Annual Financial Report - 54 of 54

RNS Number : 0632I

HSBC Holdings PLC

20 March 2015

 



Abbreviations

Abbreviation	Brief description
A
A$	Australian dollar
ABCP	Asset-backed commercial paper
ABS1	Asset-backed security
ACF	Advances to core funding
ADR	American Depositary Receipt
ADS	American Depositary Share
AED	United Arab Emirates dirham
AIEA	Average interest-earning assets
ALCM	Asset, Liability and Capital Management
ALCO	Asset and Liability Management Committee
AML	Anti-money laundering
ARM1	Adjustable-rate mortgage
ARS	Argentine peso
B
Basel Committee	Basel Committee on Banking Supervision
Basel II1	2006 Basel Capital Accord
Basel III1	Basel Committee's reforms to strengthen global capital and liquidity rules
BBA	British Bankers' Association
BoCom	Bank of Communications Co., Limited, one of China's largest banks
Bps1	Basis points. One basis point is equal to one-hundredth of a percentage point
BRRD1	Bank Recovery and Resolution Directive (EU)
BRL	Brazilian real
BSA	Bank Secrecy Act (US)
BSM	Balance Sheet Management
C
C$	Canadian dollar
CAPM	Capital Asset Pricing Model
CCA	Consumer Credit Act (UK)
CCB1	Capital conservation buffer
CCR1	Counterparty credit risk
CCyB1	Countercyclical capital buffer
CD	Certificate of deposit
CDO1	Collateralised debt obligation
CDS1	Credit default swap
CET11	Common equity tier 1
CGU	Cash-generating unit
CHF	Swiss franc
CMB	Commercial Banking, a global business
CML1	Consumer and Mortgage Lending (US)
CNY	Chinese yuan
COSO	2013 Committee of the Sponsors of the Treadway Commission (US)
CP1	Commercial paper
CPB1	Capital planning buffer
CPI	Consumer price index
CRD1	Capital Requirements Directive
CRR1	Customer risk rating
CRR/CRD IV	Capital Requirements Regulation and Directive
CRS	Card and Retail Services
CVA1	Credit valuation adjustment
D
DANY DPA	Two-year deferred prosecution agreement with the New York County District Attorney (US)
Dodd-Frank	Dodd-Frank Wall Street Reform and Consumer Protection Act (US)
DoJ	Department of Justice (US)
DPA	Deferred Prosecution Agreement (US)
DPF	Discretionary participation feature of insurance and investment contracts
DVA1	Debit valuation adjustment

Abbreviation	Brief description
E
EAD1	Exposure at default
EBA	European Banking Authority
ECB	European Central Bank
EDTF	Enhanced Disclosure Task Force
EGP	Egyptian pound
EL1	Expected loss
EMIR	European Market Infrastructure Regulation (EU)
EU	European Union
Euribor	European Interbank Offered Rate
F
Fannie Mae	Federal National Mortgage Association (US)
FCA	Financial Conduct Authority (UK)
FCA Direction	Undertaking originally with the FSA to comply with certain forward-looking obligations with respect to AML and sanctions requirements
FFVA	Funding fair value adjustment estimation methodology on derivative contracts
First Direct	A division of HSBC Bank plc
FPC	Financial Policy Committee (UK)
FRB	Federal Reserve Board (US)
Freddie Mac	Federal Home Loan Mortgage Corporation (US)
FSA	Financial Services Authority (UK)
FSB	Financial Stability Board
FSC	Forest Stewardship Council
FSVC	Financial System Vulnerabilities Committee
FTE	Full-time equivalent staff
FTSE	Financial Times - Stock Exchange index
FuM	Funds under management
G
GAAP	Generally accepted accounting principles
GAC	Group Audit Committee
GB&M	Global Banking and Markets, a global business
GDP	Gross domestic product
GENPRU	PRA's rules, as set out in the General Prudential Sourcebook
GLBA	Gramm-Leach-Bliley Act (US)
GMB	Group Management Board
GPB	Global Private Banking, a global business
GPSP	Group Performance Share Plan
GRC	Group Risk Committee
Group	HSBC Holdings together with its subsidiary undertakings
G-SIB1	Global systemically important bank
G-SII	Global systemically important institution
H
Hang Seng Bank	Hang Seng Bank Limited, one of Hong Kong's largest banks
HK$	Hong Kong dollar
HNAH	HSBC North America Holdings Inc.
Hong Kong	Hong Kong Special Administrative Region of the People's Republic of China
HSBC	HSBC Holdings together with its subsidiary undertakings
HSBC Bank	HSBC Bank plc
HSBC Bank Middle East	HSBC Bank Middle East Limited
HSBC Bank USA	HSBC Bank USA, N.A., HSBC's retail bank in the US
HSBC Canada	The sub-group, HSBC Bank Canada, HSBC Trust Company Canada, HSBC Mortgage Corporation Canada and HSBC Securities Canada, consolidated for liquidity purposes
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

Abbreviation	Brief description
HSBC Premier	HSBC's premium personal global banking service
HSBC Private Bank (Suisse)	HSBC Private Bank (Suisse) SA, HSBC's private bank in Switzerland
HSBC USA	The sub-group, HSBC USA Inc (the holding company of HSBC Bank USA) and HSBC Bank USA, consolidated for liquidity purposes
HSI	HSBC Securities (USA) Inc.
HSSL	HSBC Securities Services (Luxembourg)
I
IAS	International Accounting Standards
IASB	International Accounting Standards Board
ICB	Independent Commission on Banking (UK)
IFRSs	International Financial Reporting Standards
Industrial Bank	Industrial Bank Co. Limited, a national joint-stock bank in mainland China in which Hang Seng Bank Limited has a shareholding
IRB1	Internal ratings-based
ISDA	International Swaps and Derivatives Association
K
KPMG	KPMG Audit Plc and its affiliates
L
LCR	Liquidity coverage ratio
LFRF	Liquidity and funding risk management framework
LGD1	Loss given default
Libor	London Interbank Offer Rate
LIC	Loan impairment charge and other credit risk provision
LMU	Loan Management Unit, part of Wholesale Credit and Market Risk
LTV1	Loan-to-value ratio
M
Madoff Securities	Bernard L Madoff Investment Securities LLC
Mainland China	People's Republic of China excluding Hong Kong
Markets	HSBC's treasury and capital markets services in Global Banking and Markets
Mazarin	Mazarin Funding Limited, an asset-backed CP conduit
MBS	US mortgage-backed security
MENA	Middle East and North Africa
MME	Mid-market enterprise
Monoline1	Monoline insurance company
MSCI	Morgan Stanley Capital International index
MTN	Medium-term notes
MXN	Mexican peso
N
NII	Net interest income
NSFR	Net stable funding ratio
NYSE	New York Stock Exchange
O
OCC	Office of the Comptroller of the Currency (US)
OIS	Overnight index swap
ORMF	Operational risk management framework
OTC1	Over-the-counter
P
PD1	Probability of default
PEFC	Programme for the Endorsement of Forest Certification
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, Ltd, the second-largest life insurer in the PRC
PPI	Payment protection insurance product
PRA	Prudential Regulation Authority (UK)

Abbreviation	Brief description
PRC	People's Republic of China
Premier	HSBC Premier, HSBC's premium personal global banking service
PVIF	Present value of in-force long-term insurance business and long-term investment contracts with DPF
PwC	PricewaterhouseCoopers LLP and its network of firms
Q
QIS	Quantitative Impact Study
R
RBWM	Retail Banking and Wealth Management, a global business
Repo1	Sale and repurchase transaction
Restricted Shares	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
Risk Management Meeting	A meeting of the Group Management Board providing oversight of enterprise-wide management of all risks
RM	Malaysian ringgit
RMB	Renminbi
RMBS	Residential mortgage-backed securities
RMs	Relationship managers
RNIV	Risk not in Var
RoRWA	Return on average risk-weighted assets
ROTE	Return on tangible equity
RPI	Retail price index (UK)
RSPO	Roundtable on Sustainable Palm Oil
RTS	Regulatory Technical Standards
RWA1	Risk-weighted assets
S
SE	Structured entity
SEC	Securities and Exchange Commission (US)
SIC	Securities investment conduit
SME	Small and medium-sized enterprise
Solitaire	Solitaire Funding Limited, a special purpose entity managed by HSBC
SPE1	Special purpose entity
SRB1	Systemic Risk Buffer
T
The Hongkong and Shanghai Banking Corporation	The Hongkong and Shanghai Banking Corporation Limited, the founding member of HSBC
TLAC1	Total loss absorbing capacity
TRL	Turkish lira
TSA	Transition Servicing Agreement - relating to the sale of the CRS business in the US
TSR	Total shareholder return
U
UAE	United Arab Emirates
UK	United Kingdom
US$	United States dollar
US	United States of America
US DPA	Five-year deferred prosecution agreement with the Department of Justice and others (US)
US run-off portfolio	Includes our CML, vehicle finance and Taxpayer Financial Services businesses and insurance, commercial, corporate and treasury activities in HSBC Finance on an IFRSs management basis
V
VaR1	Value at risk
Visa	Visa Inc.
VIU	Value in use

1   Full definition included in Glossary on page 470.

Glossary

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 government 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-inable debt	Bail-in refers to 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).
Bank levy	A levy that applies to UK banks, building societies and the UK operations of foreign banks from 1 January 2011. The amount payable is based on a percentage of the group's consolidated liabilities and equity as at 31 December after deducting certain items the most material of which are those related to insured deposit balances, tier 1 capital, insurance liabilities, high quality liquid assets and items subject to a legally enforceable net settlement agreement.
Bank Recovery and Resolution Directive ('BRRD')	A European legislative package issued by the European Commission and adopted by EU Member States. This directive was finalised in July 2014 with the majority of provisions coming into effect 1 January 2015. This introduces a common EU framework for how authorities should intervene to address banks which are failing or are likely to fail. The framework includes early intervention and measures designed to prevent failure and in the event of bank failure for authorities to ensure an orderly resolution.
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', amended by subsequent changes to the capital requirements for market risk and re-securitisations, commonly known as Basel 2.5, which took effect from 31 December 2011.
Basel III	In December 2010, the Basel Committee issued 'Basel III rules: a global regulatory framework for more resilient banks and banking systems' and '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. In June 2011, the Basel Committee issued a revision to the former document setting out the finalised capital treatment for counterparty credit risk in bilateral trades.
Basis point ('bps')	One hundredth of a per cent (0.01%), so 100 basis points is 1%. For example, this is used in quoting movements in interest rates or yields on securities.
C
Capital conservation buffer ('CCB')	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, capital distributions will be constrained by the regulators.
Capital planning buffer ('CPB')	A capital buffer, prescribed by the PRA 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.
Capital requirements directive ('CRD')	A capital adequacy legislative package issued by the European Commission and adopted by EU member states. The first CRD legislative package gave effect to the Basel II proposals in the EU and came into force on 20 July 2006. CRD II, which came into force on 31 December 2010, subsequently updated the requirements for capital instruments, large exposure, liquidity risk and securitisation. A further CRD III amendment, updated market risk capital and additional securitisation requirements, and came into force on 31 December 2011. CRD IV package comprises a recast Capital Requirements Directive and a new Capital Requirements Regulation. The package implements the Basel III capital proposals together with transitional arrangements for some of its requirements. CRD IV came into force on 1 January 2014.
Capital securities	Capital securities include perpetual subordinated capital securities and contingent convertible capital securities.
Central counterparty ('CCP')	An intermediary between a buyer and a seller (generally a clearing house).
Clawback	Remuneration already paid to an individual, which has to be returned to an organisation under certain circumstances.
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.
Term	Definition
Collectively assessed impairment	Impairment assessment on a collective basis for homogeneous groups of loans that are not considered individually significant and to cover losses which have been incurred but have not yet been identified on loans subject to individual assessment.
Commercial paper ('CP')	An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. The debt is usually issued at a discount, reflecting prevailing market interest rates.
Commercial real estate	Any real estate, comprising buildings or land, intended to generate a profit, either from capital gain or rental income.
Common equity tier 1 capital ('CET1')	The highest quality form of regulatory capital under Basel III that comprises common shares issued and related share premium, retained earnings and other reserves excluding the cash flow hedging reserve, less specified regulatory adjustments.
CET 1 ratio	A Basel III measure, of CET 1 capital expressed as percentage of total risk exposure amount.
Common reporting ('COREP')	Harmonised European reporting framework established in the Capital Requirements Directives, to be mandated by the European Banking Authority.
Compliance risk	The risk that the Group fails to observe the letter and spirit of all relevant laws, codes, rules, regulations and standards of good market practice, and incurs fines and penalties and suffers damage to its business as a consequence.
Comprehensive Capital Analysis and Review ('CCAR')	CCAR is an annual exercise by the Federal Reserve to ensure that institutions have robust, forward-looking capital planning processes that account for their unique risks and sufficient capital to continue operations throughout times of economic and financial stress.
Conduits	HSBC sponsors and manages multi-seller conduits and 'SIC's. The multi-seller conduits hold interests in diversified pools of third-party assets such as vehicle loans, trade receivables and credit card receivables funded through the issuance of short-dated commercial paper and supported by a liquidity facility. The SICs hold predominantly asset-backed securities referencing such items as commercial and residential mortgages, vehicle loans and credit card receivables funded through the issuance of both long-term and short-term debt.
Constant currency	A non-GAAP financial measure that adjusts for the year-on-year effects of foreign currency translation differences by comparing reported results for the reported period with reported results for comparative period retranslated at exchange rates for the reported period. The foreign currency translation differences reflect the movements of the US dollar against most major currencies during the reported period.
Constant net asset value fund ('CNAV')	A fund that prices its assets on an amortised cost basis, subject to the amortised book value of the portfolio remaining within 50 basis points of its market value.
Consumer and Mortgage Lending ('CML')	In the US, the CML portfolio consists of our Consumer Lending and Mortgage Services businesses, which are in run-off. The Consumer Lending business offered secured and unsecured loan products, such as first and second lien mortgage loans, open-ended home equity loans and personal non-credit card loans through branch locations and direct mail. The majority of the mortgage lending products were for refinancing and debt consolidation rather than home purchases. In the first quarter of 2009, we discontinued all originations by our Consumer Lending business. Prior to the first quarter of 2007, when we ceased loan purchase activity, the Mortgage Services business purchased non-conforming first and second lien real estate secured loans from unaffiliated third parties. The business also included the operations of Decision One Mortgage Company ('Decision One'), which historically originated mortgage loans sourced by independent mortgage brokers and sold these to secondary market purchasers. Decision One ceased originations in September 2007.
Contractual maturities	The date on which the final payment (principal or interest) of any financial instrument is due to be paid, at which point all the remaining outstanding principal and interest have been repaid.
Core tier 1 capital	The highest quality form of regulatory capital, under Basel II, that comprises total shareholders' equity and related non-controlling interests, less goodwill and intangible assets and certain other regulatory adjustments.
Core tier 1 capital ratio	A Basel II measure, of core tier 1 capital expressed as a percentage of the total risk-weighted assets.
Countercyclical capital buffer ('CCyB')	A capital buffer prescribed by regulators under Basel III which aims to ensure that capital requirements take account of the macro-financial environment in which banks operate. This will provide the banking sector with additional capital to protect it against potential future losses, when excess credit growth in the financial system as a whole is associated with an increase in system-wide risk.
Counterparty credit risk ('CCR')	Counterparty credit risk, in both the trading and non-trading books, is the risk that the counterparty to a transaction may default before completing the satisfactory settlement of the transaction.
Credit default swap ('CDS')	A derivative contract whereby a buyer pays a fee to a seller in return for receiving a payment in the event of a defined credit event (e.g. bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency) on an underlying obligation (which may or may not be held by the buyer).
Credit enhancements	Facilities used to enhance the creditworthiness of financial obligations and cover losses due to asset default.
Credit risk	Risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises mainly from direct lending, trade finance and leasing business, but also from products such as guarantees, derivatives and debt securities.
Credit risk mitigation	A technique to reduce the credit risk associated with an exposure by application of credit risk mitigants such as collateral, guarantee and credit 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.
Credit spread risk	The risk that movements in credit spreads will affect the value of financial instruments.
Credit valuation adjustment ('CVA')	An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties.
Customer deposits	Money deposited by account holders. Such funds are recorded as liabilities.
Term	Definition
Customer remediation	Activities carried out by HSBC to compensate customers for losses or damages associated with a failure to comply with regulations. Customer remediation is initiated by HSBC in response to customer complaints, and not specifically initiated by regulatory action.
Customer risk rating ('CRR')	A scale of 23 grades measuring obligor PD.
CVA risk capital charge	A capital charge under CRDIV to cover the risk of mark-to-market losses on expected counterparty risk to derivatives.
D
Debit valuation adjustment ('DVA')	An adjustment made by an entity to the valuation of OTC derivative liabilities to reflect within fair value the entity's own credit risk.
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 liabilities of the Group and include certificates of deposits.
Deed-in-lieu	An arrangement in which a borrower surrenders the deed for a property to the lender without going through foreclosure proceedings and is subsequently released from any further obligations on the loan.
Defined benefit obligation	The present value of expected future payments required to settle the obligations of a defined benefit plan resulting from employee service.
Deposits by banks	All deposits received from domestic and foreign banks, excluding deposits or liabilities in the form of debt securities or for which transferable certificates have been issued.
Down-shock	Term given to the effect on our future net interest income of an incremental parallel fall in all yield curves worldwide at the beginning of each quarter during the 12 months from 1 January 2015, assuming no management response. An equivalent rise in yield curves is referred to as an up-shock.
E
Economic capital	The internally calculated capital requirement which is deemed necessary by HSBC to support the risks to which it is exposed.
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.
Economic Value of Equity ('EVE') sensitivity	Considers all re-pricing mismatches in the current balance sheet and calculates the change in market value that would result from a set of defined interest rate shocks.
Encumbered assets	Assets on our balance sheet which have been pledged as collateral against an existing liability.
Enhanced Variable Net Asset Value Fund ('ENAV')	A fund that prices its assets on a fair value basis. Consequently, process may change from one day to the next.
Equator Principles	The Equator Principles are used by financial institutions to reduce the potential impact of large projects, which they finance, on people or on the environment.
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.
Eurozone	The 18 European Union countries using the euro as their common currency. The 18 countries are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain.
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 PD (a percentage) by the EAD (an amount) and LGD (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.
Fiduciary risk	The risk to the Group of breaching its fiduciary duties where it acts in a fiduciary capacity as trustee, investment manager or as mandated by law or regulation.
Financial Conduct Authority ('FCA')	The Financial Conduct Authority regulates the conduct of financial firms and, for certain firms, prudential standards in the UK. It has a strategic objective to ensure that the relevant markets function well.
Financial Policy Committee ('FPC')	The Financial Policy Committee, at the Bank of England, is charged with a primary objective of identifying, monitoring and taking action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system. The FPC has a secondary objective to support the economic policy of the UK Government.
Financial Reporting ('FINREP')	Harmonised European financial reporting framework, proposed by the European Union, which will be used to obtain a comprehensive view of a firm's risk profile.
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.
Term	Definition
Forbearance strategies	Employed in order to improve the management of customer relationships, maximise collection opportunities and, if possible, avoid default, 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, other modifications and re‑ages.
Funded exposure	A situation 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.
G
Gap risk	The risk of financial loss arising from a significant change in market price with no accompanying trading opportunity.
Global systemically important bank ('G-SIB')	The FSB established in November 2011 a methodology to identify G-SIBs based on 12 principal indicators. Designation will result in the application of a CET1 buffer between 1% and 3.5%, to be phased in by 1 January 2019. The list of G-SIBs is re-assessed through annual re-scoring of banks and a triennial review of the methodology. National regulators have discretion to introduce higher charges than the minima. In CRD IV this is implemented via the Global Systemically Important Institutions (G-SII) Buffer.
Government-sponsored enterprises ('GSE's)	A group of financial services enterprises created by the US Congress 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 of HSBC Holdings ordinary shares to which the employee will become entitled, generally five years from the date of the award, and normally subject to individual remaining in employment. The shares to which the employee becomes entitled are subject to a retention requirement until cessation of employment.
Guarantee	An undertaking by a party to pay a creditor should a debtor fail to do so.
H
Haircut	A discount applied by management when determining the amount at which an asset can be realised. The discount takes into account the method of realisation including the extent to which an active market for the asset exists.
Historical rating transition matrices	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 in the majority of cases by a second lien or lower ranking charge over residential property. Holdings of HELoCs are classified as sub-prime.
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 Manufacturing	The writing of contracts that fall within the scope of insurance regulation by a Group subsidiary authorised to write such business. The risks and rewards of writing the insurance business are retained by HSBC (or reinsured in line with our reinsurance strategy). The balance sheet analysis presented in the Risk Management of Insurance Operations section shows the aggregated full balance sheets of these entities.
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	One of three approaches defined in the Basel Framework 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, adjusted for certain reserves and goodwill previously amortised or written off.
Investment grade	Represents a risk profile similar to a rating of BBB- or better, as defined by an external rating agency.
IRB advanced approach ('AIRB')	A method of calculating credit risk capital requirements using internal PD, LGD and EAD models.
IRB foundation approach ('FIRB')	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 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
Legacy credit in GB&M	A separately identifiable, discretely managed business comprising Solitaire Funding Limited, the securities investment conduits, the asset-backed securities trading portfolios and credit correlation portfolios, derivative transactions entered into directly with monoline insurers, and certain other structured credit transactions.

Term	Definition
Legal proceedings	Civil court, arbitration or tribunal proceedings brought against HSBC companies (whether by way of claim or counterclaim) or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings.
Legal risk	The risk of financial loss, sanction and/or reputational damage resulting from contractual risk (the risk that the rights and/or obligations of a Group member within a contractual relationship are defective); dispute risk (the risk due to an adverse dispute environment or the management of potential or actual disputes); legislative risk (the risk that a Group member fails to adhere to laws of the jurisdiction in which it operates); and non-contractual rights risk (the risk that a Group member's assets are not properly owned or are infringed by others or the infringement by a Group member of another party's rights).
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 coverage ratio ('LCR')	The ratio of the stock of high quality liquid assets to expected net cash outflows over the following 30 days. High quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. The Basel III rules require this ratio to be at least 100% with effect from 2015. The LCR is still subject to an observation period and review to address any unintended consequences.
Liquidity enhancement	Liquidity enhancement makes funds available if required for reasons other than asset default, e.g. to ensure timely repayment of maturing commercial paper.
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 re-age	An account management action that results in the resetting of the contractual delinquency status of an account to up-to-date upon fulfilment of certain requirements which indicate that payments are expected to be made in accordance with the contractual terms.
Loans past due	Loans on which repayments are overdue.
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.
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
Malus	An arrangement that permits an organisation to prevent vesting of all or part of the amount of a deferred remuneration award in relation to risk outcomes or performance.
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)	Issued by corporates across a range of maturities. Under MTN Programmes notes are offered on a regular and continuous basis to investors.
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	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 interest income sensitivity	Considers all pricing mismatches in the current balance sheet, with suitable assumptions for balance sheet growth in the future, and calculates the change in net interest income that would result from a set of defined interest rate shocks.

Term	Definition
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.
Net stable funding ratio ('NSFR')	The ratio of available stable funding to required stable funding over a one year time horizon, assuming a stressed scenario. Available stable funding would include items such as equity capital, preferred stock with a maturity of over one year and liabilities with an assessed maturity of over one year. The Basel III rules require this ratio to be over 100% with effect from 2018. The NSFR is still subject to an observation period and review to address any unintended consequences.
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.
Non-trading portfolios	Portfolios that comprise positions that primarily arise from the interest rate management of our retail and commercial banking assets and liabilities, financial investments designated as available for sale and held to maturity, and exposures arising from our insurance operations.
Non-trading risk	The market risk arising from non-trading portfolios.
O
Offset mortgages	A flexible type of mortgage where a borrower's savings balance(s) held at the same institution can be used to offset the mortgage balance outstanding. The borrower pays interest on the net balance which is calculated by subtracting the credit balance(s) from the debit balance. As part of the offset mortgage a total facility limit is agreed and the borrower may redraw up to a pre-agreed limit.
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
Pension risk	The risk that contributions from Group companies and members fail to generate sufficient funds to meet the cost of accruing benefits for the future service of active members, and the risk that the performance of assets held in pension funds is insufficient to cover existing pension liabilities.
Performance shares	Awards of HSBC Holdings ordinary shares under employee share plans that are subject to the achievement of corporate performance conditions.
Personal lending	See 'Retail loans'.
PRA standard rules	The method prescribed by the PRA for calculating market risk capital requirements in the absence of VaR model approval.
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 one year.
Profit participation contribution ('PIS')	A federal tax which is imposed monthly on gross revenue earned by legal entities in Brazil.  It is a mandatory employer contribution to an employee savings initiative.
Prudential Regulation Authority ('PRA')	The Prudential Regulation Authority in the UK is responsible for prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms.
R
Refi rate	The refi (or refinancing) rate is set by the European Central Bank ('ECB') and is the price banks pay to borrow from ECB.
Regulatory capital	The capital which HSBC holds, determined in accordance with rules established by the PRA for the consolidated Group and by local regulators for individual Group companies.
Regulatory matters	Investigations, reviews and other actions carried out by, or in response to the actions of, regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC.
Renegotiated loans	Loans for which the contractual payment terms have been changed because of significant concerns about the borrower's ability to meet the contractual payments when due.
Repo/reverse repo (or sale and repurchase agreement)	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 reverse repurchase agreement or a reverse repo.
Reputational risk	The risk that illegal, unethical or inappropriate behaviour by the Group itself, members of staff or clients or representatives of the Group will damage HSBC's reputation, leading, potentially, to a loss of business, fines or penalties.
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 retention requirement.
Retail loans	Money lent to individuals rather than institutions. This includes both secured and unsecured loans such as mortgages and credit card balances.
Return on equity	Profit attributable to ordinary shareholders of the parent company divided by average ordinary shareholders' equity.

Term	Definition
Risk appetite	The aggregate level and types of risk a firm is willing to assume within its risk capacity to achieve its strategic objectives and business plan.
Risk capacity	The maximum level of risk the firm can assume before breaching constraints determined by regulatory capital and liquidity needs and its obligations, also from a conduct perspective, to depositors, policyholders, other customers and shareholders.
Risk-weighted assets ('RWA's)	Calculated by assigning a degree of risk expressed as a percentage (risk weight) to an exposure value in accordance with the applicable Standardised or IRB approach rules.
Run-off portfolios	Legacy credit in GB&M, the US CML portfolio and other US run-off portfolios, including the treasury services related to the US CML businesses and commercial operations in run-off. Origination of new business in the run-off portfolios has been discontinued and balances are being managed down through attrition and sale.
S
Sale and repurchase agreement	See repo above.
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 SE 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.
Securitisation swap	An interest rate or cross currency swap with notional linked to the size of the outstanding asset portfolio in a securitisation. Securitisation swaps are typically executed by securitisation vehicles to hedge interest rate risk arising from mismatches between the interest rate risk profile of the asset portfolio and that of the securities issued by the vehicle.
Short sale	In relation to credit risk management, a 'short sale' is an arrangement in which a bank permits the borrower to sell the property for less than the amount outstanding under a loan agreement. The proceeds are used to reduce the outstanding loan balance and the borrower is subsequently released from any further obligations on the loan.
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.
Six filters	An internal measure designed to improve capital deployment across the Group. Five of the filters examine the strategic relevance of each business in each country, in terms of connectivity and economic development, and the current returns, in terms of profitability, cost efficiency and liquidity. The sixth filter requires adherence to global risk standards.
Social security financing contribution ('COFINS')	A federal tax imposed monthly on gross revenue earned by legal entities in Brazil.  It is a contribution to finance the social security system.
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 Entity ('SPE')	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.
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.
Standardised approach ('STD')	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.
Stressed VaR	A market risk measure based on potential market movements for a continuous one-year period of stress for a trading portfolio
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.
Sustainable cost savings	Permanent cost reductions at a given level of business activity. Sustainable cost savings exclude cost avoidance and revenue and loan impairment charge benefits as these do not represent operational expense reductions. Cost savings resulting from business disposals are not classified as sustainable.

Term	Definition
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 to be applied 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, 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. Under Basel II, Tier 1 capital comprises of 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 eligible capital securities and any related share premium.  Under Basel II, Tier 2 capital comprises of 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.
Total Loss Absorbing Capacity ('TLAC')	A proposal by the FSB and not yet finalised 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 proposals 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.

Index

A

Abbreviations 466

Accounting

developments (future) 345

estimates and judgements 349, 366, 378, 403, 407, 420

policies (critical) 62

policies 345, 354, 355, 357, 359, 365, 371, 377, 378, 392, 394, 398, 399, 402, 403, 407, 410, 413, 416, 417, 418, 419, 420, 434, 437, 440, 441, 442, 443, 445

Accounts

approval 457

basis of preparation 63, 345

consolidation and related disclosures 348

presentation of information 347

Accruals, deferred income and other liabilities 418

Acquisitions and disposals 41, 241, 244, 260

Actuarial assumptions 363

Adjusted performance 29, 40

Advances to core funding ratio 165, 169, 216

Ageing analysis 136

Annual General Meeting293, 459

Anniversary (150th) 6,8

Anti-money laundering and sanctions 450

Areas of special interest 124

Asia 84

adjusted performance 87

balance sheet data 89, 375

collateral 147

constant currency/reported reconciliation 158

country business highlights 86

customer accounts 82

economic background 84

financial overview 85

impaired loans 137

lending 131, 132, 160

loan impairment charges/allowances 141, 142

mortgage loans 156

operating expenses 88

personal lending 151

principal operations 84

profit 84, 89, 374

profit/(loss) by country 85, 86

renegotiated loans 139, 140

reverse repos 151

risk-weighted assets 240

staff numbers 84

wholesale lending 144, 145

Asset-backed securities 214

Assets

average balance sheet 46

by country 376

by geographical region 78, 82, 89, 94, 99, 104, 375

by global business 63, 82, 89, 94, 99, 104

charged as security 401

constant currency/reported reconciliation 59

customer accounts 61

deferred tax 331, 365, 366, 367, 368

encumbered/unencumbered 171, 220, 472

financial accounting/regulatory reconciliation 249

five years 57

held for sale 349, 352, 416

held in custody and under administration 106

intangible 407, 410, 413

liquid assets of principal operating entities 166

maturity analysis 426

movement in 2014 58

other 416

risk-weighted 31, 62, 63, 78, 239-244, 476

total 30, 57, 59, 76, 82, 89, 94, 99, 104, 337, 341, 427

trading 377

transferred (accounting policy) 402

Associates and joint ventures 403

accounting policy 403

Bank of Communications 404

contingent liabilities 442

critical accounting estimates and judgements 403

interests in 332, 406

reported/adjusted reconciliation 44

share of profit in 30, 55

transactions with other related parties 456

Auditor

arrangements 279

remuneration 364

report 329

B

Back-testing 177, 224, 470

Balance sheet

average 46

consolidated 57, 337

constant currency/reported reconciliation 59

data 57, 76, 82, 89, 94, 99, 104

HSBC Holdings 341

insurance manufacturing subsidiaries 191

linkages 179

movement in 2014 30, 58

regulatory 248

Balance Sheet Management 181, 227

Bancassurance 190

Banking standards 5

Basel 31, 123, 164, 218, 239, 251, 470

Behaviouralisation 181, 218, 226

Board of Directors 270

balance and independence 272

changes 6

committees 15, 276

information and support 272

meetings 271

powers 271

Brand 32

Brazilian labour claims 422

Brazilian social security claims 441

Buffers (capital) 239, 252

Business model 12

C

Capital 239

generation 245, 258

management 257

measurement and allocation 258

movement in regulatory capital in 2014 245

overview 239

ratios 31, 239, 471

regulatory 245, 247

resources 57

risks to capital 257

strength 3, 31

structure 245

Carbon dioxide emissions 38

Cash and cash equivalents 440

accounting policy 440

Cash flow

consolidated statement 338

Hedges 397

HSBC Holdings 342

notes 439

payable by contractual maturities 173

Cautionary statement regarding forward-looking statements 2

Chairman's Committee 15, 288

Chinese translation 461

Client assets 73

Climate business 37

Collateral and credit enhancements 146, 150, 156, 171, 213

management 220

Commercial Banking 16, 17, 22, 67

Commercial real estate 145

Committees (Board) 276

Communication with shareholders 298, 460

Compliance risk 115, 189

Concentration of exposure 132

Conduct & Values committee 15, 286

Conduits 443

Consent orders 120

Constant currency 41

Consumer Credit Act 422

Contents inside front cover

Contingent liabilities, contractual commitments and guarantees 441

accounting policy 441

Contractual maturity of financial liabilities 173

Corporate governance 263

codes report 275

Cost efficiency ratio 3, 28, 55, 79, 84, 91, 96, 101

Counterparty credit risk 243

Country business highlights 80, 86, 92

Credit default swap regulatory investigation 454

Credit exposure 130, 149

Credit quality 207

classifications 207

Credit risk 129, 206, 258, 260

in 2014 129

insurance 196

management thereof 206

policies and practices 206

risk-weighted assets 240

Credit valuation adjustment 382

Critical accounting estimates and judgements 349, 366, 378, 403, 407, 420

Cross-border exposures 169

Customer accounts 30, 61, 82, 89, 94, 99, 104

Customers 16, 17, 18

Customer deposit markets 164

Customer lending and deposit (combined) 60

Customers service and satisfaction 17

D

Dealings in HSBC Holdings plc shares 299

Debit valuation adjustment 382

Debt securities in issue 418

accounting policy 418

Defined terms inside front cover

Deposits

combined view 60

core 216

average balances and average rates 46

Derivatives 149, 382, 394, 422

accounting policy 394

Directors 270

appointments and re-election 271

benefits 318

biographies 264

conflicts of interest 274

emoluments 324, 364

executive 270

exit payments 318

fees 318

induction 273

interests 297, 320

loss of office 318

non-executive 270

other directorships 307

pensions 318

performance evaluation 274

relations with shareholders 274

remuneration (executive) 34, 300, 303, 311, 313

remuneration (non-executive) 306

responsibilities (statement of) 328

service contracts 306

training and development 273

variable pay 303, 309, 310

Disclosure philosophy 107

Disposal gains / groups 41

Disposals 440

Dispute risk 122

Diversity and inclusion 19, 291

Dividends 298, 370, 458

income 353

payout ratio 32

per share 3, 45

Donations 38

E

Earnings per share 29, 45, 371

Economic background

Asia 84

Europe 79

Latin America 101

Middle East and North Africa 91

North America 96

Economic contribution 33

Economic plans: HSBC Bank Brazil 454

Employees

compensation and benefits 356

development 19, 291

disabled 291

diversity and inclusion 19, 291

engagement 21, 288

gender balance 20

health, welfare and safety 20, 291

highest paid 325

material risk takers 327

numbers 1, 18, 54, 79, 84, 91, 96, 101

profile of leadership 19

relations 291

remuneration policy 34, 292

reward 291

risk 112

share plans 292

sign-on and severance 327

volunteering 37

whistleblowing 20

Encumbered assets 171, 220, 472

Enhanced Disclosure Task Force 108

Enquiries (from shareholders) 460

Equity

constant currency/reported reconciliation 59

movement in 2014 59

Equity securities 179, 226

Europe 79

adjusted performance 81

balance sheet data 82, 375

collateral 147

constant currency/reported reconciliation 158

country business highlights 80

customer accounts 61

economic background 79

financial overview 79

impaired loans 137

lending 131, 132, 160

loan impairment charges/allowances 141, 142

mortgage loans 156

operating expenses 81

personal lending 151

principal operations 79

profit/(loss) 79, 82, 374

profit/(loss) by country 80

regulatory update 254

profit/(loss) by country 80

renegotiated loans 139, 140

reverse repos 151

risk-weighted assets 240

staff numbers 79

wholesale lending 144, 145

Eurozone 126

Events after the balance sheet date 457

Executive risk 122

F

Fair value

accounting policy 378

adjustments 381

control framework 378

reconciliation 384

valuation bases 383

Fee income (net) 48, 353

Fiduciary risk 115, 200

Filters (six) 12

Financial assets 392

accounting policy 392, 402

designated at fair value 181

not qualifying for de-recognition 402

Financial crime compliance and regulatory compliance 124

Financial guarantee contracts 442

accounting policy 441

Financial instruments 378, 390

accounting policy (fair value) 378

accounting policy (valuation) 354

at fair value 330

credit quality 133, 207

critical accounting estimates and judgements (valuation) 378

net income from 50, 354

not at fair value 390

past due but not impaired 136

Financial investments 60, 399

accounting policy 399

gains less losses from 51

Financial liabilities designated at fair value 181, 379, 417

accounting policy 417

contractual maturities 173

Financial overview 79, 85, 91, 96, 101

Financial risks (insurance) 194

Financial Services Compensation Scheme 442

Financial System Vulnerabilities Committee 15, 282

Financial statements 334

changes to presentation 346

Five-year comparison 45, 57, 157, 159

Fixed pay 39, 40, 303, 311

Footnotes 39, 109, 202, 256, 344

Forbearance 139, 208, 350

Foreclosures 208, 449

Foreign currencies/exchange

accounting policy 348

exposures 435

investigations and litigation 453

rates 57

translation differences 41

Funding fair value adjustments 353

Funding sources (diversity) 168, 215

Funds transfer pricing 219

Funds under management 106

G

Geographical regions 13,78

Global businesses 16, 63

Global Banking and Markets 16, 17, 22, 70, 381

Global functions 13

Global People Survey 19

Global Private Banking 4, 16, 18, 22, 72, 124

Glossary 470

Going concern 290, 348

Goodwill 407

accounting policy 407

critical accounting estimates and judgements 407

impairment 331

Governance 15, 27

Group Audit Committee 15, 277, 290

Group CEO

annual performance 316

biography 264

bonus scorecard 264

interests in shares 320

remuneration 313

remuneration history 319

responsibilities 270

review 7

Group Chairman

biography 264

interest in shares 320

letter 263

responsibilities 270

statement 4

Group Chief Risk Officer

annual performance 317

biography 267

bonus scorecard 323

interests in shares 320

remuneration 311, 313

Group Company Secretary

biography 268

role 272

Group Finance Director

annual performance 317

biography 267

bonus scorecard 323

interests in shares 320

remuneration 311, 313

Group Management Board 15, 276

Group Remuneration Committee 15, 284, 300, 307

Group Risk Committee 15, 280, 290

Growth priorities 66, 68, 71, 74

Guarantees 442

H

Health and safety 291

Held for sale assets 349, 352

accounting policy 416

Highlights 3

HSBC Finance

foreclosures 153

loan modifications 154

HSBC Holdings plc

balance sheet 341

cash flow 174, 221, 342

credit risk 161

deferred tax 370

Directors' emoluments 364

dividends 370

employee compensation 364

financial assets and liabilities 389

financial instruments not at fair value 392

foreign exchange VaR 183

liquidity and funding 174

market risk 183

maturity analysis of assets and liabilities 432

net income from financial instruments 354

operating model 13

related parties 457

repricing gap maturities 185

share capital 439

statement of changes in equity 343

structural foreign exchange exposures 435

subordinated liabilities 425

Human rights 38

I

Impairment

accounting policy 350

allowances 142, 159

assessment 212

available-for-sale financial assets 352

charges 29, 53, 141, 159

constant currency/reported reconciliation 158

critical accounting estimates and judgements 349

goodwill 407

impaired loans 137, 329

methodologies 213

movement by industry and geographical region 142

reported/adjusted reconciliation 44

Income statement (consolidated) 45, 335

Information on HSBC (availability thereof) 461

Insurance 190

accounting policy 354, 355

asset and liability matching 191

balance sheet of manufacturing subsidiaries 193

bancassurance model 190

claims incurred (net) and movements in liabilities to policyholders 53, 355

in 2014 191

net earned premiums 51

premium income 354

PVIF business 52

reinsurers' share of liabilities 197

risk 116, 117, 194, 198

Intangible assets 410

accounting policy 410

movements 413

Interest income/expense (net) 46, 353

accounting policy 354

average balance sheet 46

sensitivities 181, 184

Interest rate derivatives 422

Interim management statements 459

Interim results 459

Internal control 288

Internet crime 123

IFRSs and Hong Kong Financial Reporting Standards comparison 345

Investment criteria 12

Investment properties 416

Investor relations 461

J

Joint ventures 403, 406, 456

K

Key management personnel 455

Key performance indicators 29, 30, 31, 32

L

Latin America 101

adjusted performance 102

balance sheet data 104, 375

collateral 147

constant currency/reported reconciliation 158

country business highlights 102

customer accounts 61

economic background 101

financial overview 101

impaired loans 137

lending 131, 132, 160

loan impairment charges/allowances 141, 142

mortgage loans 156

operating expenses 103

personal lending 151

principal operations 101

profit 101, 104, 374

profit/(loss) by country 102

renegotiated loans 139, 140

reverse repos 151

risk-weighted assets 240

staff numbers 101

wholesale lending 144, 145

Lease commitments 442

accounting policy 442

Legal

proceedings and regulatory matters 330, 446

risk 229

Lending - combined view 60

Leveraged finance transactions 383, 474

Leverage ratio 251, 255, 261

Liabilities

average balance sheet 46

by geographical region 375

constant currency/reported reconciliation 59

deferred tax 367

financial accounting/regulatory reconciliations 249

five years 57

maturity analysis 426

movement in 2014 58

of disposal groups 418

other 418

retirement benefits 359

subordinated 423, 476

total 57, 59, 337, 341, 427

trading 417

under insurance contracts 28, 419

Libor, Euribor and other rates investigations 452

Liquidity and funding 163, 215

assets 166

behaviouralisation 218

description 164

funds transfer pricing 219

in 2014 164

insurance 197

management of risk 114, 165

net contractual cash flows 166

policies and procedures 215

primary sources of funding 168

regulation 164

Loans and advances

accounting policy 349

by country 160

by geographical region 131

by industry over 5 years 157

collateral 146, 150, 156, 171, 213

concentration of exposure 132

credit quality of 133

delinquency in the US 153

impairment 137, 141

past due but not impaired 136

renegotiated 138

to banks 291

to customers 30, 132

write-off 212

Loans Management Unit 213

M

Madoff 447

Market capitalisation 1, 33

Market risk 114, 175, 221, 259

balance sheet linkages 179

description 176

governance 222

in 2014 176

insurance 194

measures 223

risk-weighting assets 244

sensitivity analysis 181

Material risk takers 300, 327

Maturity analysis of assets and liabilities 426

Maximum exposure to credit risk 130

Middle East and North Africa 91

adjusted performance 92

balance sheet data 94, 375

collateral 147

constant currency/reported reconciliation 158

country business highlights 92

customer accounts 61

economic background 91

financial overview 91

impaired loans 137

lending 131, 132, 160

loan impairment charges/allowances 141, 142

mortgage loans 156

operating expenses 93

personal lending 151

principal operations 91

profit 91, 94, 374

profit/(loss) by country 92

renegotiated loans 139, 140

risk-weighted assets 240

staff numbers 91

wholesale lending 144, 145

Model risk 25, 122, 223

Monitor 27

Mortgages

lending 152

mortgage-backed securities 214, 474

US mortgage-related investigations 449

N

Nomination Committee 15, 284

Non-controlling interests 436

Non-GAAP measures 40

Non-interest income 353

Non-trading portfolios 178, 221, 225

North America 96

adjusted performance 97

balance sheet data 99, 375

collateral 147

constant currency/reported reconciliation 158

country business highlights 97

customer accounts 61

delinquency trends in the US 153

economic background 96

financial overview 96

impaired loans 137

lending 131, 132, 160

loan impairment charges/allowances 141, 142

mortgage lending 156

operating expenses 98

personal lending 151

principal operations 96

profit 96, 99, 374

profit/(loss) by country 97

renegotiated loans 139, 140

reverse repos 151

risk-weighted assets 240

staff numbers 96

wholesale lending 144

O

Offsetting 130, 434

accounting policy 434

Oil and gas prices 125

Operating expenses 30, 42, 54

by geographical region 81, 88, 93, 96, 103

by global business 65, 68, 71, 73, 75

reported/adjusted reconciliation 44

Operating income 52, 353, 375, 376

Operating profit 356

Operational risk 115, 186, 259

in 2014 187

losses/incidents 188

Ordinary shares 294

Organisation 13

Organisational structure chart 462

Other 75

Outlook 6

P

Paper use 37

Payment protection insurance 421

Pension plans 200, 237

accounting policy 359

defined benefit plans 183, 361

for directors 318

risk 116, 200

People risk 122

Performance 1, 5, 64

adjusted 29, 40, 65, 67, 70, 73, 75, 87, 92, 97, 102

reported 29, 64, 67, 70, 73, 75

Perpetual subordinated capital securities 370

Personal lending 151

Philanthropic and Community Investment Oversight Committee 15, 288

Pillar I, II and III 253, 258, 259, 260, 326

Ping An 77

Post-employment benefit plans 359, 456

accounting policy 359

Precious metals fix-related litigation and investigations 454

Preference shares 294, 437

Preferred securities 57

Prepayment, accrued income and other assets 416

accounting policy 416

Products and services 16, 371

Profit before tax 3, 28, 63, 76

by country 80, 85, 86, 92, 97, 102

by geographical region 44, 78, 79, 82, 84, 85, 89, 94, 96, 99, 101, 102, 104

by global business 44, 64, 65, 67, 70, 72, 73, 75, 76, 82, 89, 94, 99, 104

consolidated 45

reported/adjusted reconciliation 44

Profit for the year 28, 335, 372

Property plant and equipment 107, 416

accounting policy 416

Provisions 420

accounting policy 420

critical accounting estimates and judgements 420

Purpose 1

PVIF 52, 411

R

Ratios

advances to core funding 165, 169, 216

capital 239

capital strength 3, 31

common equity tier 1  31

core tier 1 (CET 1) 471

cost efficiency 3, 28, 55, 79, 84, 91, 96, 101, 104

customer advances to deposits 30

dividend payout 32

dividends per share 3

earnings per share 29, 45, 371

leverage 31, 251, 255, 261

return on average ordinary shareholders' equity 3

return on average total assets 30

return on risk-weighted assets 32, 79, 84, 91, 96, 101

return on tangible equity 29

stressed coverage 165, 216

Reconciliation of reported and adjusted items 44

Reconciliation of RoRWA 62

Recovery and resolution 14, 255

Regulatory

balance sheet 248

capital 239, 258

capital buffers 252

CRD IV 470

developments 252

landscape 5

reconciliation to financial accounting 248

review of consumer enhancement services products 455

risk 119, 120

stress tests 125, 254, 257

structured banking reform 14, 255

systemically important banks 15, 252, 473

UK update 254

Related party transactions 455

Remuneration

adjustment, malus & clawback 306

benefits 311

bonus scorecards 323

business context 301

committee 284, 300

committee members 284, 307

Directors 73

exit factors 318

fixed pay 39, 40, 303, 311

GPSP 314

in 2014 318

in 2015/16 302, 322

letter 300

Pillar 3 remuneration policy 326

policy 35, 303, 304, 305, 306

report 307

reward strategy 34, 300

scenarios 313

single figure 311

variable pay 34, 309

Renegotiated loans 138, 154, 208

Renewable energy 37

Representations and warranties 162

Repricing gap 185

Repurchase and reverse repurchase agreements 48, 151, 219, 398

accounting policy 398

Reputational risk 115, 199

Resolution strategy 14

Retail Banking and Wealth Management 16, 22, 64

principal RBWM business 63

Revenue 29, 42

by country 81, 87, 92, 97, 102

by geographical region 81, 87, 92, 97, 102

by global business 65, 67, 70, 73, 75

Ring-fencing (UK) 14

Risk 111

appetite 25, 27, 205

banking risks 114

committee 16, 276, 280

compliance 115, 189

conduct of business 121

contingent liquidity 167

counterparty 150, 243, 261, 471

credit 114, 129, 196, 206

credit spread 178, 226

cross-currency 221

data management 123

de-peg 225

dispute 122

economic outlook 118

eurozone 126

execution 122

factors 113

fiduciary 115, 200

financial (insurance) 116, 194

foreign exchange 183

gap risk 225

geopolitical 118

governance 111, 204

in 2014 21

information security 123

insurance operations 116, 117, 190, 198

interest rate 181, 226

internet crime 123

investigations 120

legal 229

liquidity and funding 114, 197

management 24, 112, 117, 215

market 114

model 25, 122, 223

oil and gas prices 125

operational 115

overview 21

people 122

pension 116, 200

policies and practices 204

profile 111, 117

refinance 214

regulatory 119, 120

reputational 115, 199

Russia 126

security and fraud 187, 230

stress testing 117

sustainability 116, 201

systems 231

third party 124

top and emerging 22, 111, 118

vendor 190, 231

Risk-weighted assets 31, 62, 260, 476

adjusted reconciliation 62

by geographical region 78

by global businesses 63

developments 254

five year trend 57

movement in 2014 239-244

run-off portfolios 32

targets 257

RoRWA (reconciliation of measures) 62, 79, 84

Russia 126

S

Sale and repurchase agreements 398, 476

accounting policy 398

Securities litigation 446

Securitisation

exposures 161, 214, 445

litigation 449

Security and fraud risk 187, 230

Segmental analysis 371

accounting policy 371

Senior management

biographies 268

emoluments 324

Sensitivities to non-economic assumptions (insurance) 198

Share-based payments 357

accounting policy 357

Share capital 294, 437

accounting policy 437

five year trend 57

in 2014 296

notifiable interests 298

rights and obligations 294

treasury shares 297

Share information 33

Share options 321, 359

Share plans

for directors 297, 320

for employees 292, 296

Shareholder (communications with) 460

numbers 1

profile 458

Significant items (other) 42, 47, 49, 51, 52, 54

Sources of funds 168

Standards (Global) 26, 27

Statement of changes in equity 339

Statement of comprehensive income 336

Stock symbols 461

Strategy 1, 11, 26, 64, 67, 70, 72

Streamlining 27

Stress testing 117, 125, 216, 224

Stressed coverage ratios 165, 216

Structural banking reform 14, 255

Structural foreign exchange exposure 181, 226, 435

Structured entities 415, 443, 476

accounting policy 443

Subordinated loan capital 57

Subsidiaries 413, 440

accounting policy 413

Sustainable savings 32

Sustainability 9, 36

committee 286

risk 116, 201

Systemically important banks 15, 255, 473

Systems risk 231, 477

T

Targets 32

Tax 365

accounting policy 365

collected for government 33

critical accounting estimates and judgements 366

deferred tax 331, 365, 366, 367, 368

expense 56

of shares and dividends 463

paid 33

paid by region and country 106

reconciliation 366

tax and broker-dealer investigations 451

Three lines of defence 112, 186

Tier 1 capital 258, 425, 438, 477

Total loss absorbing capacity 256

Total shareholder return 33, 319

Trading assets 377

accounting policy 377

Trading income (net) 49, 353

Trading liabilities 417

accounting policy 417

Trading portfolios 176, 221, 225

U

Unobservable inputs 386

V

Value at risk 176, 178, 223

Value creation 9

Values (HSBC) 10, 19

Vendor risk management 231

Volunteering 37

W

Whistleblowing 20, 287

Wholesale funding 169, 218

Wholesale lending 144

HSBC HOLDINGS PLC

Incorporated in England on 1 January 1959 with limited liability under the UK Companies Act
Registered in England: number 617987

REGISTERED OFFICE AND
GROUP HEAD OFFICE

     8 Canada Square
London E14 5HQ
United Kingdom
Telephone: [phone]
Facsimile: 44 020 7992 4880
Web: www.hsbc.com

REGISTRARS

Principal Register
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
Telephone: [phone]
Email: via website
Web: www.investorcentre.co.uk/contactus

Hong Kong Overseas Branch Register
Computershare Hong Kong Investor Services
Limited

     Rooms 1712-1716, 17th floor
Hopewell Centre
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Hong Kong
Telephone: [phone]

     Email: [e-mail]

     Web: www.computershare.com/hk/investors

Bermuda Overseas Branch Register
Investor Relations Team
HSBC Bank Bermuda Limited
6 Front Street
Hamilton HM11
Bermuda
Telephone: [phone]
Email: [e-mail]
Web: www.computershare.com/investor/bm

ADR Depositary
The Bank of New York Mellon
Depositary Receipts
PO Box 43006
Providence, RI 02940-3006
USA
Telephone (US): 1 877 283 5786

     Telephone (International): 1 201 680 6825

     Email: [e-mail]

     Web: www.bnymellon.com/shareowner

Paying Agent (France)
HSBC France
103 avenue des Champs Elysées
75419 Paris Cedex 08
France
Telephone: [phone]
Email: ost-agence-des-titres-hsbc-reims.hbfr-
   [e-mail]

     Web: www.hsbc.fr

STOCKBROKERS

Goldman Sachs International
Peterborough Court
133 Fleet Street
London EC4A 2BB
United Kingdom

Credit Suisse Securities (Europe) Limited
1 Cabot Square
London E14 4QT
United Kingdom

HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom

 

END

 

 

ACSURVURVWAOUAR