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Guarantee Arrangements and Pledged Assets (Tables)
6 Months Ended
Jun. 30, 2012
Guarantee Arrangements, Pledged Assets, Litigation and Regulatory Matters [Abstract]  
Carrying value and contractual amounts of our sell protection credit derivatives and major off-balance sheet guarantee arrangements
                                 
    June 30, 2012     December 31, 2011  
    

Carrying

Value

    Notional    

Carrying

Value

    Notional  
    (in millions)  

Credit derivatives (1)(4)

  $ (4,299   $ 290,401     $ (7,759   $ 330,395  

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

    -       5,016       -       4,705  

Performance (non-financial) guarantees ( 2)( 3)

    -       2,860       -       3,088  

Liquidity asset purchase agreements (3)

    -       1,142       -       677  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ (4,299   $ 299,419     $ (7,759   $ 338,865  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

(1) 

Includes $48.0 billion and $45.1 billion issued for the benefit of HSBC affiliates at June 30, 2012 and December 31, 2011, respectively.

 

(2) 

Includes $652 million and $707 million issued for the benefit of HSBC affiliates at June 30, 2012 and December 31, 2011, 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 limited to the recorded amounts of these instruments.

Net credit derivative positions
                                 
    June 30, 2012     December 31, 2011  
    

Carrying (Fair)

Value

    Notional    

Carrying (Fair)

Value

    Notional  
    (in millions)  

Sell-protection credit derivative positions

  $ (4,299   $ 290,401     $ (7,759   $ 330,395  

Buy-protection credit derivative positions

    4,383       280,613       8,131       326,882  
   

 

 

   

 

 

   

 

 

   

 

 

 

Net position (1)

  $ 84     $ 9,788     $ 372     $ 3,513  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

(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 the credit ratings of credit risk related guarantees
                                 
   

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 CDS

    2.5     $ 150,501     $ 38,498     $ 188,999  

Structured CDS

    1.6       53,932       4,092       58,024  

Index credit derivatives

    3.3       28,618       683       29,301  

Total return swaps

    7.6       11,265       2,812       14,077  
           

 

 

   

 

 

   

 

 

 

Subtotal

            244,316       46,085       290,401  

Standby Letters of Credit (2)

    1.3       7,063       813       7,876  
           

 

 

   

 

 

   

 

 

 

Total

          $ 251,379     $ 46,898     $ 298,277  
           

 

 

   

 

 

   

 

 

 

 

 

(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.

Trend in repurchase demands received on loans sold to GSEs and other third parties by loan origination vintage
                                 
    Three Months Ended
June  30,
    Six Months Ended
June  30,
 
           2012                 2011                 2012                 2011        
    (in millions)  

Pre- 2004

  $ 2     $ 2     $ 3     $ 3  

2004

    7       4       11       9  

2005

    9       6       14       14  

2006

    29       10       45       23  

2007

    76       31       120       70  

2008

    52       30       78       58  

Post 2008

    6       22       10       46  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total repurchase demands received (1)

  $ 181     $ 105     $ 281     $ 223  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

(1) 

Includes repurchase demands on loans sourced from our legacy broker channel of $151 million and $75 million for the three months ended June 30, 2012 and 2011, respectively. Includes repurchase demands on loans sourced from our legacy broker channel of $233 million and $157 million for the six months ended June 30, 2012 and 2011, respectively.

Outstanding repurchase demands received from GSEs and other third parties
                 
    

June 30,

2012

   

December 31,

2011

 
    (in millions)  

GSEs

  $ 122     $ 77  

Others

    45       25  
   

 

 

   

 

 

 

Total(1)

  $ 167     $ 102  
   

 

 

   

 

 

 

 

 

(1) 

Includes repurchase demands on loans sourced from our legacy broker channel of $138 million and $87 million at June 30, 2012 and December 31, 2011, respectively.

Summary of change in estimated repurchase liability for loans sold to the GSEs and other third parties
                                 
    Three Months Ended
June  30,
    Six Months Ended
June  30,
 
           2012                 2011                 2012                 2011        
    (in millions)  

Balance at beginning of period

  $ 223     $ 270     $ 237     $ 262  

Increase (decrease) in liability recorded through earnings

    32       (4     53       40  

Realized losses

    (33     (29     (68     (65
   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

  $ 222     $ 237     $ 222     $ 237  
   

 

 

   

 

 

   

 

 

   

 

 

 
Summary of pledged assets included in consolidated balance sheet
                 
    

June 30,

2012

   

December 31,

2011

 
    (in millions)  

Interest bearing deposits with banks

  $ 1,360     $ 4,426  

Trading assets (1)

    1,784       1,640  

Securities available-for-sale (2)

    17,739       23,347  

Securities held to maturity

    359       476  

Loans(3)

    1,947       2,113  

Other assets (4)

    2,770       3,688  
   

 

 

   

 

 

 

Total

  $ 25,959     $ 35,690  
   

 

 

   

 

 

 

 

 

(1) 

Trading assets are primarily pledged against liabilities associated with consolidated variable interest entities.

 

(2) 

Securities available-for-sale are primarily pledged against public fund deposits and various short-term and long term borrowings, as well as providing capacity for potential secured borrowings from the Federal Home Loan Bank and the Federal Reserve Bank.

 

(3) 

Loans are primarily residential mortgage loans pledged against long-term borrowings from the Federal Home Loan Bank.

 

(4) 

Other assets represent cash on deposit with non-banks related to derivative collateral support agreements.