Interim Report - 25 of 26

RNS Number : 1407M

HSBC Holdings PLC

12 August 2011

 



Abbreviation	Brief description
A
ABS1	Asset-backed security
ADS	American Depositary Share
Advance	HSBC Advance, a global banking proposition for the mass-affluent segment of customers
AIEA	Average interest-earning assets
ALCO	Asset and Liability Management Committee
AML	Anti-money laundering
ARM1	Adjustable-rate mortgage
ASF	Asset and Structured Finance
B
Bank of Communications	Bank of Communications Co., Limited, one of China's largest banks
Bao Viet	BaoViet Holdings, an insurance and financial services company in Vietnam
Barion	Barion Funding Limited, a term funding vehicle
Basel Committee	Basel Committee on Banking Supervision
Basel I	1988 Basel Capital Accord
Basel II1	2006 Basel Capital Accord
Basel III1	Basel Committee's reforms to strengthen global capital and liquidity rules
BBA	British Bankers' Association
bps	Basis points. One basis point is equal to one-hundredth of a percentage point
C
CARD Act	Credit Card Accountability, Responsibility and Disclosure Act, US
CD	Certificate of deposit
CDS1	Credit default swap
CDO1	Collateralised debt obligation
CDPC1	Credit derivative product companies
CGU	Cash-generating unit
CMB	Commercial Banking, a customer group
CNAV1	Constant Net Asset Value
CP1	Commercial paper
CPI	Consumer price index
CRR1	Customer risk rating
D
DPF	Discretionary participation feature of insurance and investment contracts
E
EAD1	Exposure at default
EL1	Expected loss
EPS	Earnings per share
EU	European Union
F
Fannie Mae	Federal National Mortgage Association, US
Freddie Mac	Federal Home Loan Mortgage Corporation, US
FSA	Financial Services Authority (UK)
FTSE	Financial Times Stock Exchange index
G
G20	Leaders, finance ministers and central bank governors of the Group of Twenty countries
GB&M	Global Banking and Markets, a global business
GDP	Gross domestic product
Ginnie Mae	Government National Mortgage Association, US
Global Markets	HSBC's treasury and capital markets services in Global Banking and Markets
GMB	Group Management Board
GMO	Group Management Office
GPB	Global Private Banking, a global business
Group	HSBC Holdings together with its subsidiary undertakings
G-SIB	Global systemically important bank
G-SIFI	Global systemically important financial institution

Abbreviation	Brief description
H
Hang Seng Bank	Hang Seng Bank Limited, one of Hong Kong's largest banks
HELoC1	Home equity lines of credit
HFC	HFC Bank Limited, the UK-based consumer finance business acquired through the acquisition of HSBC Finance by HSBC
HIBOR	Hong Kong Interbank Offer Rate
HKMA	Hong Kong Monetary Authority
Hong Kong	Hong Kong Special Administrative Region of the People's Republic of China
HSBC	HSBC Holdings together with its subsidiary undertakings
HSBC Assurances	HSBC Assurances, comprising Erisa S.A., the French life insurer, and Erisa I.A.R.D., the property and casualty insurer (together, formerly Erisa)
HSBC Bank	HSBC Bank plc, formerly Midland Bank plc
HSBC Bank Argentina	HSBC Bank Argentina S.A.
HSBC Bank Bermuda	HSBC Bank Bermuda Limited, formerly The Bank of Bermuda Limited
HSBC Bank Malaysia	HSBC Bank Malaysia Berhad
HSBC Bank Middle East	HSBC Bank Middle East Limited, formerly The British Bank of the Middle East
HSBC Bank USA	HSBC's retail bank in the US, HSBC Bank USA, N.A. (formerly HSBC Bank USA, Inc.)
HSBC Finance	HSBC Finance Corporation, the US consumer finance company (formerly Household International, Inc.)
HSBC France	HSBC's French banking subsidiary, formerly CCF S.A.
HSBC Holdings	HSBC Holdings plc, the parent company of HSBC
HSBC Private Bank (Suisse)	HSBC Private Bank (Suisse) S.A., HSBC's private bank in Switzerland
I
IAS	International Accounting Standards
IASB	International Accounting Standards Board
IFRIC	International Financial Reporting Interpretations Committee
IFRSs	International Financial Reporting Standards
Industrial Bank	Industrial Bank Co. Limited, a national joint-stock bank in mainland China held by Hang Seng Bank
IRB1	Internal ratings-based
K
KPMG	KPMG Audit Plc and its affiliates
L
LGD1	Loss given default
LIBOR	London Interbank Offered Rate
Losango	Losango Promoções e Vendas Ltda, the Brazilian consumer finance company
M
M&S Money	Marks and Spencer Retail Financial Services Holdings Limited
Madoff Securities	Bernard L Madoff Investment Securities LLC
Mainland China	People's Republic of China excluding Hong Kong
Malachite	Malachite Funding Limited, a term funding vehicle
Mazarin	Mazarin Funding Limited, an asset-backed CP conduit
MBS1	US mortgage-backed security
MENA	Middle East and North Africa
Monoline1	Monoline insurance company
MSCI	Morgan Stanley Capital International index
MTN1	Medium-term notes
N
NYSE	New York Stock Exchange
O
OFAC	Office of Foreign Assets Control
OIS1	Overnight Index Swap
OTC1	Over-the-counter

Abbreviation	Brief description
P
PD1	Probability of default
Performance Shares1	Awards of HSBC Holdings ordinary shares under employee share plans that are subject to corporate performance conditions
Ping An	Ping An Insurance (Group) Company of China, Limited, the second-largest life insurer in the People's Republic of China
PPI	Payment protection insurance product
Premier	HSBC Premier, HSBC's premium global banking service
PVIF	Present value of in-force long-term insurance business
R
RBWM	Retail Banking and Wealth Management, a customer group
Repo1	Sale and repurchase transaction
Restricted Shares1	Awards of Restricted Shares define the number of HSBC Holdings ordinary shares to which the employee will become entitled, generally between one and three years from the date of the award, and normally subject to the individual remaining in employment
Reverse repo	Security purchased under commitments to sell
RPI	Retail price index (UK)
RoRWA	Return on average risk-weighted assets
RWA1	Risk-weighted assets
S
S&P	Standard and Poor's rating agency
SEC	Securities and Exchange Commission (US)
SIC	Securities investment conduit
SIV1	Structured investment vehicle
SME	Small and medium-sized enterprise
Solitaire	Solitaire Funding Limited, a special purpose entity managed by HSBC
SPE1	Special purpose entity
STIP	Short-term income protection insurance product
T
The Hongkong and Shanghai Banking Corporation	The Hongkong and Shanghai Banking Corporation Limited, the founding member of the HSBC Group
U
UAE	United Arab Emirates
UK	United Kingdom
US	United States of America
V
VAR1	Value at risk

1  For full definitions, see page 236.

Term	Definition
A
Adjustable-rate mortgages ('ARM's)	Mortgage loans in the US on which the interest rate is periodically changed based on a reference price. These are included within 'affordability mortgages'.
Affordability mortgages	Mortgage loans where the customer's monthly payments are set out at a low initial rate, either variable or fixed, before resetting to a higher rate once the introductory period is over.
Agency exposures	Exposures to near or quasi-government agencies including public sector entities fully owned by governments carrying out non-commercial activities, provincial and local government authorities, development banks and funds set up by government.
Alt-A	A US description for loans regarded as lower risk than sub-prime, but with higher risk characteristics than lending under normal criteria.
Arrears	Customers are said to be in arrears (or in a state of delinquency) when they are behind in fulfilling their obligations, with the result that an outstanding loan is unpaid or overdue. When a customer is in arrears, the total outstanding loans on which payments are overdue are described as delinquent.
Asset-backed securities ('ABS's)	Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages.
B
Back-testing	A statistical technique used to monitor and assess the accuracy of a model, and how that model would have performed had it been applied in the past.
Bail-in/Bail-inable debt	Bail-in refers to the imposition of losses at the point of non-viability (but before insolvency) on bank liabilities ('bail-inable debt') that are not exposed to losses while the institution remains a viable, going concern. Whether by way of write-down or conversion into equity, this has the effect of recapitalising the bank (although it does not provide any new funding).
Basel II	The capital adequacy framework issued by the Basel Committee on Banking Supervision in June 2006 in the form of the 'International Convergence of Capital Measurement and Capital Standards'.
Basel III	In December 2010, the Basel Committee issued final rules 'Basel III: A global regulatory framework for more resilient banks and banking systems' and 'Basel III: International framework for liquidity risk measurement, standards and monitoring'. Together these documents present the Basel Committee's reforms to strengthen global capital and liquidity rules with the goal of promoting a more resilient banking sector. The new requirements will be phased in starting 1 January 2013 with full implementation by 1 January 2019.
C
Capital conservation buffer	A capital buffer, prescribed by regulators under Basel III, and designed to ensure banks build up capital buffers outside periods of stress which can be drawn down as losses are incurred. Should a bank's capital levels fall within the capital conservation buffer range, dividends and share buybacks, discretionary payments on non-equity capital instruments and discretionary bonus payments to staff will be constrained by the regulators.
Capital planning buffer	A capital buffer, prescribed by the FSA under Basel II, and designed to ensure banks build up capital buffers outside periods of stress which can be drawn down as losses are incurred. Should a bank's capital levels fall within the capital planning buffer range, a period of heightened regulatory interaction would be triggered.
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 investment, comprising buildings or land, intended to generate a profit, either from capital gain or rental income.
Common equity tier 1 capital	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.
Conduits	HSBC sponsors and manages multi-seller conduits and securities investment conduits ('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 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.
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.
Core tier 1 capital	The highest quality form of regulatory capital that comprises total shareholders' equity and related non-controlling interests, less goodwill and intangible assets and certain other regulatory adjustments.
Term	Definition
Countercyclical capital buffer	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.
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 derivative product company ('CDPC')	Independent company that specialises in selling credit default protection on corporate exposures in the form of credit derivatives.
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 a payment 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 adjustment	An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties.
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 protection.
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.
Customer deposits	Money deposited by account holders. Such funds are recorded as liabilities.
Customer risk rating ('CRR')	A scale of 23 grades measuring internal obligor probability of default.
D
Debt restructuring	A restructuring by which the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as debt or interest charge reduction.
Debt securities	Financial assets on the Group's balance sheet representing certificates of indebtedness of credit institutions, public bodies or other undertakings, excluding those issued by central banks.
Debt securities in issue	Transferable certificates of indebtedness of the Group to the bearer of the certificates. These are financial liabilities of the Group and include certificates of deposits.
Delinquency	See 'Arrears'.
E
Economic capital	The internally calculated capital requirement which is deemed necessary by HSBC to support the risks to which it is exposed at a confidence level consistent with a target credit rating of AA.
Economic profit	The difference between the return on financial capital invested by shareholders and the cost of that capital. Economic profit may be expressed as a whole number or as a percentage.
Equity risk	The risk arising from positions, either long or short, in equities or equity-based instruments, which create exposure to a change in the market price of the equities or equity instruments.
Expected loss ('EL')	A regulatory calculation of the amount expected to be lost on an exposure using a 12-month time horizon and downturn loss estimates. EL is calculated by multiplying the Probability of Default (a percentage) by the Exposure at Default (an amount) and Loss Given Default (a percentage).
Exposure	A claim, contingent claim or position which carries a risk of financial loss.
Exposure at default ('EAD')	The amount expected to be outstanding after any credit risk mitigation, if and when the counterparty defaults. EAD reflects drawn balances as well as allowance for undrawn amounts of commitments and contingent exposures.
F
Fair value adjustment	An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model.
First lien	A security interest granted over an item of property to secure the repayment of a debt that places its holder first in line to collect repayment from the sale of the underlying collateral in the event of a default on the debt.
Forbearance strategies	Strategies that are employed in order to improve the management of customer relationships, maximise collection opportunities and, if possible, avoid foreclosure or repossession. Such arrangements include extended payment terms, a reduction in interest or principal repayments, approved external debt management plans, debt consolidations, the deferral of foreclosures, and loan restructures (which includes loan modifications and re-ages).
Funded exposures	A funded exposure is one where the notional amount of a contract is or has been exchanged.
Funding risk	A form of liquidity risk arising when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms and when required.

Term	Definition
G
Government-sponsored enterprises ('GSE's)	A group of financial services enterprises created by the US Congress. Their function is to reduce the cost of capital for certain borrowing sectors of the economy, and to make them more efficient and transparent. Examples in the residential mortgage borrowing segment are Freddie Mac and Fannie Mae. GSEs carry the implicit backing, but are not direct obligations, of the US Government.
GPSP awards	Awards that define the number HSBC Holdings ordinary shares to which the employee will become entitled, generally five years from the date of the award, and normally subject to the individual remaining in employment. The shares to which the employee becomes entitled are subject to a retention requirement until cessation of employment.
H
Historical rating transition matrices ('HRTM')	HRTMs show the probability of a counterparty with a particular rating moving to a different rating over a defined time horizon.
Home Equity Lines of Credit ('HELoC's)	A form of revolving credit facility provided to US customers, which is supported by a first or second lien charge over residential property.
I
Impaired loans	Loans where the Group does not expect to collect all the contractual cash flows or expects to collect them later than they are contractually due.
Impairment allowances	Management's best estimate of losses incurred in the loan portfolios at the balance sheet date.
Individually assessed impairment	Exposure to loss is assessed on all individually significant accounts and all other accounts that do not qualify for collective assessment.
Insurance risk	A risk, other than a financial risk, transferred from the holder of a contract to the insurance provider. The principal insurance risk is that, over time, the combined cost of claims, administration and acquisition of the contract may exceed the aggregate amount of premiums received and investment income.
Internal Capital Adequacy Assessment Process	The Group's own assessment of the levels of capital that it needs to hold through an examination of its risk profile from regulatory and economic capital viewpoints.
Internal Model Method ('IMM')	One of three approaches defined by Basel II to determine exposure values for counterparty credit risk.
Internal ratings-based approach ('IRB')	A method of calculating credit risk capital requirements using internal, rather than supervisory, estimates of risk parameters.
Invested capital	Equity capital invested in HSBC by its shareholders.
IRB advanced approach	A method of calculating credit risk capital requirements using internal PD, LGD and EAD models.
IRB foundation approach	A method of calculating credit risk capital requirements using internal PD models but with supervisory estimates of LGD and conversion factors for the calculation of EAD.
ISDA	International Swaps and Derivatives Association.
ISDA Master agreement	Standardised contract developed by ISDA used as an umbrella contract under which bilateral derivatives contracts are entered into.
K
Key management personnel	Directors and Group Managing Directors of HSBC Holdings.
L
Level 1 - quoted market price	Financial instruments with quoted prices for identical instruments in active markets.
Level 2 - valuation technique using observable inputs	Financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable.
Level 3 - valuation technique with significant unobservable inputs	Financial instruments valued using valuation techniques where one or more significant inputs are unobservable.
Leveraged finance	Funding provided for entities with higher than average indebtedness, which typically arises from sub-investment grade acquisitions or event-driven financing.
Leverage ratio	A measure, prescribed by regulators under Basel III, which is the ratio of tier 1 capital to total exposures. Total exposures include on-balance sheet items, off-balance sheet items and derivatives, and should generally follow the accounting measure of exposure. This supplementary measure to the risk-based capital requirements is intended to constrain the build-up of excess leverage in the banking sector.
Liquidity risk	The risk that HSBC does not have sufficient financial resources to meet its obligations as they fall due, or will have to do so at an excessive cost. This risk arises from mismatches in the timing of cash flows.
Loan modification	An account management action that results in a change to the original terms and conditions of a loan either temporarily or permanently without resetting its delinquency status, except in case of a 'modification re-age' where delinquency status is also reset to up-to-date. Account modifications may include revisions to one or more terms of the loan including, but not limited to, a change in interest rate, extension of the amortisation period, reduction in payment amount and partial forgiveness or deferment of principal.
Loan-to-value ratio ('LTV')	A mathematical calculation that expresses the amount of the loan as a percentage of the value of security. A high LTV indicates that there is less cushion to protect the lender against house price falls or increases in the loan if repayments are not made and interest is added to the outstanding loan balance.

Term	Definition
Loss given default ('LGD')	The estimated ratio (percentage) of the loss on an exposure to the amount outstanding at default (EAD) upon default of a counterparty.
Loss severity	The realised amount of losses incurred (including ancillary amounts owed) when a loan is foreclosed or disposed of through the arrangement with the borrower. The loss severity is represented as a percentage of the outstanding loan balance.
M
Market risk	The risk that movements in market risk factors, including foreign exchange rates and commodity prices, interest rates, credit spreads and equity prices, will reduce income or portfolio values.
Medium term notes ('MTN's)	Notes issued by corporates across a range of maturities. MTNs are frequently issued by corporates under MTN Programmes whereby notes are offered on a regular and continuous basis to investors.
Monoline insurers ('monolines')	Entities which specialise in providing credit protection to the holders of debt instruments in the event of default by the debt security counterparty. This protection is typically held in the form of derivatives such as CDSs referencing the underlying exposures held.
Mortgage-backed securities ('MBS's)	Securities that represent interests in groups of mortgages, which may be on residential or commercial properties. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). When the MBS references mortgages with different risk profiles, the MBS is classified according to the highest risk class.
Mortgage-related assets	Assets which are referenced to underlying mortgages.
Mortgage vintage	The year a mortgage was originated.
N
Negative equity mortgages	Equity is the value of the asset less the outstanding balance on the loan. Negative equity arises when the value of the property purchased is below the balance outstanding on the loan.
Net asset value per share	Total shareholders' equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue.
Net interest income	The amount of interest received or receivable on assets net of interest paid or payable on liabilities.
Net principal exposure	The gross principal amount of a financial asset after taking account of credit protection purchased but excluding the effect of any counterparty credit valuation adjustment to that protection. It includes assets that benefit from monoline protection, except where this protection is purchased with a CDS.
Non-conforming mortgages	US mortgages that do not meet normal lending criteria. Examples include mortgages where the expected level of documentation is not provided (such as with income self-certification), or where poor credit history increases the risk and results in pricing at a higher than normal lending rate.
O
Overnight Index Swap ('OIS') discounting	A method of valuing collateralised interest rate derivatives which uses a discount curve that reflects the overnight interest rate typically earned or paid in respect of collateral received.
Operational risk	The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.
Over-the-counter ('OTC')	A bilateral transaction (e.g. derivatives) that is not exchange traded and that is valued using valuation models.
P
Past due loans and advances	Loans on which repayments are overdue.
Performance Shares	Awards that define the number of HSBC Holdings ordinary shares to which the employee will become entitled subject to satisfaction of corporate performance conditions.
Prime	A US description for mortgages granted to the most creditworthy category of borrowers.
Private equity investments	Equity securities in operating companies not quoted on a public exchange, often involving the investment of capital in private companies or the acquisition of a public company that results in its delisting.
Probability of default ('PD')	The probability that an obligor will default within a one-year time horizon.
R
Re-age	A US account management action that results in the resetting of the contractual delinquency status of an account to up-to-date, without full repayment of all the arrears, upon fulfilment of certain requirements which indicate that payments are expected to be made in accordance with the contractual terms. It is our practice in the US to defer past due interest on re-aged real estate and personal non-credit card accounts to the end of the loan period.
Refi rate	The refi (or refinancing) rate is set by the European Central Bank ('ECB') and is the price banks pay to borrow from the ECB.
Regulatory capital	The capital which HSBC holds, determined in accordance with rules established by the FSA for the consolidated Group and by local regulators for individual Group companies.
Renegotiated loans	Loans whose terms have been renegotiated and are treated as up-to-date loans for measurement purposes once the specified number and/or amount of qualifying payments required under the new arrangements have been received.

Term	Definition
Restricted Shares	Awards that define the number of HSBC Holdings ordinary shares to which the employee will become entitled, generally between one and three years from the date of the award, and normally subject to the individual remaining in employment. The shares to which the employee becomes entitled may be subject to a retention requirement.
Retail loans	Money lent to individuals rather than institutions. This includes both secured and unsecured loans such as residential mortgages, overdrafts and credit card balances.
Return on equity	Profit attributable to ordinary shareholders divided by average invested capital.
Risk appetite	An assessment of the types and quantum of risks to which HSBC wishes to be exposed.
Risk-weighted assets ('RWA's)	Calculated by assigning a degree of risk expressed as a percentage (risk weight) to an exposure in accordance with the applicable Standardised or IRB approach rules.
S
Sale and repurchase agreement ('repo')	A repo is a short-term funding agreement that allows a borrower to create a collateralised loan by selling a financial asset to a lender. As part of the agreement the borrower commits to repurchase the security at a date in the future repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement or a reverse repo.
Seasoning	The emergence of credit loss patterns in portfolios over time.
Second lien	A security interest granted over an item of property to secure the repayment of a debt that is issued against the same collateral as a first lien but that is subordinate to it. In the case of default, repayment for this debt will only be received after the first lien has been repaid.
Securitisation	A transaction or scheme whereby the credit risk associated with an exposure, or pool of exposures, is tranched and where payments to investors in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures. A traditional securitisation involves the transfer of the exposures being securitised to an SPE which issues securities. In a synthetic securitisation, the tranching is achieved by the use of credit derivatives and the exposures are not removed from the balance sheet of the originator.
Single-issuer liquidity facility	A liquidity or stand-by line provided to a corporate customer which is different from a similar line provided to a conduit funding vehicle.
Sovereign exposures	Exposures to governments, ministries, departments of governments, embassies, consulates and exposures on account of cash balances and deposits with central banks.
Special purpose entities ('SPE's)	A corporation, trust or other non-bank entity, established for a narrowly defined purpose, including for carrying on securitisation activities. The structure of the SPE and its activities are intended to isolate its obligations from those of the originator and the holders of the beneficial interests in the securitisation.
Standardised approach	In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institutions ('ECAI') ratings 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.
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.
Structured Investment Vehicles ('SIV's)	Special purpose entities which invest in diversified portfolios of interest-earning assets, generally funded through issues of commercial paper, medium-term notes and other senior debt to take advantage of the spread differentials between the assets in the SIV and the funding cost.
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.
T
Tier 1 capital	A component of regulatory capital, comprising core tier 1 and other tier 1 capital. Other tier 1 capital includes qualifying capital instruments such as non-cumulative perpetual preference shares and hybrid capital securities.
Tier 2 capital	A component of regulatory capital, comprising qualifying subordinated loan capital, related non-controlling interests, allowable collective impairment allowances and unrealised gains arising on the fair valuation of equity instruments held as available-for-sale. Tier 2 capital also includes reserves arising from the revaluation of properties.
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.

Term	Definition
U
Unfunded exposures	An exposure where the notional amount of a contract has not been exchanged.
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 lending	Money lent to sovereign borrowers, banks, non-bank financial institutions and corporate entities.
Write-down	Reduction in the carrying value of an asset due to impairment or fair value movements.
Wrong-way risk	An adverse correlation between the counterparty's probability of default and the mark-to-market value of the underlying transaction.

A

Accounting

future developments 180

policies 181

standards 88

Areas of special interest 98

Asset-backed securities 121, 124, 155

Assets

by customer group and global business 29

by geographical region 41

held for sale 205

held in custody and under administration 80

maturity analysis 207

movement in 26

trading 187

underlying/reported reconciliation 27

Associates and joint ventures 24

Auditor's review report 220

B

Balance sheet

consolidated 25, 173

data 25, 38, 46, 52, 59, 65, 71, 77

movement 26

underlying/reported reconciliation 27

Basel II, 2.5, III 159, 163

Basis of preparation 9, 179

Bonus arrangements (deferred) 80

C

Capital

buffers 86

future developments 162

management 158

measurement and allocation 158

quality 86

regulatory 159, 162

structure 161

Cash flow

consolidated statement 174

notes 208

Cautionary statement regarding forward-looking statements 232

Challenges and uncertainties 84

Client assets 36

Collateral 90

Commercial Banking 32

Comparative information 180

Compliance with IFRSs 179

Composition of Group (changes in) 181

Conduits 211

Constant currency 10

Contents - inside front cover

Contingent liabilities, contractual commitments and financial guarantee contracts 209

Copies of the Interim Report 2011 230

Corporate governance 229

Credit derivative product companies 131

Credit quality 110

Credit risk 89

credit exposure 89, 90, 92

Customer groups and global businesses 29, 38

D

Daily distribution of trading revenues 137

Dealings in HSBC Holdings shares 228

Defined terms - Inside front cover

Derivatives 91, 200

by product contract type 201

hedging instruments 202

trading and credit 201

Directors

biographies 165

fees 224

interests 221

responsibility statement 219

Dividends 182, 228

E

Earnings per share 2, 171, 182

Economic background

Europe 42

Hong Kong 49

Latin America 74

Middle East and North Africa 62

North America 68

Rest of Asia-Pacific 55

Economic profit/(loss) 28

Equity 27, 175

Equity securities available for sale 138

Estimates and assumptions 180

Europe

assets 41

balance sheet data 46

economic background 42

impairment allowances 115, 120

loans and advances 95

profit before tax 41, 42 43, 46

review of performance 42

risk-weighted assets 41

Eurozone exposures 98

Events after the balance sheet date 218

F

Fair values

control framework 189

of financial instruments at fair value 188

of financial instruments not at fair value 196

valuation bases 191

Fee income (net) 16

Final results 229

Financial assets

designated at fair value 18, 199

reclassification 198

Financial highlights 2

Financial instruments

at fair value 188

credit quality 110, 150

Financial investments 203

Financial liabilities designated at fair value 206

Footnotes 81, 146, 164, 178

Forbearance strategies 108, 150

Foreclosed properties in US 108

Foreign exchange rates 25

Funds under management 80

G

Gains less losses from financial investments 19

Geographical regions 41

Glossary 233

Global Banking and Markets 34

ABSs classified as AFS 122

management view 35

Global Private Banking 36

Going concern 230

Goodwill impairment 214

Group Chairman's Statement 4

Group Chief Executive's Review 6

Group Managing Directors 169

H

Highlights 1

Hong Kong

assets 41

balance sheet data 52

economic background 49

impairment allowances 115, 120

loans and advances 95

profit before tax 41, 49, 50, 52

review of performance 49

risk-weighted assets 41

HSBC Finance 109, 135

I

Impairment

allowances and charges 89, 115

by geographical region 115

by industry 93

charges and other credit risk provisions 118

impaired loans 115

Income from financial instruments designated at fair value (net) 18

Income statement (consolidated) 13, 171

Independent Commission on Banking 87

Insurance 142, 157

balance sheet by type of contract 144

claims incurred and movement in liabilities to policyholders (net) 21

net earned premiums 19

risk management 142

Interest-earning assets 15

Interest income (net) 15

sensitivity 139, 155

Interest rate repricing gap 140

Interim Management Statement 9

Interim Report 2010 218

L

Latin America

assets 41

balance sheet data 77

economic background 74

impairment allowances 115, 120

loans and advances 95

profit before tax 41, 74, 75, 77

review of performance 74

risk-weighted assets 41

Legal proceedings 214

Legal risk 156

Leveraged finance transactions 132

Liabilities

financial liabilities designated at fair value 206

maturity analysis 207

movement in 26

trading 206

underlying/reported reconciliation 27

LIBOR investigation 218

Liquidity and funding 133, 152

contingent liquidity risk 135

Loans and advances

by country/region 93, 95, 197

by credit quality 110

by industry sector 91, 93

delinquency in the US 108

exposure 89

impaired 115

mortgage lending 104

past due but not impaired 114

personal lending 101, 107

renegotiated 108

to banks 97, 99

to customers 2, 93, 95

to sovereigns 99

wholesale lending 98

Loan impairment charges and other credit risk provisions 21, 89

M

Madoff 215

Margin 15

Market capitalisation 3

Market risk 136, 153

measures applicable to parent 140

Merlin agreement 33, 43

Middle East and North Africa

areas of special interest 101

balance sheet data 65

economic background 62

impairment allowances 115, 120

loans and advances 95

profit/(loss) before tax 41, 62, 63, 65

review of performance 62

risk-weighted assets 41

Money market funds 213

Monoline insurers 130

Mortgage lending 104

N

Non-trading portfolios 136

North America

assets 41

balance sheet data 71

economic background 68

impairment allowances 115, 120

loans and advances 95

profit/(loss) before tax 41, 68, 69, 71

review of performance 68

risk-weighted assets 41

Notifiable interests in share capital 228

O

Off-balance sheet arrangements 213

Offsets 90

Operating expenses 23

Operating income (net) 2

Operating income (other) 20

Operational risk 141, 156

'Other' customer group 37

P

Payment protection insurance 216

Pension scheme 140, 155

Personal lending 101, 107

Pillar 1, 2 and 3 159, 160

Post-employment benefits 183

Preferred securities 25

Presentation of information 179

Principal activities 8

Profit before tax

attributable 2, 171

by country 43, 56, 63, 69, 75

by customer group and global business 29, 30, 32, 38, 46, 52

by geographical region 41, 42, 46, 52, 59, 65, 71, 77

consolidated 2

underlying/reported reconciliations 10

Provisions 206

R

Ratios

advances to core funding 134

capital 2, 25

cost efficiency 3, 23, 42, 49, 55, 62, 68, 74

credit coverage 3

dividends per share 2

earnings per share 2

net assets per share 2, 25

performance 3

return on average risk-weighted assets 30, 32, 34, 36, 42, 49, 55, 62, 68, 74

returns 2

stressed one month coverage 134

Regulation and supervision (challenges) 85

Related parties 80

Reputational risk 141, 157

Responsibility statement 219

Rest of Asia-Pacific

assets 41

balance sheet data 59

economic background 55

impairment allowances 115, 120

loans and advances 95

profit before tax 41, 55, 56, 59

review of performance 57

risk-weighted assets 41

Retail Banking and Wealth Management 30

Review of performance 30, 32, 34, 36, 42, 49, 57, 62, 68

Risk policies and practices 148

Risks

compliance 156

contingent liquidity 135

credit 89, 148, 190

credit spread 137, 154

foreign exchange 141

gap 138, 154

governance 148

insurance operations 142, 157

legal 156

liquidity and funding 134, 152

managing risk 83, 148

market 136, 153

operational 141, 156

pension 140, 155

profile 83

reputational 141, 157

security and fraud 157

top and emerging 9

Risk-weighted assets 25, 29, 41, 162

S

Securitisation 121, 151

Segmental analysis 214

Senior management 169

Sensitivity

projected net interest income 155

Share capital - notifiable interests 228

Shareholder enquiries 230

Share information 3

Share option plans 222

Directors 222

subsidiary company plans 225

HSBC Bank Bermuda 227

HSBC Finance 227

HSBC Private Bank France 226

Directors' interests 221

employee share option plans 225

Shares in issue 225

Special purpose entities 209

Spread 15

Staff numbers 23, 42, 49, 55, 62, 68, 74

Statement of changes in equity (consolidated) 175

Statement of comprehensive income (consolidated) 172

Stock symbols 230

Strategic direction 8

Commercial Banking 32

Global Banking and Markets 34

Global Private Banking 36

Retail Banking and Wealth Management 30

Stress testing 154

T

Tax expense 24, 185

Telephone and online share-dealing service 230

Total shareholder return 3

Trading

assets 187

derivatives 201

income (net) 17

liabilities 206

portfolios 136, 154

U

Underlying performance 2, 10

US mortgage-related investigations 217

V

Value at risk 136, 153

Values 8

W

Wholesale lending 98

Y

Yield 15

 

END

 

 

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