HSBC 2015 Annual Report Download - page 436

Notes on the Financial Statements (continued)
32 – Offsetting of financial assets and financial liabilities
HSBC HOLDINGS PLC
434
32 Offsetting of financial assets and financial liabilities
Accounting policy
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability
simultaneously (‘the offset criteria’).
The disclosure below has been enhanced this year with the inclusion of ‘Amounts not subject to enforceable netting
arrangements’ resulting in a change in the basis of preparation from the prior period. Prior period data have been represented
accordingly.
The ‘Amounts not set off in the balance sheet’ in the following table for derivatives and reverse repurchase/repurchase, stock
borrowing/lending and similar agreements include transactions where:
• the counterparty has an offsetting exposure with HSBC and a master netting or similar arrangement is in place with a right
of set off only in the event of default, insolvency or bankruptcy, or the offset criteria are otherwise not satisfied; and
• cash and non-cash collateral has been received/pledged in respect of the transactions described above.
For loans and advances to customers and customer accounts at amortised cost the amounts included in the table below
typically relate to transactions entered into with corporate and commercial customers for working capital management
purposes. The ‘Amounts not set off in the balance sheet’ relate to transactions where the customer has an offsetting exposure
with HSBC and an agreement is in place with the right of offset but the offset criteria are otherwise not satisfied. For risk
management purposes, the net amounts of such exposures are subject to limits which are monitored and the relevant
customer agreements are subject to review and updated, as necessary, to ensure that the legal right of offset remains
appropriate.
Footnotes to the table on page 435 are set out below:
1 At 31 December 2015, the amount of cash margin received that has been offset against the gross derivatives assets is $4,135m (2014: $606m). The
amount of cash margin paid that has been offset against the gross derivatives liabilities is $4,224m (2014: $190m).
2 For the amount of reverse repos, stock borrowing and similar agreements recognised in the balance sheet, see the ‘Funding sources and uses; table
on page 160. In the analysis below, the $7,556m (2014: $9,266m) of trading assets presented in the balance sheet comprised $438m of reverse repos
(2014: $1,297m) and $7,118m of stock borrowing (2014: $7,969m).
3 At 31 December 2015, the total amount of loans and advances to customers at amortised cost was $924,454m (2014: $974,660m) of which $45,904m
(2014: $62,096m) was subject to offsetting. For the amount of loans and advances to customers at amortised cost recognised in the balance sheet,
see the ‘Funding sources and uses’ table on page 160.
4 For the amount of repos, stock lending and similar agreements recognised in the balance sheet, see the ‘Funding sources and uses’ table on page 160.
In the analysis below, the $9,301m (2014: $15,830m) of trading liabilities presented in the balance sheet comprised $442m of repos (2014: $3,798m)
and $8,859m of stock lending (2014: $12,032m).
5 At 31 December 2015, the total amount of customer accounts at amortised cost was $1,289,586m (2014: $1,350,642m) of which $51,442m
(2014: $69,082m) was subject to offsetting. For the amount of customer accounts at amortised cost recognised in the balance sheet, see the ‘Funding
sources and uses’ table on page 160.
6 These exposures continue to be secured by financial collateral, but we may not have sought or been able to obtain a legal opinion evidencing
enforceability of the right of offset.