Annual Financial Report - 22 of 54

RNS Number : 0753I

HSBC Holdings PLC

20 March 2015

 



Other information
Funds under management and assets held in custody	106
Taxes paid by region and country	106
Property	107
Our disclosure philosophy	107
Disclosures arising from EDTF recommendations	108

Funds under management and assets held in custody

Funds under management⁵⁹

		2014		2013
		US$bn		US$bn
Funds under management
At 1 January		921		910
Net new money		38		(18)
Value change		40		34
Exchange and other		(45)		(5)
At 31 December		954		921

		2014		2013
		US$bn		US$bn
Funds under management by business
Global Asset Management		445		420
Global Private Banking		275		282
Affiliates		5		5
Other		229		214
At 31 December		954		921

For footnote, see page 109.

Funds under management ('FuM') at 31 December 2014 amounted to US$954bn, an increase of 4%, primarily due to favourable market movements and net inflows in the year.

Global Asset Management FuM increased by 6% to US$445bn as we attracted US$29bn of net new money, notably in fixed income products from our customers in Europe and Asia, as well as from net inflows into liquidity funds in Europe and North America. In addition, we transferred FuM of US$18bn which had previously been reported within Other FuM and we benefited from favourable movements in equity and bond markets. These increases were partly offset by adverse foreign exchange movements reflecting the strengthening of the US dollar against all major currencies.

GPB FuM decreased by 3% to US$275bn due to the ongoing repositioning of our client base, which gave rise to disposals of a portfolio of assets in Switzerland to LGT Bank (Switzerland) Ltd and our HSBC Trinkaus & Burkhardt AG business in Luxembourg with a combined
FuM of US$8bn, and negative net new money in Europe. In addition, there were unfavourable foreign exchange movements, mainly in Europe. This was partly offset by favourable market movements, also principally in Europe, and from positive net new money in areas targeted for growth.

Other FuM increased by 7% to US$229bn, primarily due to strong net inflows and favourable market movements. This was partly offset by the transfer of FuM into Global Asset Management noted above.

Assets held in custody⁵⁹ and under administration

Custody is the safekeeping and servicing of securities and other financial assets on behalf of clients. At 31 December 2014, we held assets as custodian of US$6.4 trillion, 3% higher than the US$6.2 trillion held at 31 December 2013. This was mainly driven by incremental net asset inflows in Asia and Europe, and notably in Middle East and North Africa, partly offset by adverse foreign exchange movements.

Our assets under administration business, which includes the provision of bond and loan administration services and the valuation of portfolios of securities and other financial assets on behalf of clients, complements the custody business. At 31 December 2014, the value of assets held under administration by the Group amounted to US$3.2 trillion, which was 6% higher than at 31 December 2013. This was mainly driven by incremental net asset inflows in the Funds business in Europe and Asia, which was partly offset by adverse foreign exchange movements.

Taxes paid by region and country

The following tables reflect a geographical view of HSBC's operations and the basis of preparation is aligned to the Group's approach in meeting its country-by- country reporting obligations as laid out in Article 89 of the EU's CRD IV.

Breakdown of tax paid by region⁶⁰

		2014 US$bn		2013 US$bn
Region
UK		2.4		2.1
Rest of Europe		1.3		1.5
Asia		2.7		2.5
Middle East and North Africa		0.2		0.3
North America		(0.1)		0.4
Latin America		1.4		1.8
Total		7.9		8.6

Forfootnote, see page 109.

Taxes paid by country⁶⁰

		2014		2013		2012
		US$m		US$m		US$m
Total taxes paid analysed by regions
Asia		2,687		2,536		2,639
Home and priority growth markets		2,399		2,185		2,225
- Hong Kong		1,273		1,248		974
- Mainland China		278		207		276
- India		290		318		349
- Australia		204		105		209
- Malaysia		133		106		193
- Indonesia		76		74		113
- Singapore		101		88		89
- Taiwan		44		39		22
Other markets		288		351		414
Europe		3,709		3,570		3,213
Home and priority growth markets		3,466		3,326		3,021
- UK		2,363		2,107		1,906
- France		790		844		679
- Germany		131		151		200
- Switzerland		107		142		160
- Turkey		75		82		76
Other markets		243		244		192
Middle East and North Africa		210		251		284
Priority growth markets		162		213		234
- UAE		102		98		120
- Egypt		60		115		114
Other markets		48		38		50
North America		(108)		414		1,236
Priority growth markets
- US		(377)		125		798
- Canada		269		285		434
Other markets		-		4		4
Latin America		1,384		1,836		1,977
Priority growth markets		1,338		1,645		1,835
- Brazil		804		1,002		1,174
- Argentina		333		318		391
- Mexico		201		325		270
Other markets		46		191		142
Total		7,882		8,607		9,349

For footnote, see page 109.

Property

At 31 December 2014, we operated from some 7,885 operational properties worldwide, of which approximately 1,965 were located in Europe, 2,500 in Asia, 450 in North America, 2,700 in Latin America and 275 in the Middle East and North Africa. These properties had an area of approximately 54.3m square feet (2013: 56.6m square feet).

Our freehold and long leasehold properties, together with all our leasehold land in Hong Kong, were valued in 2014. The value of these properties was US$10.8bn
(2013: US$10.3bn) in excess of their carrying amount in the consolidated balance sheet on an historical cost based measure. In addition, properties with a net book value of US$1.6bn (2013: US$1.5bn) were held for investment purposes.

Our operational properties are stated at cost, being historical cost or fair value at the date of transition to IFRSs (their deemed cost) less any impairment losses, and are depreciated on a basis calculated to write off the assets over their estimated useful lives. Properties owned as a consequence of an acquisition are recognised initially at fair value.

Further details are included in Note 23 on the Financial Statements.

Our disclosure philosophy

HSBC strives to maintain the highest standards of disclosure in our reporting.

It has long been our policy to provide disclosures that help investors and other stakeholders understand the Group's performance, financial position and changes thereto. In accordance with this policy:

·   In order to make the financial statements and notes thereon easier to understand, we have undertaken an initiative to provide more focused information and to remove duplication where possible. As a result, we have changed the location and the wording used to describe certain accounting policies within the notes, removed certain immaterial disclosures and changed the order of certain sections. In applying materiality to financial statement disclosures, we consider both the amount and nature of each item. The main changes to the presentation of the financial statements and notes thereon in 2014 are described on pages 346 and 347.

·   The information provided in the 'Notes on the Financial Statements' and the 'Report of the Directors' goes beyond the minimum levels required by accounting standards, statutory and regulatory requirements and listing rules. In particular, we provide additional disclosures having regard to the recommendations of the Enhanced Disclosures Task Force ('EDTF') report 'Enhancing the Risk Disclosures of Banks' issued in October 2012. The report aims to help financial institutions identify areas that investors had highlighted needed better and more transparent information about banks' risks, and how these risks relate to performance measurement and reporting. In addition, we continue to enhance our disclosures in line with good practice recommendations issued by relevant regulators and standard setters and in response to feedback received from users of our financial statements.

Disclosures arising from EDTF recommendations

Type of risk	Recommendation	Disclosure	Page
General	1	The risks to which the business is exposed.	112 to 117
	2	Our risk appetite and stress testing.	117 to 118
	3	Top and emerging risks, and the changes during the reporting period.	118 to 124
	4	Discussion of future regulatory developments affecting our business model and Group profitability, and its implementation in Europe.	119 to 120 and 252 to 256
Risk governance, risk management and business model	5	Group Risk Committee, and their activities.	280 to 281
	6	Risk culture and risk governance and ownership.	111
	7	Diagram of the risk exposure by global business segment.	22
	8	Stress testing and the underlying assumptions.	117 to 118
Capital adequacy and risk-weighted assets	9	Pillar 1 capital requirements. For calculation of Pillar 1 capital requirements, see the Pillar 3 Disclosures 2014 document.	258 to 259
	10	Reconciliation of the accounting balance sheet to the regulatory balance sheet.	249
	11	Flow statement of the movements in regulatory capital since the previous reporting period, including changes in the different tiers of regulatory capital.	245
	12	Discussion of targeted level of capital, and the plans on how to establish this.	239 and 252 to 258
	13	Analysis of risk-weighted assets by risk type, global business and geographical region, and market risk RWAs.	240
	14	For analysis of the capital requirements for each Basel asset class, see the Pillar 3 Disclosures 2014 document.
	15	For analysis of credit risk for each Basel asset class, see the Pillar 3 Disclosures 2014 document.
	16	Flow statements reconciling the movements in risk-weighted assets for each risk-weighted asset type.	242 to 244
	17	For discussion of Basel credit risk model performance, see the Pillar 3 Disclosures 2014 document.
Liquidity	18	Analysis of the Group's liquid asset buffer.	165 to 166
Funding	19	Encumbered and unencumbered assets analysed by balance sheet category.	171 to 173
	20	Consolidated total assets, liabilities and off-balance sheet commitments analysed by remaining contractual maturity at the balance sheet date.	426 to 435
	21	Analysis of the Group's sources of funding and a description of our funding strategy.	168
Market risk	22	Relationship between the market risk measures for trading and non-trading portfolios and the balance sheet, by business segment.	179 to 180
	23	Discussion of significant trading and non-trading market risk factors.	176 to 179
	24	VaR assumptions, limitations and validation.	223 to 224
	25	Discussion of stress tests, reverse stress tests and stressed VaR.	224 to 225
Credit risk	26	Analysis of the aggregate credit risk exposures, including details of both personal and wholesale lending.	129 to 130
	27	Discussion of the policies for identifying impaired loans, defining impairments and renegotiated loans, and explaining loan forbearance policies.	137 and 208 to 213
	28	Reconciliations of the opening and closing balances of impaired loans and impairment allowances during the year.	137 and 142 to 143
	29	Analysis of counterparty credit risk that arises from derivative transactions.	150 to 151
	30	Discussion of credit risk mitigation, including collateral held for all sources of credit risk.	146 to 150
Other risks	31	Quantified measures of the management of operational risk.	187 to 189
	32	Discussion of publicly known risk events.	118 to 124

The 32 recommendations listed above were made in the report 'Enhancing the Risk Disclosures of Banks' issued by the Enhanced Disclosure Task Force of the Financial Stability Board in October 2012.

 

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