REG - Standard Chrtrd PLC - Interim Results 2014 Part 1 <Origin Href="QuoteRef">STAN.L</Origin> - Part 10
29/10/2014 10:39
- Part 10: For the preceding part double click ID:nRSF3926Oi
14.5 17.4 13.4 17.4
Total3 32.5 34.9 29.2 32.7
1 Trading book for market risk was defined in
accordance with the relevant section of the
PRA Handbook's Prudential Sourcebook for
Banks, Building Societies and Investment Firms
(BIPRU). On 1 January 2014 this regulation was
superseded by the EU Capital Requirements
Regulation (CRDIV/CRR). The PRA permits only
certain types of financial instruments or
arrangements to be included within the trading
book, so this regulatory definition is
narrower than the accounting definition of the
trading book within IAS39 'Financial
Instruments: Recognition and Measurement'
2 Interest rate risk VaR includes credit spread
risk arising from securities held for trading
or available-for-sale
3 The total VaR shown in the tables above is not
a sum of the component risks due to offsets
between them
45 Highest and lowest VaR for each risk factor
are independent and usually occur on different
daysActual one day VaR at year end date
6 The H1 2013 balance has been restated at a
lower level, because the Non-trading book
Interest Rate VaR for two days in June 2013
was over-stated. This was restated correctly
in the FY 2013 disclosure. In the H1 2013
disclosure the Total trading and Non-trading
book Interest Rate VaR was reported as $22.1
million
Average daily income earned from market risk related activities1
Trading 6 months to 30.06.14 6 months to 30.06.13 6 months to 31.12.13
$million $million $million
Interest rate risk2 4.3 5.8 3.6
Foreign exchange risk 5.1 6.7 4.4
Commodity risk 1.5 1.8 1.2
Equity risk 0.6 0.5 0.5
Total 11.5 14.8 9.7
Non-Trading
Interest rate risk 3.9 3.1 2.5
Equity risk 0.3 - 1.0
Total 4.2 3.1 3.5
1 2 Reflects total product income which is the sum of Client Income and Own Account Income. Includes elements of Trading Income, Interest Income and Other Income which are generated from market risk related activities2013 comparatives have been restated to exclude certain fee income attributed to the trading book
Financial Markets loss days
Financial Markets trading book total product income reported no loss days in H1 2014 (one in H1 2013; two in H2 2013).
Market risk VaR coverage
Interest rate risk from non-trading book portfolios is transferred to Financial Markets where it is managed by local ALM
desks under the supervision of local Asset and Liability Committees (ALCO). ALM deals in the market in approved financial
instruments in order to manage the net interest rate risk, subject to approved VaR and risk limits.
VaR and stress tests are therefore applied to these non-trading book exposures (except Group Treasury, see below) in the
same way as for the trading book, including available-for-sale securities. Securities classed as Loans and Receivables or
Held to maturity are not reflected in VaR or stress tests since they are accounted on an amortised cost basis, so market
price movements have limited effect on either profit and loss or reserves.
Structural foreign exchange currency risks are managed by Group Treasury, as described below, and are not included within
Group VaR. Otherwise, the non-trading book does not run open foreign exchange positions.
Equity risk relating to non-listed Private Equity and Strategic Investments is not included within the VaR. It is
separately managed through delegated limits for both investment and divestment, and is also subject to regular review by an
investment committee. These are included as Level 3 assets as disclosed in note 12 to the financial statements.
Group Treasury market risk
Group Treasury raises debt and equity capital and the proceeds are invested within the Group as capital or placed with ALM.
Interest rate risk arises due to the investment of equity and reserves into rate-sensitive assets, as well as some tenor
mismatches between debt issuance and placements. This risk is measured as the impact on net interest income (NII) of an
unexpected and instantaneous adverse parallel shift in rates and is monitored over a rolling one-year time horizon (see
table below).
This risk is monitored and controlled by the Group's Capital Management Committee (CMC).
Group Treasury NII sensitivity to parallel shifts in yield curves
30.06.14 30.06.13 31.12.13
$million $million $million
+25 basis points 34.5 32.0 33.9
-25 basis points (34.5) (32.0) (33.9)
NII sensitivity has increased as Group capital investment in branches and subsidiaries has increased.
Group Treasury also manages the structural foreign exchange risk that arises from non-US dollar currency net investments in
branches and subsidiaries. The impact of foreign exchange movements is taken to reserves which form part of the capital
base. The effect of exchange rate movements on the capital ratio is partially mitigated by the fact that both the value of
these investments and the risk weighted assets in those currencies follow broadly the same exchange rate movements. With
the approval of CMC, Group Treasury may hedge the net investments if it is anticipated that the capital ratio will be
materially affected by exchange rate movements. As at 30 June 2014, the Group had taken net investment hedges (using a
combination of derivative and non-derivative financial investments) of $1,048 million (30 June 2013: $1,341 million, 31
December 2013: $1,280 million) to partly cover its exposure to Korean won.
The table below sets out the principal structural foreign exchange exposures (net of investment hedges) of the Group:
30.06.14 30.06.13 31.12.13
$million $million $million
Hong Kong dollar 7,651 7,207 7,079
Korean won 5,523 5,522 5,194
Indian rupee 4,405 4,036 3,793
Taiwanese dollar 2,874 2,797 2,853
Chinese renminbi 3,492 2,943 3,084
Singapore dollar 3,011 947 2,925
Thai baht 1,624 1,666 1,640
UAE dirham 1,671 1,641 1,766
Malaysian ringgit 1,749 1,519 1,650
Indonesian rupiah 1,146 1,023 993
Pakistani rupee 562 555 530
Other 3,876 3,803 4,010
37,584 33,659 35,517
An analysis has been performed on these exposures to assess the impact of a one per cent fall in the US dollar exchange
rates adjusted to incorporate the impacts of correlations of these currencies to the US dollar. The impact on the positions
above would be an increase of $275 million (30 June 2013: $244 million; 31 December 2013: $247 million). Changes in the
valuation of these positions are taken to reserves.
Derivatives
Derivatives are contracts with characteristics and value derived from underlying financial instruments, interest and
exchange rates or indices. They include futures, forwards, swaps and options transactions. Derivatives are an important
risk management tool for banks and their clients because they can be used to manage market price risk. The market risk of
derivatives is managed in essentially the same way as other traded products.
Our derivative transactions are principally in instruments where the mark-to-market values are readily determinable by
reference to independent prices and valuation quotes.
We enter into derivative contracts in the normal course of business to meet client requirements and to manage our exposure
to fluctuations in market price movements.
Derivatives are carried at fair value and shown in the balance sheet as separate totals of assets and liabilities.
Recognition of fair value gains and losses depends on whether the derivatives are classified as trading or held for hedging
purposes.
The credit risk arising from all financial derivatives is managed as part of the overall lending limits to financial
institutions and corporate clients. This is covered in more detail in the Credit risk section (see page 40).
Hedging
Countries within the Group use futures, forwards, swaps and options transactions primarily to mitigate interest and foreign
exchange risk arising from their in-country exposures. The Group also uses futures, forwards and options to hedge foreign
exchange and interest rate risk.
In accounting terms under IAS 39, hedges are classified into three types: fair value hedges, predominantly where fixed
rates of interest or foreign exchange are exchanged for floating rates; cash flow hedges, predominantly where variable
rates of interest or foreign exchange are exchanged for fixed rates; and hedges of net investments in overseas operations
translated to the parent company's functional currency, US dollars.
The notional value of interest rate swaps for the purpose of fair value hedging increased by $5.8 billion at 30 June 2014
compared to 31 December 2013. Fair value hedges largely hedge the interest-rate risk on our sub-debt and debt securities in
the UK which form part of the Group's liquidity buffers and are used to manage fixed rate securities and loan portfolios in
our key markets. Currency and interest rate swaps used for cash flow hedging have decreased by $6 billion at 30 June 2014
compared to 31 December 2013. The increase of cash flow hedges is attributable to floating rate loans, bonds and deposits
mainly in Korea and Singapore.
We may also, under certain individually approved circumstances, enter into economic hedges that do not qualify for IAS 39
hedge accounting treatment, and which are accordingly marked to market through the profit and loss account, thereby
creating an accounting asymmetry. These are entered into primarily to ensure that residual interest rate and foreign
exchange risks are being effectively managed. Current economic hedge relationships include hedging the foreign exchange
risk on certain debt issuances and on other monetary instruments held in currencies other than US dollars.
Liquidity risk
Liquidity risk is the risk that we either do not have sufficient financial resources available to meet our obligations as
they fall due, or can only access these financial resources at excessive cost.
It is our policy to maintain adequate liquidity at all times, in all geographic locations and for all currencies, and hence
to be in a position to meet obligations as they fall due. We manage liquidity risk both on a short-term and structural
basis. In the short-term, our focus is on ensuring that the cash flow demands can be met where required. In the
medium-term, the focus is on ensuring that the balance sheet remains structurally sound and is aligned to our strategy.
The Group Asset and Liability Committee (GALCO) is the responsible governing body that approves our liquidity management
policies. The Liquidity Management Committee (LMC) receives authority from the GALCO and is responsible for setting or
delegating authority to set liquidity limits and proposing liquidity risk policies. Liquidity in each country is managed by
the country ALCO within pre-defined liquidity limits and in compliance with Group liquidity policies and practices, as well
as local regulatory requirements. MTCR and Group Treasury propose and oversee the implementation of policies and other
controls relating to the above risks.
We seek to manage our liquidity prudently in all geographical locations and for all currencies. Exceptional market events
could impact us adversely, thereby potentially affecting our ability to fulfill our obligations as they fall due. The
principal uncertainties for liquidity risk are that customers withdraw their deposits at a substantially faster rate than
expected, or that asset repayments are not received on the expected maturity date. To mitigate these uncertainties, our
funding base is diverse and largely customer-driven, while customer loans are of short tenor (51 per cent of these assets
have a contractual maturity of less than 1 year). In addition we have contingency funding plans including a portfolio of
liquid assets that can be realised if a liquidity stress occurs, as well as ready access to wholesale funds under normal
market conditions.
Policies and procedures
Our liquidity risk management framework requires limits to be set for prudent liquidity management. There are limits on:
• The local and foreign currency cash flow gaps
• The level of external wholesale funding to ensure that the size of this funding is proportionate to the local market and
our local operations
• The level of borrowing from other countries within the Group to contain the risk of contagion from one country to
another
• Commitments, both on and off balance sheet, to ensure there are sufficient funds available in the event of drawdown
The advances to deposits ratio to ensure that commercial advances are funded by stable sources and that customer lending is
funded by customer deposits
· The amount of assets that may be funded from other currencies
· The amount of medium term assets that have to be funded by medium term funding
In addition, we prescribe a liquidity stress scenario that includes accelerated withdrawal of deposits over a period of
time. Each country has to ensure on a daily basis that cash inflows would exceed outflows under such a scenario.
All limits are reviewed at least annually, and more frequently if required, to ensure that they remain relevant given
market conditions and business strategy. Compliance with limits is monitored independently on a regular basis by MTCR and
Finance. Limit excesses are escalated and approved under a delegated authority structure and reported to the country ALCO.
Excesses are also reported monthly to the LMC which provide further oversight.
We have significant levels of marketable securities, including government securities that can be monetised or pledged as
collateral in the event of a liquidity stress. In addition, a Funding Crisis Response and Recovery Plan (FCRRP), reviewed
and approved annually, is maintained by Group Treasury. The FCRRP strengthens existing governance processes by providing a
broad set of Early Warning Indicators (EWIs), an escalation framework and a set of management actions that could be
effectively implemented by the appropriate level of senior management in the event of a liquidity stress. A similar plan is
maintained within each major country.
Primary sources of funding
Asubstantial portion of our assets are funded by customer deposits, largely made up of current and savings accounts.
Wholesale funding deposits are widely diversified by type and maturity and represent a stable source of funds for the
Group. In addition, the short term nature of our wholesale assets results in a balance sheet that is funded
conservatively.
The ALCO in each country monitors trends in the balance sheet and ensures that any concerns that might impact the stability
of these customer deposits are addressed effectively. The ALCO also reviews balance sheet plans to ensure that projected
asset growth is matched by growth in customer deposits.
Customer assets are as far as possible funded in the same currency. Where mismatches arise, they are controlled by limits
in each country on the amount of foreign currency that can be swapped to local currency and vice versa. Such limits are
therefore a means of controlling reliance on foreign exchange markets, which minimises the risk that obligations could not
be met in the required currency in the event that access to foreign exchange markets becomes restricted. In sizing the
limits we consider a range of factors including:
· The size and depth of local FX markets; and
· The local regulatory environment, particularly the presence or risk of imposition of foreign exchange controls.
We maintain access to wholesale funding markets in all major financial centres and countries in which we operate. This
seeks to ensure that we have market intelligence, maintain stable funding lines and can obtain optimal pricing when we
perform our interest rate risk management activities.
Debt refinancing levels are low. In the next 12 months approximately $5.4 billion of the Group's senior and subordinated
debt is falling due for repayment either contractually or callable by the Group. Further details of the Group's senior and
subordinated debt by geography are provided in note 2 to the financial statements on page 110.
The table below shows the diversity of funding by type and by geography. Customer deposits make up almost 57 per cent of
total liabilities as at 30 June 2014, the majority of which are current accounts, savings accounts and time deposits. Our
largest customer deposit base by geography is Greater China (in particular Hong Kong) which holds 36 per cent of Group
customer accounts.
30.06.14 30.06.13 31.12.13
Group's composition of Liabilities % % %
Customer accounts 56.6 58.6 58.0
Deposits by banks 7.3 7.0 6.6
Derivative financial instruments 6.9 8.3 9.1
Other liabilities 6.9 6.3 5.8
Debt securities in issue 11.7 10.1 10.6
Subordinated liabilities and other borrowed funds 3.6 2.8 3.0
Total equity 7.0 6.9 6.9
Total 100.0 100.0 100.0
30.06.14 30.06.13 30.12.13
Geographic distribution of customer accounts % % %
Greater China 36.0 35.7 37.2
North East Asia 8.7 8.9 8.7
South Asia 3.8 3.9 4.0
ASEAN 25.1 25.0 24.5
MENAP 6.2 5.9 6.0
Africa 3.0 2.7 2.9
Americas 4.4 4.1 3.8
Europe 12.8 13.8 12.9
Total 100.0 100.0 100.0
Encumbered assets
Encumbered assets represent those on balance sheet assets pledged or used as collateral in respect of certain of the
Group's liabilities. Hong Kong government certificates of indebtedness which secure the equivalent amount of Hong Kong
currency notes in circulation, and cash collateral pledged against derivatives are included within other assets. Taken
together
these encumbered assets represent 3.3 per cent (30 June 2013: 2.8 per cent; 31 December 2013: 3.1 per cent) of total
assets, continuing the Group's historical low level of encumbrance.
The following table provides a reconciliation of the Group's encumbered assets to total assets.
30.06.14 30.06.13
Unencumbered assets Unencumbered assets
Not readily available to secure funding Readily available to secure funding Encumbered assets Total assets Not readily available to secure funding Readily available to secure funding Encumbered assets Total assets
$million $million $million $million $million $million $million $million
Cash and balances at central banks 10,557 51,625 - 62,182 9,663 47,958 - 57,621
Derivative financial instruments 48,105 - - 48,105 54,548 - - 54,548
Loans and advances to banks1 50,841 37,086 3,493 91,420 41,705 32,023 1,152 74,880
Loans and advances to customers1 303,924 - 1,137 305,061 290,246 - 1,547 291,793
Investment securities1 43,198 76,654 7,604 127,456 44,920 66,764 3,248 114,932
Other assets 26,227 - 10,857 37,084 26,137 - 11,904 38,041
Current tax assets 290 - - 290 198 - - 198
Prepayments and accrued income 2,807 - - 2,807 2,687 - - 2,687
Interests in associates and joint ventures 1,932 - - 1,932 1,819 - - 1,819
Goodwill and intangible assets 6,200 - - 6,200 5,943 - - 5,943
Property, plant and equipment 6,967 - - 6,967 6,759 - - 6,759
Deferred tax assets 634 - - 634 736 - - 736
Total 501,682 165,365 23,091 690,138 485,361 146,745 17,851 649,957
31.12.13
Unencumbered assets
Not readily available to secure funding Readily available to secure funding Encumbered assets Total assets
$million $million $million $million
Cash and balances at central banks 9,946 44,588 - 54,534
Derivative financial instruments 61,802 - - 61,802
Loans and advances to banks1 46,917 36,890 2,362 86,169
Loans and advances to customers1 294,884 - 1,131 296,015
Investment securities1 48,699 72,062 3,516 124,277
Other assets 19,870 - 13,700 33,570
Current tax assets 234 - - 234
Prepayments and accrued income 2,510 - - 2,510
Interests in associates and joint ventures 1,767 - - 1,767
Goodwill and intangible assets 6,070 - - 6,070
Property, plant and equipment 6,903 - - 6,903
Deferred tax assets 529 - - 529
Total 500,131 153,540 20,709 674,380
1 Includes assets held at fair value through profit or loss
Encumbered assets continued
In addition to the above the Group received $17, 029 million (30 June 2013: $8,710 million; 31 December 2013: $15,906
million) as collateral under reverse repurchase agreements that was eligible for repledging. Of this the Group repledged
$1,914 million (30 June 2013: $1,161 million; 31 December 2013: $1,804 million) under repurchase agreements
Readily available to secure funding
Readily available to secure funding includes unencumbered assets that can be sold outright or under repo within a few days,
in line with regulatory definitions. The Group's readily available assets comprise of cash and balances at central banks,
loans and advances to banks and investment securities.
Assets classified as not readily available to secure funding include:
· Assets which have no restrictions for funding and collateral purposes, such as loans and advances to customers, which
are not acquired or originated with the intent of generating liquidity value; and
· Assets that cannot be encumbered, such as derivatives, goodwill and intangible and deferred tax assets
Liquidity metrics
We also monitor key liquidity metrics on a regular basis, both on a country basis and in aggregate across the Group. The
key metrics are:
Advances to deposits ratio
This is defined as the ratio of total loans and advances to customers relative to total customer deposits. A low advances
to deposits ratio demonstrates that customer deposits exceed customer loans resulting from emphasis placed on generating a
high level of funding from customers.
30.06.14 30.06.13 31.12.13
$million $million $million
Loans and advances to customers1 305,061 291,793 296,015
Customer accounts 390,523 380,785 390,971
Advances to deposits ratio 78.1% 76.6% 75.7%
1 See note 16 to the financial statements on page 140
Liquid asset ratio (LAR)
The Liquid Asset Ratio (LAR) ensures that a proportion of the Group's total assets are held in liquid assets, on a
consolidated currency basis.
Liquid assets are the total cash (less restricted balances), treasury bills, loans and advances to banks (including net
unsecured interbank and trade finance) and debt securities (less illiquid securities). Illiquid securities are debt
securities that
cannot be sold or exchanged easily for cash without substantial loss in value.
The Group LAR remained at similar levels as in the previous year, reflecting an increase in liquid assets holdings to match
balance sheet growth. The LAR in Europe increased as a consequence of liquidity optimisation activities resulting in
increased balances at central banks and holding of liquid securities.
The following table sets an analysis of the Group's liquid assets by geographic region:
30.06.14
Greater China NorthEast Asia South Asia ASEAN MENAP Africa Americas Europe Total
$ million $ million $ million $ million $ million $ million $ million $ million $million
Cash and balances at central banks 7,389 5,203 945 5,585 2,603 1,573 24,178 14,706 62,182
Restricted balances (3,438) (560) (493) (3,220) (1,645) (738) (424) (39) (10,557)
Loans and advances to banks - net of non-performing loans 28,554 7,806 478 7,781 1,712 901 13,187 30,900 91,319
Deposits by banks (8,670) (4,472) (501) (7,096) (1,777) (822) (18,128) (8,909) (50,375)
Treasury bills 6,940 5,680 2,359 4,821 1,058 3,175 929 1,303 26,265
Debt securities 29,723 7,629 3,775 15,035 4,438 2,628 5,040 26,428 94,696
of which :
Issued by governments 13,536 6,194 2,875 6,243 3,765 1,143 422 5,134 39,312
Issued by banks 10,299 484 186 3,663 297 381 3,805 14,119 33,234
Issued by corporate and other entities 5,888 951 714 5,129 376 1,104 813 7,175 22,150
Illiquid securities and Other Assets (819) (19) (538) (222) - (6) (468) (1,103) (3,175)
Liquid assets 59,679 21,267 6,025 22,684 6,389 6,711 24,314 63,286 210,355
Total assets 203,638 74,602 27,857 162,176 39,262 21,203 64,016 97,384 690,138
Liquid assets to total asset ratio (%) 29.3% 28.5% 21.6% 14.0% 16.3% 31.7% 38.0% 65.0% 30.5%
Liquid asset ratio (LAR) continued
30.06.13
Greater China NorthEast Asia South Asia ASEAN MENAP Africa Americas Europe Total
$ million $ million $ million $ million $ million $ million $ million $ million $million
Cash and balances at central banks 6,944 3,803 1,031 5,025 2,440 1,303 27,367 9,708 57,621
Restricted balances (3,363) (667) (565) (2,578) (1,538) (626) (301) (25) (9,663)
Loans and advances to banks - net of non-performing loans 26,021 5,257 759 7,647 2,437 813 11,048 20,787 74,769
Deposits by banks (6,548) (4,545) (496) (4,890) (1,514) (611) (15,777) (11,009) (45,390)
Treasury bills 6,796 6,954 2,789 3,496 1,449 2,390 1,396 480 25,750
Debt securities 30,690 4,963 2,709 16,914 4,044 3,115 3,432 17,756 83,623
of which :
Issued by governments 12,348 3,840 1,834 6,881 3,364 1,400 513 2,575 32,755
Issued by banks 11,940 270 390 4,402 524 303 2,702 8,933 29,464
Issued by corporate and other entities 6,402 853 485 5,631 156 1,412 217 6,248 21,404
Illiquid securities and Other Assets (101) (5) (696) (177) - (112) - (1,698) (2,789)
Liquid assets 60,439 15,760 5,531 25,437 7,318 6,272 27,165 35,999 183,921
Total assets 194,208 72,227 27,886 150,124 36,550 18,790 64,858 85,314 649,957
Liquid assets to total asset ratio (%) 31.1% 21.8% 19.8% 16.9% 20.0% 33.4% 41.9% 42.2% 28.3%
Liquid asset ratio (LAR) continued
31.12.13
Greater China NorthEast Asia South Asia ASEAN MENAP Africa Americas Europe Total
$ million $ million $ million $ million $ million $ million $ million $ million $million
Cash and balances at central banks 7,188 4,909 970 5,679 2,169 1,621 23,345 8,653 54,534
Restricted balances (3,431) (547) (523) (2,959) (1,546) (644) (262) (34) (9,946)
Loans and advances to banks - net of non-performing loans 27,899 6,561 575 6,689 2,097 742 13,067 28,432 86,062
Deposits by banks (4,652) (3,719) (542) (6,917) (1,491) (566) (17,739) (8,900) (44,526)
Treasury bills 10,741 6,794 2,567 4,748 1,220 2,777 1,027 1,530 31,404
Debt securities 30,126 5,895 2,896 16,093 3,986 2,803 3,979 20,295 86,073
of which :
Issued by governments 12,625 4,289 2,162 6,584 3,382 1,307 194 3,331 33,874
Issued by banks 12,334 935 327 4,183 265 267 3,484 10,376 32,171
Issued by corporate and other entities 5,167 671 407 5,326 339 1,229 301 6,588 20,028
Illiquid securities and Other Assets (170) - (773) (348) (39) - - (1,051) (2,381)
Liquid assets 67,701 19,893 5,170 22,985 6,396 6,733 23,417 48,925 201,220
Total assets 201,832 73,130 27,142 156,366 37,519 19,357 65,125 93,909 674,380
Liquid assets to total asset ratio (%) 33.5% 27.2% 19.0% 14.7% 17.0% 34.8% 36.0% 52.1% 29.8%
Liquid asset ratio (LAR) continued
Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)
The Group monitors the LCR and NSFR in line with the Bank of International Settlements' BCBS238 guidelines. In June 2014
the Group started reporting its LCR on a monthly basis to its lead regulator, the Prudential Regulation Authority (PRA),
calculated in accordance with the Capital Requirements Regulation (CRR), the Regulation that implements BCBS238 in Europe.
The Group meets the Basel III requirements for the NSFR and LCR under both BCBS 238 and CRR definitions. As at 30 June 2014
both the Group LCR and NSFR were above 100 per cent.
Liquidity management - stress scenarios
The Group conducts a range of liquidity related stress analyses, both for internal and regulatory purposes.
Internally, three stress tests are run routinely: a severe 8-day name specific stress, a 30-day market wide stress and a
90-day combined name specific and market wide stress. Liquidity and funding risks are also considered as part of the
Group's wider periodic scenario analysis, including reverse stress testing. In addition, the Group runs a range of stress
tests to meet regulatory requirements, as defined by the PRA and local regulators.
The 8-day stress is specifically designed to determine a minimum quantity of marketable securities that must be held at all
times in all countries. This stress is computed daily, and the minimum marketable securities requirement is observed daily.
This is intended to ensure that, in the unlikely event of an acute loss of confidence in the Group or any individual entity
within it, there is sufficient time to take corrective action. Every country must pass, on a stand-alone basis, with no
presumption of Group support. As at 30 June 2014 all countries passed the stress test
The Group's resilience to market-wide disruption, such as loss of interbank money or foreign exchange markets, is tested
using the 30-day market wide stress scenario, and is monitored by country ALCOs.
Finally, the 90-day stress test considers more prolonged stresses that affect markets across a number of the Group's main
footprint countries and in which the Group itself may come under some sustained pressure. This pressure may be unwarranted
or may be because the Group is inextricably linked with those markets/countries. This stress is managed at a Group rather
than individual country level. It tests the adequacy of contingency funding arrangements beyond the marketable securities
held to cover the 8-day stress, including the ability to support countries from elsewhere in the Group.
Our country stress testing considers potential currency mismatches between outflows and inflows. Particular focus is paid
to mismatches in less liquid currencies and those which are not freely convertible. Mismatches are controlled by management
action triggers set by MTCR. Group-wide stress tests also consider the portability of liquidity surpluses between Group
entities, taking account of regulatory restrictions on large and intra-group exposures.
Standard Chartered Bank's credit ratings as at June 2014 were AA- (Fitch), AA- with negative outlook (S&P) and A1
(Moody's). A downgrade in credit rating would increase derivative collateral requirements and outflows due to rating-linked
liabilities. The impact of a 2-notch downgrade results in an estimated outflow of $1.4 billion.
Liquidity analysis of the Group's balance sheet
Contractual maturity of assets and liabilities
This table analyses assets and liabilities into relevant maturity groupings based on the remaining period to the
contractual maturity date as at the balance sheet date on a discounted basis. Contractual maturities do not necessarily
reflect actual repayments or cash flow.
Within the tables below cash and balances
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