XML 59 R44.htm IDEA: XBRL DOCUMENT v3.2.0.727
Guarantee Arrangements, Pledged Assets and Collateral (Tables)
6 Months Ended
Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]  
Carrying Value and Contractual Amounts of our Sell Protection Credit Derivatives and Major Off-Balance Sheet Guarantee Arrangements
The following table presents total carrying value and contractual amounts of our sell protection credit derivatives and major off-balance sheet guarantee arrangements as of June 30, 2015 and December 31, 2014. Following the table is a description of the various arrangements.
 
June 30, 2015
 
December 31, 2014
  
Carrying
Value
 
Notional / Maximum
Exposure to Loss
 
Carrying
Value
 
Notional / Maximum
Exposure to Loss
 
(in millions)
Credit derivatives(1)(4)
$
(1,605
)
 
$
105,348

 
$
(1,484
)
 
$
117,768

Financial standby letters of credit, net of participations(2)(3)

 
6,022

 

 
5,358

Performance standby letters of credit, net of participations(2)(3)

 
3,283

 

 
3,083

Liquidity asset purchase agreements(3)

 
3,046

 

 
2,685

Total
$
(1,605
)
 
$
117,699

 
$
(1,484
)
 
$
128,894

 
(1) 
Includes $32,284 million and $32,688 million of notional issued for the benefit of HSBC affiliates at June 30, 2015 and December 31, 2014, respectively.
(2) 
Includes $980 million and $937 million issued for the benefit of HSBC affiliates at June 30, 2015 and December 31, 2014, respectively.
(3) 
For standby letters of credit and liquidity asset purchase agreements, maximum loss represents losses to be recognized assuming the letter of credit and liquidity facilities have been fully drawn and the obligors have defaulted with zero recovery.
(4) 
For credit derivatives, the maximum loss is represented by the notional amounts without consideration of mitigating effects from collateral or recourse arrangements.
Net Credit Derivative Positions
The following table summarizes our net credit derivative positions as of June 30, 2015 and December 31, 2014:
 
June 30, 2015
 
December 31, 2014
  
Carrying / Fair
Value
 
Notional
 
Carrying / Fair
Value
 
Notional
 
(in millions)
Sell-protection credit derivative positions
$
(1,605
)
 
$
105,348

 
$
(1,484
)
 
$
117,768

Buy-protection credit derivative positions
1,774

 
111,457

 
1,741

 
122,969

Net position(1)
$
169

 
$
6,109

 
$
257

 
$
5,201

 
(1) 
Positions are presented net in the table above to provide a complete analysis of our risk exposure and depict the way we manage our credit derivative portfolio. The offset of the sell-protection credit derivatives against the buy-protection credit derivatives may not be legally binding in the absence of master netting agreements with the same counterparty. Furthermore, the credit loss triggering events for individual sell protection credit derivatives may not be the same or occur in the same period as those of the buy protection credit derivatives thereby not providing an exact offset.
Summary of Credit Ratings of Credit Risk Related Guarantees
The following table summarizes the credit ratings related to guarantees including the ratings of counterparties against which we sold credit protection and financial standby letters of credit as of June 30, 2015 as an indicative proxy of payment risk:
 
Average
Life
(in years)
 
Credit Ratings of the Obligors or the Transactions
Notional/Contractual Amounts
      Investment      
Grade
 
Non-Investment
Grade
 
Total
 
(dollars are in millions)
Sell-protection Credit Derivatives(1)
 
 
 
 
 
 
 
Single name credit default swaps ("CDS")
2.6
 
$
66,677

 
$
18,511

 
$
85,188

Structured CDS
1.8
 
5,079

 
627

 
5,706

Index credit derivatives
3.3
 
4,002

 
6,716

 
10,718

Total return swaps
2.5
 
3,332

 
404

 
3,736

Subtotal
 
 
79,090

 
26,258

 
105,348

Standby Letters of Credit(2)
1.0
 
6,537

 
2,768

 
9,305

Total
 
 
$
85,627

 
$
29,026

 
$
114,653

 
(1) 
The credit ratings in the table represent external credit ratings for classification as investment grade and non-investment grade.
(2) 
External ratings for most of the obligors are not available. Presented above are the internal credit ratings which are developed using similar methodologies and rating scale equivalent to external credit ratings for purposes of classification as investment grade and non-investment grade.
Summary of Change in Estimated Repurchase Liability for Loans Sold to GSEs and Other Third Parties
The following table summarizes the change in our estimated repurchase liability during the three and six months ended June 30, 2015 and 2014 for obligations arising from the breach of representations and warranties associated with mortgage loans sold:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(in millions)
Balance at beginning of period
$
23

 
$
36

 
$
27

 
$
99

Decrease in liability recorded through earnings
(2
)
 

 
(5
)
 
(34
)
Realized losses

 
(2
)
 
(1
)
 
(31
)
Balance at end of period
$
21

 
$
34

 
$
21

 
$
34

Summary of Pledged Assets Included in Consolidated Balance Sheet
Pledged assets included in the consolidated balance sheet consisted of the following:

June 30, 2015
 
December 31, 2014
 
(in millions)
Interest bearing deposits with banks
$
487

 
$
415

Trading assets(1)
3,195

 
2,886

Securities available-for-sale(2)
17,523

 
22,023

Securities held-to-maturity
3,187

 
3,602

Loans(3) 
13,537

 
12,580

Other assets(4)
1,526

 
2,495

Total
$
39,455

 
$
44,001

 
(1) 
Trading assets are primarily pledged against liabilities associated with repurchase agreements.
(2) 
Securities available-for-sale are primarily pledged against derivatives, public fund deposits, trust deposits and various short-term and long term borrowings, as well as providing capacity for potential secured borrowings from the Federal Home Loan Bank of New York ("FHLB") and the Federal Reserve Bank of New York.
(3) 
Loans are primarily residential mortgage loans pledged against current and potential borrowings from the FHLB and the Federal Reserve Bank of New York.
(4) 
Other assets represent cash on deposit with non-banks related to derivative collateral support agreements.
Offsetting Assets and Liabilities
The following table provides information about resale and repurchase agreements that are subject to offset as of June 30, 2015 and December 31, 2014:
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Balance Sheet
 
 
 
Gross Amounts Recognized
 
Gross Amounts Offset in the Balance Sheet(1)
 
Net Amounts Presented in the Balance Sheet
 
Financial Instruments (2)
 
Cash Collateral Received / Pledged
 
Net Amount (3)
 
(in millions)
As of June 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Securities purchased under resale agreements
$
17,339

 
1,227

 
16,112

 
16,112

 

 
$

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Securities sold under repurchase agreements
$
8,916

 
1,227

 
7,689

 
7,689

 

 
$

 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014:
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Securities purchased under resale agreements
$
7,165

 
5,752

 
1,413

 
1,413

 

 
$

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Securities sold under repurchase agreements
$
13,459

 
5,752

 
7,707

 
7,707

 

 
$

 
(1) 
Represents recognized amount of resale and repurchase agreements with counterparties subject to legally enforceable netting agreements that meet the applicable netting criteria as permitted by generally accepted accounting principles.
(2) 
Represents securities received or pledged to cover financing transaction exposures.
(3) 
Represents the amount of our exposure that is not collateralized / covered by pledged collateral.
Class of Collateral Pledged and Remaining Contractual Maturity of Repurchase Agreements Accounted for as Secured Borrowings
The following table provides the class of collateral pledged and remaining contractual maturity of repurchase agreements accounted for as secured borrowings as of June 30, 2015:
 
Overnight and Continuous
 
Up to 30 days
 
30 to 90 days
 
Greater than 90 days
 
Total
 
(in millions)
As of June 30, 2015:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
U.S. Treasury, U.S. Government agencies and sponsored entities
$
1,243

 
$
4,453

 
$
49

 
$
3,171

 
$
8,916