RNS Announcement
Page
App1
Tables
Liquidity and funding
164
215
Primary sources of funding
Liquidity and funding in 2014
Customer deposit markets
Wholesale senior funding markets
Liquidity regulation
Management of liquidity and funding risk
165
Inherent liquidity risk categorisation
Core deposits
216
Advances to core funding ratio
Advances to core funding ratios
Stressed coverage ratios
Stressed one-month and three-month coverage ratios
Stressed scenario analysis
Liquid assets of HSBC's principal operatingentities
166
217
Liquid assets of HSBC's principal entities
Net contractual cash flows
Net cash inflows/(outflows) for inter-bank loans and intra-group deposits and reverse repo, repo and short positions
167
Wholesale debt monitoring
218
Liquidity behaviouralisation
Funds transfer pricing
219
Contingent liquidity risk arising from committed lending facilities
The Group's contractual undrawn exposures monitoredunder the contingent liquidity risk limit structure
Sources of funding
168
Repos and stock lending
Funding sources and uses
Cross-border intra-Group and cross-currency liquidity and funding risk
169
Advances to core funding ratios by material currency
Wholesale term debt maturity profile
Wholesale funding cash flows payable by HSBC under financial liabilities by remaining contractual maturities
170
Encumbered and unencumbered assets
171
220
Summary of assets available to support potential future funding and collateral needs (on and off-balance sheet)
Collateral
The effect of active collateral management
Off-balance sheet collateral received and pledged for reverse repo, stock borrowing and derivative transactions
Analysis of on-balance sheet encumbered and unencumbered assets
Analysis of on-balance sheet encumbered andunencumbered assets
172
Additional contractual obligations
173
Contractual maturity of financial liabilities
Cash flows payable by HSBC under financial liabilitiesby remaining contractual maturities
Management of cross-currency liquidity and funding risk
221
HSBC Holdings
174
Cash flows payable by HSBC Holdings under financial liabilities by remaining contractual maturities
1.. Appendix to Risk - risk policies and practices.
Liquidity risk is the risk that the Group does not have sufficient financial resources to meet its obligations as they fall due, or will have to do so at an excessive cost. The risk arises from mismatches in the timing of cash flows.
There were no material changes to our policies and practices for the management of liquidity and funding risks in 2014.
Following the change in balance sheet presentation explained on page 347, the advances to deposits ratio now excludes non-trading reverse repos and repos with customers. The change had no effect on the 31 December 2013 ratio as disclosed.
A summary of our current policies and practices regarding liquidity and funding is provided in the Appendix to Risk on page 215.
Our liquidity and funding risk management framework
The objective of our liquidity framework is to allow us to withstand very severe liquidity stresses. It is designed to be adaptable to changing business models, markets and regulations.
Our liquidity and funding risk management framework requires:
· liquidity to be managed by operating entities on a stand-alone basis with no implicit reliance on the Group or central banks;
· all operating entities to comply with their limits for the advances to core funding ratio; and
· all operating entities to maintain a positive stressed cash flow position out to three months under prescribed Group stress scenarios.
(Unaudited)
The liquidity position of the Group strengthened in 2014, and we continued to enjoy strong inflows of customer deposits and maintained good access to wholesale markets. Customer accounts increased by 4% (US$47bn) on a constant currency basis. On a reported basis, customer account balances decreased marginally by 1% (US$11bn). Loans and advances to customers increased by 3% (US$28bn) on a constant currency basis. On a reported basis, loans and advances to customers decreased by 2% (US$17bn). These changes resulted in a small decrease in our advances to deposits ratio to 72% (2013:73%)
HSBC UK recorded a decrease in its advances to core funding ('ACF') ratio to 97% at 31 December 2014 (2013: 100%), mainly because core deposits increased more than advances, and due to the disposal of legacy assets.
The Hongkong and Shanghai Banking Corporation recorded an increase in its ACF ratio to 75% at 31 December 2014 (2013: 72%), mainly because advances increased more than core deposits.
HSBC USA recorded an increase in its ACF ratio to 100% at 31 December 2014 (2013: 85%), mainly because of growth in customer advances.
HSBC UK, The Hongkong and Shanghai Banking Corporation and HSBC USA are defined in footnotes 26 to 28 on page 202. The ACF ratio is discussed on page 216.
RBWM customer account balances increased by 4%, driven by our two home markets of the UK and Hong Kong and the majority of our priority growth markets.
Customer accounts increased by 7% in 2014, driven by growth in Payments and Cash Management accounts in our two home markets.
Customer accounts increased by 2% in 2014, mainly from a rise in Payments and Cash Management accounts.
GPB customer account balances decreased by 10% compared with the end of 2013 following the continued repositioning of the GPB business and a client portfolio disposal.
Conditions in the bank wholesale debt markets were generally positive in 2014, supporting increased primary market issuance volumes across the capital structure from banks when compared with 2013. Periods of volatility remained, however, particularly during the latter months of the year when concerns around the decline in the oil price and growth in Europe combined with a variety of other factors to leave the outlook uncertain, with market confidence affected as a result.
In 2014, we issued the equivalent of US$20bn (2013: US$16bn) of senior term debt securities in the public capital markets in a range of currencies and maturities from a number of Group entities.
The European adoption of the Basel Committee framework (legislative texts known as the Capital Requirements Regulation and Directive - 'CRR/CRD IV') was published in June 2013, and required the reporting of the liquidity coverage ratio ('LCR') and the net stable funding ratio ('NSFR') to European regulators from January 2014, which was subsequently delayed until 30 June 2014. A significant level of interpretation has been required to report and calculate the LCR as defined in the CRR text as certain areas were only addressed by the finalisation of the LCR delegated act in January 2015, which will not become a regulatory standard until 1 October 2015. The European calibration of NSFR is still pending following the Basel Committee's final recommendation in October 2014.
(Audited)
Our liquidity and funding risk management framework ('LFRF') employs two key measures to define, monitor and control the liquidity and funding risk of each of our operating entities. The ACF ratio is used to monitor the structural long-term funding position, and the stressed coverage ratio, incorporating Group-defined stress scenarios, is used to monitor the resilience to severe liquidity stresses.
The three principal entities listed in the tables below represented 66% (2013: 66%) of the Group's customer accounts. Including the other principal entities, the percentage was 95% (2013: 94%).
The table to the right shows the extent to which loans and advances to customers in our principal banking entities were financed by reliable and stable sources of funding.
ACF limits set for principal operating entities at 31 December 2014 ranged between 80% and 120%.
Core funding represents the core component of customer deposits and any term professional funding with a residual contractual maturity beyond one year. Capital is excluded from our definition of core funding.
The ratios tabulated below express stressed cash inflows as a percentage of stressed cash outflows over both one-month and three-month time horizons. Operating entities are required to maintain a ratio of 100% or greater out to three months.
Inflows included in the numerator of the stressed coverage ratio are generated from liquid assets net of assumed haircuts, and cash inflows related to assets contractually maturing within the time period.
In general, customer advances are assumed to be renewed and as a result do not generate a cash inflow.
Advances to core funding ratios25
At 31 December
2014
2013
%
HSBC UK26
Year-end
97
100
Maximum
102
107
Minimum
Average
104
The Hongkong and Shanghai Banking Corporation27
75
72
77
70
74
HSBC USA28
85
78
95
82
Total of HSBC's other principal entities29
92
93
94
89
91
For footnotes, see page 202.
The one-month stressed coverage ratio for HSBC UK increased as certain assets previously treated as realisable under stress between 1 and 3 months were reassessed as being either realisable within 1 month or beyond 3 months. The three-month stressed coverage ratio remained broadly unchanged.
The stressed coverage ratios for the other entities remained broadly unchanged.
Stressed one-month and three-month coverage ratios25
Stressed one-month coverage
ratios at 31 December
Stressed three-month coverage
117
106
109
114
103
101
119
112
131
126
113
111
116
110
122
108
115
121
128
120
The table below shows the estimated liquidity value (before assumed haircuts) of assets categorised as liquid and used for the purposes of calculating the three-month stressed coverage ratios, as defined under the LFRF.
The level of liquid assets reported reflects the stock of unencumbered liquid assets at the reporting date, adjusted for the effect of reverse repo, repo and collateral swaps maturing within three months as the liquidity value of these transactions is reflected as a contractual cash flow reported in the net contractual cash flow table.
Like reverse repo transactions with residual contractual maturities within three months, unsecured interbank loans maturing within three months are not included in liquid assets, but are treated as contractual cash inflows.
Liquid assets are held and managed on a stand-alone operating entity basis. Most of the liquid assets shown are held directly by each operating entity's Balance Sheet Management function, primarily for the purpose of managing liquidity risk, in line with the LFRF.
Liquid assets also include any unencumbered liquid assets held outside Balance Sheet Management for any other purpose. The LFRF gives ultimate control of all unencumbered assets and sources of liquidity to Balance Sheet Management.
For a summary of our liquid asset policy and definitions of the classifications shown in the table below, see the Appendix to Risk on page 217.
Estimated liquidity value30
31 December 2014
31 December 2013
US$m
Level 1
131,756
168,877
Level 2
4,688
1,076
Level 3
66,011
63,509
202,455
233,462
109,683
108,713
4,854
5,191
7,043
7,106
121,580
121,010
51,969
43,446
15,184
12,709
197
5,044
Other
9,492
8,000
76,842
69,199
141,659
144,774
10,419
12,419
13,038
13,663
165,116
170,856
All assets held within the liquid asset portfolio are unencumbered.
Liquid assets held by HSBC UK decreased as a result of switching from central bank reserves to short-term reverse repo placements. A corresponding improvement can be seen in HSBC UK's net repo cash flow shown in the net contractual cash flow table.
Liquid assets held by The Hongkong and Shanghai Banking Corporation remained broadly unchanged.
Liquid assets held by HSBC USA increased, mainly due to a reduction in short-term repos and the reclassification of some assets as liquid in line with the LFRF.
The following table quantifiesthe contractual cash flows from interbank and intra-Group loans and deposits, and reverse repo, repo (including intra-Group transactions) and short positions for the principal entities shown. These contractual cash inflows and outflows are reflected gross in the numerator and denominator, respectively, of the one and three-month stressed coverage ratios and should be considered alongside the level of liquid assets.
Outflows included in the denominator of the stressed coverage ratios include the principal outflows associated with the contractual maturity of wholesale debt securities reported in the table headed 'Wholesale
funding cash flows payable by HSBC under financial liabilities by remaining contractual maturities' on page 170.
For a summary of our policy and definitions of the classifications shown in the table below, see the Appendix to Risk on page 218.
Net cash inflows/(outflows) for interbank and intra-Group loans and deposits and reverse repo, repo and short positions
At 31 December 2014
At 31 December 2013
Cash flows
within 1 month
Cash flows from
1 to 3 months
Interbank and intra-Group loans and deposits
(14,110)
(2,846)
(19,033)
(5,272)
(1,277)
6,862
2,314
7,487
(18,353)
1,648
(24,268)
729
(1,322)
6,158
4,295
10,149
Reverse repo, repo, stock borrowing, stock lending and outright short positions (including intra-Group)
(16,070)
11,551
(39,064)
149
8,139
8,189
12,662
4,297
(4,928)
-
(11,001)
(22,110)
(11,120)
(40,223)
9,551
The Group's operating entities provide commitments to various counterparties. In terms of liquidity risk, the most significant risk relates to committed lending facilities which, whilst undrawn, give rise to contingent liquidity risk as they could be drawn during a period of liquidity stress. Commitments are given to customers and committed lending facilities are provided to consolidated multi-seller conduits established to enable clients to access flexible market-based sources of finance (see page 443), consolidated securities investment conduits and third-party sponsored conduits.
The consolidated securities investment conduits include Solitaire Funding Limited ('Solitaire') and Mazarin Funding Limited ('Mazarin'). They issue asset-backed commercial paper secured against the portfolio of securities held by them. At 31 December 2014, HSBC UK had undrawn committed lending facilities to these conduits of US$11bn (2013: US$15bn), of which Solitaire represented US$9.5bn (2013: US$11bn) and the remaining US$1.6bn (2013: US$4bn) pertained to Mazarin. Although HSBC UK provides a liquidity facility, Solitaire and Mazarin have no need to draw on it so long as HSBC purchases the commercial paper issued, which it intends to do for the foreseeable future. At 31 December 2014, the commercial paper issued by Solitaire and Mazarin was entirely held by HSBC UK. Since HSBC controls the size of the portfolio of securities held by these conduits, no contingent liquidity risk exposure arises as a result of these undrawn committed lending facilities.
The table below shows the level of undrawn commitments to customers outstanding for the five largest single facilities and the largest market sector, and the extent to which they are undrawn.
The Group's contractual undrawn exposures at 31 December monitored under the contingent liquidity risk limit structure
HSBC Canada
US$bn
Commitments to conduits
Consolidated multi-seller conduits
- total lines
9.8
10.1
2.3
2.5
0.2
1.0
- largest individual lines
0.9
0.7
0.5
Consolidated securities investment conduits - total lines
11.1
14.8
Third party conduits - total lines
0.1
Commitments to customers
- five largest31
2.6
4.4
7.1
6.3
1.7
1.5
2.4
- largest market sector32
16.6
9.5
10.0
8.2
3.5
3.4
3.2
2.7
Our primary sources of funding are customer current accounts and customer savings deposits payable on demand or at short notice. We issue wholesale securities (secured and unsecured) to supplement our customer deposits and change the currency mix, maturity profile or location of our liabilities.
The 'Funding sources and uses' table below, which provides a consolidated view of how our balance sheet is funded, should be read in light of the LFRF, which requires operating entities to manage liquidity and funding risk on a stand-alone basis.
The table analyses our consolidated balance sheet according to the assets that primarily arise from operating activities and the sources of funding primarily supporting these activities. The assets and liabilities that do not arise from operating activities are presented as a net balancing source or deployment of funds.
The level of customer accounts continued to exceed the level of loans and advances to customers. The positive funding gap was predominantly deployed in liquid assets - cash and balances with central banks and financial investments - as required by the LFRF.
Loans and other receivables due from banks continued to exceed deposits taken from banks. The Group remained a net unsecured lender to the banking sector.
For a summary of sources and utilisation of repos and stock lending, see the Appendix to Risk on page 219.
Funding sources and uses33
Sources
Customer accounts1
1,350,642
1,361,297
Deposits by banks1
77,426
86,507
Repurchase agreements - non-trading1
107,432
164,220
Debt securities issued
95,947
104,080
Subordinated liabilities
26,664
28,976
Financial liabilities designated
at fair value
76,153
89,084
Liabilities under insurance contracts
73,861
74,181
Trading liabilities
190,572
207,025
- repos
3,798
17,421
- stock lending
12,032
12,218
- settlement accounts
17,454
17,428
- other trading liabilities
157,288
159,958
Total equity
199,979
190,459
2,198,676
2,305,829
Uses
Loans and advances to customers1
974,660
992,089
Loans and advances to banks1
112,149
120,046
161,713
179,690
Trading assets
304,193
303,192
- reverse repos
1,297
10,120
- stock borrowing
7,969
10,318
21,327
19,435
- other trading assets
273,600
263,319
Financial investments
415,467
425,925
Cash and balances with central banks
129,957
166,599
Net deployment in other balance sheet assets and liabilities
100,537
118,288
For footnote, see page 202.
Cross-border, intra-Group and cross-currency liquidity and funding risk
The stand-alone operating entity approach to liquidity and funding mandated by the LFRF restricts the exposure of our operating entities to the risks that can arise from extensive reliance on cross-border funding. Operating entities manage their funding sources locally, focusing predominantly on the local customer deposit base. The RBWM, CMB and GPB customer relationships that give rise to core deposits within an operating entity generally reflect a local customer relationship with that operating entity. Access to public debt markets is co-ordinated globally by the Global Head of Balance Sheet Management and the Group Treasurer with Group ALCO monitoring all planned public debt issuance on a monthly basis. As a general principle, operating entities are only permitted to issue in their local currency and are encouraged to focus on local private placements. The public issuance of debt instruments in foreign currency is tightly controlled and generally restricted to HSBC Holdings and HSBC Bank.
A central principle of our stand-alone approach to LFRF is that operating entities place no future reliance on other Group entities. However, operating entities may, at their discretion, utilise their respective committed facilities from other Group entities if necessary. In addition, intra-Group large exposure limits are applied by national regulators to individual legal entities locally, which restricts the unsecured exposures of legal entities to the rest of the Group to a percentage of the lender's regulatory capital.
Our LFRF also considers the ability of each entity to continue to access foreign exchange markets under stress when a surplus in one currency is used to meet a deficit in another currency, for example, by using the foreign currency swap markets. Where appropriate, operating entities are required to monitor stressed coverage ratios and ACF ratios for non-local currencies and set limits for them. Foreign currency swap markets in currency pairs settled through the Continuous Link Settlement Bank are considered to be extremely deep and liquid and it is assumed that capacity to access these markets is not exposed to idiosyncratic risks. The table below shows the ACF ratios by material currencies for the year ended 31 December 2014.
Advances to core funding ratios by material currency25
Local currency (sterling)
98
US dollars
Euros
99
Consolidated
Local currency (Hong Kong dollars)
81
Local currency (US dollars)
Local currency
For all HSBC's operating entities, the only significant foreign currencies that exceed 5% of Group balance sheet liabilities are the Hong Kong dollar, euro, sterling and US dollar.
The maturity profile of our wholesale term debt obligations is set out in the table on page 170, 'Wholesale funding principal cash flows payable by HSBC under financial liabilities by remaining contractual maturities'.
The balances in the table do not agree directly with those in the consolidated balance sheet as the table presents gross cash flows relating to principal payments and not the balance sheet carrying value, which includes debt securities and subordinated liabilities measured at fair value.
Due not
more than
1 month
Due over 1 month but not more than 3 months
Due over 3 months but not more than 6 months
Due over 6 months but not more than 9 months
Due over 9 months but not more than 1 year
Due over 1 year but not more than 2 years
Due over 2 years but not more than 5 years
Due over
5 years
Total
17,336
17,161
19,030
9,352
9,055
27,312
40,855
31,928
172,029
- unsecured CDs and CP
5,637
9,337
9,237
4,793
3,010
3,506
4,158
185
39,863
- unsecured senior MTNs
1,300
5,679
7,684
2,922
4,794
17,676
23,523
20,715
84,293
- unsecured senior structured notes
1,363
1,082
2,049
1,149
979
4,757
8,444
6,789
26,612
- secured covered bonds
205
2,765
2,942
5,912
- secured ABCP
8,602
- secured ABS
212
1,063
60
283
272
915
1,562
4,367
- others
222
458
403
2,380
150
3
5,556
40,487
46,494
- subordinated debt securities
34,750
40,757
- preferred securities
5,737
17,311
9,355
9,240
27,425
46,411
72,415
218,523
25,426
9,752
17,942
11,659
10,587
31,839
46,934
31,066
185,205
7,589
7,206
9,867
3,239
5,043
4,449
2,749
−
40,142
6,284
71
5,448
4,221
3,062
21,428
33,091
21,433
95,038
987
1,423
1,952
1,689
1,718
3,712
6,036
5,021
22,538
1,250
225
2,747
3,317
7,539
10,383
1,052
675
1,260
764
1,861
2,311
7,997
1,295
1,568
28
1,171
144
6
1,460
3,374
41,801
47,984
460
34,899
40,082
1,000
6,902
7,902
9,780
19,113
11,803
10,593
33,299
50,308
72,867
233,189
The table on page 172, 'Analysis of on-balance sheet encumbered and unencumbered assets', summarises the total on and off-balance sheet assets that are capable of supporting future funding and collateral needs and shows the extent to which these assets are currently pledged for this purpose. The objective of this disclosure is to facilitate an understanding of available and unrestricted assets that could be used to support potential future funding and collateral needs.
The disclosure is not designed to identify assets which would be available to meet the claims of creditors or to predict assets that would be available to creditors in the event of a resolution or bankruptcy.
An asset is defined as encumbered if it has been pledged as collateral against an existing liability, and as a result is no longer available to the Group to secure funding, satisfy collateral needs or be sold to reduce the funding requirement. An asset is therefore categorised as unencumbered if it has not been pledged against an existing liability. Unencumbered assets are further analysed into four separate sub-categories; 'readily realisable assets', 'other realisable assets', 'reverse repo/stock borrowing receivables and derivative assets' and 'cannot be pledged as collateral'.
At 31 December 2014, the Group held US$1,770bn of unencumbered assets that could be used to support potential future funding and collateral needs, representing 85% of the total assets that can support funding and collateral needs (on and off-balance sheet). Of this amount, US$765bn (US$684bn on-balance sheet) were assessed to be readily realisable.
Total on-balance sheet assets
2,634
2,671
Less:
Reverse repo/stock borrowing receivables and derivative assets
(518)
(482)
Other assets that cannot be pledged as collateral
(281)
(255)
Total on-balance sheet assets that can support funding and collateral needs
1,835
1,934
Add off-balance sheet assets:
Fair value of collateral received from reverse repo/stock borrowing/derivatives that is available to sell or repledge
257
265
Total assets that can support funding and collateral needs (on and off-balance sheet)
2,092
2,199
On-balance sheet assets pledged
(146)
(187)
Off-balance sheet collateral received from reverse repo/stock borrowing/derivatives which has been repledged or sold
(176)
Assets available to support future funding and collateral needs at 31 December
1,770
1,825
For a summary of our policy on collateral management and definition of encumbrance, see the Appendix to Risk on page 213.
The fair value of assets accepted as collateral that we are permitted to sell or repledge in the absence of default was US$257bn at 31 December 2014 (2013: US$265bn). The fair value of any such collateral sold or repledged was US$176bn (2013: US$187bn). We are obliged to return equivalent securities. These transactions are conducted under terms that are usual and customary to standard reverse repo, stock borrowing and derivative transactions.
The fair value of collateral received and repledged in relation to reverse repos, stock borrowing and derivatives is reported on a gross basis. The related balance sheet receivables and payables are reported on a net basis where required under IFRSs offset criteria.
As a consequence of reverse repo, stock borrowing and derivative transactions where the collateral received could be but had not been sold or repledged, we held US$81bn (2013: US$78bn) of unencumbered collateral available to support potential future funding and collateral needs at 31 December 2014.
The table below presents an analysis of on-balance sheet holdings only, and shows the amounts of balance sheet assets on a liquidity and funding basis that are encumbered. The table therefore excludes any available off-balance sheet holdings received in respect of reverse repos, stock borrowing or derivatives.
Encumbered
Unencumbered
Assets pledged as collateral
Readily realisable assets
Other realisable assets
Reverse repos/stock borrowing receivables and derivative assets
Cannot
be pledged
as collateral
Cash and balances at central banks
123,990
425
5,542
Items in the course of collection from other banks
4,927
Hong Kong Government certificates of indebtedness
27,674
59,162
182,305
17,869
9,266
35,591
- . Treasury and other eligible bills
1,994
14,122
4
50
16,170
- . debt securities
46,311
94,941
23
141,532
- . equity securities
10,857
62,855
1,497
40
75,249
- . loans and advances to banks
2,530
4,818
2,781
17,452
27,581
- . loans and advances to customers
7,857
11,527
6,485
17,792
43,661
Financial assets designated at fair value
177
2,330
26,530
29,037
52
56
1,058
7,656
8,891
1,139
18,867
20,006
- . loans and advances to banks and
customers
84
Derivatives
345,008
Loans and advances to banks
178
3,573
74,231
762
33,405
Loans and advances to customers
24,329
92,238
840,241
1,170
16,682
Reverse repurchase agreements - non-trading
61,785
275,732
22,780
55,170
3,176
75,896
2,167
278
81,517
58,609
192,411
18,266
53,970
323,256
7,425
2,347
922
10,694
Prepayments, accrued income andother assets
294
6,334
29,780
38,768
75,176
Current tax assets
1,309
Interest in associates and joint ventures
22
17,875
284
18,181
Goodwill and intangible assets
27,577
Deferred tax
7,111
145,748
684,371
1,005,531
517,919
280,570
2,634,139
161,240
269
5,090
6,021
25,220
99,326
142,211
14,654
20,438
26,563
3,402
17,976
206
21,584
83,563
57,850
231
141,644
8,373
55,156
363
63,892
1,796
2,813
6,151
5,263
11,861
27,884
2,192
8,416
7,934
15,175
14,471
48,188
19
2,706
1,883
33,822
38,430
826
776
10,968
12,589
1,874
1,103
22,734
25,711
80
282,265
162
8,342
80,231
31,311
32,218
102,203
854,724
65
2,879
54,473
289,093
31,096
51,263
2,985
72,849
2,052
226
78,112
51,488
210,516
25,720
50,949
338,673
5,728
3,324
88
9,140
1,028
16,788
24,619
34,407
985
12
16,356
16,640
29,918
7,456
187,226
722,595
1,023,832
482,458
255,207
2,671,318
The US$24bn (2013: US$32bn) of loans and advances to customers reported in the table above as encumbered have been pledged predominantly to support the issuance of secured debt instruments such as covered bonds and ABSs, including asset-backed commercial paper issued by consolidated multi-seller conduits. It also includes those pledged in relation to any other form of secured borrowing.
In total, the Group pledged US$121bn (2013: US$150bn) of negotiable securities, predominantly as a result of market-making in securities financing to our clients.
Under the terms of our current collateral obligations under derivative contracts (which are ISDA compliant CSA contracts and contracts entered for pension obligations, and exclude the contracts entered for special purpose vehicles and additional termination events) and based on the positions at 31 December 2014, we estimate that we could be required to post additional collateral of up to US$0.5bn (2013: US$0.7bn) in the event of a one-notch downgrade in credit ratings, which would increase to US$1.2bn (2013: US$1.2bn) in the event of a two-notch downgrade.
The balances in the table below do not agree directly with those in our consolidated balance sheet as the table incorporates, on an undiscounted basis, all cash flows relating to principal and future coupon payments (except for trading liabilities and derivatives not treated as hedging derivatives). Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their contractual maturities. Trading liabilities and derivatives not treated as hedging derivatives are included in the 'On demand' time bucket and not by contractual maturity.
A maturity analysis of repos and debt securities in issue included in trading liabilities is presented in Note 31 on the Financial Statements.
In addition, loans and other credit-related commitments and financial guarantees and similar contracts are generally not recognised on our balance sheet. The undiscounted cash flows potentially payable under financial guarantees and similar contracts are classified on the basis of the earliest date they can be called.
Cash flows payable by HSBC under financial liabilities by remaining contractual maturities
On
demand US$m
Due within
3 months
Due between 3
and 12 months
Due between
1 and 5 years
Due after
Deposits by banks
52,682
17,337
3,600
3,580
390
Customer accounts
1,088,769
187,207
61,687
15,826
Repurchase agreements - non-trading
8,727
91,542
6,180
1,057
Financial liabilities designated at fair value
365
2,201
9,192
28,260
39,397
335,168
375
1,257
4,231
1,517
Debt securities in issue
9
32,513
30,194
37,842
7,710
737
1,256
10,003
42,328
Other financial liabilities
41,517
23,228
4,740
1,893
988
1,717,809
355,140
118,106
101,658
93,777
Loan and other credit-related commitments
406,561
101,156
64,582
62,312
16,769
Financial guarantees and similar contracts
13,166
6,306
13,753
9,575
4,278
2,137,536
462,602
196,441
173,545
114,824
56,198
22,965
3,734
2,819
686
1,097,159
196,048
57,243
15,520
726
37,117
112,621
14,177
18,689
1,967
3,223
39,554
64,144
269,554
456
1,684
6,099
1,638
2,528
35,401
33,695
46,141
6,526
55
391
2,687
11,871
44,969
31,996
30,706
6,564
2,376
1,720,321
400,555
123,007
124,380
119,989
377,352
79,599
55,124
59,747
16,872
18,039
4,796
12,040
7,479
3,988
2,115,712
484,950
190,171
191,606
140,849
Liquidity risk in HSBC Holdings is overseen by HALCO. Liquidity risk arises because of HSBC Holdings' obligation to make payments to debt holders as they fall due. The liquidity risk related to these cash flows is managed by matching debt obligations with internal loan cash flows and by maintaining an appropriate liquidity buffer that is monitored by HALCO.
At 31 December 2014, the Group had US$9.2bn of CRD IV compliant non-common equity capital instruments, of which US$3.5bn were classified as tier 2 and US$5.7bn were classified as additional tier 1 (for details on the additional tier 1 instruments issued during the year see Note 35 on the Financial Statements).
The balances in the table below do not agree directly with those on the balance sheet of HSBC Holdings as the table incorporates, on an undiscounted basis, all cash flows relating to principal and future coupon payments (except for derivatives not treated as hedging derivatives). Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their contractual maturities. Derivatives not treated as hedging derivatives are included in the 'On demand' time bucket.
In addition, loan commitments and financial guarantees and similarcontracts are generally not recognised on our balance sheet. The undiscounted cash flows potentially payable under financial guarantees and similar contracts are classified on the basis of the earliest date on which they can be called.
On demand
Due within 3 months
3 and 12 months
Due after 5 years
Amounts owed to HSBC undertakings
1,441
42
449
210
642
6,345
19,005
1,066
16
263
1,303
252
770
5,815
28,961
1,132
158
2,507
2,595
1,662
12,975
49,269
Loan commitments
52,023
54,546
2,053
1,759
2,315
857
5,654
299
671
4,921
26,518
704
37
1,780
279
1,451
676
5,699
24,812
885
2,757
3,205
5,726
11,756
58,435
1,245
52,836
56,838
Annual Financial Report - 30 of 54
16:44:01
20 Mar 2015
Results
0462I
