holdings’ financial assets and liabilities measured at fair value
2015 2014
$m $m
Valuation technique using observable inputs: Level 2
Assets at 31 December
Derivatives 2,467 2,771
Available for sale 4,285 4,073
Liabilities at 31 December
Designated at fair value 19,853 18,679
Derivatives 2,278 1,169
14 Fair values of financial instruments not carried at fair value
Fair values of financial instruments not carried at fair value and bases of valuation
Fair value
Valuation techniques
Carrying
amount
Quoted
market
price
Level 1
Using
observable
inputs
Level 2
With
significant
unobservable
inputs
Level 3 Total
$m $m $m $m $m
Assets and liabilities not held for sale at 31 December 2015
Assets
Loans and advances to banks 90,401
–
88,156 2,255 90,411
Loans and advances to customers 924,454
–
12,412 910,057 922,469
Reverse repurchase agreements
–
non-trading 146,255
–
145,307 959 146,266
Financial investments: debt securities 44,102 1,163 44,076 19 45,258
Liabilities
Deposits by banks 54,371
–
54,295 76 54,371
Customer accounts 1,289,586
–
1,280,368 9,421 1,289,789
Repurchase agreements
–
non-trading 80,400
–
80,400
–
80,400
Debt securities in issue 88,949
–
89,023
–
89,023
Subordinated liabilities 22,702
–
24,344 649 24,993
Assets and liabilities not held for sale at 31 December 2014
Assets
Loans and advances to banks 112,149
–
109,087 3,046 112,133
Loans and advances to customers 974,660
–
13,598 959,239 972,837
Reverse repurchase agreements
–
non-trading 161,713
–
160,600 1,123 161,723
Financial investments: debt securities 37,751 1,418 37,671 74 39,163
Liabilities
Deposits by banks 77,426
–
77,300 98 77,398
Customer accounts 1,350,642
–
1,336,865 13,730 1,350,595
Repurchase agreements
–
non-trading 107,432
–
107,432
–
107,432
Debt securities in issue 95,947 146 94,325 1,932 96,403
Subordinated liabilities 26,664
–
28,806 1,248 30,054
Fair values are determined according to the hierarchy set out in Note 13.
Other financial instruments not carried at fair value are typically short-term in nature and re-price to current market rates
frequently. Accordingly, their carrying amount is a reasonable approximation of fair value. This includes cash and balances at
central banks, items in the course of collection from and transmission to other banks, Hong Kong Government certificates of
indebtedness and Hong Kong currency notes in circulation, all of which are measured at amortised cost.