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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	Average Life (in years)		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.

- Definition

Tabular disclosure of each guarantee obligation, or each group of similar guarantee obligations, including (a) the nature of the guarantee, including its term, how it arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee; (c) the current carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature of any recourse provisions under the guarantee, and any assets held either as collateral or by third parties, and any relevant related party disclosure. Excludes disclosures about product warranties.

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