HSBC 2015 Annual Report Download - page 486

Shareholder information (continued)
Glossary
HSBC HOLDINGS PLC
484
Term Definition
Collateralised debt obligation
(‘CDO’)
A security issued by a third-party which references ABSs and/or certain other related assets purchased by the issuer.
CDOs may feature exposure to sub-prime mortgage assets through the underlying assets.
Collectively assessed
impairment
Impairment assessment on a collective basis for homogeneous groups of loans that are not considered individually
significant and to cover losses which have been incurred but have not yet been identified on loans subject to
individual assessment.
Commercial paper (‘CP’) An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts
receivable, inventories and meeting short-term liabilities. The debt is usually issued at a discount, reflecting
prevailing market interest rates.
Commercial real estate Any real estate, comprising buildings or land, intended to generate a profit, either from capital gain or rental income.
Common equity tier 1 capital
(‘CET1’)
The highest quality form of regulatory capital under Basel III that comprises common shares issued and related share
premium, retained earnings and other reserves excluding the cash flow hedging reserve, less specified regulatory
adjustments.
CET 1 ratio A Basel III measure of CET 1 capital expressed as percentage of total risk exposure amount.
Compliance risk The risk that the Group fails to observe the letter and spirit of all relevant laws, codes, rules, regulations and
standards of good market practice, and incurs fines and penalties and suffers damage to its business as a
consequence.
Comprehensive Capital
Analysis and Review (‘CCAR’)
CCAR is an annual exercise by the FRB to ensure that institutions have robust, forward-looking capital planning
processes that account for their unique risks and sufficient capital to continue operations throughout times of
economic and financial stress.
Conduits HSBC sponsors and manages multi-seller conduits and ‘SIC’s. The multi-seller conduits hold interests in diversified
pools of third-party assets such as vehicle loans, trade receivables and credit card receivables funded through the
issuance of short-dated commercial paper and supported by a liquidity facility. The SICs hold predominantly asset-
backed securities referencing such items as commercial and residential mortgages, vehicle loans and credit card
receivables funded through the issuance of both long-term and short-term debt.
Constant currency A non-GAAP financial measure that adjusts for the year-on-year effects of foreign currency translation differences by
comparing reported results for the reported period with reported results for comparative period retranslated at
exchange rates for the reported period. The foreign currency translation differences reflect the movements of the
US dollar against most major currencies during the reported period.
Constant net asset value fund
(‘CNAV’)
A fund that prices its assets on an amortised cost basis, subject to the amortised book value of the portfolio
remaining within 50 basis points of its market value.
Consumer and Mortgage Lending
(‘CML’)
In the US, the CML portfolio consists of our Consumer Lending and Mortgage Services businesses, which are in run-
off.
The Consumer Lending business offered secured and unsecured loan products, such as first and second lien
mortgage loans, open-ended home equity loans and personal non-credit card loans through branch locations and
direct mail. The majority of the mortgage lending products were for refinancing and debt consolidation rather
than home purchases. In the first quarter of 2009, we discontinued all originations by our Consumer Lending
business.
Prior to the first quarter of 2007, when we ceased loan purchase activity, the Mortgage Services business purchased
non-conforming first and second lien real estate secured loans from unaffiliated third parties. The business also
included the operations of Decision One Mortgage Company (‘Decision One’), which historically originated
mortgage loans sourced by independent mortgage brokers and sold these to secondary market purchasers.
Decision One ceased originations in September 2007.
Contractual maturities The date on which the final payment (principal or interest) of any financial instrument is due to be paid, at which
point all the remaining outstanding principal and interest have been repaid.
Countercyclical capital buffer
(‘CCyB’)
A capital buffer prescribed by regulators under Basel III which aims to ensure that capital requirements take account
of the macro-financial environment in which banks operate. This will provide the banking sector with additional
capital to protect it against potential future losses, when excess credit growth in the financial system as a whole is
associated with an increase in system-wide risk.
Counterparty credit risk
(‘CCR’)
Counterparty credit risk, in both the trading and non-trading books, is the risk that the counterparty to a transaction
may default before completing the satisfactory settlement of the transaction.
Credit default swap
(‘CDS’)
A derivative contract whereby a buyer pays a fee to a seller in return for receiving a payment in the event of a
defined credit event (e.g. bankruptcy, payment default on a reference asset or assets, or downgrades by a rating
agency) on an underlying obligation (which may or may not be held by the buyer).
Credit enhancements Facilities used to enhance the creditworthiness of financial obligations and cover losses due to asset default.
Credit risk Risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises mainly from
direct lending, trade finance and leasing business, but also from products such as guarantees, derivatives and debt
securities.
Credit risk mitigation A technique to reduce the credit risk associated with an exposure by application of credit risk mitigants such as
collateral, guarantee and credit derivatives.
Credit risk spread The premium over the benchmark or risk-free rate required by the market to accept a lower credit quality. The yield
spread between securities with the same coupon rate and maturity structure but with different associated credit
risks. The yield spread rises as the credit rating worsens.
Credit spread risk The risk that movements in credit spreads will affect the value of financial instruments.
Credit valuation adjustment
(‘CVA’)
An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative
counterparties.