NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2011
Credit exposures by Country of Incorporation At 31 December 2011, the Group had exposures to various countries where net exposure exceeded 1 of the Group’s total assets.
The exposures are determined based on the location of the credit risk of the customers and counterparties regardless of where the transactions are booked.
The Group’s exposures exceeding 1 of the Group’s total assets as at 31 December are as follows:
Loans and debt securities Total exposure
Central banks and
In millions government
Non- As a of
Assets in Banks
securities banks
a
Investments Amount
Total assets 1
2 3
4 5=1+2+3+4
6
2011 Top 10 countries
Net exposure 1 of Total assets Hong Kong SAR
1,955 3,584
41,689 75
47,303 13.9
China 6,067
2,157 23,226
192 31,642
b
9.3
India 3,130
2,222 11,197
39 16,588
4.9
South Korea 3,597
2,680 5,377
– 11,654
3.4
Taiwan 114
3,954 6,616
3 10,687
3.1
United Kingdom 3,715
321 3,692
6 7,734
2.3
Indonesia 70
1,433 5,820
9 7,332
2.1
United States 1,042
3,893 2,230
119 7,284
2.1
Australia 2,582
319 1,800
97 4,798
1.4
Malaysia 240
157 2,731
101 3,229
1.0
Total 22,512
20,720 104,378
641 148,251
43.5 2010
Top 10 countries Net exposure 1 of Total assets
Hong Kong SAR 3,554
2,288 37,631
79 43,552
15.4 China
3,947 1,346
8,023 291
13,607 4.8
India 3,944
1,047 6,911
46 11,948
4.2 South Korea
2,133 1,965
4,491 –
8,589 3.0
Taiwan 217
1,982 5,108
20 7,327
2.6 Indonesia
191 1,700
4,394 15
6,300 2.2
United States 995
2,862 1,727
106 5,690
2.0 United Kingdom
1,479 375
2,612 9
4,475 1.6
Malaysia 1,148
143 2,837
101 4,229
1.5 Japan
1,156 1
2,375 1
3,533 1.2
Total 18,764
13,709 76,109
668 109,250
38.5
a Non-bank loans include loans to government and quasi-government entities b The increase in China exposure was largely driven by trade finance
136
45 MARKET RISK 45.1
Market risk
The following table shows the period-end, average, high and low VaR at a 99 confidence level over a one-day holding period for trading book market risk:
The Group 1 Jan 2011 to 31 Dec 2011
In millions As at 31 Dec 2011
Average High
Low
Total 37
27 42
14
The Group 1 Jan 2010 to 31 Dec 2010
In millions As at 31 Dec 2010
Average High
Low
Total 31
27 39
15 Although VaR provides valuable insights, no single measure can capture all aspects of market risk. Therefore, regular stress testing is
carried out to monitor the Group’s vulnerability to shocks. The Group has a comprehensive capital-linked risk appetite framework for all types of market risk, including interest rate risk in the
banking book, in line with its internal capital adequacy assessment process. The Group level total VaR associated with this framework is tabulated below, showing the period-end, average, high and low VaR at a 99 confidence level over a one-day holding period.
The Group 1 Jan 2011 to 31 Dec 2011
In millions As at 31 Dec 2011
Average High
Low
Total 61
57 70
45
The Group 1 Jan 2010 to 31 Dec 2010
In millions As at 31 Dec 2010
Average High
Low
Total 65
56 74
38 The economic value impact of changes in interest rates is simulated under various assumptions for the banking book. Based on a
200 basis point upward parallel shock to all yield curves, the simulated economic value change is negative 433 million 2010: negative 465 million. The corresponding simulated economic value change for a 200 basis point downward shock is positive
573 million 2010: positive 499 million.
45.2 Interest rate repricing gaps
