HSBC 2015 Annual Report Download - page 492

Shareholder information (continued)
Glossary
HSBC HOLDINGS PLC
490
Term Definition
Standardised approach
(‘STD’)
In relation to credit risk, a method for calculating credit risk capital requirements using ratings agencies and
supervisory risk weights. In relation to operational risk, a method of calculating the operational capital
requirement by the application of a supervisory defined percentage charge to the gross income of eight specified
business lines.
Stressed VaR A market risk measure based on potential market movements for a continuous one-year period of stress for a
trading portfolio
Structured entities
(‘SE’s)
An entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls
the entity, such as when voting rights relate to administrative tasks only and the relevant activities are directed by
means of contractual arrangements.
Structured finance/notes An instrument whose return is linked to the level of a specified index or the level of a specified asset. The return on a
structured note can be linked to equities, interest rates, foreign exchange, commodities or credit. Structured
notes may or may not offer full or partial capital protection in the event of a decline in the underlying index or
asset.
Student loan-related assets Securities with collateral relating to student loans.
Subordinated liabilities Liabilities which rank after the claims of other creditors of the issuer in the event of insolvency or liquidation.
Sub-prime A US description for customers with high credit risk, for example those who have limited credit histories, modest
incomes, high debt-to-income ratios, high loan-to-value ratios (for real estate secured products) or have
experienced credit problems caused by occasional delinquencies, prior charge-offs, bankruptcy or other credit-
related problems.
Sustainability risk The risk that the environmental and social effects of providing financial services outweigh the economic benefits.
Systemic Risk Buffer (‘SRB’) A capital buffer prescribed in the EU under CRD IV, to address risks in the financial sector as a whole, or one or more
sub-sectors, to be deployed as necessary by each EU member state with a view to mitigate structural macro-
prudential risk. In the UK this was transposed in January 2015 and is intended to apply to ring-fenced banks and
building societies over a certain threshold.
Systems risk The risk of failure or other deficiency in the automated platforms that support the Group’s daily execution and the
systems infrastructure on which they reside, including data centres, networks and distributed computers.
T
Tier 1 capital A component of regulatory capital, as defined in CRDIV, comprising common equity tier 1 and additional tier 1.
Additional tier 1 capital includes eligible non-common equity capital securities and any related share premium.
Tier 2 capital
A
component of regulatory capital, as defined in CRDIV, comprising eligible capital securities and any related share
premium.
Total Loss Absorbing Capacity
(‘TLAC’)
Requirements set out by the FSB for global systemically important banks to have a sufficient amount of specific types
of liabilities which can be used to absorb losses and recapitalise a bank in resolution. These requirements were
finalised in November 2015 and are intended to facilitate an orderly resolution that minimises any impact on
financial stability, ensures the continuity of critical functions, and avoids exposing taxpayers to loss.
Trading portfolios Positions arising from market-making and warehousing of customer-derived positions.
Trading risk Market risk arising from trading portfolios.
Troubled debt restructuring A US description for restructuring a debt whereby the creditor for economic or legal reasons related to a debtor’s
financial difficulties grants a concession to the debtor that it would not otherwise consider.
U
Unencumbered assets Assets on our balance sheet which have not been pledged as collateral against an existing liability.
Unfunded exposures An exposure where the notional amount of a contract has not been exchanged.
Up-shock See down-shock.
US government agency and
US government sponsored
enterprises mortgage-related
assets
Securities that are guaranteed by US government agencies such as Ginnie Mae, or by US government sponsored
entities including Fannie Mae and Freddie Mac.
V
Value at risk
(‘VaR’)
A measure of the loss that could occur on risk positions as a result of adverse movements in market risk factors (e.g.
rates, prices, volatilities) over a specified time horizon and to a given level of confidence.
W
Wholesale loans Money lent to sovereign borrowers, banks, non-bank financial institutions and corporate entities.
Write-down/write-off When a financial asset is written down or written off, a customer balance is partially or fully removed, respectively, from
the balance sheet. Loans (and related impairment allowance accounts) are normally written off, either partially or in
full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any
proceeds from the realisation of security. In circumstances where the net realisable value of any collateral has been
determined and there is no reasonable expectation of further recovery, write-off may be earlier.
Wrong-way risk An adverse correlation between the counterparty’s PD and the mark-to-market value of the underlying transaction.