Annual Financial Report - 48x of 48

RNS Number : 3993B

HSBC Holdings PLC

03 April 2013

 



Abbreviations

Abbreviation	Brief description
A
A$	Australian dollar
ABS1	Asset-backed security
ADR	American Depositary Receipt
ADS	American Depositary Share
ALCM	Asset and Liability Capital Management
ALCO	Asset and Liability Management Committee
AML	Anti-money laundering
ARM1	Adjustable-rate mortgage
ARS	Argentinian peso
B
Basel Committee	Basel Committee on Banking Supervision
Basel I	1988 Basel Capital Accord
Basel II1	2006 Basel Capital Accord
Basel III1	Basel Committee's reforms to strengthen global capital and liquidity rules
BMD	Bermudan dollar
BoCom	Bank of Communications Co., Limited, mainland China's fourth largest bank by market capitalisation
Bps1	Basis points. One basis point is equal to one hundredth of a percentage point
BRL	Brazilian real
BSA	Bank Secrecy Act, US
BSM	Balance Sheet Management
C
C$	Canadian dollar
CCP1	Central counterparty
CCR1	Counterparty credit risk
CD	Certificate of deposit
CDO1	Collateralised debt obligation
CDS1	Credit default swap
CDPC	Credit derivative product company
CET11	Common equity tier 1 ratio
CGU	Cash-generating unit
CHF	Swiss franc
CMB	Commercial Banking, a global business
CML1	Consumer and Mortgage Lending portfolio in the US, comprising Consumer Lending and Mortgage Services businesses in run-off
CNY	Chinese yuan
CP1	Commercial paper
CPI	Consumer price index
CRD1	Capital Requirements Directive
CRR1	Customer risk rating
CVA1	Credit valuation adjustment
D
Dodd-Frank	The Dodd-Frank Wall Street Reform & Consumer Protection Act, US
DoJ	Department of Justice, US
DPA	The Deferred Prosecution Agreement with DoJ and, if the context so requires, the Deferred Prosecution Agreement with the New York County District Attorney's Office, in each case entered into in December 2012
DPF	Discretionary participation feature of insurance and investment contracts
DVA1	Debit valuation adjustment
E
EAD1	Exposure at default
EBA	European Banking Authority
ECB	European Central Bank
EDTF	Enhanced Disclosure Task Force
EGP	Egyptian pound
EL1	Expected loss
EU	European Union
Euribor	European Interbank Offered Rates
F
Fannie Mae	Federal National Mortgage Association, US
FCA	Financial Conduct Authority, UK
FHFA	Federal Housing Finance Agency
first direct	first direct is a division of HSBC Bank plc
FPC	Financial Policy Committee, UK
Freddie Mac	Federal Home Loan Mortgage Corporation, US

Abbreviation	Brief description
FSA	Financial Services Authority, UK
FSMA	Financial Services and Markets Act 2000, UK
FTE	Full time equivalent staff
FTSE	Financial Times - Stock Exchange index
G
G20	Leaders, Finance Ministers and Central Bank Governors of the Group of Twenty
GAC	Group Audit Committee
GB&M	Global Banking and Markets, a global business
GDP	Gross domestic product
GENPRU	The FSA's General Prudential Sourcebook of rules and guidance
Ginnie Mae	Government National Mortgage Association, US
Global Markets	HSBC's treasury and capital markets services in GB&M
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
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	The Hong Kong Special Administrative Region of the People's Republic of China
HSBC	HSBC Holdings together with its subsidiary undertakings
HSBC Afore	HSBC Afore S.A. de C.V.
HSBC Bank	HSBC Bank plc, formerly Midland Bank plc
HSBC Bank Argentina	HSBC Bank Argentina S.A.
HSBC Bank Bermuda	HSBC Bank Bermuda Limited formerly The Bank of Bermuda Limited
HSBC Bank Malaysia	HSBC Bank Malaysia Berhad
HSBC Bank Middle East	HSBC Bank Middle East Limited, formerly The British Bank of the Middle East
HSBC Bank USA	HSBC's retail bank in the US, HSBC Bank USA, N.A. (formerly HSBC Bank USA, Inc.)
HSBC Canada	The sub-group, HSBC Bank Canada, HSBC Trust Company Canada, HSBC Mortgage Corporation Canada, HSBC Securities Canada and HSBC Financial Co. 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
HSBC Mexico	HSBC México S.A., the commercial banking subsidiary of Grupo Financiero HSBC, S.A. de C.V.
HSBC Premier	HSBC's premium 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
HTCD	HSBC Trust Company (Delaware), N.A.
I
IAS	International Accounting Standard
IASB	International Accounting Standards Board
ICB	Independent Commission on Banking, UK
IFRIC	International Financial Reporting Interpretations Committee
IFRSs	International Financial Reporting Standards
IMM1	Internal model method
Industrial Bank	Industrial Bank Co. Limited, a national joint-stock bank in mainland China in which Hang Seng Bank has a shareholding
INR	Indian rupee
IRB1	Internal ratings-based
ISDA	International Swaps and Derivatives Association
K
KPI	Key performance indicator
KPMG	KPMG Audit Plc and its affiliates
KRW	South Korean won
L
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
LTV1	Loan to value ratio
M
Mainland China	People's Republic of China excluding Hong Kong
Mazarin	Mazarin Funding Limited, an asset-backed CP conduit

Abbreviation	Brief description
MENA	Middle East and North Africa
Monoline1	Monoline insurance company
MSCI	Morgan Stanley Capital International index
MXN	Mexican peso
N
NYSE	New York Stock Exchange
O
OFAC	Office of Foreign Assets Control, USA
OIB	Oman International Bank S.A.O.G.
OIS	Overnight index swap
ORMF	Operational risk management framework
OTC1	Over-the-counter
P
PAB	Panamanian balboa
PD1	Probability of default
Performance Shares1	Awards of HSBC Holdings ordinary shares under employee share plans that are subject to corporate performance conditions
Ping An	Ping An Insurance (Group) Company of China, Ltd, the second-largest life insurer in the PRC
PPI	Payment protection insurance product
PRC	People's Republic of China
Premier	See HSBC Premier
PVIF	Present value of in-force long-term insurance business
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	The Risk Management Meeting of the Group Management Board
RM	Malaysian ringgit
RMB	Renminbi
RMC	Risk Management Committee
RoRWA	Return on average risk-weighted assets
RPI	Retail price index (UK)
RRP	Recovery and resolution plan
RWA1	Risk-weighted asset
S
S&P	Standard and Poor's rating agency
SEC	Securities and Exchange Commission, US
SIC	Securities investment conduit
SIV1	Structured investment vehicle
SME	Small and medium-sized enterprise
Solitaire	Solitaire Funding Limited, a special purpose entity managed by HSBC
SPE1	Special purpose entity
SR	Saudi Arabian riyal
T
The Hongkong and Shanghai Banking Corporation	The Hongkong and Shanghai Banking Corporation Limited, the founding member of the HSBC Group
TRL	Turkish lira
TSR	Total shareholder return
U
UAE	United Arab Emirates
UK	United Kingdom
US$	United States dollar
US	United States of America
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
VND	Vietnamese dong

1  Full definition included in Glossary on page 529.

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 2011 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.
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 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. The Basel III requirements will be phased in starting on 1 January 2013 with full implementation by 1 January 2019.
Basis point ('Bps')	One hundredth of a per cent (0.01%), so 100 basis points is 1%. Used in quoting movements in interest rates or yields on securities.
C
Capital conservation buffer	A capital buffer, prescribed by regulators under Basel III, and designed to ensure banks build up capital buffers outside periods of stress which can be drawn down as losses are incurred. Should a bank's capital levels fall within the capital conservation buffer range, capital distributions will be constrained by the regulators.
Capital planning buffer	A capital buffer, prescribed by the FSA under Basel II, and designed to ensure banks build up capital buffers outside periods of stress which can be drawn down as losses are incurred. Should a bank's capital levels fall within the capital planning buffer range, a period of heightened regulatory interaction would be triggered.
Capital requirements directive ('CRD')	A capital adequacy legislative package issued by the European Commission and adopted by 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 amendment, CRD III 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 proposals are in draft and yet to have legal effect.
Central counterparty ('CCP')	An intermediary between a buyer and a seller (generally a clearing house).
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 investment, 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.
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.
Conduits	HSBC sponsors and manages multi-seller conduits and securities investment conduits ('SIC's). The multi-seller conduits hold interests in diversified pools of third-party assets such as vehicle loans, trade receivables and credit card receivables funded through the issuance of short-dated commercial paper and supported by a liquidity facility. The SICs hold predominantly asset-backed securities referencing such items as commercial and residential mortgages, vehicle loans and credit card receivables funded through the issuance of both long-term and short-term debt.
Constant 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	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 Mortgage and 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 new 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.
Countercyclical capital buffer ('CCB')	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	A derivative contract whereby a buyer pays a fee to a seller in return for receiving a payment in the event of a defined credit event (e.g. bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency) on an underlying obligation (which may or may not be held by the buyer).
Credit derivative product companies ('CDPC's)	Independent companies that specialise in selling credit default protection on corporate exposures in the form of credit derivatives.
Credit enhancements	Facilities used to enhance the creditworthiness of financial obligations and cover losses due to asset default.
Credit risk	Risk of financial loss if a customer or counterparty fails to meet 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 valuation adjustment ('CVA')	An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties. Formerly described as Credit Risk Adjustment.

Term	Definition
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.
Customer deposits	Money deposited by account holders. Such funds are recorded as liabilities.
Customer remediation	Customer remediation refers to 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 internal obligor probability of default.
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	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.
Delinquency	See 'Arrears'.
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.
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.
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	Represents the 17 European Union countries that have adopted the euro as their common currency. The 17 countries are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, 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 Probability of Default (a percentage) by the Exposure at Default (an amount) and Loss Given Default (a percentage).
Exposure	A claim, contingent claim or position which carries a risk of financial loss.
Exposure at default ('EAD')	The amount expected to be outstanding after any credit risk mitigation, if and when the counterparty defaults. EAD reflects drawn balances as well as allowance for undrawn amounts of commitments and contingent exposures.
F
Fair value adjustment	An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model.
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 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	Strategies that are 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.
FSA standard rules	The method prescribed by the FSA for calculating market risk capital requirements in the absence of VAR model approval.
Funded exposures	A funded exposure is one where the notional amount of a contract is or has been exchanged.
Funding risk	A form of liquidity risk arising when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms and when required.
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')	A bank that meets the criteria defined in the Basel Committee's final rules set out in their 4 November 2011 document 'Global systemically important banks: Assessment methodology and the additional loss absorbency requirement'. The latest official list of such banks comprised the 28 names, which include HSBC, published by the Financial Stability Board in November 2012. The Financial Stability Board is co-ordinating, on behalf of the G20 Group of Governors and Heads of Supervision ('GHOS'), the overall set of measures to reduce the moral hazard and risks to the global financial system posed by global systemically important financial institutions ('G-SIFI's) of all kinds.
Government-sponsored enterprises ('GSE's)	A group of financial services enterprises created by the US Congress. Their function is to reduce the cost of capital for certain borrowing sectors of the economy, and to make them more efficient and transparent. Examples in the residential mortgage borrowing segment are Freddie Mac and Fannie Mae. GSEs carry the implicit backing, but are not direct obligations, of the US Government.
GPSP Awards	Awards that define the number 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
Haircuts	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 ('HRTM')	HRTMs show the probability of a counterparty with a particular rating moving to a different rating over a defined time horizon.
Home Equity Lines of Credit ('HELoC's)	A form of revolving credit facility provided to US customers, which is supported 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 risk	A risk, other than a financial risk, transferred from the holder of a contract to the insurance provider. The principal insurance risk is that, over time, the combined cost of claims, administration and acquisition of the contract may exceed the aggregate amount of premiums received and investment income.
Internal Capital Adequacy Assessment Process	The Group's own assessment of the levels of capital that it needs to hold through an examination of its risk profile from regulatory and economic capital viewpoints.
Internal Model Method ('IMM')	One of three approaches defined by Basel II to determine exposure values for counterparty credit risk.
Internal ratings-based approach ('IRB')	A method of calculating credit risk capital requirements using internal, rather than supervisory, estimates of risk parameters.
Invested capital	Equity capital invested in HSBC by its shareholders, 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	A method of calculating credit risk capital requirements using internal PD, LGD and EAD models.
IRB foundation approach	A method of calculating credit risk capital requirements using internal PD models but with supervisory estimates of LGD and conversion factors for the calculation of EAD.
ISDA Master agreement	Standardised contract developed by ISDA used as an umbrella under which bilateral derivatives contracts are entered into.

Term	Definition
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.
Legal proceedings	Legal proceedings include 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 when involved in or managing 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 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
Market risk	The risk that movements in market risk factors, including foreign exchange rates and commodity prices, interest rates, credit spreads and equity prices will reduce income or portfolio values.
Medium-term notes ('MTN's)	Notes issued by corporates across a range of maturities. MTNs are frequently issued by corporates under MTN Programmes whereby notes are offered on a regular and continuous basis to investors.
Monoline insurers ('monolines')	Entities which specialise in providing credit protection to the holders of debt instruments in the event of default by the debt security counterparty. This protection is typically held in the form of derivatives such as CDSs referencing the underlying exposures held.

Term	Definition
Mortgage-backed securities ('MBS's)	Securities that represent interests in groups of mortgages, which may be on residential or commercial properties. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). When the MBS references mortgages with different risk profiles, the MBS is classified according to the highest risk class.
Mortgage-related assets	Assets which are referenced to underlying mortgages.
Mortgage vintage	The year a mortgage was originated.
N
Negative equity mortgages	Equity is the value of the asset less the outstanding balance on the loan. Negative equity arises when the value of the property purchased is below the balance outstanding on the loan.
Net asset value per share	Total shareholders' equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue.
Net interest income	The amount of interest received or receivable on assets net of interest paid or payable on liabilities.
Net interest income sensitivity	Considers all re-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.
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 owing. 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 past capital repayments up this 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'.
Prime	A US description for mortgages granted to the most creditworthy category of borrowers.
Private equity investments	Equity securities in operating companies not quoted on a public exchange, often involving the investment of capital in private companies or the acquisition of a public company that results in its delisting.
Probability of default ('PD')	The probability that an obligor will default within a one-year time horizon.
R
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 FSA for the consolidated Group and by local regulators for individual Group companies.
Regulatory matters	Regulatory matters refer to 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.

Term	Definition
Renegotiated loans	Loans for which the contractual terms have been changed because of significant concerns about the borrower's ability to meet the contractual payments when due.
Repo (or Sale and repurchase agreement)	A repo is a short-term funding agreement that allows a borrower to create a collateralised loan by selling a financial asset to a lender. As part of the agreement the borrower commits to repurchase the security at a date in the future repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is 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.
Residential mortgage	A loan to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms.
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 shareholders of the parent company divided by average ordinary shareholders' equity.
Risk appetite	An assessment of the types and quantum of risks to which HSBC wishes to be exposed.
Risk-weighted assets ('RWA's)	Calculated by assigning a degree of risk expressed as a percentage (risk weight) to an exposure in accordance with the applicable Standardised or IRB approach rules.
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.
Seasoning	The emergence of credit loss patterns in portfolios over time.
Second lien	A security interest granted over an item of property to secure the repayment of a debt that is issued against the same collateral as a first lien but that is subordinate to it. In the case of default, repayment for this debt will only be received after the first lien has been repaid.
Securitisation	A transaction or scheme whereby the credit risk associated with an exposure, or pool of exposures, is tranched and where payments to investors in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures. A traditional securitisation involves the transfer of the exposures being securitised to an SPE which issues securities. In a synthetic securitisation, the tranching is achieved by the use of credit derivatives and the exposures are not removed from the balance sheet of the originator.
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. This examines 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.
Sovereign exposures	Exposures to governments, ministries, departments of governments, embassies, consulates and exposures on account of cash balances and deposits with central banks.
Special purpose entities ('SPE's)	A corporation, trust or other non-bank entity, established for a narrowly defined purpose, including for carrying on securitisation activities. The structure of the SPE and its activities are intended to isolate its obligations from those of the originator and the holders of the beneficial interests in the securitisation.
Standardised approach	In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institutions ('ECAI') ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the application of a supervisory defined percentage charge to the gross income of eight specified business lines.
Stressed VAR	A market risk measure based on potential market movements for a continuous one-year period of stress for a trading portfolio

Term	Definition
Structured finance/notes	An instrument whose return is linked to the level of a specified index or the level of a specified asset. The return on a structured note can be linked to equities, interest rates, foreign exchange, commodities or credit. Structured notes may or may not offer full or partial capital protection in the event of a decline in the underlying index or asset.
Structured Investment Vehicles ('SIV's)	Special purpose entities which invest in diversified portfolios of interest-earning assets, generally funded through issues of commercial paper, medium-term notes and other senior debt to take advantage of the spread differentials between the assets in the SIV and the funding cost.
Student loan-related assets	Securities with collateral relating to student loans.
Subordinated liabilities	Liabilities which rank after the claims of other creditors of the issuer in the event of insolvency or liquidation.
Sub-prime	A US description for customers with high credit risk, for example those who have limited credit histories, modest incomes, high debt-to-income ratios, high loan-to-value ratios (for real estate secured products) or have experienced credit problems caused by occasional delinquencies, prior charge-offs, bankruptcy or other credit-related problems.
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.
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 core tier 1 and other tier 1 capital. Other tier 1 capital includes qualifying capital instruments such as non-cumulative perpetual preference shares and hybrid capital securities.
Tier 2 capital	A component of regulatory capital, comprising qualifying subordinated loan capital, related non-controlling interests, allowable collective impairment allowances and unrealised gains arising on the fair valuation of equity instruments held as available-for-sale. Tier 2 capital also includes reserves arising from the revaluation of properties.
Total compensation ratio	The total compensation ratio represents the proportion of total employee expenses to operating income net of impairment charges.
Trading portfolios	Portfolios that comprise positions arising from market-making and warehousing of customer-derived positions.
Trading risk	The 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.
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	Reduction in the carrying value of an asset due to impairment or fair value movements.
Wrong-way risk	An adverse correlation between the counterparty's probability of default and the mark-to-market value of the underlying transaction.

Index

A

Abbreviations 526

Accounting

developments (future) 385

policies (critical) 54

policies (significant) 387

Accounts

approval 515

basis of preparation 58, 383

consolidation 372, 384

presentation of information 383

use of estimates 384

Acquisitions and disposals 27, 59, 80

Actuarial assumptions 417

Advances to core funding ratio 23, 205

Annual General Meeting 339, 517

Anti-money laundering and sanctions 510

Areas of special interest 128

Asset-backed securities 185, 268

Assets 46

average balance sheet 33

by country 432

by geographical region 79

by global business 58

charged as security 493

constant currency/reported reconciliation 48

deferred tax 422

encumbered/unencumbered 211

five years 45

held for sale 143, 471

accounting policy 405

held in custody and under administration 118

intangible 465

liquid assets of principal operating entities 263

maturity analysis 485

other 472

risk-weighted 2, 59, 79, 254, 296

trading 436

Associates and joint ventures

interests in 460

share of profit in 43

Auditor

arrangements 322

remuneration 419

report 369

B

Balance sheet

average 33

consolidated 45, 374

constant currency/reported reconciliation 48

data 45, 76, 86, 91, 97, 102, 108, 115, 431

HSBC Holdings 379

insurance manufacturing subsidiaries 235

movement in 2012  46

Balance Sheet Management 185, 222

Bancassurance 233

Basel 288

Board of Directors 309

balance and independence 311

changes 6

committees 318

information and support 312

meetings 310

powers 310

Brand 24

Brazilian labour claims 480

Business model 14, 185

C

Calendar (dividends) 516

Capital 281

future developments 291 generation 294 management 293 measurement and allocation 294 movement in regulatory capital in 2012  285 overview 282 ratio 2, 23 regulatory 294 regulatory and accounting 288 resources 45 return on average invested capital 3 risk 293 structure 286

Capital and performance ratios 2, 23

Carbon dioxide emissions 331

Cash flow

accounting policy 405

consolidated statement 375

HSBC Holdings 380

notes 498

Cautionary statement regarding forward-looking statements 525

Client assets 118

Collateral and credit enhancements 163, 493

management 212

Commercial Banking 60, 65 204, 432

constant currency/reported profit 26

Commercial real estate 128

Committees (Board) 318

Communication with shareholders 345, 518

Compliance risk 125, 128, 230

Concentration of exposure 178, 259

Conduits 504

Constant currency 25

Contents inside front cover

Contingent liabilities and contractual commitments 208, 500

Contractual maturity of financial liabilities 214

Core tier 1 capital 2, 23, 286

Corporate and commercial lending 154, 165

Corporate governance 301

codes report 316

Corporate Sustainability Committee 330

Cost efficiency ratio 3, 23, 43, 81, 88, 93, 99, 104, 111

Counterparty credit risk 284

CRD IV 298

Credit cards 152

Credit coverage ratios 3

Credit exposure 144

Credit quality 151, 154

classifications 253

Credit risk

in 2012  139

insurance 240, 277

management thereof 124, 252

risk-weighted assets 283

Credit valuation adjustment 56, 441

Critical accounting policies 54

Cross-border exposures 259

Customer accounts 50

Customer deposit markets 204

Customer lending and deposit (combined) 49

Customer recommendation 24

D

Daily distribution of revenues 220

Daily trading/non-trading VAR 219, 220, 221

Dealings in HSBC Holdings plc shares 346

Debit valuation adjustment 56, 441

Debt securities in issue 474

accounting policy 404

Defined terms inside front cover

Deposits 449

accounting policy 404

average balances and average rates 33

Derivatives 145, 167, 179, 189, 452

accounting policy 395

Directors

annual incentives 355

appointments and re-election 316

biographies 302

Board of Directors 309

conflicts of interest 316

emoluments 361, 419

executive 312

exit payments 359

fees 362

interests 343

non-executive 313

other directorships 363

pensions 365

performance evaluation 315

relations with shareholders 316

remuneration (executive) 354, 361

responsibilities (statement of) 368

service contracts 359

terms of appointment 309

Disclosure philosophy 12

Disposal groups 471, 475

Disposals 18, 27, 52, 78, 117, 499

Diversity and inclusion 335

Dividends 344, 425, 516, 523

payout ratio 29

per share 2, 24

E

Earnings per share 2, 23, 29, 426

Economic background

Europe 81 Hong Kong 88 Latin America 111 Middle East and North Africa 99 North America 104 Rest of Asia-Pacific 93

Economic loss 51

Efficiency and revenue mix ratios 3

Employees 335

compensation and benefits 366, 409

disabled 336

diversity and inclusion 335

engagement 22

issues 331

numbers 42, 335, 409

relations 335

remuneration policy 336

reward 335

Encumbered assets 211

Enhanced Disclosure Task Force 12, 119

Enquiries (from shareholders) 518

Equity 47

Equity securities 222

Europe

balance sheet data 86, 431

collateral 164-167

constant currency/reported reconciliation 178

customer accounts 50

economic background 81

lending 140, 141, 142, 147, 149, 153, 157, 158, 163, 167, 172, 181

loan impairment charges/allowances 169, 170

operating expenses 85

pension plans 248, 279

principal operations 81

profit/(loss) 81, 86, 428

profit/(loss) by country 82

review of performance 81

risk-weighted assets 79

Eurozone 129

exposures 192

Events after the balance sheet date 515

Exposures 185, 186

F

Fair value 438

accounting policy 393

adjustments 439

control framework 438

movements 80

valuation bases 441, 442

Fee income (net) 35

Fiduciary risk 126, 231, 273

Filters (six) 18

Financial assets

accounting policy 397

designated at fair value 451

not qualifying for de-recognition 459

reclassification 388, 450

transfers 458

Financial assets and liabilities

accounting policy 397

by measurement basis 432

Financial guarantee contracts

accounting policy 402

Financial highlights 2

Financial instruments

accounting policy (fair value) 393

accounting policy (valuation) 56, 388, 448

at fair value 37, 437

credit quality 154, 253

net income from 406

not at fair value 447

Financial investments 49, 145, 179, 456

accounting policy 394

gains less losses from 38

Financial liabilities designated at fair value 473

contractual maturities 214

Financial risks (insurance) 238, 275

Financial Services Compensation Scheme 501

Financial System Vulnerabilities Committee 328

Financial statements 371

Five-year comparison 29, 45

Footnotes 120, 249, 382

Forbearance 158

Foreclosures 151

Foreign currencies/exchange

accounting policy 401

exposures 493

rates 29, 45

Funding sources (diversity) 209

Funds under management 118

G

Gains on disposal of US branch network, US cards and Ping An 39

Geographical regions 16, 79

Global businesses 16, 58

Global Banking and Markets 18, 60, 68, 204, 432

constant currency/reported profit 26

Global functions 16

Global People Survey 335

Global Private Banking 19, 60, 72, 204, 432

constant currency/reported profit 26

Glossary 529

Going concern 334

Goodwill

accounting policy 55, 398

and intangible assets 463

Governance codes 316

Group Audit Committee 319

Group CEO's Business Review 8

Group Chairman's Statement 4, (letter) 301

Group Management Board 318

Group Remuneration Committee 329, 347

Group Risk Committee 323

Growing HSBC 19

H

Health and safety 336

Held for sale 52, 78, 117, 471

Highlights 1

Hong Kong

balance sheet data 91, 431

collateral 164-167

constant currency/reported reconciliation 178

customer accounts 50

economic background 88

lending 140-142, 147, 149, 153, 157, 158, 163-167, 172, 181

loan impairment charges/allowances 169, 170

pension plans 248, 279

principal operations 88

profit/(loss) 88, 89, 91, 428

review of performance 88

risk-weighted assets 79

HSBC Finance

foreclosures 151

funding 211

loan modifications 158

share plans 338

HSBC Holdings plc

balance sheet 379 cash flow 216, 380 credit risk 184 deferred tax 424 dividends 425 employee compensation 419 financial assets and liabilities 435, 446, 474 financial instruments not at fair value 449 liquidity and funding 216, 265 market risk 270 maturity analysis of assets and liabilities 491 net income from financial instruments 406 share plans 363 statement of changes in equity 381 structural foreign exchange exposures 493 subordinated liabilities 484

I

Impairment

accounting policy 54, 389

allowances 168, 172

assessment 258

charges 28, 41

constant currency/reported reconciliation 177

goodwill 55

impaired loans and advances 143, 162

losses as percentage of loans and advances 176

methodologies 186, 260

movement by industry and geographical region 163, 172

Income statement (consolidated) 29, 372

Information on HSBC (availability thereof) 520

Insurance

accounting policy 402

balance sheet of manufacturing subsidiaries 235

claims incurred (net) and movements in liabilities to policyholders 40, 407

economic/non-economic assumptions 245

in 2012  233

liabilities under contracts issued 242, 475

net earned premiums 38, 407

products 273

PVIF business 124

risk management 125, 233, 273

Interest income/expense (net) 33, 406

accounting policy 387

average balance sheet 33

sensitivity 223, 225, 269

Interest rate derivatives 480

Interim management statements 518

Interim results 518

Internal control 332

Internet crime 135

IFRSs and Hong Kong Financial Reporting Standards comparison 383

Investment properties 39, 236, 399, 468

Investor relations 519

J

Joint ventures 43, 460

K

Key performance indicators 22

L

Latin America 115, 431

balance sheet data 115, 431

collateral 164-167

constant currency/reported reconciliation 178

customer accounts 50

economic background 111

lending 140-142, 147, 149, 153, 157, 158, 163-167, 172, 181

loan impairment charges/allowances 169, 170

principal operations 111

profit/(loss) 111, 115, 428

profit/(loss) by country 112

review of performance 111

risk-weighted assets 79

Lease commitments 501

accounting policy 399

Legal

proceedings and regulatory matters 506

risk 271

Leveraged finance transactions 190

Liabilities 47

average balance sheet 33

by geographical region 431

constant currency/reported reconciliation 48

deferred tax 422

five years 45

maturity analysis 485

of disposal groups 475

other 475

retirement benefit 413

subordinated 480

trading 473

Life insurance business 234, 273, 477

Liquidity and funding 203

assets 206

in 2012  204

insurance 242, 277

management of risk 124, 261

net contractual cash flows 207

policies and procedures 261

primary sources of funding 261

regulation 216

Loans and advances 2, 139, 144, 179

accounting policy 389

by country 182

collateral 163

concentration of exposure 178

credit quality of 142

delinquency in the US 152

impairment 2, 162

past due but not impaired 156

renegotiated 158

to banks by geographical region 167, 182

to customers by industry sector and geographical region 153, 158, 179, 181

write-off 259

M

Madoff 507

Market Capitalisation 3

Market risk 125, 217, 265

in 2012  218

insurance 239, 275

sensitivity analysis 266

Maturity analysis of assets and liabilities 485

Maximum exposure to credit risk 139, 144, 184

Middle East and North Africa

balance sheet data 102, 431

collateral 164-167

constant currency/reported reconciliation 178

customer accounts 50

economic background 99

lending 140-142, 147, 149, 153, 157, 158, 163-167, 172, 181

loan impairment charges/allowances 169, 170

principal operations 99

profit/(loss) 99, 102, 428

profit/(loss) by country 100

review of performance 99

risk-weighted assets 79

Model risk 136

Money market funds 505

Monoline insurers 189

Mortgages

lending 148, 150

mortgage-backed securities 184, 259

US mortgage-related investigations 508

N

Nomination Committee 329

Non-controlling interests 494

Non-GAAP measures 25

Non-interest income

accounting policy 387

Non-life insurance business 234, 273, 476

Non-money market investment funds 505

Non-trading portfolios 221, 268

North America

balance sheet data 108, 431

collateral 164-167

constant currency/reported reconciliation 178

customer accounts 50

economic background 104

lending 140-142, 147, 149, 153, 158, 163-167, 172, 181

loan impairment charges/allowances 169, 170

mortgage lending 150

pension plans 249, 280

personal lending 151

principal operations 104

profit/(loss) 104, 108, 428

profit/(loss) by country 105

review of performance 105

risk-weighted assets 79

Notable items 31, 32

O

Operating expenses 28, 42, 85

Operating income 2, 39

Operating profit 408

Operating model 15

Operational risk 125, 227, 270

in 2012  228

losses/incidents 229, 230

Ordinary shares 45

Organisational structure chart 521

Other 74, 432

Outlook 7, 11

P

Payment protection insurance 479

Pension plans

accounting policy 400

defined benefit plans 246, 269, 365, 413, 415

for directors 365

risk 126, 224, 246, 279

Performance 9, 81, 88, 94, 99, 105, 111, 348

Personal lending 130, 140, 147, 164

Pillar I, II and III 295

Ping An 472

Preference shares 340

Preferred securities 480

Principal activities 13

Products and services 60, 427

Profit before tax

by country 82, 88, 94, 100, 105, 112

by geographical region 79, 81, 88, 97, 99, 104, 111, 428

by global business 58, 76, 86, 91, 97, 102, 108, 115

consolidated 29, 372

constant currency/reported reconciliation 26

data 2

underlying 2

Property plant and equipment 118, 467

accounting policy 399

Provisions 478

accounting policy 57, 402

PVIF 243

R

Ratios

advances to core funding 23, 205 capital 2, 287 core tier 1 (CET1) 2, 23, 289, 290 cost efficiency 3, 23, 43, 81, 88, 93, 99, 104, 111 credit coverage 3 customer accounts 2 dividend payout 29 dividends per share 2, 24 earnings per share 2, 23, 29, 426 key performance indicators 22 net assets per share 2, 45 performance 3 risk adjusted revenue growth 24 return on average ordinary shareholders' equity 3, 23, 29 return on average total assets 3, 29 stressed coverage ratios 205, 262 total equity 2

Reconciliation of reported and underlying items 28

Redenomination risk 201

Regulatory reform 5

Related party transactions 512

Remuneration

clawback 353 committee 329 in 2012  354 key metrics 348 letter 347 members 349 policy 336, 351 report 347 reward strategy 335, 347 structure 347 variable pay pool 348, 352

Renegotiated loans 158, 254

Representations and warranties 191

Repricing gap 226

Reputational risk 126, 246, 278

Rest of Asia-Pacific

balance sheet data 97, 431

collateral 164-167

constant currency/reported reconciliation 178

customer accounts 50

economic background 73

lending 140-142, 147, 149, 153, 157, 158, 163-167, 172, 181

loan impairment charges/allowances 169, 170

principal operations 93

profit/(loss) 93, 97, 428

profit/(loss) by country 94

review of performance 95

Restructuring HSBC 18

Retail Banking and Wealth Management 60, 62, 204, 432

constant currency/reported profit 26

Revenue 28

Reward 335

Risk

appetite 126 business activities 20 business operations 134 capital 293 committee 323 compliance 125, 230, 271 contingent liquidity 208, 265 counterparty 284 credit 124, 137, 240, 252, 283, 296 credit spread 221, 277 cross-currency 265 description 124 dispute 134 economic 131 eurozone 192 factors 20 fiduciary 126, 231, 273 financial (insurance) 238, 275 foreign exchange 225 gap risk 268 geopolitical 131 governance 252 information security 136 insurance operations 125, 232, 233, 273 interest rate 222 internet crime 135 legal 271 liquidity and funding 124, 205, 261, 273 management of 124 market 125, 239, 265, 275 model 136 operational 125, 227, 270 pension 126, 224, 246, 279 policies and practices 252 profile 123, 126 redenomination 201 regulatory 132 reputational 126, 246, 278 scenario stress testing 127 security and fraud 271 sustainability 126, 249, 280, 332 systems 272 top and emerging 22, 130, 325 vendor 272

Risk-weighted assets 2, 59, 79, 294, 296

movement in 2012  282

RoRWA (reconciliation of measures) 3, 52

Run-off portfolios 52, 78, 117

S

Sale and repurchase agreements

accounting policy 395

Securities litigation 506

Securitisations 184, 259, 505

Security and fraud risk 271

Segmental analysis 426

accounting policy 388

Senior management

biographies 308, 309

emoluments 366

Share-based payments 411

accounting policy 401

Share capital 340, 495

accounting policy 404

in 2012  342

notifiable interests in 345

ownership guidelines 359

rights and obligations 340

Share information 2, 45

Share plans

for directors 363

for employees 336

HSBC Bank Bermuda plans 338, 497

HSBC Finance plans 338, 497

HSBC France plans 337, 496

Performance Shares and Restricted Share awards 352

Share ownership guidelines 359

Shareholder (communications with) 345

profile 517

Simplifying HSBC 17

Social contribution 7

Special purpose entities 470, 502

Staff development 335

Staff numbers 42, 335

Statement of changes in equity 376

Statement of comprehensive income 373

Stock symbols 519

Strategic direction 17, 62, 65, 68, 72

Stressed coverage ratios 205, 262

Stress testing 127, 266, 293, 326

Structural banking reform 292

Structural foreign exchange exposure 222, 268

Subsidiaries 469

accounting policy 398

Supplier payment policy 344

Sustainability

committee governance risk 330

risk 126, 249, 280

Systemically important banks 291

Systems risk 272

T

Tax

accounting policy 57, 400

deferred tax 422

expense 44

of shares and dividends 522

reconciliation 421

tax and broker-dealer investigations 511

Tier 1 capital (core) 282

Total shareholder return 2, 358

Trading assets 145, 178, 268, 436

accounting policy 393

Trading income (net) 36

Trading liabilities 473

accounting policy 393

Trading portfolios  218, 220

U

UK regulatory reform 291

Underlying performance 26

V

Value at risk 219, 266

Values (HSBC) 13

Vendor risk management 272

Vision (HSBC) 13

W

Wholesale funding 205, 210, 264

Wholesale lending 141, 152

HSBC HOLDINGS PLC
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Depositary Receipts
P.O. 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: [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

 

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