TIDMHSBA
RNS Number : 6315V
HSBC Holdings PLC
10 August 2020
http://www.rns-pdf.londonstockexchange.com/rns/6315V_1-2020-8-10.pdf
HSBC Holdings plc
Pillar 3 Disclosures at 30 June 2020
Contents
Page
Introduction 2
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Highlights 2
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Regulatory framework for disclosures 2
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Pillar 3 disclosures 2
----
Key metrics 3
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Regulatory developments 3
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Risk management response to Covid-19 4
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Linkage to the Interim Report 5
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Capital and RWAs 7
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Own funds 7
----
Leverage ratio 9
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Capital buffers 10
----
Pillar 1 minimum capital requirements
and RWA flow 10
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Minimum requirement for own funds
and eligible liabilities 13
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Credit risk 19
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Credit quality of assets 19
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Non-performing and forborne exposures 22
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Defaulted exposures 27
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Risk mitigation 27
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Counterparty credit risk 37
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Securitisation 42
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Market risk 46
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Other information 50
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Abbreviations 50
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Cautionary statement regarding
forward-looking statements 51
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Contacts 52
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Tables
Ref Page
1 Key metrics (KM1/IFRS9-FL) a 3
------- -------------------------------------- ---- ----
Reconciliation of balance
sheets - financial accounting
2 to regulatory scope of consolidation 6
------- -------------------------------------- ---- ----
3 Own funds disclosure b 7
----
Leverage ratio common disclosure
4 ('LRCom') a 9
------- -------------------------------------- ---- ----
Summary reconciliation of
accounting assets and leverage
5 ratio exposures ('LRSum') b 9
------- -------------------------------------- ---- ----
Leverage ratio - Split of
on-balance sheet exposures
(excluding derivatives,
SFTs and exempted exposures)
6 ('LRSpl') a 10
------- -------------------------------------- ----
7 Overview of RWAs ('OV1') b 11
----
RWA flow statements of credit
risk exposures under IRB
8 ('CR8') 11
----
RWA flow statements of CCR
9 exposures under IMM ('CCR7') 12
----
RWA flow statements of market
risk exposures under IMA
10 ('MR2-B') 12
----
Key metrics of the European
11.i resolution group ('KM2') a 13
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Key metrics of the Asian
11.ii resolution group ('KM2') 14
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Key metrics of the US resolution
11.iii group ('KM2') 14
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12 TLAC composition ('TLAC1') a 15
------- -------------------------------------- ---- ----
HSBC Holdings plc creditor
13 ranking ('TLAC3') 16
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HSBC UK Bank plc creditor
14 ranking ('TLAC2') 16
------- -------------------------------------- ---- ----
HSBC Bank plc creditor ranking
15 ('TLAC2') 17
------- -------------------------------------- ---- ----
HSBC Asia Holdings Ltd creditor
16 ranking ('TLAC3') 17
------- -------------------------------------- ---- ----
The Hongkong and Shanghai
Banking Corporation Ltd
17 creditor ranking ('TLAC2') 18
------- -------------------------------------- ---- ----
Hang Seng Bank Ltd creditor
18 ranking ('TLAC2') 18
------- -------------------------------------- ---- ----
HSBC North America Holdings
19 Inc. creditor ranking ('TLAC3') 18
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Credit quality of exposures
by exposure class and instrument
20 ('CR1-A') 19
----
Credit quality of exposures
by industry or counterparty
21 types(1), ('CR1-B') 21
----
Credit quality of exposures
22 by geography 1,2 ('CR1-C') 22
----
Credit quality of forborne
23 exposures 23
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Collateral obtained by taking
possession and execution
24 processes 23
------- -------------------------------------- ----
Credit quality of performing
and non-performing exposures
25 by past due days 24
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Performing and non-performing
26 exposures and related provisions 25
-------------------------------------- ----
Changes in stock of general
and specific credit risk
27 adjustments ('CR2-A') 27
-------------------------------------- ---- ----
Changes in stock of defaulted
loans and debt securities
28 ('CR2-B') 27
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Credit risk mitigation techniques
29 - overview ('CR3') 27
-------------------------------------- ---- ----
Standardised approach -
credit conversion factor
and credit risk mitigation
30 ('CRM') effects ('CR4') b 28
---- ----
Standardised approach -
exposures by asset classes
31 and risk weights ('CR5') b 29
----
IRB - Credit risk exposures
by portfolio and PD range
32 ('CR6') a 30
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IRB - Effect on RWA of credit
derivatives used as CRM
33 techniques ('CR7') 36
----
Specialised lending on slotting
34 approach ('CR10') 36
---- ----
Analysis of counterparty
credit risk exposure by
approach (excluding centrally
35 cleared exposures) ('CCR1') 37
----
Credit valuation adjustment
36 capital charge ('CCR2') 37
----
Standardised approach -
CCR exposures by regulatory
portfolio and risk weights
37 ('CCR3') 37
---- ----
IRB - CCR exposures by portfolio
38 and PD scale ('CCR4') 38
----
Impact of netting and collateral
held on exposure values
39 ('CCR5-A') 40
---- ----
Composition of collateral
40 for CCR exposure ('CCR5-B') 40
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Exposures to central counterparties
41 ('CCR8') 40
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Credit derivatives exposures
42 ('CCR6') 41
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Securitisation exposures
in the non-trading book
43 ('SEC1') 43
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Securitisation exposures
44 in the trading book ('SEC2') 44
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Securitisation exposures
in the non-trading book
and associated regulatory
capital requirements - bank
acting as originator or
45 as sponsor ('SEC3') 44
------- -------------------------------------- ---- ----
Securitisation exposures
in the non-trading book
and associated capital requirements
- bank acting as investor
46 ('SEC4') 45
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Market risk under standardised
47 approach (MR1) 46
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48 Market risk under IMA (MR2-A) 46
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IMA values for trading portfolios
49 (MR3) 47
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Comparison of VaR estimates
50 with gains/losses (MR4) 48
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The Group has adopted the EU's regulatory transitional
arrangements for IFRS 9 'Financial Instruments'. A number of tables
in this document report under this arrangement as follows:
a. Some figures have been prepared on an IFRS 9 transitional
basis. Details are provided in the table footnotes.
b. All figures have been prepared on an IFRS 9 transitional basis.
All other tables report numbers on the basis of the full
adoption of IFRS 9.
This document should be read in conjunction with the Interim
Report 2020, which has been published on our website
www.hsbc.com
Certain defined terms
Unless the context requires otherwise, 'HSBC Holdings' means
HSBC Holdings plc and 'HSBC', the 'Group', 'we', 'us' and 'our'
refer to HSBC Holdings together with its subsidiaries. Within this
document the Hong Kong Special Administrative Region of the
People's Republic of China is referred to as 'Hong Kong'. When used
in the terms 'shareholders' equity' and 'total shareholders'
equity', 'shareholders' means holders of HSBC Holdings ordinary
shares and those preference shares and capital securities issued by
HSBC Holdings classified as equity. The abbreviations '$m', '$bn'
and '$tn' represent millions, billions (thousands of millions) and
trillions of US dollars, respectively.
Introduction
Highlights
Common equity tier 1 ('CET1') ratio increased over 2Q20 to 15%
due to higher CET1 capital, which included an increase from the
cancellation of the 4Q19 dividend and the current suspension of
dividends on ordinary shares, more than offsetting the impact of
RWA growth.
Please click on the link below to view the following chart and
Pillar 3 document in full:
http://www.rns-pdf.londonstockexchange.com/rns/6315V_1-2020-8-10.pdf
Common equity tier 1 ($bn and %)
Risk-weighted assets by risk type
and global business ($bn)
Credit risk
Counterparty
credit risk
Market risk
Operational
risk
Commercial
Banking
Global Banking
and Markets
Wealth and
Personal
Banking
Corporate
Centre
Regulatory framework for disclosures
We are supervised on a consolidated basis in the UK by the
Prudential Regulation Authority ('PRA'), which receives information
on the capital adequacy of, and sets capital requirements for, the
Group as a whole. Individual banking subsidiaries are directly
regulated by their local banking supervisors, which set and monitor
their local capital adequacy requirements. In most jurisdictions,
non-banking financial subsidiaries are also subject to the
supervision and capital requirements of local regulatory
authorities.
At a consolidated Group level, capital is calculated for
prudential regulatory reporting purposes using the Basel III
framework of the Basel Committee on Banking Supervision ('Basel'),
as implemented by the European Union ('EU') in the revisions to the
Capital Requirements Regulation, as implemented ('CRR II'), and in
the PRA Rulebook for the UK banking industry. The regulators of
Group banking entities outside the EU are at varying stages of
implementing the Basel III framework, so the Group may have been
subject to local regulations in the first half of 2020 that were on
the basis of the Basel I, II or III frameworks.
The Basel Committee's framework is structured around three
'pillars': Pillar 1, minimum capital requirements; Pillar 2,
supervisory review process; and Pillar 3, market discipline. The
aim of Pillar 3 is to produce disclosures that allow market
participants to assess the scope of banks' application of the Basel
Committee's framework. It also aims to assess their application of
the rules in their jurisdiction, capital conditions, risk exposures
and risk management processes, and hence their capital
adequacy.
Pillar 3 disclosures
Our Pillar 3 Disclosures at 30 June 2020
comprises quantitative and qualitative information required
under Pillar 3. They are made in accordance with Part Eight of the
Capital Requirements Regulation, as implemented by CRR II and the
European Banking Authority ('EBA') guidelines on disclosure
requirements. These disclosures are supplemented by specific
additional requirements of the PRA and discretionary disclosures on
our part.
The Pillar 3 disclosures are governed by the disclosure policy
framework approved by the Group Audit Committee.
To give insight into movements during the year, we provide
comparative figures, commentary of variances and flow tables for
capital requirements. In all tables where the term 'capital
requirements' is used, this represents the minimum total capital
charge set at 8% of risk-weighted assets ('RWAs') by article 92 of
the Capital Requirements Regulation.
Where disclosures have been enhanced, or are new, we do not
generally restate or provide comparatives. Wherever specific rows
and columns in the tables prescribed by the EBA or Basel are not
applicable or immaterial to our activities, we omit them and follow
the same approach for comparatives.
Pillar 3 requirements may be met by inclusion in other
disclosure media. Where we adopt this approach, references are
provided to the relevant pages of the Interim Report 2020 or to
other documents.
We continue to engage in the work of the UK authorities and
industry associations to improve the transparency and comparability
of UK banks' Pillar 3 disclosures.
Reporting and disclosure of exposures subject to measures
applied in response to the Covid-19 outbreak
On 2 June, the EBA announced temporary additional reporting and
disclosure requirements concerning payment moratoria and
forbearance measures related to the Covid-19 outbreak.
On 28 July, the PRA issued a statement setting out its
expectations on how the disclosure guidelines are to be applied,
amending the EBA instructions and definitions to reflect the UK
approach to payment deferrals.
We will publish these disclosures on or around 24 August 2020 on
the HSBC website, hsbc.com.
Key metrics
Table 1: Key metrics (KM1/IFRS9-FL)
At
30 Jun 31 Mar 31 Dec 30 Sep 30 Jun
Ref* Footnotes 2020 2020 2019 2019 2019
--------- --------- --------- --------- ---------
Available capital ($bn)(1) 2
----------
1 Common equity tier 1 ('CET1') capital ^ 128.4 125.2 124.0 123.8 126.9
---------- -------
CET1 capital as if IFRS 9 transitional
2 arrangements had not been applied 127.4 124.5 123.1 122.9 126.0
3 Tier 1 capital ^ 152.5 149.2 148.4 149.7 152.8
----------
Tier 1 capital as if IFRS 9 transitional
4 arrangements had not been applied 151.4 148.5 147.5 148.8 151.9
5 Total capital ^ 177.2 174.0 172.2 175.1 178.3
----------
Total capital as if IFRS 9 transitional
6 arrangements had not been applied 176.1 173.3 171.3 174.2 177.4
-------
Risk-weighted assets ('RWAs') ($bn)
--------- ---------
7 Total RWAs 854.6 857.1 843.4 865.2 886.0
-------
Total RWAs as if IFRS 9 transitional
8 arrangements had not been applied 854.1 856.7 842.9 864.7 885.5
-------------------------------------------- ---------- ------- -------
Capital ratios (%) 2
----------
9 CET1 ^ 15.0 14.6 14.7 14.3 14.3
---------- -------
CET1 as if IFRS 9 transitional arrangements
10 had not been applied 14.9 14.5 14.6 14.2 14.2
------- -------
11 Tier 1 ^ 17.8 17.4 17.6 17.3 17.2
---------- ------- -------
Tier 1 as if IFRS 9 transitional
12 arrangements had not been applied 17.7 17.3 17.5 17.2 17.2
------- -------
13 Total capital ^ 20.7 20.3 20.4 20.2 20.1
---------- ------- -------
Total capital as if IFRS 9 transitional
14 arrangements had not been applied 20.6 20.2 20.3 20.1 20.0
------- -------
Additional CET1 buffer requirements
as a percentage of RWA (%)
----- -------------------------------------------- ---------- --------- ---------
Capital conservation buffer requirement 2.50 2.50 2.50 2.50 2.50
-------
Countercyclical buffer requirement 0.20 0.22 0.61 0.69 0.68
------- ------- -------
Bank G-SIB and/or D-SIB additional
requirements 2.00 2.00 2.00 2.00 2.00
------- -------
Total of bank CET1 specific buffer
requirements 4.70 4.72 5.11 5.19 5.18
------- ------- ------- -------
Total capital requirement (%) 3
-------------------------------------------- ---------- --------- ---------
Total capital requirement 11.1 11.0 11.0 11.0 11.0
-------------------------------------------- ---------- -------
CET1 available after meeting the
bank's minimum capital requirements 8.8 8.4 8.5 8.1 8.1
---------- ------- ------- ------- ------- -------
Leverage ratio 4
----------
Total leverage ratio exposure measure
15 ($bn) 2,801.4 2,782.7 2,726.5 2,708.2 2,786.5
---------- -------
16 Leverage ratio (%) ^ 5.3 5.3 5.3 5.4 5.4
---------- ------- -------
Leverage ratio as if IFRS 9 transitional
arrangements had not been applied
17 (%) 5.3 5.2 5.3 5.4 5.3
-------------------------------------------- ------- -------
Liquidity coverage ratio ('LCR') 5
----- -------------------------------------------- ---------- --------- ---------
Total high-quality liquid assets
($bn) 654.4 617.2 601.4 513.2 532.8
----------
Total net cash outflow ($bn) 442.9 395.0 400.5 378.0 391.0
----------
LCR ratio (%) 147.8 156.3 150.2 135.8 136.3
----- -------------------------------------------- ---------- ------- ------- ------- ------- -------
* The references in this and subsequent tables identify lines
prescribed in the relevant EBA template where applicable and where
there is a value.
^ Figures have been prepared on an IFRS 9 transitional basis.
1 Where applicable, our reporting throughout this document also
reflects government relief schemes intended to mitigate the impact
of the Covid-19 outbreak.
2 Capital figures and ratios are reported on a CRR II
transitional basis for capital instruments.
3 Total capital requirement is defined as the sum of Pillar 1
and Pillar 2A capital requirements set by the PRA. The minimum
requirements represent the total capital requirement to be met by
CET1.
4 Leverage ratio is calculated using the CRR II end point basis for capital.
5 The EU's regulatory transitional arrangements for IFRS 9
'Financial Instruments' in article 473a of the Capital Requirements
Regulation do not apply to liquidity coverage measures. LCR is
calculated as at the end of each period rather than using average
values. For further details, refer to page 83 of the Interim Report
2020.
We have adopted the regulatory transitional arrangements for
IFRS 9 'Financial Instruments', including paragraph four within
article 473a of the Capital Requirements Regulation, published by
the EU on 27 December 2017. These transitional arrangements permit
banks to add back to their capital base a proportion of the impact
that IFRS 9 has upon their loan loss allowances during the first
five years of use. The impact of IFRS 9 on loan loss allowances is
defined as:
-- the increase in loan loss allowances on day one of IFRS 9 adoption; and
-- any subsequent increase in expected credit losses ('ECL') in
the non-credit-impaired book thereafter.
Any add-back must be tax affected and accompanied by a
recalculation of capital deduction thresholds, exposure and RWAs.
The impact is calculated separately for portfolios using the
standardised ('STD') and internal-ratings based ('IRB') approaches.
For IRB portfolios, there is no add-back to capital unless loan
loss allowances exceed regulatory 12-month expected losses.
The EU's CRR 'Quick Fix' relief package enacted in June 2020
increased from 70% to 100% the relief that banks may take
for
loan loss allowances recognised since 1 January 2020 on the
non-credit-impaired book.
In the current period, the add-back to the capital base amounted
to $1.4bn under the STD approach with a tax impact of $0.3bn.
At 31 December 2019, the add-back to the capital base under the
STD approach was $1.0bn with a tax impact of $0.2bn.
Regulatory developments
Covid-19
The current Covid-19 pandemic has created an unprecedented
challenge to the global economy. Governments, central banks and
regulatory authorities have responded to this challenge with a
number of regulatory measures. The substance of the announcements
and the pace of response varies by jurisdiction, but broadly these
have included a number of customer support measures, operational
capacity measures and amendments to the RWAs, capital and liquidity
frameworks.
In the EU, the relief measures have included a package known as
the 'CRR Quick Fix' that was enacted in June 2020. The package
represents an acceleration of some of the beneficial elements of
the amendments to CRR II that were originally scheduled for June
2021, together with other amendments to mitigate the potential
volatility in capital ratios arising from the pandemic. The
material changes that were finalised in June, include:
-- a resetting of the transitional provisions in relation to
recognising IFRS 9 provisions in CET1 capital;
-- the acceleration of the timetable for the changes to the CET1
deduction of software assets so that once the EBA finishes its
current consultation on the new methodology, the rules can go
live;
-- the CRR II changes to the small and medium-sized enterprises
('SME') supporting factor and the new infrastructure supporting
factor; and
-- the CRR II change to the netting in the leverage ratio
exposure measure of regular-way purchases and sales.
The PRA has published a statement in response to the package,
stating that it will be undertaking a quantitative analysis of the
benefits, which will be used to inform its supervisory approach.
This will include an assessment of whether further action is
necessary in Pillar 2. The accelerated application of the revised
SME and infrastructure supporting factors will be implemented by
the Group in the second half of 2020.
In addition to the CRR Quick Fix package, there were other
changes to the regime in response to the Covid-19 outbreak. These
included the enactment by the EU of beneficial changes to the CET1
deduction for prudent valuation adjustments, which will remain in
place until 1 January 2021, and the PRA announcing that it is
setting all Pillar 2A requirements in 2020 and 2021 as a nominal
amount, instead of as a percentage of total RWAs.
The Basel Committee
In December 2017, the Basel Committee ('Basel') published the
Basel III Reforms. The package was finalised in July 2020 when
Basel published the final revisions to the credit valuation
adjustment ('CVA') framework.
In March 2020, Basel announced a one-year delay to the
implementation of the package. It is now to be implemented on
1 January 2023, with a five-year transitional provision for the
output floor. This floor ensures that, at the end of the
transitional period, banks' total RWAs will be no lower than 72.5%
of those generated by the standardised approaches. The final
standards will need to be transposed into the relevant local law
before coming into effect. The EU, the UK and Hong Kong authorities
have already indicated that they will apply the new timetable.
There remains a significant degree of uncertainty about the
impact of these changes due to the number of national discretions
within Basel's reforms and the need for further supporting
technical standards to be developed. Furthermore, any impact needs
to be viewed in light of the possibility of offsets against Pillar
2, which may arise as shortcomings within Pillar 1 are
addressed.
The Capital Requirements Regulation amendments
In June 2019, the EU enacted CRR II. This is the EU's
implementation of changes to the own funds regime and to the
Financial Stability Board's ('FSB') requirements for total
loss-absorbing capacity ('TLAC'), known in the EU as the minimum
requirements for own funds and eligible liabilities ('MREL'). CRR
II will also implement the first tranche of changes to the EU's
legislation to reflect the Basel III Reforms, including the changes
to market risk ('FRTB') rules, revisions to the standardised
approach for measuring counterparty risk, changes to the equity
investments in funds rules and the new leverage ratio rules. The
CRR II rules will follow a phased implementation with significant
elements entering into force in 2021, in advance of Basel's
timeline.
The EU's implementation of the Basel III Reforms
The remaining elements of the Basel III Reforms will be
implemented in the EU by a further set of amendments to the Capital
Requirements Regulation. In 2019, the European Commission began
consulting on its implementation, which will include reforms to the
credit and operational risk rules and a new output floor. However,
draft legislative text has not yet been published. The EU
implementation will be subject to an extensive negotiation process
with the EU Council and Parliament. As a result, the final form of
the rules remains unclear.
The UK's withdrawal from the EU
The UK left the EU on 31 January 2020. In order to smooth the
transition, the UK remains subject to EU law during an
implementation period, which will end on 31 December 2020. The PRA
has announced its intention that, save for in certain limited
circumstances, the changes to the prudential framework arising as a
result of the UK's withdrawal will be delayed until 31 March
2022.
In June, Her Majesty's Treasury ('HMT') published an update on
the framework to implement future prudential changes in the UK.
This will be in the form of a Financial Services Bill in which
powers will be delegated to the PRA for detailed rule making. The
UK has stated that it intends to implement its own version of CRR
II to the same timetable as the EU.
At the same time, HMT published a consultation on the
implementation of the amendments to the Bank Recovery and
Resolution Directive, the main EU regulation overseeing resolution
and MREL standards. It also subsequently published a consultation
on aspects of the amendments to the Capital Requirements Directive
('CRD V'). HMT proposes to implement in UK law only those elements
of the Bank Recovery and Resolution Directive and CRD V that will
be live on 31 December 2020.
In July 2020, the PRA also issued a consultation on implementing
parts of CRD V, which includes its requirements for Pillar 2,
remuneration and governance. In the autumn, the PRA will consult on
the remaining elements of CRD V and the CRR II elements that apply
from December 2020.
Other developments
In July 2020, the PRA published its final policy on reducing
Pillar 2A to reflect the additional resilience associated with the
higher countercyclical capital buffer ('CCyB') in a standard risk
environment proposed by the Bank of England's Financial Policy
Committee. However, reflecting the reduction of the UK's CCyB to 0%
and the fact that the UK's structural CCyB rate set in a standard
risk environment has not changed, the PRA introduced a requirement
to temporarily increase the PRA buffer to offset some of the
reductions in Pillar 2A that firms receive under this proposal. The
rules take immediate effect.
Also in July, the PRA published a statement outlining its views
on the implications of London interbank offered rate ('Libor')
transition for contracts in scope of its resolution-related rules.
The EBA also published its final guidelines on the treatment of
structural foreign exchange positions, which will apply from
1 January 2022, one year later than originally planned.
On 1 July, the PRA sent a letter to CEOs outlining its
expectations of firms in managing climate-related financial risks
and advising firms that they must have fully embedded their
approaches to managing such risk by the end of 2021.
Risk management response to Covid-19
The first half of 2020 was marked by unprecedented global
economic events, leading to banks playing an expanded role to
support society and customers. The Covid-19 outbreak and its impact
on the global economy have impacted many of our customers' business
models and income, requiring significant levels of support from
both governments and banks. In response, we have enhanced our
approach to the management of risk in this rapidly changing
environment.
Throughout the Covid-19 outbreak, we have supported our
customers and adapted our operational processes. Our people,
processes and systems have responded to the changes needed and
increased the workload in serving our customers through this time.
To meet the additional challenges, we supplemented our existing
approach to risk management with additional tools and practices. We
increased our focus on the quality and timeliness of the data used
to inform management decisions, through measures such as early
warning indicators, prudent active risk management against our risk
appetite, and ensuring regular communication with our Board and
other key stakeholders. This section sets out how we have managed
our key risks resulting from the outbreak and its impacts.
Capital and liquidity management
The management of capital was a key focus in 1H20 to ensure the
Group responded to unprecedented customer and capital demands
arising from Covid-19 outbreak. All major entities remained in
excess of their capital risk appetite.
In response to a written request from the PRA, we cancelled the
fourth interim dividend for 2019 of $0.21 per ordinary share.
Similar requests were also made to other UK incorporated banking
groups. We also announced that until the end of 2020, we will make
no quarterly or interim dividend payments or accruals in respect of
ordinary shares. We also plan to suspend share buy-backs in respect
of ordinary shares in 2020 and 2021.
The reduction of the UK countercyclical buffer rate to 0% was
reflected in the Group's risk appetite statement, and together with
other regulatory relief, resulted in a reduction to Group CET1 and
leverage ratio requirements.
In 1H20, all entities remained within the CET1 risk appetite and
the Group continues to maintain the appropriate resources required
to adequately support risks to which it is exposed. This has been
further informed by additional internal stress tests carried out in
response to the Covid-19 outbreak. Capital risk management
practices continued to be enhanced across the Group through the
capital risk management function, focusing on both adequacy of
capital and sufficiency of returns.
The management of liquidity risk was enhanced during 1H20 in
response to the Covid-19 pandemic to ensure the Group anticipated,
monitored and responded to the impacts both at Group and entity
level. Liquidity levels were impacted by drawdown of committed
facilities and buy-backs of short-term debt. However, this was
offset by an increase in deposits, use of central bank facilities
where appropriate and the ability to issue in the short-term
markets as they stabilised. As a result of these liability
enhancing actions, the Group and all entities have significant
surplus liquidity, resulting in heightened liquidity coverage
ratios ('LCR') in 1H20.
Prudential valuation adjustment
To achieve the degree of certainty prescribed for prudent
valuation, banks must adjust fair valued exposures for valuation
uncertainties and deduct the resulting prudent valuation adjustment
('PVA') charge from CET1. Market turmoil caused by the Covid-19
outbreak resulted in a significant increase in asset price
dispersion, bid-offer spreads and subsequent hypothetical exit
costs, leading to a material increase of the PVA charge in 1Q20
when compared with 4Q19. For 2Q20, the charge materially reduced
from bid offer spreads and price dispersion reduction as market
volatility reduced, as well as from the application of a higher
diversification benefit temporarily permitted by regulators.
Credit risk management
During 1Q20, a number of relief programmes were initiated across
the Group in response to the Covid-19 outbreak. These remained in
place during the second quarter, with some programmes extended to
support our customers where required.
Enhanced model monitoring has been established to detect any
trends, shifts in key risk drivers or early performance indicators
that could signal that our IRB models are no longer performing as
expected. Using the latest available data from May 2020 for our
retail models, the monitoring outputs indicate there have been
limited impacts on the performance of IRB models as a direct
consequence of the outbreak. Within wholesale, the most recent
financial data received from customers do not always reflect
current business performance during the outbreak, so we apply
appropriate levels of judgemental overrides to the model outputs.
As better information emerges on the outbreak's impact on the
credit quality of loan portfolios and the creditworthiness of
groups of borrowers, credit risk evaluations will be modified
accordingly. We will continue to monitor the credit risk within our
business and take the appropriate mitigating actions to help
support our customers and our franchise.
For further details of the customer relief programmes that we
are participating in, see page 66 of the Interim Report 2020.
Non-financial risk
As a result of the Covid-19 outbreak, business continuity plans
have been implemented successfully. Despite high levels of working
from home, the majority of service level agreements are being
maintained. We have experienced no major impacts to the supply
chain from our third-party service providers. The risk of damage or
theft to our physical assets or criminal injury to our employees
remains unchanged. No significant incidents have impacted our
buildings or staff. Expedited decisions to ensure the continuity of
critical customer services are being documented through
governance.
Market risk management
We managed market risk prudently in the first half of 2020.
Sensitivity exposures remained within appetite as the business
pursued its core market-making activity in support of our customers
during the pandemic. We have also undertaken hedging activities to
protect the business from potential future deterioration in credit
conditions. Market risk continued to be managed using a
complementary set of exposure measures and limits, including stress
and scenario analysis.
Linkage to the Interim Report
Structure of the regulatory group
Assets, liabilities and post-acquisition reserves of
subsidiaries engaged in insurance activities are excluded from the
regulatory consolidation. Our investments in these insurance
subsidiaries are recorded at cost and deducted from CET1 capital,
subject to thresholds.
The regulatory consolidation also excludes special purpose
entities ('SPEs') where significant risk has been transferred to
third parties. Exposures to these SPEs are risk weighted as
securitisation positions for regulatory purposes.
Participating interests in banking associates are proportionally
consolidated for regulatory purposes by including our share of
assets, liabilities, profits and losses, and RWAs in accordance
with the PRA's application of EU legislation. Non-participating
significant investments along with non-financial associates are
deducted from capital, subject to thresholds.
For further explanation of the differences between the
accounting and regulatory scope of consolidation and their
definition of exposure, see pages 8 to 13 of the Pillar 3
Disclosures at 31 December 2019.
Table 2: Reconciliation of balance sheets - financial accounting to
regulatory scope of consolidation
Accounting Deconsolidation Consolidation Regulatory
balance of insurance/ of banking balance
sheet other entities associates sheet
Ref $m $m $m $m
Assets
------------------------------------------------------------ ----- ---------- ----------------- --------------- ------------
Cash and balances at central banks 249,673 (10) 323 249,986
Items in the course of collection
from other banks 6,289 - - 6,289
Hong Kong Government certificates
of indebtedness 39,519 - - 39,519
Trading assets 208,964 (810) - 208,154
--------- ----
Financial assets designated and
otherwise mandatorily measured
at fair value through profit or
loss 41,785 (31,488) 535 10,832
--------- ----------- --- --------- ---- ---------
* of which: debt securities eligible as tier 2 issued
by Group Financial Sector Entities ('FSEs') that are
outside the regulatory scope of consolidation r - 597 - 597
------------------------------------------------------------ ----- --------- ----------- ---- --------- ---- ---------
Derivatives 313,781 (169) 160 313,772
Loans and advances to banks 77,015 (2,071) 1,248 76,192
Loans and advances to customers 1,018,681 (1,074) 12,306 1,029,913
* of which: lending eligible as tier 2 to Group FSEs
outside the regulatory scope of consolidation r - 411 - 411
------------------------------------------------------------ ----- --------- ----------- ---- --------- ---- ---------
expected credit losses on IRB
portfolios h (10,630) - - (10,630)
------------------------------------------------------------ ----- --------- ----------- ---- --------- ---- ---------
Reverse repurchase agreements -
non-trading 226,345 2,078 161 228,584
----------- ----
Financial investments 494,109 (70,116) 4,625 428,618
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
* of which: lending eligible as tier 2 to Group FSEs
outside the regulatory scope of consolidation r - 369 - 369
------------------------------------------------------------ ----- --------- --------- ----
Capital invested in insurance and
other entities - 2,286 - 2,286
------------------------------------------------------------------- --------- ----------- ---- --------- ---- ---------
Prepayments, accrued income and
other assets 197,425 (6,414) 452 191,463
--------- ----------- --- --------- ---- ---------
- of which: retirement benefit
assets j 9,894 - - 9,894
----- --------- ----------- ---- --------- ---- ---------
Current tax assets 821 (69) 14 766
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
Interests in associates and joint
ventures 24,800 (410) (4,626) 19,764
------------------------------------------------------------------- --------- ----------- --- --------- --- ---------
- of which: positive goodwill on
acquisition e 478 (12) - 466
--------- ----------- --- --------- ---- ---------
Goodwill and intangible assets e 19,438 (9,651) 1,222 11,009
Deferred tax assets f 4,153 128 16 4,297
Total assets at 30 Jun 2020 2,922,798 (117,790) 16,436 2,821,444
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
Liabilities and equity
------------------------------------------------------------ -----
Hong Kong currency notes in circulation 39,519 - - 39,519
--------- ----------- ---- --------- ---- ---------
Deposits by banks 82,715 (29) 624 83,310
Customer accounts 1,532,380 3,432 14,656 1,550,468
Repurchase agreements - non-trading 112,799 - - 112,799
Items in the course of transmission
to other banks 6,296 - - 6,296
Trading liabilities 79,612 - - 79,612
Financial liabilities designated
at fair value 156,608 (4,396) - 152,212
---------
o,
q,
* of which: included in tier 2 i 10,054 - - 10,054
------------------------------------------------------------ ----- --------- ----------- ---- --------- ---- ---------
Derivatives 303,059 72 229 303,360
- of which: debit valuation adjustment i 138 - - 138
------------------------------------------------------------ ----- --------- ----------- ---- --------- ---- ---------
Debt securities in issue 110,114 (1,611) - 108,503
Accruals, deferred income and other
liabilities 173,181 (2,823) 640 170,998
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
Current tax liabilities 1,141 (28) 106 1,219
--------- ----------- --- --------- ---- ---------
Liabilities under insurance contracts 98,832 (98,832) - -
Provisions 3,209 (7) 55 3,257
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
* of which: credit-related contingent liabilities and
contractual commitments on IRB portfolios h 687 - - 687
------------------------------------------------------------ ----- --------- ----------- ---- --------- ---- ---------
Deferred tax liabilities 4,491 (1,455) 8 3,044
Subordinated liabilities 23,621 1 118 23,740
--------- ----------- ---- --------- ---- ---------
- of which:
l,
included in tier 1 n 1,763 - - 1,763
o,
included in tier 2 q 20,168 - - 20,168
--------- ----------- ---- --------- ---- ---------
Total liabilities at 30 Jun 2020 2,727,577 (105,676) 16,436 2,638,337
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
Equity
Called up share capital a 10,346 - - 10,346
------------------------------------------------------------ ----- --------- ----------- ---- --------- ---- ---------
a,
Share premium account l 14,268 - - 14,268
Other equity instruments k 20,914 - - 20,914
c,
Other reserves g (301) 1,888 - 1,587
b,
Retained earnings c 141,809 (12,851) - 128,958
-----
Total shareholders' equity 187,036 (10,963) - 176,073
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
d,
m,
n,
Non-controlling interests p 8,185 (1,151) - 7,034
--------- ----------- --- --------- ---- ---------
Total equity at 30 Jun 2020 195,221 (12,114) - 183,107
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
Total liabilities and equity at
30 Jun 2020 2,922,798 (117,790) 16,436 2,821,444
------------------------------------------------------------------- --------- ----------- --- --------- ---- ---------
The references (a)-(r) identify balance sheet components that
are used in the calculation of regulatory capital in Table 3: Own
funds disclosure. This table shows such items at their accounting
values, which may be subject to analysis or adjustment in the
calculation of regulatory capital shown in Table 3.
Capital and RWAs
Capital management
Approach and policy
Our approach to capital management is driven by our strategic
and organisational requirements, taking into account the
regulatory, economic and commercial environment. We aim to maintain
a strong capital base to support the risks inherent in our business
and invest in accordance with our strategy, meeting both
consolidated and local regulatory capital requirements at all
times.
Our capital management process culminates in the annual Group
capital plan, which is approved by the Board. HSBC Holdings is the
primary provider of equity capital to its subsidiaries and also
provides them with non-equity and loss-absorbing capital where
necessary. These investments are substantially funded by HSBC
Holdings' issuance of equity and non-equity capital and by profit
retention. As part of its capital management process, HSBC
Holdings seeks to maintain a balance between the composition of
its capital and its investment in subsidiaries, including
management of double leverage.
The main features of capital securities issued by the Group,
categorised as tier 1 ('T1') capital and tier 2 ('T2') capital, are
set out on the HSBC website, www.hsbc.com.
The values disclosed are the IFRS balance sheet carrying
amounts, not the amounts that these securities contribute to
regulatory capital. For example, the IFRS accounting and the
regulatory treatments differ in their approaches to issuance costs,
regulatory amortisation and regulatory eligibility limits
prescribed by the relevant regulatory legislation.
A list of the main features of our capital instruments, in
accordance with Annex III of Commission Implementing Regulation
1423/2013, is also published on our website. This is in addition to
the full terms and conditions of our securities, also available on
our website.
For further details on our management of capital, see page 77 of
the Interim Report 2020.
Own funds
Table 3: Own funds disclosure
----------
At
30 Jun 31 Dec
2020 2019
Ref $m $m
---------- ----------
Common equity tier 1 ('CET1') capital: instruments
and reserves
--- ----------------------------------------------------------- ---- ---------- ----------
Capital instruments and the related share premium
1 accounts 23,209 22,873
- ordinary shares a 23,209 22,873
---- -------
2 Retained earnings b 127,989 127,188
----
Accumulated other comprehensive income (and other
3 reserves) c 2,594 1,735
----
Minority interests (amount allowed in consolidated
5 CET1) d 4,036 4,865
----
Independently reviewed interim net profits net of
5a any foreseeable charge or dividend b 1,729 (3,381)
---- -------
6 Common equity tier 1 capital before regulatory adjustments 159,557 153,280
--- ----------------------------------------------------------- ---- ------- -------
Common equity tier 1 capital: regulatory adjustments
--- ----------------------------------------------------------- ---- ---------- ----------
7 Additional value adjustments(1) (1,162) (1,327)
----
8 Intangible assets (net of related deferred tax liability) e (11,181) (12,372)
----
10 Deferred tax assets that rely on future profitability
excluding those arising from temporary differences
(net of related tax liability) f (1,505) (1,281)
----
Fair value reserves related to gains or losses on
11 cash flow hedges g (426) (41)
----
Negative amounts resulting from the calculation of
12 expected loss amounts h (1,191) (2,424)
----
Gains or losses on liabilities valued at fair value
14 resulting from changes in own credit standing i 5 2,450
----
15 Defined-benefit pension fund assets j (7,409) (6,351)
----
16 Direct and indirect holdings of own CET1 instruments(2) (40) (40)
--- ----------------------------------------------------------- ---- ------- -------
19 Direct, indirect and synthetic holdings by the institution
of the CET1 instruments of financial sector entities
where the institution has a significant investment
in those entities (amount above 10% threshold and
net of eligible short positions)(3) (8,202) (7,928)
--- ----------------------------------------------------------- ---- ------- -------
Total regulatory adjustments to common equity tier
28 1 (31,111) (29,314)
-------
29 Common equity tier 1 capital 128,446 123,966
--- ----------------------------------------------------------- ---- ------- -------
Additional tier 1 ('AT1') capital: instruments
--- ----------------------------------------------------------- ----
30 Capital instruments and the related share premium
accounts 20,914 20,871
31 - classified as equity under IFRSs k 20,914 20,871
--- ----------------------------------------------------------- ----
33 Amount of qualifying items and the related share
premium accounts subject to phase out
from AT1 l 2,305 2,305
----
34 Qualifying tier 1 capital included in consolidated
AT1 capital (including minority interests not included
in CET1) issued by subsidiaries and held by third m,
parties n 872 1,277
-------
35 - of which: instruments issued by subsidiaries subject
to phase out m 812 1,218
--- ----------------------------------------------------------- ---- -------
36 Additional tier 1 capital before regulatory adjustments 24,091 24,453
--- ----------------------------------------------------------- ---- ------- -------
Additional tier 1 capital: regulatory adjustments
--- ----------------------------------------------------------- ---- ---------- ----------
37 Direct and indirect holdings of own AT1 instruments(2) (60) (60)
-------
Total regulatory adjustments to additional tier 1
43 capital (60) (60)
--- ----------------------------------------------------------- ---- ------- -------
44 Additional tier 1 capital 24,031 24,393
--- ----------------------------------------------------------- ---- ------- -------
45 Tier 1 capital (T1 = CET1 + AT1) 152,477 148,359
-------
Table 3: Own funds disclosure (continued)
At
30 Jun 31 Dec
2020 2019
Ref $m $m
----
Tier 2 capital: instruments and provisions
---- -------------------------------------------------------------- ---- ---------- ----------
Capital instruments and the related share premium
46 accounts o 21,338 20,525
---- -------
- of which: instruments grandfathered under CRR II 7,572 7,067
-------------------------------------------------------------- ---- -------
48 Qualifying own funds instruments included in consolidated
T2 capital (including minority interests and AT1
instruments not included in CET1 or AT1) issued by p,
subsidiaries and held by third parties q 4,843 4,667
----
49 - of row 48: instruments issued by subsidiaries subject
to phase out q 2,172 2,251
----
- of row 48: instruments issued by subsidiaries grandfathered
under CRR II 1,500 1,452
---- -------------------------------------------------------------- ---- ------- -------
51 Tier 2 capital before regulatory adjustments 26,181 25,192
---- -------------------------------------------------------------- ---- ------- -------
Tier 2 capital: regulatory adjustments
52 Direct and indirect holdings of own T2 instruments (40) (40)
---- -------------------------------------------------------------- ---- ------- -------
55 Direct and indirect holdings by the institution of
the T2 instruments and subordinated loans of financial
sector entities where the institution has a significant
investment in those entities (net of eligible short
positions) r (1,376) (1,361)
---- -------------------------------------------------------------- ---- ------- -------
57 Total regulatory adjustments to tier 2 capital (1,416) (1,401)
---- -------------------------------------------------------------- ---- ------- -------
58 Tier 2 capital 24,765 23,791
---- -------------------------------------------------------------- ---- ------- -------
59 Total capital (TC = T1 + T2) 177,242 172,150
---- -------------------------------------------------------------- ---- ------- -------
60 Total risk-weighted assets 854,552 843,395
---- -------------------------------------------------------------- ---- ------- -------
Capital ratios and buffers
---- -------------------------------------------------------------- ---- ---------- ----------
61 Common equity tier 1 15.0% 14.7%
----------
62 Tier 1 17.8% 17.6%
63 Total capital 20.7% 20.4%
----------
64 Institution specific buffer requirement 4.70% 5.11%
---- -------------------------------------------------------------- ----
65
* capital conservation buffer requirement 2.50% 2.50%
66
* countercyclical buffer requirement 0.20% 0.61%
67a
* Global Systemically Important Institution ('G-SII')
buffer 2.00% 2.00%
----------
68 Common equity tier 1 available to meet buffers 8.8% 8.5%
---- -------------------------------------------------------------- ---- ---------- ----------
Amounts below the threshold for deduction (before
risk weighting)
---- -------------------------------------------------------------- ---- ---------- ----------
72 Direct and indirect holdings of the capital of financial
sector entities where the institution does not have
a significant investment in those entities (amount
below 10% threshold and net of eligible short positions) 2,425 2,938
73 Direct and indirect holdings by the institution of
the CET1 instruments of financial sector entities
where the institution has a significant investment
in those entities (amount below 10% threshold and
net of eligible short positions) 13,556 13,189
75 Deferred tax assets arising from temporary differences
(amount below 10% threshold, net of related tax liability) 3,915 4,529
Applicable caps on the inclusion of provisions in
tier 2
---- -------------------------------------------------------------- ---- ---------- ----------
77 Cap on inclusion of credit risk adjustments in T2
under standardised approach 2,035 2,163
79 Cap for inclusion of credit risk adjustments in T2
under IRB approach 3,233 3,128
Capital instruments subject to phase out arrangements
(only applicable between 1 Jan 2013 and 1 Jan 2022)
---- -------------------------------------------------------------- ---- ---------- ----------
82 Current cap on AT1 instruments subject to phase out
arrangements 3,461 5,191
-------
83 Amount excluded from AT1 due to cap (excess over
cap after redemptions and maturities) 51 122
-------
84 Current cap on T2 instruments subject to phase out
arrangements 1,825 2,737
---- -------------------------------------------------------------- ---- ------- -------
The references (a)-(r) identify balance sheet components in
Table 2: Reconciliation of balance sheets - financial accounting to
regulatory scope of consolidation which is used in the calculation
of regulatory capital. This table shows how they contribute to the
regulatory capital calculation. Their contribution may differ from
their accounting value in Table 2 as a result of adjustment or
analysis to apply regulatory definitions of capital.
1 Additional value adjustments are deducted from CET1. These are
calculated on assets measured at fair value.
2 The deduction for holdings of own CET1, T1 and T2 instruments is set by the PRA.
3 The threshold deduction for significant investments relates to
balances recorded on numerous lines on the balance sheet and
includes: investments in insurance subsidiaries and
non-consolidated associates, other CET1 equity held in financial
institutions, and connected funding of a capital nature etc.
At 30 June 2020, our common equity tier 1 ('CET1') capital ratio
increased to 15.0% from 14.7% at 31 December 2019.
CET1 capital increased in 1H20 by $4.5bn, mainly as a result
of:
-- the cancellation of the 4Q19 unpaid dividend of $3.4bn at the PRA's request;
-- a $1.8bn increase as a result of lower deductions for excess
expected loss. ECL against IRB exposures rose by $4.3bn compared
with 31 December 2019, while regulatory expected losses rose by
$2.5bn;
-- capital generation of $1.7bn through profits, net of
dividends relating to other equity instruments; and
-- a $1.5bn increase in the fair value through other comprehensive income reserve.
These increases were partly offset by:
-- foreign currency translation differences of $3.7bn; and
-- a $0.8bn fall in allowable non-controlling interests in CET1.
This partly reflected the acquisition in May 2020 of additional
shares representing 18.66% of the capital of HSBC Trinkaus &
Burkhardt AG from Landesbank Baden-Württemberg, the principal
minority shareholder.
At 30 June 2020, our Pillar 2A requirement was $26.3bn,
equivalent to 3.1% of RWAs. Of this, 1.7% was met by CET1. Pillar
2A requirements are set by the PRA as part of our total capital
requirement.
Leverage ratio
The risk of excessive leverage is managed as part of HSBC's
global risk appetite framework and monitored using a leverage ratio
metric within our risk appetite statement ('RAS'). The RAS
articulates the aggregate level and types of risk that HSBC is
willing to accept in its business activities in order to achieve
its strategic business objectives.
The RAS is monitored via the risk appetite profile report, which
includes comparisons of actual performance against the risk
appetite and tolerance thresholds assigned to each metric. This is
to ensure that any excessive risk is highlighted, assessed and
mitigated appropriately. The risk appetite profile report is
presented monthly to the Risk Management Meeting of the Group
Management Board and the Group Risk Committee.
Our approach to risk appetite is described on page 73 of the
Annual Report and Accounts 2019.
Table 4: Leverage ratio common disclosure ('LRCom')
At
30 Jun 31 Dec
2020 2019
Footnotes $bn $bn
------ ------------------------------------------------------ ---------- ----------------- -------------
On-balance sheet exposures (excluding derivatives
and SFTs)
------ ------------------------------------------------------ ---------- ----------------- -------------
On-balance sheet items (excluding derivatives,
1 SFTs and fiduciary assets, but including collateral) 2,232.1 2,119.1
--------------
2 (Asset amounts deducted in determining tier
1 capital) (29.6) (30.5)
3 Total on-balance sheet exposures (excluding
derivatives, SFTs and fiduciary assets) 2,202.5 2,088.6
------ ------------------------------------------------------ ---------- -------------- ----------
Derivative exposures
------ ------------------------------------------------------ ---------- ----------------- -------------
4 Replacement cost associated with all derivatives
transactions (i.e. net of eligible cash variation
margin) 85.4 53.5
5 Add-on amounts for potential future exposure
associated with all derivatives transactions
(mark-to-market method) 146.3 162.1
6 Gross-up for derivatives collateral provided
where deducted from the balance sheet assets
pursuant to IFRSs 13.3 8.3
7 (Deductions of receivables assets for cash variation
margin provided in derivatives transactions) (58.5) (43.1)
8 (Exempted central counterparty ('CCP') leg of
client-cleared trade exposures) (80.3) (53.2)
9 Adjusted effective notional amount of written
credit derivatives 153.6 159.4
--------------
10 (Adjusted effective notional offsets and add-on
deductions for written credit derivatives) (147.1) (150.4)
11 Total derivative exposures 112.7 136.6
------ ------------------------------------------------------ ---------- -------------- ----------
Securities financing transaction exposures
------ ------------------------------------------------------ ---------- ----------------- -------------
12 Gross SFT assets (with no recognition of netting),
after adjusting for sales accounting transactions 483.0 451.0
13 (Netted amounts of cash payables and cash receivables
of gross SFT assets) (228.3) (196.1)
14 Counterparty credit risk exposure for SFT assets 10.7 10.7
16 Total securities financing transaction exposures 265.4 265.6
------ ------------------------------------------------------ ---------- -------------- ----------
Other off-balance sheet exposures
------ ------------------------------------------------------ ---------- ----------------- -------------
17 Off-balance sheet exposures at gross notional
amount 859.9 865.5
18 (Adjustments for conversion to credit equivalent
amounts) (639.1) (629.8)
19 Total off-balance sheet exposures 220.8 235.7
------ ------------------------------------------------------ ---------- -------------- ----------
Capital and total exposures
20 Tier 1 capital 1 149.4 144.8
------ ------------------------------------------------------ ---------- -------------- ----------
21 Total leverage ratio exposure 2,801.4 2,726.5
------ ------------------------------------------------------ ---------- -------------- ----------
22 Leverage ratio (%) 1 5.3 5.3
------ ------------------------------------------------------ ---------- -------------- ----------
EU-23 Choice of transitional arrangements for the Fully
definition of the capital measure Fully phased-in phased-in
------ ------------------------------------------------------ ---------- ----------------- -------------
1 Leverage ratio is calculated using the CRR II end point basis for capital.
Table 5: Summary reconciliation of accounting assets and leverage ratio
exposures ('LRSum')
At
30 Jun 31 Dec
2020 2019
$bn $bn
1 Total assets as per published financial statements 2,922.8 2,715.2
---------------------------------------------------------- ------- -------
Adjustments for:
2 - entities which are consolidated for accounting
purposes but are outside the scope of regulatory
consolidation (101.4) (101.2)
4 * derivative financial instruments (201.0) (106.4)
5 * SFTs 12.2 2.8
6
* off-balance sheet items (i.e. conversion to credit
equivalent amounts of off-balance sheet exposures) 220.8 235.7
7 * other (52.0) (19.6)
---------------------------------------------------------- ------- -------
8 Total leverage ratio exposure 2,801.4 2,726.5
---------------------------------------------------------- ------- -------
Table 6: Leverage ratio - Split of on-balance sheet exposures (excluding
derivatives, SFTs and exempted exposures) ('LRSpl')
At
30 Jun 31 Dec
2020 2019
$bn $bn
Total on-balance sheet exposures (excluding derivatives,
EU-1 SFTs and exempted exposures) 2,173.6 2,076.0
EU-2 - trading book exposures 181.2 230.8
EU-3 - banking book exposures 1,992.4 1,845.2
------- -------
'banking book exposures' comprises:
EU-4 covered bonds 2.6 2.6
------- -------
EU-5 exposures treated as sovereigns 682.3 539.3
------- -------
exposures to regional governments, multilateral
development banks, international organisations
EU-6 and public sector entities not treated as sovereigns 8.8 9.4
------- -------
EU-7 institutions 66.3 59.3
------- -------
EU-8 secured by mortgages of immovable properties 342.9 330.4
------- -------
EU-9 retail exposures 83.6 106.2
------- -------
EU-10 corporate 589.8 603.2
------- -------
EU-11 exposures in default 12.7 9.9
------- -------
other exposures (e.g. equity, securitisations and
EU-12 other non-credit obligation assets) 203.4 184.9
------- ---------------------------------------------------------- ------- -------
Capital buffers
Our geographical breakdown and institution-specific
countercyclical capital buffer ('CCyB') disclosure and G-SIB
Indicators Disclosure are published annually on the HSBC website,
www.hsbc.com.
Pillar 1 minimum capital requirements
and
RWA flow
Pillar 1 covers the minimum capital resource requirements for
credit risk, counterparty credit risk ('CCR'), equity,
securitisation, market risk and operational risk. These
requirements are expressed in terms of RWAs.
Credit The Basel Committee's framework For consolidated Group reporting,
risk applies three approaches of increasing we have adopted the AIRB approach
sophistication to the calculation for the majority of our business.
of Pillar 1 credit risk capital Some portfolios remain on the
requirements. The most basic level, standardised or FIRB approaches:
the standardised approach, requires * pending the issuance of local regulations or model
banks to use external credit ratings approval;
to determine the risk weightings
applied to rated counterparties.
Other counterparties are grouped * following supervisory prescription of a non-advanced
into broad categories and standardised approach; or
risk weightings are applied to
these categories. The next level,
the foundation IRB ('FIRB') approach, * under exemptions from IRB treatment.
allows banks to calculate their
credit risk capital requirements
on the basis of their internal
assessment of a counterparty's
probability of default ('PD'),
but subjects their quantified
estimates of exposure at default
('EAD') and loss given default
('LGD') to standard supervisory
parameters. Finally, the advanced
IRB ('AIRB') approach allows banks
to use their own internal assessment
in both determining PD and quantifying
EAD and LGD.
Counterparty Four approaches to calculating We use the mark-to-market and
credit CCR and determining exposure values IMM approaches for CCR. Details
risk are defined by the Basel Committee: of the IMM permission we have
mark-to-market, original exposure, received from the PRA can be found
standardised and internal model in the Financial Services Register
method ('IMM'). These exposure on the PRA website. Our aim is
values are used to determine capital to increase the proportion of
requirements under one of the positions on IMM over time.
credit risk approaches: standardised,
FIRB or AIRB.
Equity For the non-trading book, equity For Group reporting purposes,
exposures can be assessed under all non-trading book equity exposures
standardised or IRB approaches. are treated under the standardised
approach.
--------------- -------------------------------------------------------- ------------------------------------------------------------
Securitisation On 1 January 2019, the new securitisation Under the new framework:
framework came into force in the * Our originated positions are reported under SEC-IRBA.
EU for new transactions. This
framework prescribes the following
approaches: * Our positions in the sponsored Solitaire programme
* internal ratings-based approach ('SEC-IRBA'); and our investment in third-party positions are
reported under SEC-SA and SEC-ERBA.
* standardised approach ('SEC-SA');
* Our sponsored positions in Regency are reported under
IAA. Our IAA approach is audited annually by internal
* external ratings-based approach ('SEC-ERBA'); and model review and is subject to review by the PRA.
* internal assessment approach ('IAA').
From 1 January 2020, all transactions
were subject to the new framework.
Market Market risk capital requirements The market risk capital requirement
risk can be determined under either is measured using internal market
the standard rules or the internal risk models, where approved by
models approach ('IMA'). The latter the PRA, or under the standard
involves the use of internal value rules. Our internal market risk
at risk ('VaR') models to measure models comprise VaR, stressed
market risks and determine the VaR and IRC. Non-proprietary details
appropriate capital requirement. of the scope of our IMA permission
In addition to the VaR models, are available in the Financial
other internal models include Services Register on the PRA website.
stressed VaR ('SVaR'), incremental We are in compliance with the
risk charge ('IRC') and comprehensive requirements set out in articles
risk measure. 104 and 105 of the Capital Requirements
Regulation.
--------------- -------------------------------------------------------- ------------------------------------------------------------
Operational The Basel Committee allows firms We currently use the standardised
risk to calculate their operational approach in determining our operational
risk capital requirement under risk capital requirement. We have
the basic indicator approach, in place an operational risk model
the standardised approach or the that is used for economic capital
advanced measurement approach. calculation purposes.
--------------- -------------------------------------------------------- ------------------------------------------------------------
Table 7: Overview of RWAs ('OV1')
At
30 Jun 31 Mar 30 Jun
2020 2020 2020
-------- -------- ---------------
Capital
RWAs RWAs requirements
Footnotes $bn $bn $bn
-------- ---------------
Credit risk (excluding counterparty credit
1 risk) 632.6 631.9 50.6
---- ----------------------------------------------- ---------- -------------
2 - standardised approach 116.8 119.9 9.3
3 - foundation IRB approach 103.9 101.2 8.3
---- -----------------------------------------------
4 - advanced IRB approach 411.9 410.8 33.0
---- ----------------------------------------------- ----------
6 Counterparty credit risk 43.1 47.3 3.4
---- ----------------------------------------------- ---------- -------------
7 - mark-to-market 20.6 23.2 1.6
---- ----------------------------------------------- ----------
10 - internal model method 18.3 20.0 1.5
---- ----------------------------------------------- ----------
11 - risk exposure amount for contributions
to the default fund of a central counterparty 0.5 0.6 -
---- ----------------------------------------------- ----------
12 - credit valuation adjustment 3.7 3.5 0.3
---- ----------------------------------------------- ---------- ------ ------ -------------
13 Settlement risk - 0.2 -
---- ----------------------------------------------- ---------- ------ ------ -------------
14 Securitisation exposures in the non-trading
book 10.4 10.4 0.8
---- ----------------------------------------------- ---------- ------
14a - internal ratings-based approach ('SEC-IRBA') 1.8 1.8 0.1
---- ----------------------------------------------- ----------
14b - external ratings-based approach ('SEC-ERBA') 3.9 3.6 0.3
---- ----------------------------------------------- ----------
14c - internal assessment approach ('IAA') 2.3 2.5 0.2
---- ----------------------------------------------- ----------
14d - standardised approach ('SEC-SA') 2.4 2.5 0.2
---- ----------------------------------------------- ----------
19 Market risk 35.2 34.8 2.8
---- ----------------------------------------------- ---------- -------------
20 - standardised approach 8.4 8.8 0.7
---- ----------------------------------------------- ----------
21 - internal models approach 26.8 26.0 2.1
---- ----------------------------------------------- ----------
23 Operational risk 89.6 89.2 7.2
---- ----------------------------------------------- ---------- ------ ------ -------------
25 - standardised approach 89.6 89.2 7.2
---- ----------------------------------------------- ----------
27 Amounts below the thresholds for deduction
(subject to 250% risk weight) 43.7 43.3 3.5
---- ----------------------------------------------- ---------- ------ ------ -------------
29 Total 854.6 857.1 68.3
---- ----------------------------------------------- ---------- ------ ------ -------------
Credit risk, including amounts below the thresholds for
deduction
Credit risk RWAs increased by $1.1bn in 2Q20. This included a
$11.7bn fall in asset size attributable to repayments and
management initiatives, largely offset by an increase in RWAs due
to changes in asset quality of $11.6bn. Asset quality movements
reflected significant credit migration, largely in North America,
Europe and Asia. A $3.9bn increase in RWAs due to foreign currency
exchange differences was partly offset by a decrease due to
methodology and policy changes of $3.3bn, mainly due to risk
parameter refinements.
Counterparty credit risk
The $4.0bn decrease in counterparty credit risk RWAs was
primarily due to management initiatives, lower market volatility
and trade maturities.
Market risk
The $0.4bn increase in market risk RWAs included a $3.5bn
increase from asset size movements largely due to market
volatility, partly offset by management initiatives. This was
largely offset by a $2.1bn decrease due to methodology and policy
changes, mostly in the calculation of foreign exchange risk, and a
$1.0bn fall due to model updates from a temporary adjustment to the
calculation of risks not in VaR.
Table 8: RWA flow statements of credit risk exposures under IRB(1)
('CR8')
Capital
RWAs requirements
$bn $bn
---- ---------------------------------------------- ------------ ---------------
1 RWAs at 1 Apr 2020 512.0 41.0
----------------------------------------------
2 Asset size (10.2) (0.8)
3 Asset quality 11.4 0.8
4 Model updates 0.8 0.1
5 Methodology and policy (1.4) (0.1)
7 Foreign exchange movements 3.2 0.3
---- ---------------------------------------------- --------- ------------
9 RWAs at 30 Jun 2020 515.8 41.3
---- ---------------------------------------------- --------- ------------
1 Securitisation positions are not included in this table.
IRB RWAs increased by $3.8bn in 2Q20, including a rise of $3.2bn
due to foreign currency translation differences. The remaining
increase of $0.6bn was mostly from a $11.4bn RWA rise due to asset
quality movements, reflecting an increase in credit migration in
North America, Europe and Asia. This was partly offset by a
fallfrom asset size movements of $10.2bn due to customer repayments
and active portfolio management in the same regions. A $1.4bn fall
in RWAs from methodology and policy was largely due to risk
parameter refinements, and a $0.8bn increase from model updates
included changes to global corporate models.
Table 9: RWA flow statements of CCR exposures under IMM ('CCR7')
Capital
RWAs requirements
$bn $bn
------------ ---------------
1 RWAs at 1 Apr 2020 22.9 1.8
-------------------------------------------
2 Asset size (1.6) (0.1)
3 Asset quality 0.4 -
5 Methodology and policy (0.3) -
---- ------------------------------------------- -------- ------------
9 RWAs at 30 Jun 2020 21.4 1.7
---- ------------------------------------------- -------- ------------
IMM RWAs fell by $1.5bn in 2Q20 predominantly due to management
initiatives and a fall in mark-to-market as a result of lower
market volatility.
Table 10: RWA flow statements of market risk exposures under IMA ('MR2-B')
Total
Stressed Total capital
VaR VaR IRC Other RWAs requirements
$bn $bn $bn $bn $bn $bn
---------------
1 RWAs at 1 Apr 2020 5.8 8.6 9.2 2.4 26.0 2.1
---------------------------------
2 Movement in risk levels 1.9 2.3 (2.1) - 2.1 0.1
3 Model updates/changes (0.4) (0.6) - - (1.0) (0.1)
4 Methodology and policy - - - (0.3) (0.3) -
8 RWAs at 30 Jun 2020 7.3 10.3 7.1 2.1 26.8 2.1
--- --------------------------------- ------ ------- ----- ----- ----- -----------
RWAs under IMA increased by $0.8bn in 2Q20 due to a $2.1bn
increase in risk levels, largely offset by a $1.0bn fall due to
model updates from a temporary adjustment to the calculation of
risks not in VaR. The increase in risk levels reflected heightened
market volatility, partly offset by management initiatives and a
$2.1bn fall in IRC RWAs following a reduction in exposures.
Minimum requirement for own
funds and eligible liabilities
A requirement for total loss-absorbing capacity ('TLAC'), as
defined in the final standards adopted by the Financial Stability
Board, came into effect on 1 January 2019. In the EU, TLAC
requirements were implemented via CRR II, which came into force in
June 2019 and includes a new framework on minimum requirement for
own funds and eligible liabilities ('MREL').
MREL includes own funds and liabilities that can be written down
or converted into capital resources in order to absorb losses or
recapitalise a bank in the event of its failure. The new framework
is complemented with new disclosure requirements. As the specific
EU format for disclosure is yet to be agreed, the disclosures are
based on the formats provided in the Basel Committee Standards for
Pillar 3 disclosures requirements.
The preferred resolution strategy for the Group, as confirmed by
the BoE, is a multiple point of entry ('MPE') strategy - allowing
each individual resolution group to be resolved by its respective
local resolution authority. Aligned with this strategy, the Group
issues TLAC to the market from HSBC Holdings only, and then
downstreams the proceeds to its subsidiaries as necessary and in
accordance with requirements set by our regulators. This approach
gives host authorities the option to recapitalise local
subsidiaries through the write-down of internal TLAC resources,
with the BoE applying bail-in powers at the HSBC Holdings level
where necessary and subsequently conducting any necessary
restructuring and separation of the Group in coordination with host
authorities.
In line with the existing structure and business model of the
Group, we have three resolution groups. There are some smaller
entities that fall outside of the resolution groups, and can be
separately resolved.
The table below lists the resolution groups, the related
resolution entities and their material subsidiaries subject to TLAC
requirements as currently agreed with the BoE.
The external MREL requirement for the Group as a whole is
currently the highest of:
-- 16% of the Group's consolidated RWAs;
-- 6% of the Group's consolidated leverage exposure; and
-- the sum of all loss-absorbing capacity requirements and other
capital requirements relating to Group entities or sub-groups.
The indicative, external MREL requirements applying to the Group
from 2020 to 2021 follow the same calibration. The indicative,
external MREL requirement applicable in 2022 is expected to be the
highest of:
-- 18% of the Group's consolidated RWAs;
-- 6.75% of the Group's consolidated leverage exposure; and
-- the sum of all loss-absorbing capacity requirements and other
capital requirements relating to other Group entities or
sub-groups.
These indicative requirements remain subject to the BoE MREL
recalibration as part of setting the 2021 requirements, based on
BoE deliberation in 2020.
Further details of our approach to capital management can be
found in 'Capital risk management' on page 77 of the Interim Report
2020.
European resolution HSBC Holdings plc HSBC UK Holdings Limited
group
-------------------- ----------------------------
HSBC Bank plc
-------------------- ----------------------------
HSBC UK Bank plc
HSBC France
-------------------- ----------------------------
Asian resolution HSBC Asia Holdings Limited The Hongkong and Shanghai Banking
group Corporation Limited
-------------------- ----------------------------
Hang Seng Bank Limited
-------------------- ----------------------------
US resolution group HSBC North America Holdings N/A
Inc
-------------------- ---------------------------- ----------------------------------
The tables below summarise the key metrics for the Group's three
resolution groups.
Table 11.i: Key metrics of the European resolution group(1) ('KM2')
At
30 Jun 31 Mar 31 Dec 30 Sep 30 Jun
2020 2020 2019 2019 2019
------
Total loss absorbing capacity ('TLAC')
1 available ($bn) 94.3 98.5 94.6 95.5 97.3
Fully loaded ECL accounting model TLAC
1a available ($bn) 94.2 98.4 94.4 95.3 97.1
Total RWA at the level of the resolution
2 group ($bn) 295.7 299.6 297.4 316.8 321.1
------
TLAC as a percentage of RWA (row1/row2)
3 (%) 31.9 32.9 31.8 30.1 30.3
------ ------ ------
3a Fully loaded ECL accounting model TLAC
as a percentage of fully loaded ECL accounting
model RWA (%) 31.9 32.8 31.8 30.1 30.2
------ ------ ------ ------ ------
Leverage exposure measure at the level
4 of the resolution group ($bn) 1,166 1,163 1,167 1,133 1,176
5 TLAC as a percentage of leverage exposure
measure (row1/row4) (%) 8.1 8.5 8.1 8.4 8.3
--- ------------------------------------------------- ------ ------ ------ ------ ------
5a Fully loaded ECL accounting model TLAC
as a percentage of fully loaded ECL accounting
model Leverage exposure measure (%) 8.1 8.5 8.1 8.4 8.3
------ ------ ------ ------ ------
6a Does the subordination exemption in the
antepenultimate paragraph of Section 11
of the FSB TLAC Term Sheet apply? No No No No No
------ ------ ------ -------- --------
6b Does the subordination exemption in the
penultimate paragraph of Section 11 of
the FSB TLAC Term Sheet apply? No No No No No
------ ------ ------ -------- --------
6c If the capped subordination exemption
applies, the amount of funding issued
that ranks pari passu with excluded liabilities
and that is recognised as external TLAC,
divided by funding issued that ranks pari
passu with excluded liabilities and that
would be recognised as external TLAC if
no cap was applied (%) N/A N/A N/A N/A N/A
--- ------------------------------------------------- ------ ------ ------ -------- --------
Footnotes can be found at the end of the table.
Table 11.ii: Key metrics of the Asian resolution group(2) ('KM2')
At
30 Jun 31 Mar 31 Dec 30 Sep 30 Jun
2020 2020 2019 2019 2019
------ ------
Total loss absorbing capacity ('TLAC')
1 available ($bn) 99.8 96.0 98.8 97.2 97.0
------
Fully loaded ECL accounting model TLAC
1a available ($bn) 99.8 96.0 98.8 97.2 97.0
Total RWA at the level of the resolution
2 group ($bn) 379.7 374.8 366.1 370.6 371.1
------ ------
TLAC as a percentage of RWA (row1/row2)
3 (%) 26.3 25.6 27.0 26.2 26.1
------ ------ ------ ------ ------
3a Fully loaded ECL accounting model TLAC
as a percentage of fully loaded ECL accounting
model RWA (%) 26.3 25.6 27.0 26.2 26.1
------ ------ ------ ------ ------
Leverage exposure measure at the level
4 of the resolution group ($bn) 1,092 1,055 1,036 1,025 1,041
------
TLAC as a percentage of leverage exposure
5 measure (row1/row4) (%) 9.1 9.1 9.5 9.5 9.3
--- ------------------------------------------------ ------ ------ ------ ------ ------
5a Fully loaded ECL accounting model TLAC
as a percentage of fully loaded ECL accounting
model Leverage exposure measure (%) 9.1 9.1 9.5 9.5 9.3
------ ------ ------ ------ ------
6a Does the subordination exemption in the
antepenultimate paragraph of Section 11
of the FSB TLAC Term Sheet apply? No No No No No
------ ------ ------ -------- --------
6b Does the subordination exemption in the
penultimate paragraph of Section 11 of
the FSB TLAC Term Sheet apply? No No No No No
------ ------ ------ -------- --------
6c If the capped subordination exemption applies,
the amount of funding issued that ranks
pari passu with excluded liabilities and
that is recognised as external TLAC, divided
by funding issued that ranks pari passu
with excluded liabilities and that would
be recognised as external TLAC if no cap
was applied (%) N/A N/A N/A N/A N/A
--- ------------------------------------------------ ------ ------ ------ -------- --------
Footnotes can be found at the end of the table.
Table 11.iii: Key metrics of the US resolution group(3) ('KM2')
At
30 Jun 31 Mar 31 Dec 30 Sep 30 Jun
2020 2020 2019 2019 2019
------ --------
Total loss absorbing capacity ('TLAC')
1 available ($bn) 30.4 30.5 29.8 30.2 31.7
--------
Fully loaded ECL accounting model TLAC
1a available ($bn) 30.3 30.4 N/A N/A N/A
------ --------
Total RWA at the level of the resolution
2 group ($m) 127.2 140.4 128.7 139.0 140.8
-------- ------
TLAC as a percentage of RWA (row1/row2)
3 (%) 23.9 21.7 23.2 21.7 22.5
------ -------- ------ ------ ------
3a Fully loaded ECL accounting model TLAC
as a percentage of fully loaded ECL accounting
model RWA (%) 23.8 21.7 N/A N/A N/A
------ -------- ------ -------- --------
Leverage exposure measure at the level
4 of the resolution group ($bn) 306 367 332 373 363
------
5 TLAC as a percentage of leverage exposure
measure (row1/row4) (%) 9.9 8.3 9.0 8.1 8.8
--- ------------------------------------------------ ------ -------- ------ ------ ------
5a Fully loaded ECL accounting model TLAC
as a percentage of fully loaded ECL accounting
model Leverage exposure measure (%) N/A N/A N/A N/A N/A
------ -------- ------ -------- --------
6a Does the subordination exemption in the
antepenultimate paragraph of Section 11
of the FSB TLAC Term Sheet apply? No No No No No
------ -------- ------ -------- --------
6b Does the subordination exemption in the
penultimate paragraph of Section 11 of
the FSB TLAC Term Sheet apply? No No No No No
------ -------- ------ -------- --------
6c If the capped subordination exemption applies,
the amount of funding issued that ranks
pari passu with excluded liabilities and
that is recognised as external TLAC, divided
by funding issued that ranks pari passu
with excluded liabilities and that would
be recognised as external TLAC if no cap
was applied (%) N/A N/A N/A N/A N/A
--- ------------------------------------------------ ------ -------- ------ -------- --------
1 The European resolution group reports in accordance with the
applicable provisions of the Capital Requirements Regulation as
amended by
CRR II. Unless otherwise stated, all figures are calculated
using the EU's regulatory transitional arrangements for IFRS 9 in
article 473a of the Capital Requirements Regulation.
2 Reporting for the Asian resolution group follows the Hong Kong
Monetary Authority regulatory rules. IFRS 9 has been implemented
but no regulatory transitional arrangements apply.
3 Reporting for the US resolution group is prepared in
accordance with local regulatory rules. The US accounting standard
for current expected credit losses ('CECL') became effective in
2020. On 31 March 2020, in response to the Covid-19 outbreak, the
federal banking agencies issued an interim final rule that provides
the option to transition regulatory capital impacts of the new CECL
accounting standard over a five-year period. HSBC North America
Holdings Inc. has adopted this option. Leverage exposure and ratio
are calculated under the US supplementary leverage ratio ('SLR')
rules. On 15 May 2020, in response to the continuing economic
impact of Covid-19, the US agencies also issued an interim final
rule that allows US banks to temporarily exclude on-balance sheet
US Treasury securities and deposits held at the Federal Reserve
from the SLR denominator until 31 March 2021.
As the Bank of England framework includes requirements set on
the basis of the Group consolidated position, we present data for
both the consolidated Group and the resolution groups in the table
below. The difference between Group CET1 and the aggregate of
resolution groups' CET1 is driven by entities that fall outside of
the resolution groups and by differences in regulatory
frameworks.
Table 12: TLAC composition ('TLAC1')
At 30 Jun 2020 At 31 Dec 2019
---------- ---------------------------------- ---------- ----------------------------------
Resolution group Resolution group
-------- --------
Group(1) European(1) Asian(2) US(3) Group(1) European(1) Asian(2) US(3)
---------- ---------- ------- ---------- ---------- -------
Regulatory capital
elements
of TLAC and
adjustments ($bn)
---------- ------------- ---------- ------- ---------- ------------- ---------- -------
Common equity tier 1
capital
before adjustments 128.4 114.2 63.5 17.4 124.0 110.2 63.2 16.8
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
Deduction of CET1
exposures
between MPE
resolution groups
and other group
entities - 100.4 - - 100.0 - -
--- ---------------------- -------- ------------- ---------- ----- -------- ------------- -------- -----
Common equity tier 1
capital
1 ('CET1') 128.4 13.8 63.5 17.4 124.0 10.2 63.2 16.8
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
Additional tier 1
capital
('AT1') before TLAC
2 adjustments 24.0 23.5 5.9 2.2 24.4 23.5 5.8 2.2
---------- ------------- ---------- ------- ---------- ------------- ---------- -------
4 Other adjustments - 6.7 - - - 6.7 - -
-------- ------------- -------- ----- -------- ------------- -------- -----
AT1 instruments
eligible under
the TLAC framework
(row 2
minus row 3 minus row
5 4) 24.0 16.8 5.9 2.2 24.4 16.8 5.8 2.2
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
Tier 2 capital ('T2')
before
6 TLAC adjustments 24.8 25.3 7.7 5.8 23.8 25.0 7.9 4.6
---------- ------------- ---------- ------- ---------- ------------- ---------- -------
Amortised portion
of T2 instruments
where remaining
maturity
7 > 1 year 0.8 0.7 - - 0.6 0.6 - -
--- ---------------------- ---------- ------------- -------- ----- ---------- ------------- -------- -----
T2 capital
ineligible as
TLAC as issued out
of subsidiaries
8 to third parties - - 0.4 - - - 0.4 -
-------- ----------- -------- ----- -------- ----------- -------- -----
9 Other adjustments 0.1 8.4 - 3.0 0.2 8.1 - 1.8
--- ---------------------- ---------- ------------- -------- ------- -------- ------------- -------- -------
T2 instruments
eligible under
the TLAC framework
(row 6
plus row 7 minus row
8 minus
10 row 9) 25.5 17.6 7.3 2.9 24.2 17.5 7.5 2.8
---------- ------------- ---------- ------- ---------- ------------- ---------- -------
TLAC arising from
regulatory
11 capital 177.9 48.2 76.6 22.4 172.6 44.5 76.5 21.8
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
Non-regulatory
capital elements
of TLAC ($bn)
---------- ------------- ---------- ------- ---------- ------------- ---------- -------
External TLAC
instruments
issued directly by
the bank
and subordinated to
excluded
12 liabilities 77.5 46.1 23.2 8.0 81.2 50.1 22.3 8.0
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
TLAC arising from
non-regulatory
capital instruments
before
17 adjustments 77.5 46.1 23.2 8.0 81.2 50.1 22.3 8.0
---------- ------------- -------- ----- ---------- ------------- -------- -----
Non-regulatory
capital elements
of TLAC: adjustments
($bn)
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
TLAC before
18 deductions 255.4 94.3 99.8 30.4 253.8 94.6 98.8 29.8
---------- ------------- -------- ----- ---------- ------------- -------- -----
Deduction of
investments in
own other TLAC
20 liabilities - - - - 0.1 - - -
-------- ----------- -------- ----- ---------- ----------- -------- -----
TLAC after deductions
(row
18 minus row 19 minus
row
22 20 minus row 21) 255.4 94.3 99.8 30.4 253.7 94.6 98.8 29.8
---------- ------------- ---------- ----- ---------- ------------- ---------- -----
Risk-weighted assets
and leverage
exposure measure for
TLAC
purposes ($bn)
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
Total risk-weighted
23 assets 854.6 295.7 379.7 127.2 843.4 297.4 366.1 128.7
---------- ------------- -------- ----- ---------- ------------- -------- -----
Leverage exposure
24 measure 2,801.4 1,166.3 1,092.4 306.0 2,726.5 1,166.6 1,036.2 331.9
--- ---------------------- ---------- ------------- -------- ----- ---------- ------------- -------- -----
TLAC ratios and
buffers (%)
---------- ------------- ---------- ------- ---------- ------------- ---------- -------
TLAC (as a percentage
of risk-weighted
25 assets) 29.9% 31.9% 26.3% 23.9% 30.1% 31.8% 27.0% 23.2%
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
TLAC (as a percentage
of leverage
26 exposure) 9.1% 8.1% 9.1% 9.9% 9.3% 8.1% 9.5% 9.0%
---------- ------------- ---------- ------- ---------- ------------- ---------- -------
CET1 (as a percentage
of risk-weighted
assets) available
after meeting
the resolution
group's minimum
capital and TLAC
27 requirements(4) 8.8% N/A N/A 5.9% 8.5% N/A N/A 5.2%
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
Institution-specific
buffer
requirement (capital
conservation
buffer plus
countercyclical
buffer requirements
plus higher
loss absorbency
requirement,
expressed as a
percentage
of risk-weighted
28 assets) 4.7% N/A N/A 2.5% 5.1% N/A N/A 2.5%
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
- Of which: capital
conservation
29 buffer requirement 2.5% N/A N/A 2.5% 2.5% N/A N/A 2.5%
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
- Of which: bank
specific
countercyclical
30 buffer requirement 0.2% N/A N/A N/A 0.6% N/A N/A N/A
---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
- Of which: higher
loss absorbency
31 (G-SIB) requirement 2.0% N/A N/A N/A 2.0% N/A N/A N/A
--- ---------------------- ---------- ------------- ---------- ------- ---------- ------------- ---------- -------
1 The European resolution group reports in accordance with the
applicable provisions of the Capital Requirements Regulation as
amended by
CRR II. Unless otherwise stated, all figures are calculated
using the EU's regulatory transitional arrangements for IFRS 9 in
article 473a of the Capital Requirements Regulation.
2 Reporting for the Asian resolution group follows the Hong Kong
Monetary Authority regulatory rules. IFRS 9 has been implemented
but no regulatory transitional arrangements apply.
3 Reporting for the US resolution group is prepared in
accordance with local regulatory rules. The US accounting standard
for current expected credit losses ('CECL') became effective in
2020. On 31 March 2020, in response to the Covid-19 outbreak, the
federal banking agencies issued an interim final rule that provides
the option to transition regulatory capital impacts of the new CECL
accounting standard over a five-year period. HSBC North America
Holdings Inc. has adopted this option. Leverage exposure and ratio
are calculated under the US supplementary leverage ratio rules.
4 For the Group, minimum capital requirement is defined as the
sum of Pillar 1 and Pillar 2A capital requirements set by the PRA.
The minimum requirements represent the total capital requirement to
be met by CET1.
Creditor ranking at legal entity
level
The following tables present information regarding the ranking
of creditors in the liability structure of legal entities at 30
June 2020. The tables present the ranking of creditors of HSBC
Holdings plc, its resolution entities, and their material sub-group
entities. Nominal values are disclosed.
The main features of capital instruments disclosure for the
Group, Asia and US resolution groups is published on our website,
www.hsbc.com/investors/fixed-income-investors/regulatory-capital-securities.
European resolution group
The European resolution group comprises HSBC Holdings plc, the
designated resolution entity, together with its material operating
entities - namely HSBC Bank plc and its subsidiaries, and HSBC UK
Bank plc and its subsidiaries. The following tables present
information regarding the ranking of creditors of HSBC Holdings
plc, HSBC Bank plc and HSBC UK Bank plc.
Table 13: HSBC Holdings plc creditor ranking ('TLAC3')
Creditor ranking ($m)
1 2 3 4
--------- ----------- -------------- -----------
Sum of
(most (most 1 to
Footnotes junior) senior) 4
--------------
Senior
notes
Preference and other
shares pari
Ordinary and AT1 Subordinated passu
1 Description of creditor ranking shares(1) instruments notes liabilities
---------------------------------------------------
Total capital and liabilities
2 net of credit risk mitigation 10,346 21,993 20,553 81,527 134,419
- of row 2 that are excluded
3 liabilities 2 - - - 6,870 6,870
Total capital and liabilities
less excluded liabilities (row
4 2 minus row 3) 10,346 21,993 20,553 74,657 127,549
- of row 4 that are potentially
5 eligible as TLAC 10,346 21,993 20,553 73,406 126,298
- of row 5 with 1 year <= residual
6 maturity < 2 years - - - 12,555 12,555
- of row 5 with 2 years <= residual
7 maturity < 5 years - - 3,683 24,252 27,935
- of row 5 with 5 years <= residual
8 maturity < 10 years - - 5,725 32,349 38,074
9
* of row 5 with residual maturity >= 10 years,
but
excluding perpetual securities - - 10,245 4,250 14,495
---------------------------------------------------
- of row 5 that are perpetual
10 securities 10,346 21,993 900 - 33,239
--- --------------------------------------------------- ---------- --------- ----------- ------------ -----------
1 Excludes the value of share premium and reserves attributable to ordinary shareholders.
2 Excluded liabilities are defined in CRR II Article 72a (2).
The balance mainly relates to TLAC eligible liabilities maturing
within one year and accruals for service company recharges.
Table 14: HSBC UK Bank plc creditor ranking ('TLAC2')
Creditor ranking ($m)
1 2 3 4
Sum of
(most (most 1 to
Footnotes junior) senior) 4
---------- --------------
Is the resolution entity the
1 creditor/investor? 1 No No No No
---------------------------------------------------
Senior
Ordinary AT1 Subordinated subordinated
2 Description of creditor ranking shares(2) instruments loans loans
Total capital and liabilities
3 net of credit risk mitigation - 2,707 3,676 8,241 14,624
---------- --------- ----------- ------------ ------------
- of row 3 that are excluded
4 liabilities - - - - -
---------- --------- ----------- ------------ ------------ ------
Total capital and liabilities
less excluded liabilities (row
5 3 minus row 4) - 2,707 3,676 8,241 14,624
---------- --------- ----------- ------------ ------------ ------
- of row 5 that are eligible
6 as TLAC - 2,707 3,676 8,241 14,624
---------- --------- ----------- ------------ ------------ ------
- of row 6 with 1 year <= residual
7 maturity < 2 years - - - - -
---------- --------- ----------- ------------ ------------ ------
- of row 6 with 2 years <= residual
8 maturity < 5 years - - - - -
---------- --------- ----------- ------------ ------------ ------
- of row 6 with 5 years <= residual
9 maturity < 10 years - - 1,641 8,241 9,882
---------- --------- ----------- ------------ ------------ ------
10
* of row 6 with residual maturity >= 10 years,
but
excluding perpetual securities - - 2,035 - 2,035
--- --------------------------------------------------- ---------- --------- ----------- ------------ ------------ ------
- of row 6 that are perpetual
11 securities - 2,707 - - 2,707
--- --------------------------------------------------- ---------- --------- ----------- ------------ ------------ ------
1 The entity's capital and TLAC are owned by HSBC UK Holdings Limited.
2 The nominal value of ordinary shares is GBP50,002. This
excludes the value of share premium and reserves attributable to
ordinary shareholders.
Table 15: HSBC Bank plc creditor ranking ('TLAC2')
Creditor ranking ($m)
1 2 3 4
Sum of
(most (most 1 to
Footnotes junior) senior) 4
----------
Is the resolution entity the
1 creditor/investor? 1 No No No No
Third
Dollar Subordinated
preference Undated notes
shares primary and
Ordinary and AT1 capital subordinated
2 Description of creditor ranking shares(2) instruments notes loans
Total capital and liabilities
3 net of credit risk mitigation 983 5,069 1,550 17,723 25,325
---------- --------- ----------- ------- ------------
- of row 3 that are excluded
4 liabilities 3 - - - 450 450
---------- --------- ----------- ------- ------------
Total capital and liabilities
less excluded liabilities (row
5 3 minus row 4) 983 5,069 1,550 17,273 24,875
---------- --------- ----------- ------- ------------
- of row 5 that are eligible
6 as TLAC 983 5,069 1,550 17,273 24,875
---------- --------- ----------- ------- ------------
- of row 6 with 1 year <= residual
7 maturity < 2 years - - - 750 750
---------- --------- ----------- ------- ------------
- of row 6 with 2 years <= residual
8 maturity < 5 years - - - 10,523 10,523
---------- --------- ----------- ------- ------------
- of row 6 with 5 years <= residual
9 maturity < 10 years - - - 3,072 3,072
---------- --------- ----------- ------- ------------
10
* of row 6 with residual maturity >= 10 years,
but
excluding perpetual securities - - - 2,065 2,065
--- --------------------------------------------------- ---------- --------- ----------- ------- ------------
- of row 6 that are perpetual
11 securities 983 5,069 1,550 863 8,465
--- --------------------------------------------------- ---------- --------- ----------- ------- ------------ ------
1 The entity's ordinary shares are owned by HSBC UK Holdings
Limited. Other instruments are either owned by HSBC UK Holdings
Limited or by third parties.
2 Excludes the value of share premium and reserves attributable to ordinary shareholders.
3 Excluded liabilities balance relates to TLAC eligible liabilities maturing within one year.
Asian resolution group
The Asian resolution group comprises HSBC Asia Holdings Ltd, The
Hongkong and Shanghai Banking Corporation Limited, Hang Seng Bank
Limited and their subsidiaries. HSBC Asia Holdings Ltd is the
designated resolution entity. The following table presents
information regarding the ranking of creditors of HSBC Asia
Holdings Limited.
Table 16: HSBC Asia Holdings Ltd creditor ranking(1) ('TLAC3')
Creditor ranking ($m)
1 2 3 4
--------- ----------- ------------- ---------
Sum of
(most (most 1 to
junior) senior) 4
-----------
Ordinary AT1 Tier
1 Description of creditor ranking shares(2) instruments 2 instruments LAC loans
---------------------------------------------------
Total capital and liabilities net
2 of credit risk mitigation 56,587 5,700 1,780 21,173 85,240
3 - of row 2 that are excluded liabilities - - - - -
Total capital and liabilities less
excluded liabilities (row 2 minus
4 row 3) 56,587 5,700 1,780 21,173 85,240
- of row 4 that are potentially
5 eligible as TLAC 56,587 5,700 1,780 21,173 85,240
- of row 5 with 1 year <= residual
6 maturity < 2 years - - - 2,500 2,500
- of row 5 with 2 years <= residual
7 maturity < 5 years - - - 7,318 7,318
- of row 5 with 5 years <= residual
8 maturity < 10 years - - - 9,355 9,355
9
* of row 5 with residual maturity >= 10 years,
but
excluding perpetual securities - - 1,780 2,000 3,780
---------------------------------------------------
10 - of row 5 that are perpetual securities 56,587 5,700 - - 62,287
--- --------------------------------------------------- --------- ----------- ----------- ---------
1 The entity's capital and TLAC are held by HSBC Holdings plc.
2 Excludes the value of share premium and reserves attributable to ordinary shareholders.
Within the Asian resolution group, the identified material
sub-group entities are The Hongkong and Shanghai Banking
Corporation Ltd and Hang Seng Bank Ltd. The following tables
presents the make-up of their issued MREL and its ranking on a
legal entity basis.
Table 17: The Hongkong and Shanghai Banking Corporation Ltd creditor
ranking ('TLAC2')
Creditor ranking ($m)
1 2 3 4 5
Sum of
(most (most 1 to
junior) senior) 5
1 Is the resolution entity
the creditor/investor? Yes Yes No(1) Yes Yes
2 Ordinary Primary
Description of creditor shares AT1 capital Tier 2
ranking (2) instruments notes instruments LAC loans
Total capital and liabilities
3 net of credit risk mitigation 22,236 5,700 400 1,780 21,173 51,289
- of row 3 that are excluded
4 liabilities - - - - - -
Total capital and liabilities
less excluded liabilities
5 (row 3 minus row 4) 22,236 5,700 400 1,780 21,173 51,289
- of row 5 that are eligible
6 as TLAC 22,236 5,700 - 1,780 21,173 50,889
- of row 6 with 1 year
<= residual maturity <
7 2 years - - - - 2,500 2,500
- of row 6 with 2 years
<= residual maturity <
8 5 years - - - - 7,318 7,318
- of row 6 with 5 years
<= residual maturity <
9 10 years - - - - 9,355 9,355
10
* of row 6 with residual maturity >= 10 years,
but
excluding perpetual securities - - - 1,780 2,000 3,780
--- --------------------------------------------------- -------- ----------- ------- ----------- -------
- of row 6 that are perpetual
11 securities 22,236 5,700 - - - 27,936
--- --------------------------------------------------- -------- ----------- ------- ----------- ------- ------
1 The company's primary capital notes are held by third parties.
2 Excludes the value of share premium and reserves attributable to ordinary shareholders.
Table 18: Hang Seng Bank Ltd creditor ranking ('TLAC2')
Creditor ranking ($m)
1 2 3
Sum of
(most (most 1 to
Footnotes junior) senior) 3
---------- -----------
Is the resolution entity the
1 creditor/investor? 1 No No No
Ordinary
shares
2 Description of creditor ranking (2) AT1 instruments LAC loans
---------- ------------
Total capital and liabilities net
3 of credit risk mitigation 1,246 1,500 2,513 5,259
4 - of row 3 that are excluded liabilities - - - -
Total capital and liabilities less
excluded liabilities (row 3 minus
5 row 4) 1,246 1,500 2,513 5,259
6 - of row 5 that are eligible as TLAC 1,246 1,500 2,513 5,259
- of row 6 with 1 year <= residual
7 maturity < 2 years - - - -
- of row 6 with 2 years <= residual
8 maturity < 5 years - - - -
- of row 6 with 5 years <= residual
9 maturity < 10 years - - 2,513 2,513
- of row 6 with residual maturity
>= 10 years, but excluding perpetual
10 securities - - - -
--- --------------------------------------------- ---------- ---------- --------------- ---------
11 - of row 6 that are perpetual securities 1,246 1,500 - 2,746
--- --------------------------------------------- ---------- ---------- --------------- --------- ------
1 A total of 62.14% of Hang Seng Bank Limited's ordinary share
capital is owned by The Hongkong and Shanghai Banking Corporation
Limited. Hang Seng Bank Limited's other TLAC eligible securities
are directly held by The Hongkong and Shanghai Banking Corporation
Limited.
2 Excludes the value of reserves attributable to ordinary shareholders.
US resolution group
The US resolution group comprises HSBC North America Holdings
Inc. and its subsidiaries. HSBC North America Holdings Inc. is
the
designated resolution entity. The following table presents
information regarding the ranking of creditors of HSBC North
America Holdings Inc.
Table 19: HSBC North America Holdings Inc. creditor ranking(1) ('TLAC3')
Creditor ranking ($m)
1 2 3 4
-------- --------- -------------- -----------
Sum of
(most (most 1 to
junior) senior) 4
Senior
unsecured
loans
and other
Common Preferred Subordinated pari passu
1 Description of creditor ranking Footnotes stock(2) stock loans liabilities
---------------------------------------------------
Total capital and liabilities
2 net of credit risk mitigation - 2,240 2,850 8,350 13,440
- of row 2 that are excluded
3 liabilities 3 - - - 204 204
------
Total capital and liabilities
less excluded liabilities
4 (row 2 minus row 3) - 2,240 2,850 8,146 13,236
------
- of row 4 that are potentially
5 eligible as TLAC - 2,240 2,850 8,000 13,090
------
- of row 5 with 1 year <=
6 residual maturity < 2 years - - - - -
------
- of row 5 with 2 years <=
7 residual maturity < 5 years - - 850 3,500 4,350
------
- of row 5 with 5 years <=
8 residual maturity < 10 years - - 2,000 4,500 6,500
------
9
* of row 5 with residual maturity >= 10 years,
but
excluding perpetual securities - - - - -
------
- of row 5 that are perpetual
10 securities - 2,240 - - 2,240
--- --------------------------------------------------- --------- -------- --------- ------------ ----------- ------
1 The entity's capital and TLAC are held by HSBC Overseas Holdings (UK) Limited.
2 The nominal value of common stock is $2. This excludes the
value of share premium and reserves attributable to ordinary
shareholders.
3 Excluded liabilities consists of 'unrelated liabilities' as
defined in the Final US TLAC rules. This mainly represents accrued
employee benefit obligations.
Credit risk
Credit risk is the risk of financial loss if a customer or
counterparty fails to meet an obligation under a contract. It
arises principally from direct lending, trade finance and leasing
business, but also from other products, such as guarantees and
credit derivatives and from holding assets in the form of debt
securities. Credit risk represents our largest regulatory capital
requirement.
There have been no material changes to our policies and
practices, which are described in the Pillar 3 Disclosures at 31
December 2019.
Further details of our approach to credit risk may be found in
'Credit Risk' on page 54 of the Interim Report 2020.
Credit quality of assets
We are a universal bank with a conservative approach to credit
risk. This is reflected in our credit risk profile being
diversified across a number of asset classes and geographies with a
credit quality profile concentrated in the higher quality bands.
The following tables present information on the credit quality of
exposures by exposure class, industry and geography.
Table 20: Credit quality of exposures by exposure class and instrument(1)
('CR1-A')
Gross carrying
values of
Credit
risk
Specific adjustment
credit Write-offs charges
Defaulted Non-defaulted risk in the of the Net carrying
exposures exposures adjustments year(2) period(2) values
$bn $bn $bn $bn $bn $bn
------------ --------------- -------------- ------------- ------------- --------------
Central
governments and
central
1 banks 0.2 406.7 0.1 - - 406.8
2 Institutions - 85.7 0.1 - 0.1 85.6
3 Corporates 11.5 1,039.7 7.5 0.5 3.9 1,043.7
---- ------------------- ---------- ------------- ------------ ----------- ----------- ------------
- of which:
specialised
4 lending 0.9 51.1 0.5 - - 51.5
6 Retail 3.4 552.8 3.1 0.3 1.5 553.1
- secured by real
7 estate property 2.3 329.8 0.5 - 0.3 331.6
- of which:
8 SMEs - 1.4 - - - 1.4
---- -------------------
9 Non-SMEs 2.3 328.4 0.5 - 0.3 330.2
- qualifying
10 revolving retail 0.4 137.6 1.4 0.2 0.5 136.6
11 - other retail 0.7 85.4 1.2 0.1 0.7 84.9
- of which:
12 SMEs 0.3 11.1 0.4 - 0.2 11.0
13 Non-SMEs 0.4 74.3 0.8 0.1 0.5 73.9
15 Total IRB approach 15.1 2,084.9 10.8 0.8 5.5 2,089.2
---- ------------------- ---------- ------------- ------------ ----------- ----------- ------------
Central
governments and
central
16 banks - 260.0 - - - 260.0
Regional
governments or
local
17 authorities - 9.3 - - - 9.3
Public sector
18 entities - 15.9 - - - 15.9
Multilateral
19 development banks - - - - - -
International
20 organisations - 1.4 - - - 1.4
21 Institutions - 1.6 - - - 1.6
22 Corporates 3.4 140.1 2.3 0.1 0.5 141.2
24 Retail 1.1 76.4 1.8 0.3 0.9 75.7
25 - of which: SMEs 0.1 3.5 0.1 - - 3.5
Secured by
mortgages on
immovable
26 property 0.7 32.1 0.2 - - 32.6
27 - of which: SMEs - 0.1 - - - 0.1
Exposures in
28 default 5.2 - 2.1 0.4 0.6 3.1
Items associated
with particularly
29 high risk - 5.5 - - - 5.5
Collective
investment
undertakings
32 ('CIU') - 0.4 - - - 0.4
33 Equity exposures - 17.0 - - - 17.0
34 Other exposures - 14.9 - - - 14.9
Total standardised
35 approach 5.2 574.6 4.3 0.4 1.4 575.5
---- ------------------- ---------- ------------- ------------ ----------- ----------- ------------
Total at 30 Jun
36 2020 20.3 2,659.5 15.1 1.2 6.9 2,664.7
------------------- ---------- ------------- ------------ ----------- ----------- ------------
- of which: loans 17.8 1,357.8 13.9 1.2 6.3 1,361.7
- of which: debt
securities 0.2 423.1 0.2 - 0.1 423.1
- of which:
off-balance sheet
exposures 2.3 838.8 1.0 - 0.5 840.1
---- ------------------- ---------- ------------- ------------ ----------- ----------- ------------
Table 20: Credit quality of exposures by exposure class and instrument(1)
('CR1-A') (continued)
Gross carrying
values of
Credit
risk
Specific adjustment
credit Write-offs charges
Defaulted Non-defaulted risk in the of the Net carrying
exposures exposures adjustments year(2) period(2) values
$bn $bn $bn $bn $bn $bn
------------ --------------- -------------- ------------ ------------- --------------
Central governments
and central
1 banks - 355.4 - - - 355.4
2 Institutions - 93.2 - - - 93.2
3 Corporates 6.9 1,038.9 4.0 0.3 0.4 1,041.8
- of which:
4 specialised lending 1.1 50.6 0.4 - - 51.3
6 Retail 3.3 501.4 1.9 0.5 0.6 502.8
- secured by real
7 estate property 2.4 301.6 0.3 - - 303.7
- of which:
8 SMEs 0.1 3.5 0.1 - - 3.5
---- --------------------
9 Non-SMEs 2.3 298.1 0.2 - - 300.2
- qualifying
10 revolving retail 0.2 134.5 0.8 0.3 0.2 133.9
11 - other retail 0.7 65.3 0.8 0.2 0.4 65.2
- of which:
12 SMEs 0.4 7.8 0.4 0.1 0.2 7.8
13 Non-SMEs 0.3 57.5 0.4 0.1 0.2 57.4
15 Total IRB approach 10.2 1,988.9 5.9 0.8 1.0 1,993.2
---- -------------------- ---------- ------------- ------------ ---------- --------- ------------
Central governments
and central
16 banks - 163.1 - - - 163.1
Regional
governments or
local
17 authorities - 7.8 - - - 7.8
Public sector
18 entities - 12.9 - - - 12.9
Multilateral
19 development banks - 0.1 - - - 0.1
International
20 organisations - 1.5 - - - 1.5
21 Institutions - 2.2 - - - 2.2
22 Corporates 3.4 193.5 2.2 0.3 - 194.7
24 Retail 1.0 68.5 1.5 0.3 0.4 68.0
25 - of which: SMEs - 1.3 0.1 - - 1.2
Secured by
mortgages on
immovable
26 property 0.7 31.4 0.2 - - 31.9
Exposures in
28 default 5.1 - 2.2 0.6 0.5 2.9
Items associated
with particularly
29 high risk 0.1 5.3 - - - 5.4
Collective
investment
undertakings
32 ('CIU') - 0.4 - - - 0.4
33 Equity exposures - 16.5 - - - 16.5
34 Other exposures - 16.8 - - - 16.8
Total standardised
35 approach 5.2 520.0 3.9 0.6 0.4 521.3
---- -------------------- ---------- ------------- ------------ ---------- --------- ------------
Total at 30 Jun
36 2019 15.4 2,508.9 9.8 1.4 1.4 2,514.5
---- -------------------- ---------- ------------- ------------ ---------- --------- ------------
- of which: loans 14.0 1,289.8 9.3 1.4 1.5 1,294.5
- of which: debt
securities - 363.2 - - - 363.2
- of which:
off-balance sheet
exposures 1.4 813.9 0.5 - (0.1) 814.8
---- -------------------- ---------- ------------- ------------ ---------- --------- ------------
1 Securitisation positions and non-credit obligation assets are not included in this table.
2 Presented on a year-to-date basis.
Table 21: Credit quality of exposures by industry or counterparty types(1,3)
('CR1-B')
Gross carrying
values of
Credit
risk
Specific adjustment
credit Write-offs charges
Defaulted Non-defaulted risk in the of the Net carrying
exposures exposures adjustments year(2) period(2) values
$bn $bn $bn $bn $bn $bn
1 Agriculture 0.4 9.1 0.2 - - 9.3
Mining and oil
2 extraction 1.4 39.4 0.7 - 0.4 40.1
3 Manufacturing 2.3 255.9 1.9 0.4 0.8 256.3
4 Utilities 0.1 33.4 0.1 - - 33.4
5 Water supply - 3.2 - - - 3.2
6 Construction 1.0 42.8 0.7 - 0.1 43.1
Wholesale and
7 retail trade 3.6 194.2 2.5 0.1 1.3 195.3
Transportation and
8 storage 0.9 47.4 0.4 - 0.2 47.9
Accommodation and
9 food services 0.3 29.8 0.3 - 0.2 29.8
Information and
10 communication 0.2 15.3 0.2 - 0.1 15.3
Financial and
11 insurance 0.9 645.1 0.4 - 0.2 645.6
---------- ------------- ------------ ----------- ----------- ------------
12 Real estate 1.1 196.3 1.0 - 0.3 196.4
Professional
13 activities 0.3 27.2 0.2 - 0.1 27.3
Administrative
14 service 1.9 158.2 1.3 - 0.5 158.8
Public
administration and
15 defence 0.4 255.2 0.2 - - 255.4
16 Education - 3.9 - - - 3.9
Human health and
17 social work 0.3 7.2 0.2 - 0.1 7.3
Arts and
18 entertainment - 7.7 0.1 - 0.1 7.6
19 Other services 0.2 15.6 0.1 - 0.1 15.7
20 Personal 5.0 626.6 4.6 0.7 2.4 627.0
Extraterritorial
21 bodies - 46.0 - - - 46.0
---------- ------------- ------------ ----------- ----------- ------------
Total at 30 Jun
22 2020 20.3 2,659.5 15.1 1.2 6.9 2,664.7
---- ------------------- ---------- ------------- ------------ ----------- ----------- ------------
1 Agriculture 0.3 9.0 0.2 - - 9.1
Mining and oil
2 extraction 0.3 42.6 0.3 - - 42.6
3 Manufacturing 1.7 261.3 1.2 0.3 0.2 261.8
4 Utilities 0.2 31.3 0.1 0.1 - 31.4
5 Water supply - 3.5 - - - 3.5
6 Construction 1.3 41.1 0.6 0.1 0.1 41.8
Wholesale and
7 retail trade 2.0 196.7 1.3 0.1 0.1 197.4
Transportation and
8 storage 0.6 44.2 0.2 - - 44.6
Accommodation and
9 food services 0.3 28.5 0.1 - - 28.7
Information and
10 communication - 17.9 - - - 17.9
Financial and
11 insurance 0.7 567.6 0.2 - - 568.1
---------- ------------- ------------ ----------- ----------- ------------
12 Real estate 0.9 202.0 0.6 - - 202.3
Professional
13 activities 0.1 27.1 0.1 - - 27.1
Administrative
14 service 1.6 156.5 1.2 0.1 0.2 156.9
Public
administration and
15 defence 0.3 237.5 0.3 - - 237.5
16 Education - 3.6 - - - 3.6
Human health and
17 social work 0.1 7.0 0.1 - - 7.0
Arts and
18 entertainment 0.1 9.0 0.1 - 0.1 9.0
19 Other services 0.3 14.0 0.1 - - 14.2
20 Personal 4.6 594.8 3.1 0.7 0.7 596.3
Extraterritorial
21 bodies - 13.7 - - - 13.7
---------- ------------- ------------ ----------- ----------- ------------
Total at 30 Jun
22 2019 15.4 2,508.9 9.8 1.4 1.4 2,514.5
---- ------------------- ---------- ------------- ------------ ----------- ----------- ------------
1 Securitisation positions and non-credit obligation assets are not included in this table.
2 Presented on a year-to-date basis.
3 The industry classifications of this disclosure have been
revised. 30 June 2019 data has been restated to be on a consistent
basis with the current year.
Table 22: Credit quality of exposures by geography(1,2) ('CR1-C')
Gross carrying
values of
Credit
risk
Specific adjustment
credit Write-offs charges
Defaulted Non-defaulted risk in the of the Net carrying
exposures exposures adjustments year(3) period(3) values
$bn $bn $bn $bn $bn $bn
------------ --------------- -------------- ------------- ------------- --------------
1 Europe 9.3 883.8 6.1 0.4 2.9 887.0
---------- ------------- ------------ -----------
2 - UK 5.4 532.0 4.4 0.4 2.3 533.0
3 - France 1.4 167.5 0.7 - 0.2 168.2
4 - Other countries 2.5 184.3 1.0 - 0.4 185.8
---------- ------------- ------------ ----------- --------- ------------
5 Asia 4.0 1,095.0 3.7 0.3 1.8 1,095.3
6 - Hong Kong 1.1 556.9 1.2 0.2 0.5 556.8
7 - China 0.3 167.0 0.5 - 0.1 166.8
8 - Singapore 1.0 85.8 0.9 - 0.8 85.9
9 - Australia 0.2 62.1 0.2 - 0.1 62.1
----
10 - Other countries 1.4 223.2 0.9 0.1 0.3 223.7
------------------- ---------- ------------- ------------ ----------- --------- ------------
Middle East and
North Africa
11 ('MENA') 3.3 146.8 2.5 0.1 0.6 147.6
-------------------
12 North America 2.5 463.7 1.5 0.2 1.0 464.7
13 - US 1.6 328.3 0.8 0.2 0.7 329.1
14 - Canada 0.3 120.4 0.4 - 0.2 120.3
15 - Other countries 0.6 15.0 0.3 - 0.1 15.3
---------- ------------- ------------ ----------- --------- ------------
16 Latin America 1.2 52.7 1.3 0.2 0.6 52.6
Other geographical
17 areas - 17.5 - - - 17.5
-------------------
Total at 30 Jun
18 2020 20.3 2,659.5 15.1 1.2 6.9 2,664.7
---- ------------------- ---------- ------------- ------------ ----------- --------- ------------
1 Europe 6.8 800.5 3.7 0.6 0.6 803.6
---- ---------- ------------- ------------ ----------- --------- ------------
2 - UK 4.1 495.8 2.5 0.4 0.6 497.4
----
3 - France 1.3 134.5 0.6 - 0.1 135.2
----
4 - Other countries 1.4 170.2 0.6 0.2 (0.1) 171.0
----
5 Asia 2.5 1,049.9 2.0 0.3 0.3 1,050.4
---- ---------- ------------- ------------ ----------- --------- ------------
6 - Hong Kong 0.7 523.1 0.7 0.1 0.1 523.1
----
7 - China 0.3 163.6 0.4 - 0.1 163.5
----
8 - Singapore 0.1 75.1 0.1 - - 75.1
----
9 - Australia 0.2 58.4 0.1 - - 58.5
----
10 - Other countries 1.2 229.7 0.7 0.2 0.1 230.2
---- ---------- ------------- ------------ ----------- --------- ------------
11 MENA 3.3 142.2 2.4 0.2 0.1 143.1
---- ---------- ------------- ------------ ----------- --------- ------------
12 North America 1.9 436.7 0.7 0.1 0.1 437.9
---- ---------- ------------- ------------ ----------- --------- ------------
13 - US 1.2 306.9 0.3 0.1 0.1 307.8
----
14 - Canada 0.3 114.4 0.2 - - 114.5
----
15 - Other countries 0.4 15.4 0.2 - - 15.6
---- ---------- ------------- ------------ ----------- --------- ------------
16 Latin America 0.9 64.3 1.0 0.2 0.3 64.2
---- ---------- ------------- ------------ ----------- --------- ------------
Other geographical
17 areas - 15.3 - - - 15.3
---- ------------------- ---------- ------------- ------------ ----------- --------- ------------
Total at 30 Jun
18 2019 15.4 2,508.9 9.8 1.4 1.4 2,514.5
---- ------------------- ---------- ------------- ------------ ----------- --------- ------------
1 Amounts shown by geographical region and country/territory in this table are based on the country/territory of residence of the counterparty.
2 Securitisation positions and non-credit obligation assets are not included in this table.
3 Presented on a year-to-date basis.
Non-performing and forborne exposures
Tables 23 to 26 are presented in accordance with the EBA's
'Guidelines on disclosure of non-performing and forborne
exposures'.
The EBA defines non-performing exposures as exposures with
material amounts that are more than 90 days past due or exposures
where the debtor is assessed as unlikely to pay its credit
obligations in full without the realisation of collateral,
regardless of the existence of any past due amounts or number days
past due. Any debtors that are in default for regulatory purposes
or impaired under the applicable accounting framework are always
considered as non-performing exposures. The Annual Report and
Accounts 2019 does not define non-performing exposures, although
the definition of credit impaired (stage 3) is aligned to the EBA's
definition of non-performing exposures.
Forborne exposures are defined by the EBA as exposures where the
bank has made concessions toward a debtor that is experiencing or
about to experience financial difficulties in meeting its financial
commitments. In the Annual Report and Accounts 2019, forborne
exposures are reported as 'renegotiated loans'. This term is
aligned to the EBA definition of forborne exposure, except in its
treatment of 'cures'.
Under the EBA definition, exposures cease to be reported as
forborne if they pass three tests:
-- the forborne exposure must have been considered to be
performing for a 'probation period' of at least two years;
-- regular payments of more than an insignificant aggregate
amount of principal or interest have been made during at least half
of the probation period; and
-- no exposure to the debtor is more than 30 days past due at the end of the probation period.
In the Annual Report and Accounts 2019, renegotiated loans
retain this classification until maturity or de-recognition.
Under EBA and PRA guidelines, the use of support measures
introduced as a result of the Covid-19 outbreak does not in itself
trigger identification as non-performing or forborne.
Borrower-specific support measures are assessed under the existing
rules to determine whether forbearance has been granted.
Table 23: Credit quality of forborne exposures
Accumulated impairment,
accumulated negative Collateral received
changes in fair and financial
Gross carrying amount/nominal value due to credit guarantees received
amount risk and provisions on forborne exposures
------------------------------ ---------------------------
Non-performing
forborne
On On Of which:
performing non-performing forborne
Performing Of which: Of which: forborne forborne non-performing
forborne Total defaulted impaired exposures exposures Total exposures
$bn $bn $bn $bn $bn $bn $bn $bn
-------------- ------------ -------- ----------- ---------- ------------ ---------------- --------- ----------------
Loans and
1 advances 1.1 5.8 5.8 5.8 (0.1) (1.8) 3.0 2.7
2 Central banks - - - - - - - -
General
3 governments - - - - - - - -
--- --------------
Credit
4 institutions - - - - - - - -
---
Other
financial
5 corporations - - - - - - - -
--------------
Non-financial
6 corporations 1.1 3.7 3.7 3.7 (0.1) (1.4) 1.7 1.4
7 Households - 2.1 2.1 2.1 - (0.4) 1.3 1.3
----------
Debt
8 securities - - - - - - - -
--- -------------- ---------- ------ --------- -------- ------- --- --------- ----- ------- --------------
Loan
commitments
9 given - 0.2 0.2 0.2 - - 0.2 0.2
--- --------------
Total at 30
10 Jun 2020 1.1 6.0 6.0 6.0 (0.1) (1.8) 3.2 2.9
-------------- ---------- ------ --------- -------- ------- --------- ---- ------- --------------
Loans and
1 advances 1.7 5.7 5.7 5.7 - (1.8) 3.2 2.4
2 Central banks - - - - - - - -
General
3 governments - - - - - - - -
Credit
4 institutions - - - - - - - -
Other
financial
5 corporations - - - - - - - -
Non-financial
6 corporations 1.7 3.5 3.5 3.5 - (1.4) 1.8 1.0
7 Households - 2.2 2.2 2.2 - (0.4) 1.4 1.4
Debt
8 securities - - - - - - - -
--------------
Loan
commitments
9 given - 0.1 0.1 0.1 - - 0.1 0.1
--------------
Total at 31
10 Dec 2019 1.7 5.8 5.8 5.8 - (1.8) 3.3 2.5
--- -------------- ---------- ------ --------- -------- ------- --- --------- ---- ------- --------------
The table below provides information on the value of the
collateral obtained by taking possession. The value at initial
recognition represents the gross carrying amount of the collateral
obtained by taking possession at initial recognition on the balance
sheet. The accumulated negative change represents the accumulated
impairment or negative change on the initial recognition value of
the collateral obtained by taking possession, including
amortisation in the case of property, plant and equipment and
investment properties.
Table 24: Collateral obtained by taking possession and execution processes
At 30 Jun 2020 At 31 Dec 2019
-------------------------------------- --------------------------------------
Collateral obtained Collateral obtained
by taking possession by taking possession
Value Accumulated Value Accumulated
at initial negative at initial negative
recognition changes recognition changes
$bn $bn $bn $bn
--- --------------------------------- ----------------------- ------------- ----------------------- -------------
1 Property, plant and equipment - - - -
---------------------------------
Other than property, plant and
2 equipment 0.1 - 0.1 -
---------------------------------
3 Residential immovable property 0.1 - 0.1 -
---------------------------------
8 Total 0.1 - 0.1 -
--- --------------------------------- --------------------- ----------- --------------------- -----------
Table 25 presents an analysis of performing and non-performing
exposures by days past due. The gross non-performing loan ('NPL')
ratio at 30 June 2020 calculated in line with the EBA guidelines
was 1.08%.
Table 25: Credit quality of performing and non-performing exposures
by past due days
Gross carrying amount/nominal amount(1)
Performing exposures Non-performing exposures
Unlikely
to pay
but
Not not
past Past past Past Past Past Past Past
due due due due due due due due
or past > 30 or past > 90 > 180 > 1 > 2 > 5 Past
due days due days days year years years due
<= 30 <= 90 <= 90 <= 180 <= 1 <= 2 <= 5 <= 7 > 7 of which:
Total days days Total days days year years years years years defaulted
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
--- ------------------ --------- --------- ------ ------- ---------- ------ ------ ------- ------- ------- ------- -----------
Loans and
1 advances 1,649.3 1,647.1 2.2 18.0 11.2 2.4 0.9 0.8 1.9 0.3 0.5 18.0
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
2 Central banks 290.5 290.5 - - - - - - - - - -
-------
General
3 governments 11.0 11.0 - - - - - - - - - -
--- ------------------ -------
Credit
4 institutions 140.9 140.9 - - - - - - - - - -
--- -------
Other financial
5 corporations 248.0 248.0 - 0.5 0.5 - - - - - - 0.5
------------------ -------
Non-financial
6 corporations 539.3 538.8 0.5 12.3 8.4 1.2 0.3 0.5 1.3 0.2 0.4 12.3
8 Households 419.6 417.9 1.7 5.2 2.3 1.2 0.6 0.3 0.6 0.1 0.1 5.2
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
9 Debt securities 428.2 428.2 - 0.4 0.2 0.2 - - - - - 0.4
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
10 Central banks 81.0 81.0 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
General
11 governments 259.6 259.6 - 0.4 0.2 0.2 - - - - - 0.4
Credit
12 institutions 41.2 41.2 - - - - - - - - - -
Other financial
13 corporations 42.0 42.0 - - - - - - - - - -
Non-financial
14 corporations 4.4 4.4 - - - - - - - - -
------- ------- ---- ----- -------- ---- ------ ----- ----- ----- ----- ---------
Off-balance-sheet
15 exposures 751.4 N/A N/A 1.9 N/A N/A N/A N/A N/A N/A N/A 1.9
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
16 Central banks 0.1 N/A N/A - N/A N/A N/A N/A N/A N/A N/A -
--------- ------ ---------- ------ ------ ------- ------- ------- -------
General
17 governments 3.9 N/A N/A - N/A N/A N/A N/A N/A N/A N/A -
--------- ------ ---------- ------ ------ ------- ------- ------- -------
Credit
18 institutions 81.0 N/A N/A - N/A N/A N/A N/A N/A N/A N/A -
--------- ------ ---------- ------ ------ ------- ------- ------- -------
Other financial
19 corporations 68.2 N/A N/A - N/A N/A N/A N/A N/A N/A N/A -
--------- ------ ---------- ------ ------ ------- ------- ------- -------
Non-financial
20 corporations 368.1 N/A N/A 1.7 N/A N/A N/A N/A N/A N/A N/A 1.7
--------- ------ ---------- ------ ------ ------- ------- ------- -------
21 Households 230.1 N/A N/A 0.2 N/A N/A N/A N/A N/A N/A N/A 0.2
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
Total at 30
22 Jun 2020 2,828.9 2,075.3 2.2 20.3 11.4 2.6 0.9 0.8 1.9 0.3 0.5 20.3
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
Loans and
1 advances 1,535.0 1,533.2 1.8 14.6 7.4 2.8 0.8 1.1 1.7 0.3 0.5 14.6
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
2 Central banks 191.7 191.7 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
General
3 governments 9.9 9.9 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
Credit
4 institutions 126.0 126.0 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
Other financial
5 corporations 238.5 238.4 0.1 0.3 0.3 - - - - - - 0.3
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
Non-financial
6 corporations 537.6 537.2 0.4 9.5 4.8 1.9 0.3 0.8 1.1 0.2 0.4 9.5
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
8 Households 431.3 430.0 1.3 4.8 2.3 0.9 0.5 0.3 0.6 0.1 0.1 4.8
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
9 Debt securities 381.2 381.2 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
10 Central banks 66.9 66.9 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
General
11 governments 229.9 229.9 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
Credit
12 institutions 36.8 36.8 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
Other financial
13 corporations 41.0 41.0 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
Non-financial
14 corporations 6.6 6.6 - - - - - - - - - -
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
Off-balance-sheet
15 exposures 709.5 N/A N/A 1.2 N/A N/A N/A N/A N/A N/A N/A 1.2
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
16 Central banks 0.1 N/A N/A - N/A N/A N/A N/A N/A N/A N/A -
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
General
17 governments 2.7 N/A N/A - N/A N/A N/A N/A N/A N/A N/A -
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
Credit
18 institutions 56.3 N/A N/A - N/A N/A N/A N/A N/A N/A N/A -
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
Other financial
19 corporations 54.9 N/A N/A - N/A N/A N/A N/A N/A N/A N/A -
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
Non-financial
20 corporations 373.1 N/A N/A 1.0 N/A N/A N/A N/A N/A N/A N/A 1.0
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
21 Households 222.4 N/A N/A 0.2 N/A N/A N/A N/A N/A N/A N/A 0.2
--- ------------------ ------- --------- ------ ----- ---------- ------ ------ ------- ------- ------- ------- ---------
Total at 31
22 Dec 2019 2,625.7 1,914.4 1.8 15.8 7.4 2.8 0.8 1.1 1.7 0.3 0.5 15.8
--- ------------------ ------- ------- ---- ----- -------- ---- ---- ----- ----- ----- ----- ---------
The following table provides information on the gross carrying
amount of exposures and related impairment with further details on
the IFRS 9 stage, accumulated partial write off and collateral. The
IFRS 9 stages have the following characteristics:
-- Stage 1: These financial assets are unimpaired and without a
significant increase in credit risk. A 12-month allowance for ECL
is recognised.
-- Stage 2: A significant increase in credit risk has been
experienced on these financial assets since initial
recognition.
A lifetime ECL is recognised.
-- Stage 3: There is objective evidence of impairment and the
financial assets are therefore considered to be in default or
otherwise credit impaired. A lifetime ECL is recognised.
-- Purchased or originated credit-impaired ('POCI'): Financial
assets purchased or originated at a deep discount are seen to
reflect incurred credit losses. A lifetime ECL is recognised. These
exposures are included in Stage 3 in the table below.
Credit-impaired (Stage 3) exposures are disclosed on pages 105
and 120 of the Annual Report and Accounts 2019.
Table 26: Performing and non-performing exposures and related provisions
Accumulated impairment,
accumulated negative Collaterals
changes in fair value and financial
Gross carrying amount/nominal due to credit risk and guarantees
amount(1) provisions received
--------------------------------
Non-performing Performing Non-performing
Performing exposures exposures exposures exposures
of of of of of of of On On
of which: which: which: which: which: which: which: which: Accu-mulated perfor-ming non-perfo-rming
Stage Stage Stage Stage Stage Stage Stage Stage partial expo- expo-
1 2 2 3 1 2 2 3 write-off sures sures
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
------------------ --------- --------- -------- -------- -------- -------- ------- -------- -------- --------- -------- -------- -------------- ------------- -----------------
Loans
1 and advances 1,649.3 1,470.0 173.5 18.0 - 18.0 (6.8) (2.0) (4.8) (7.0) - (7.0) (0.7) 924.5 6.3
--- ------------------ ------- ------- ------ ------ ------ ------ ---- ----- ----- ----- ------ ----- ------- ---- ----------- ---------------
Central
2 banks 290.5 288.2 2.3 - - - - - - - - - - 8.1 -
-------
General
3 governments 11.0 9.6 1.4 - - - - - - - - - - 2.3 -
--- ------------------ -------
Credit
4 institutions 140.9 136.3 4.6 - - - - - - - - 86.5 -
--- -------
Other
financial
5 corporations 248.0 230.7 12.3 0.5 - 0.5 (0.2) (0.1) (0.1) (0.1) - (0.1) - 156.3 -
------------------ -------
Non-financial
6 corporations 539.3 413.0 125.8 12.3 - 12.3 (3.5) (1.0) (2.5) (5.5) - (5.5) (0.3) 303.1 3.3
8 Households 419.6 392.2 27.1 5.2 - 5.2 (3.1) (0.9) (2.2) (1.4) - (1.4) (0.4) 368.2 3.0
------- ------- ---- ---- ----------- ---------------
9 Debt securities 428.2 424.4 2.4 0.4 - 0.4 (0.1) (0.1) - - - - - 17.6 -
--- ------------------ ------- ------- ------ ------ ------ ------ ---- ----- ----- ----- ------ ----- ------- ----- ----------- ---------------
Central
10 banks 81.0 80.3 0.7 - - - - - - - - - - - -
------- ------- ---- ------- ----- ----------- ---------------
General
11 governments 259.6 258.9 0.3 0.4 - 0.4 (0.1) (0.1) - - - - - 6.5 -
Credit
12 institutions 41.2 40.5 0.7 - - - - - - - - - - - -
Other
financial
13 corporations 42.0 40.8 0.6 - - - - - - - - - - 11.1 -
Non-financial
14 corporations 4.4 3.9 0.1 - - - - - - - - - - - -
Off-balance-sheet
15 exposures 751.4 617.5 58.3 1.9 - 1.5 (0.8) (0.2) (0.4) (0.3) - (0.2) - 127.2 0.2
------------------
Central
16 banks 0.1 0.1 - - - - - - - - - - - - -
General
17 governments 3.9 2.8 0.4 - - - - - - - - - - 0.2 -
Credit
18 institutions 81.0 75.4 2.1 - - - - - - - - - - 1.1 -
Other
financial
19 corporations 68.2 63.0 3.4 - - - (0.1) - - - - - - 10.5 -
Non-financial
20 corporations 368.1 248.5 50.0 1.7 - 1.3 (0.7) (0.2) (0.4) (0.3) - (0.2) - 64.8 0.2
21 Households 230.1 227.7 2.4 0.2 - 0.2 - - - - - - - 50.6 -
At 30
22 Jun 2020 2,828.9 2,511.9 234.2 20.3 - 19.9 (7.7) (2.3) (5.2) (7.3) - (7.2) (0.7) 1,069.3 6.5
--- ------------------ ----
Table 26: Performing and non-performing exposures and related provisions
(continued)
Accumulated impairment,
accumulated negative Collaterals
changes in fair value and financial
Gross carrying amount/nominal due to credit risk and guarantees
amount(1) provisions received
Non-performing Performing Non-performing
Performing exposures exposures exposures exposures
of of of of of of of On On
of which: which: which: which: which: which: which: which: Accu-mulated perfor-ming non-perfo-rming
Stage Stage Stage Stage Stage Stage Stage Stage partial expo- expo-
1 2 2 3 1 2 2 3 write-off sures sures
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
------------------ --------- -------------
Loans
1 and advances 1,535.0 1,448.0 82.0 14.6 - 14.6 (3.8) (1.4) (2.5) (5.5) - (5.5) (0.5) 931.4 5.6
--- ------------------ ------ ------ ------- ----- ----- ------ ----- ----
Central
2 banks 191.7 190.4 1.3 - - - - - - - - - - 8.3 -
General
3 governments 9.9 9.3 0.6 - - - - - - - - - - 2.1 -
--- ------------------
Credit
4 institutions 126.0 125.8 0.1 - - - - - - - - - - 83.9 -
---
Other
financial
5 corporations 238.5 229.4 5.2 0.3 - 0.3 (0.1) (0.1) (0.1) (0.2) - (0.2) - 169.3 -
------------------
Non-financial
6 corporations 537.6 477.7 59.2 9.5 - 9.5 (1.7) (0.7) (1.0) (4.1) - (4.1) (0.2) 295.0 2.7
8 Households 431.3 415.4 15.6 4.8 - 4.8 (2.0) (0.6) (1.4) (1.2) - (1.2) (0.3) 372.8 2.9
----
9 Debt securities 381.2 379.6 0.4 - - - (0.1) - (0.1) - - - - 19.3 -
--- ------------------ ------ ------ ------- ----- ----- ------ ----- -----
Central
10 banks 66.9 66.8 0.1 - - - - - - - - - - - -
------ ------ ------- ----- ----- ------ ----- -----
General
11 governments 229.9 229.0 0.2 - - - (0.1) - (0.1) - - - - 6.3 -
Credit
12 institutions 36.8 36.8 0.1 - - - - - - - - - - - -
Other
financial
13 corporations 41.0 40.6 - - - - - - - - - - - 13.0 -
Non-financial
14 corporations 6.6 6.4 - - - - - - - - - - - - -
Off-balance-sheet
15 exposures 709.5 614.6 24.0 1.2 - 1.2 (0.4) (0.1) (0.2) (0.2) - (0.1) 117.5 0.1
------------------
Central
16 banks 0.1 0.1 - - - - - - - - - - - -
General
17 governments 2.7 1.7 0.1 - - - - - - - - - 0.3 -
Credit
18 institutions 56.3 52.6 - - - - - - - - - - 0.4 -
Other
financial
19 corporations 54.9 51.2 1.4 - - - (0.1) - - - - - 6.9 -
Non-financial
20 corporations 373.1 288.2 20.9 1.0 - 1.0 (0.3) (0.1) (0.2) (0.2) - (0.1) 60.6 0.1
21 Households 222.4 220.8 1.6 0.2 - 0.2 - - - - - - 49.3 -
Total
at 31
22 Dec 2019 2,625.7 2,442.2 106.4 15.8 - 15.8 (4.3) (1.5) (2.8) (5.7) - (5.6) (0.5) 1,068.2 5.7
---
1 Includes reverse repos and settlement accounts.
Defaulted exposures
The accounting definition of impairment and the regulatory
definition of default are generally aligned. For specific retail
exposures, regulatory default is identified at 180 days past
due,
while the exposures are identified as impaired at 90 days past
due.
In the retail portfolio in the US, a renegotiation would
normally trigger identification as 'impaired' for accounting
purposes. For regulatory purposes, default is identified mainly
based on the 180 days past due criterion.
Table 27:Changes in stock of general and specific credit risk adjustments
('CR2-A')
Half-year to
30 Jun
2020 2019
Accumulated Accumulated
specific specific
credit credit
risk adjustments risk adjustments
Footnotes $bn $bn
1 Opening balance at the beginning of the period 10.0 9.8
---------
Increases due to amounts set aside for estimated
2 loan losses during the period 1 6.9 1.2
--------- -------------- --- ---
Decreases due to amounts taken against accumulated
4 credit risk adjustments (1.2) (1.4)
6 Impact of exchange rate differences (0.6) 0.2
9 Closing balance at the end of the period 15.1 9.8
Recoveries on credit risk adjustments recorded
10 directly to the statement of profit or loss 0.1 0.2
---- --------- -------------- --- ---
1 Following adoption of IFRS 9 'Financial Instruments', the
movement due to amounts set aside for estimated loan losses during
the period has been reported on a net basis.
Table 28:Changes in stock of defaulted loans and debt securities ('CR2-B')
Half-year to
30 Jun
2020 2019
Gross Gross
carrying carrying
value value
Footnotes $bn $bn
Defaulted loans and debt securities at the beginning
1 of the period 14.6 13.7
2 Loans and debt securities that have defaulted
since the last reporting period 6.7 2.9
3 Returned to non-defaulted status (0.8) (0.6)
4 Amounts written off (1.2) (1.4)
5 Other changes 1 (0.9) 0.2
7 Repayments (0.4) (0.8)
--- ---------- --------
6 Defaulted loans and debt securities at the end
of the period 18.0 14.0
--- ---------- --------
1 Other changes include foreign exchange movements and changes
in assets held for sale in default.
Risk mitigation
Our approach when granting credit facilities is to do so on the
basis of capacity to repay, rather than placing primary reliance on
credit risk mitigants. Depending on a customer's standing and the
type of product, facilities may be provided unsecured. Mitigation
of credit risk is a key aspect of effective risk management and
takes many forms. Our general policy is to promote the use of
credit risk mitigation, justified by commercial prudence and
capital efficiency. Detailed policies cover the acceptability,
structuring and terms with regard to the availability of credit
risk mitigation, such as in the form of collateral security. These
policies, together with the setting of suitable valuation
parameters, are subject to regular review to ensure that they are
supported by empirical evidence and continue to fulfil their
intended purpose.
Table 29: Credit risk mitigation techniques - overview ('CR3')
Exposures Exposures Exposures Exposures
unsecured: secured: Exposures secured secured
carrying carrying secured by financial by credit
amount amount by collateral guarantees derivatives
$bn $bn $bn $bn $bn
1 Loans 717.6 644.1 526.4 116.5 1.2
2 Debt securities 383.7 39.4 34.4 5.0 -
3 Total at 30 Jun 2020 1,101.3 683.5 560.8 121.5 1.2
--- ----------- --------- -------------- ------------- ------------
4 - Of which: defaulted 6.5 4.8 4.2 0.6 -
1 Loans 626.0 653.2 546.1 106.6 0.5
---
2 Debt securities 335.8 41.5 35.6 5.9 -
---
3 Total at 31 Dec 2019 961.8 694.7 581.7 112.5 0.5
---
4 - Of which: defaulted 5.3 4.2 3.7 0.5 -
---
Table 30: Standardised approach - credit conversion factor and credit
risk mitigation ('CRM') effects ('CR4')
Exposures before
CCF Exposures post-CCF RWAs and RWA
and CRM and CRM density
On-balance Off-balance On-balance Off-balance
sheet sheet sheet sheet
amount amount amount amount RWAs RWA density
$bn $bn $bn $bn $bn %
----
Asset classes(1)
----
Central governments
1 or central banks 258.5 1.2 272.7 1.4 10.0 4
Regional governments
2 or local authorities 9.1 0.3 9.4 - 1.6 17
3 Public sector entities 15.8 0.1 15.7 - - -
Multilateral development
4 banks - - - - - -
International
5 organisations 1.4 - 1.4 - - -
6 Institutions 1.6 - 0.9 - 0.6 64
7 Corporates 69.9 69.8 61.1 8.9 65.9 94
8 Retail 18.8 56.6 18.1 0.6 13.6 73
Secured by mortgages
9 on immovable property 30.8 1.2 30.8 0.3 11.6 37
10 Exposures in default 3.2 0.2 3.0 - 3.5 114
11 Higher risk categories 3.2 2.3 3.1 1.3 6.5 150
-----------
Collective investment
14 undertakings 0.4 - 0.4 - 0.4 100
15 Equity 17.0 - 17.0 - 37.3 220
16 Other items 14.1 0.8 14.0 0.9 9.5 64
17 Total at 30 Jun 2020 443.8 132.5 447.6 13.4 160.5 35
---- ---------- ----------- ------------- ----------- -------- -----------
Central governments
1 or central banks 175.8 0.9 183.9 1.6 11.2 6
Regional governments
2 or local authorities 8.5 0.4 8.8 0.1 1.6 18
3 Public sector entities 16.5 0.1 16.4 - - -
Multilateral development
4 banks 0.1 - 0.1 - - -
----
International
5 organisations 1.6 - 1.6 - - -
6 Institutions 2.2 0.2 1.5 0.1 0.9 58
7 Corporates 75.0 84.9 66.3 10.5 72.5 94
8 Retail 19.8 51.1 19.1 0.4 14.4 74
Secured by mortgages
9 on immovable property 32.3 1.1 32.2 0.3 12.0 37
10 Exposures in default 3.6 0.2 3.6 - 4.1 114
11 Higher risk categories 3.1 2.4 3.1 2.2 7.9 150
Collective investment
14 undertakings 0.4 - 0.4 - 0.4 100
15 Equity 16.5 - 16.5 - 36.3 220
16 Other items 12.2 0.7 12.2 0.7 8.8 68
17 Total at 31 Dec 2019 367.6 142.0 365.7 15.9 170.1 45
----
1 Securitisation positions are not included in this table.
Table 31: Standardised approach - exposures by asset classes and risk
weights ('CR5')
Total
credit
exposure
amount Of
Risk weight (post-CCF which:
('RW%') 0% 2% 20% 35% 50% 70% 75% 100% 150% 250% Deducted and CRM) unrated
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
--- ---------- ----------- ---------
Asset
classes(1)
---------- ----------- ---------
Central
governments
or central
1 banks 269.9 - 0.1 - - - - 0.2 - 3.9 - 274.1 3.9
--------
Regional
governments
or local
2 authorities 3.5 - 5.3 - 0.2 - - 0.4 - - - 9.4 0.4
Public sector
3 entities 15.6 - 0.1 - - - - - - - - 15.7 -
Multilateral
development
4 banks - - - - - - - - - - - - -
International
5 organisations 1.4 - - - - - - - - - - 1.4 -
6 Institutions - - 0.2 - 0.4 - - 0.3 - - - 0.9 0.3
7 Corporates - - 3.5 0.2 2.9 0.3 - 61.7 1.4 - - 70.0 47.5
8 Retail - - - - - - 18.7 - - - - 18.7 18.7
Secured by
mortgages
on immovable
9 property - - - 29.0 1.2 - - 0.9 - - - 31.1 31.1
Exposures in
10 default - - - - - - - 2.1 0.9 - - 3.0 3.0
Higher risk
11 categories - - - - - - - - 4.4 - - 4.4 4.4
Collective
investment
14 undertakings - - - - - - - 0.4 - - - 0.4 0.4
15 Equity - - - - - - - 3.4 - 13.6 - 17.0 17.0
16 Other items 0.3 - 6.3 - - - - 8.3 - - - 14.9 14.9
Total at 30
Jun
17 2020 290.7 - 15.5 29.2 4.7 0.3 18.7 77.7 6.7 17.5 - 461.0 141.6
--- -------- -------
Central
governments
or central
1 banks 180.9 - 0.1 - - - - 0.1 - 4.4 - 185.5 4.4
-------- -------
Regional
governments
or local
2 authorities 3.8 - 3.9 - 0.9 - - 0.3 - - - 8.9 0.3
Public sector
3 entities 16.4 - - - - - - - - - - 16.4 -
Multilateral
development
4 banks 0.1 - - - - - - - - - - 0.1 -
International
5 organisations 1.6 - - - - - - - - - - 1.6 -
6 Institutions - - 0.3 - 0.8 - - 0.5 - - - 1.6 0.3
7 Corporates - - 3.9 0.3 2.5 0.5 - 68.0 1.6 - - 76.8 65.9
8 Retail - - - - - - 19.5 - - - - 19.5 19.5
Secured by
mortgages
on immovable
9 property - - - 30.7 1.0 - - 0.8 - - - 32.5 32.5
Exposures in
10 default - - - - - - - 2.6 1.0 - - 3.6 3.6
Higher risk
11 categories - - - - - - - - 5.3 - - 5.3 5.3
Collective
investment
14 undertakings - - - - - - - 0.4 - - - 0.4 0.4
15 Equity - - - - - - - 3.3 - 13.2 - 16.5 16.5
16 Other items 0.1 - 5.0 - - - - 7.8 - - - 12.9 12.9
Total at 31
Dec
17 2019 202.9 - 13.2 31.0 5.2 0.5 19.5 83.8 7.9 17.6 - 381.6 161.6
--- -------- -------
1 Securitisation positions are not included in this table.
Table 32: IRB - Credit risk exposures by portfolio and PD range(1)
('CR6')
Original
on-balance Off-balance EAD Value
sheet sheet post-CRM Number adjustments
gross exposures Average and Average of Average Average RWA Expected and
exposure pre-CCF CCF post-CCF PD obligors LGD maturity RWAs density loss provisions^
PD scale $bn $bn % $bn % % years $bn % $bn $bn
-------------- ---------- ------- -------- -------- -------- -------- -------------
AIRB - Central
government and
central banks
---------- ------- -------- --------
0.00 to <0.15 382.2 2.8 40.9 383.3 0.02 335 42.1 1.90 25.6 7 - -
0.15 to <0.25 6.0 - 39.7 6.0 0.22 11 45.0 3.40 3.5 58 - -
0.25 to <0.50 1.5 - 50.2 1.6 0.37 8 45.0 1.80 0.9 55 - -
0.50 to <0.75 4.4 0.2 63.7 4.6 0.63 19 44.1 1.20 2.9 62 - -
0.75 to <2.50 7.0 0.2 32.3 6.9 1.48 24 44.7 1.30 6.2 90 - -
2.50 to
<10.00 0.5 0.2 9.2 0.1 7.77 8 8.4 3.20 - 37 - -
10.00 to
<100.00 1.7 - - 1.7 75.00 1 45.0 1.00 2.2 130 0.7 -
-------------- -------- -----------
100.00
(Default) 0.2 - - 0.2 100.00 1 45.0 1.50 - - 0.1 -
-------------- ---------- ------- -------- -------- --------
Sub-total 403.5 3.4 41.8 404.4 0.42 407 42.2 1.90 41.3 10 0.8 0.1
-------------- ---------- ------- -------- -------- -------- -----------
AIRB -
Institutions
-------------- ---------- ------- -------- -------- -------- -------- -------------
0.00 to <0.15 66.3 11.5 34.5 69.9 0.05 2,649 38.3 1.40 9.3 13 - -
0.15 to <0.25 1.4 1.3 40.0 1.9 0.22 277 45.0 1.10 0.8 41 - -
0.25 to <0.50 0.9 0.5 45.5 1.2 0.37 155 42.3 1.10 0.6 51 - -
0.50 to <0.75 1.0 0.2 23.9 1.1 0.63 122 45.3 1.30 0.9 81 - -
0.75 to <2.50 1.0 0.6 35.0 1.2 1.03 157 32.9 1.80 0.7 63 - -
2.50 to
<10.00 - - 12.0 - 4.76 29 45.0 0.70 - 139 - -
10.00 to
<100.00 - 0.1 60.8 0.1 16.31 17 11.1 1.70 - 49 - -
-------------- -------- -----------
100.00
(Default) - - 90.0 - 100.00 2 81.9 1.00 - - - -
-------------- ----------
Sub-total 70.6 14.2 35.3 75.4 0.10 3,408 38.6 1.40 12.3 16 - 0.1
-------------- ---------- -------- -----------
AIRB -
Corporate
- specialised
lending
(excluding
slotting)(2)
---------- ------- -------- --------
0.00 to <0.15 2.0 1.2 30.0 2.2 0.10 40 17.8 3.30 0.3 15 - -
0.15 to <0.25 1.8 0.7 41.3 2.0 0.22 47 28.7 3.40 0.7 37 - -
0.25 to <0.50 1.5 2.5 42.0 2.5 0.37 40 22.8 3.80 0.9 38 - -
0.50 to <0.75 1.2 0.5 55.1 1.2 0.63 28 28.6 3.20 0.7 53 - -
0.75 to <2.50 1.3 0.9 42.6 1.6 1.35 36 30.5 2.70 1.2 71 - -
2.50 to
<10.00 0.7 - 96.1 0.7 5.03 15 23.3 2.90 0.5 80 0.1 -
10.00 to
<100.00 0.1 - 35.0 0.1 16.01 4 8.1 3.90 - 41 - -
-------------- -------- -----------
100.00
(Default) 0.2 0.1 73.7 0.2 100.00 12 18.7 4.60 0.2 95 - -
-------------- ---------- ------- -------- -------- --------
Sub-total 8.8 5.9 41.2 10.5 2.94 222 24.6 3.30 4.5 44 0.1 0.1
-------------- ---------- ------- -------- -------- -------- -----------
AIRB -
Corporate
- Other
--------------
0.00 to <0.15 81.7 137.9 32.6 166.4 0.08 6,600 41.2 2.10 36.2 22 0.1 -
0.15 to <0.25 31.9 51.6 32.4 58.0 0.22 4,767 41.9 1.80 22.5 39 0.1 -
0.25 to <0.50 33.1 38.8 30.6 50.5 0.37 5,395 38.0 2.00 23.8 47 0.1 -
0.50 to <0.75 45.0 35.2 29.4 53.5 0.63 6,425 36.6 1.90 30.8 58 0.1 -
0.75 to <2.50 126.9 95.5 28.6 114.2 1.39 21,492 36.9 1.90 87.7 77 0.6 -
2.50 to
<10.00 31.9 22.4 29.8 27.5 4.51 9,737 34.8 2.10 30.2 110 0.4 -
10.00 to
<100.00 4.6 3.3 36.9 4.3 21.30 1,155 35.4 2.10 7.1 164 0.3 -
-------- -----------
100.00
(Default) 4.3 0.9 36.2 4.7 100.00 1,099 39.9 1.80 3.8 81 2.6 -
-------------- ---------- ------- -------- -------- --------
Sub-total 359.4 385.6 31.2 479.1 1.92 56,670 39.0 2.00 242.1 51 4.3 3.8
-------------- ---------- ------- -------- -------- -------- -----------
Wholesale AIRB
-
Total at 30
Jun 2020(3) 905.0 409.1 31.6 1,032.1 1.16 60,707 40.1 1.90 313.8 31 5.2 4.1
Table 32: IRB - Credit risk exposures by portfolio and PD range(1)
('CR6') (continued)
Original
on-balance Off-balance EAD Value
sheet sheet post-CRM Number adjustments
gross exposures Average and Average of Average Average RWA Expected and
exposure pre-CCF CCF post-CCF PD obligors LGD maturity RWAs density loss provisions^
PD scale $bn $bn % $bn % % years $bn % $bn $bn
---------- ------- ---------- -------- ---- -------- -------------
AIRB -
Secured
by
mortgages
on
immovable
property
SME
---------- --------
0.00 to
<0.15 0.3 - 100.0 0.3 0.06 1,110 11.5 - - 5 - -
0.15 to
<0.25 - - 73.8 - 0.19 142 18.9 - - 7 - -
0.25 to
<0.50 0.3 - 59.9 0.3 0.38 2,290 18.9 - - 10 - -
0.50 to
<0.75 0.1 - 37.7 0.1 0.58 344 20.9 - - 17 - -
0.75 to
<2.50 0.2 - 64.2 0.2 1.40 960 21.4 - 0.1 32 - -
2.50 to
<10.00 0.4 - 82.7 0.4 4.74 1,702 24.5 - 0.3 65 - -
10.00 to
<100.00 - - 94.3 - 17.42 214 24.6 - - 101 - -
------- ---------- -------- ---- -----------
100.00
(Default) 0.1 - 2,173.3 0.1 100.00 385 28.8 - 0.1 129 - -
---------- ------- ---------- -------- ---- --------
Sub-total 1.4 - 75.8 1.4 6.05 7,147 19.7 - 0.5 34 - -
---------- ------- ---------- -------- ---- -------- -----------
AIRB -
Secured
by
mortgages
on
immovable
property
non-SME
---------- --------
0.00 to
<0.15 192.7 10.9 86.8 206.1 0.07 1,158,676 15.8 - 15.5 8 - -
0.15 to
<0.25 37.4 1.8 89.0 39.3 0.21 162,118 15.2 - 4.9 12 - -
0.25 to
<0.50 32.0 2.6 42.1 33.2 0.36 145,521 16.3 - 5.7 17 - -
0.50 to
<0.75 16.2 0.8 71.1 16.8 0.60 68,612 14.4 - 3.0 18 - -
0.75 to
<2.50 23.2 1.1 70.6 24.0 1.33 112,017 13.0 - 6.2 26 0.1 -
2.50 to
<10.00 6.2 0.2 78.1 6.4 4.72 30,747 11.2 - 2.4 38 - -
10.00 to
<100.00 3.2 0.1 99.4 3.3 22.45 20,632 17.2 - 3.6 108 0.1 -
------- ---------- -------- ---- -----------
100.00
(Default) 2.3 - 76.2 2.3 100.00 17,855 24.4 - 2.1 92 0.6 -
---------- ------- ---------- -------- ---- --------
Sub-total 313.2 17.5 78.5 331.4 1.23 1,716,178 15.5 - 43.4 13 0.8 0.4
---------- ------- ---------- -------- ---- -------- -----------
AIRB -
Qualifying
revolving
retail
exposures
---------- ------- -------- --------
0.00 to
<0.15 4.3 72.8 49.9 41.0 0.06 13,777,449 89.6 - 1.7 4 - -
0.15 to
<0.25 1.0 16.2 48.1 8.8 0.20 2,750,060 93.3 - 1.0 11 - -
0.25 to
<0.50 1.9 14.7 42.5 8.3 0.35 2,171,602 91.3 - 1.5 18 - -
0.50 to
<0.75 2.3 5.3 48.3 4.8 0.59 974,001 88.2 - 1.2 26 - -
0.75 to
<2.50 4.7 8.3 46.3 8.6 1.42 1,699,994 87.1 - 4.2 49 0.1 -
2.50 to
<10.00 3.0 1.8 65.3 4.2 4.96 854,564 84.3 - 4.7 113 0.2 -
10.00 to
<100.00 0.9 0.4 67.5 1.2 31.80 311,917 83.4 - 2.4 207 0.4 -
------- ---------- -------- ---- -----------
100.00
(Default) 0.3 0.1 30.3 0.4 100.00 203,294 77.1 - 0.8 220 0.2 -
---------- ------- ---------- -------- ---- --------
Sub-total 18.4 119.6 48.7 77.3 1.51 22,742,881 89.4 - 17.5 23 0.9 1.3
---------- ------- ---------- -------- ---- -------- -----------
AIRB -
Other
SME
---------- ------- ---------- -------- ---- -------- -------------
0.00 to
<0.15 0.1 0.4 33.3 0.2 0.09 93,690 74.0 - - 13 - -
0.15 to
<0.25 - 0.2 46.0 0.1 0.23 71,103 93.5 - - 33 - -
0.25 to
<0.50 0.1 0.3 57.3 0.3 0.39 127,153 74.1 - 0.1 39 - -
0.50 to
<0.75 0.2 0.3 75.9 0.5 0.62 123,447 63.0 - 0.2 43 - -
0.75 to
<2.50 1.3 1.2 54.2 1.6 1.57 336,924 65.7 - 1.1 70 - -
2.50 to
<10.00 5.3 1.2 46.7 2.1 4.86 176,794 46.4 - 1.7 77 0.1 -
10.00 to
<100.00 0.3 0.1 53.9 0.3 20.33 65,623 72.9 - 0.4 132 - -
------- ---------- -------- ---- -----------
100.00
(Default) 0.3 0.1 65.2 0.3 100.00 20,518 44.5 - 0.4 137 0.3 -
---------- ------- ---------- -------- ---- --------
Sub-total 7.6 3.8 51.8 5.4 9.33 1,015,252 58.6 - 3.9 73 0.4 0.4
---------- ------- ---------- -------- ---- -------- -----------
AIRB -
Other
non-SME
---------- ------- ---------- -------- ---- -------- -------------
0.00 to
<0.15 10.5 17.2 11.5 12.9 0.07 713,239 13.8 - 0.5 4 - -
0.15 to
<0.25 5.3 4.0 36.5 7.1 0.21 508,629 28.3 - 0.9 13 - -
0.25 to
<0.50 8.8 5.1 18.4 10.0 0.36 449,416 16.9 - 1.1 11 - -
0.50 to
<0.75 4.3 2.5 16.1 4.8 0.62 235,005 34.5 - 1.4 30 - -
0.75 to
<2.50 9.4 3.3 4.5 9.7 1.28 438,787 30.3 - 3.7 38 - -
2.50 to
<10.00 2.3 1.1 21.9 2.6 4.12 235,280 55.3 - 2.3 88 0.1 -
10.00 to
<100.00 0.6 - 11.9 0.6 32.34 98,668 74.9 - 0.9 146 0.1 -
------- ---------- -------- ---- -----------
100.00
(Default) 0.3 - 60.1 0.3 100.00 43,069 58.7 - 0.5 145 0.3 -
---------- ------- ---------- -------- ---- --------
Sub-total 41.5 33.2 15.6 48.0 1.81 2,722,093 25.3 - 11.3 24 0.5 0.7
---------- ------- ---------- -------- ---- -------- -----------
Retail AIRB
-
Total at
30 Jun
2020 382.1 174.1 45.4 463.5 1.44 28,203,551 29.3 - 76.6 17 2.6 2.8
Table 32: IRB - Credit risk exposures by portfolio and PD range(1)
('CR6') (continued)
Original
on-balance Off-balance EAD Value
sheet sheet post-CRM Number adjustments
gross exposures Average and Average of Average Average RWA Expected and
exposure pre-CCF CCF post-CCF PD obligors LGD maturity RWAs density loss provisions^
PD scale $bn $bn % $bn % % years $bn % $bn $bn
FIRB -
Central
government
and
central banks
-------------
0.00 to <0.15 - - 72.8 0.3 0.04 1 45.0 4.00 0.1 24 - -
Sub-total - - 72.8 0.3 0.04 1 45.0 4.00 0.1 24 - -
---------- -------- -------- -----------
FIRB -
Institutions
---------- -------- -------- -------- -------- -------------
0.00 to <0.15 0.7 - 26.0 0.7 0.08 5 44.9 2.30 0.2 23 - -
0.15 to <0.25 - - 25.1 - 0.22 1 45.0 2.40 - 48 - -
0.25 to <0.50 - - 3.4 - 0.37 1 45.0 0.80 - 44 - -
0.75 to <2.50 - 0.2 - - 1.65 2 45.0 1.00 - 95 - -
Sub-total 0.7 0.2 24.9 0.7 0.08 9 44.9 2.30 0.2 24 - -
---------- -------- -------- -----------
FIRB -
Corporate
- Other
---------- -------- -------- -------- -------- -------------
0.00 to <0.15 29.2 50.7 53.8 58.7 0.08 5,198 40.4 2.20 13.7 23 - -
0.15 to <0.25 18.2 19.0 46.7 26.4 0.22 6,070 35.6 2.20 10.2 39 - -
0.25 to <0.50 15.7 12.7 39.0 19.8 0.37 6,414 35.9 2.20 10.1 51 - -
0.50 to <0.75 13.5 10.5 32.0 16.3 0.63 5,438 35.6 2.20 10.2 63 - -
0.75 to <2.50 34.7 21.3 34.6 39.5 1.40 34,566 39.0 2.20 34.5 88 0.2 -
2.50 to
<10.00 12.6 7.0 44.0 14.7 4.55 7,074 39.4 2.40 19.3 131 0.3 -
10.00 to
<100.00 2.7 1.0 39.5 3.0 17.47 1,247 42.4 2.00 5.6 190 0.2 -
---------- -------- -------- -----------
100.00
(Default) 4.6 0.7 42.2 4.7 100.00 1,806 43.6 1.70 - - 2.2 -
Sub-total 131.2 122.9 45.4 183.1 3.65 67,813 38.5 2.20 103.6 57 2.9 2.9
---------- -------- -------- -----------
FIRB - Total
at 30 Jun
2020 131.9 123.1 45.4 184.1 3.63 67,823 38.6 2.20 103.9 56 2.9 2.9
-----------
^ Figures have been prepared on an IFRS 9 transitional basis.
1 Securitisation positions are not included in this table.
2 Slotting exposures are disclosed in Table 34: Specialised
lending on slotting approach ('CR10').
3 The 'Wholesale AIRB - Total' includes non-credit obligation
assets ('NCOA') amounting to $62.7bn of original exposure and EAD,
and $13.6bn of RWAs.
Table 32: IRB - Credit risk exposures by portfolio and PD range(1)
('CR6') (continued)
Original
on-balance Off-balance EAD Value
sheet sheet post-CRM Number adjustments
gross exposures Average and Average of Average Average RWA Expected and
exposure pre-CCF CCF post-CCF PD obligors LGD maturity RWAs density loss provisions
PD scale $bn $bn % $bn % % years $bn % $bn $bn
AIRB -
Central
government
and
central banks
0.00 to <0.15 328.5 2.6 42.9 329.6 0.02 269 41.6 2.10 26.1 8 -
0.15 to <0.25 2.0 0.3 2.6 2.0 0.22 11 45.0 1.40 0.8 38 -
0.25 to <0.50 2.3 - 20.0 2.3 0.37 12 45.0 1.20 1.1 50 -
0.50 to <0.75 2.4 0.3 60.6 2.6 0.63 15 45.0 1.10 1.6 64 -
0.75 to <2.50 5.6 0.2 31.1 5.4 1.39 21 44.5 1.20 4.8 89 -
2.50 to
<10.00 0.5 0.2 0.2 0.1 7.58 8 7.8 3.30 - 31 -
10.00 to
<100.00 1.5 - - 1.5 75.00 5 45.0 1.00 1.9 130 0.6
-----------
100.00
(Default) - - - - - - - - - - -
----------- ------- -------- --------
Sub-total 342.8 3.6 40.1 343.5 0.37 341 41.7 2.10 36.3 11 0.6 0.1
----------- ------- -------- --------
AIRB -
Institutions
----------- ------- -------- --------
0.00 to <0.15 56.7 9.9 32.4 59.6 0.05 2,520 37.1 1.40 7.9 13 -
0.15 to <0.25 2.9 1.2 27.4 3.3 0.22 290 33.7 1.00 1.0 30 -
0.25 to <0.50 1.3 0.3 56.5 1.5 0.37 145 41.3 1.10 0.7 48 -
0.50 to <0.75 0.8 0.1 3.8 0.8 0.63 102 45.0 1.40 0.6 82 -
0.75 to <2.50 0.8 0.6 28.6 0.9 1.14 177 28.3 2.10 0.5 59 -
2.50 to
<10.00 - - 36.7 0.1 3.60 25 45.3 0.90 0.1 125 -
-----------
10.00 to
<100.00 - 0.1 17.9 - 15.75 19 45.8 1.90 - 216 -
----------- ------- -------- --------
100.00
(Default) - - - - 100.00 1 45.8 1.00 - 10 -
----------- ------- -------- --------
Sub-total 62.5 12.2 32.0 66.2 0.09 3,279 37.0 1.40 10.8 16 - -
----------- ------- -------- --------
AIRB -
Corporate
- Specialised
Lending
(excluding
Slotting)(2)
----------- ------- --------
0.00 to <0.15 2.1 1.2 39.5 2.5 0.10 40 20.5 3.30 0.4 17 -
0.15 to <0.25 1.8 0.8 32.0 2.0 0.22 44 29.3 3.80 0.8 40 -
0.25 to <0.50 1.1 0.6 40.1 1.2 0.37 31 27.0 3.50 0.5 43 -
0.50 to <0.75 1.1 0.2 52.6 1.0 0.63 24 26.1 3.70 0.6 53 -
0.75 to <2.50 1.2 0.7 51.5 1.4 1.40 35 28.3 3.10 1.0 74 -
2.50 to
<10.00 0.6 - 69.2 0.5 4.51 13 25.3 3.30 0.4 85 -
10.00 to
<100.00 0.1 - 57.5 0.1 18.28 4 12.3 2.50 0.1 64 -
100.00
(Default) 0.2 0.1 66.2 0.2 100.00 12 19.5 4.50 0.3 129 -
----------- --------
Sub-total 8.2 3.6 41.8 8.9 3.45 203 25.4 3.50 4.1 46 - 0.1
----------- ------- -------- --------
AIRB -
Corporate
- Other
0.00 to <0.15 107.4 171.5 36.0 212.1 0.08 10,842 40.7 2.10 45.5 21 0.1
0.15 to <0.25 50.0 64.0 36.4 83.8 0.22 9,967 38.8 2.00 32.2 38 0.1
0.25 to <0.50 55.4 51.0 32.9 75.3 0.37 11,148 36.6 2.10 35.3 47 0.1
0.50 to <0.75 54.1 40.5 31.6 63.2 0.63 10,296 35.0 2.00 35.7 57 0.1
0.75 to <2.50 142.5 101.3 30.0 132.2 1.36 41,384 37.0 1.90 103.4 78 0.7
2.50 to
<10.00 34.7 25.8 33.0 32.7 4.31 11,505 38.7 1.90 38.8 119 0.6
10.00 to
<100.00 5.0 3.7 39.1 4.9 17.34 1,812 33.1 1.90 7.6 156 0.3
100.00
(Default) 4.2 0.6 35.8 4.4 100.00 2,246 46.1 1.80 2.5 57 2.4
Sub-total 453.3 458.4 34.1 608.6 1.56 99,200 38.4 2.00 301.0 49 4.4 3.4
-----------
Wholesale
AIRB
- Total at
31
Dec 2019(3) 929.2 477.8 34.2 1,089.6 1.09 103,023 39.3 2.00 365.5 34 5.0 3.6
Table 32: IRB - Credit risk exposures by portfolio and PD range(1)
('CR6') (continued)
Original
on-balance Off-balance EAD Value
sheet sheet post-CRM Number adjustments
gross exposures Average and Average of Average Average RWA Expected and
exposure pre-CCF CCF post-CCF PD obligors LGD maturity RWAs density loss provisions
PD scale $bn $bn % $bn % % years $bn % $bn $bn
AIRB -
Secured
by
mortgages
on
immovable
property
SME
0.00 to
<0.15 0.4 - 46.0 0.3 0.06 1,196 11.8 - - 4 -
0.15 to
<0.25 0.1 - 36.2 0.1 0.21 2,192 32.7 - - 13 -
0.25 to
<0.50 0.6 - 41.6 0.6 0.35 6,785 27.0 - 0.1 15 -
0.50 to
<0.75 0.3 0.1 38.7 0.4 0.62 5,423 33.1 - 0.1 27 -
0.75 to
<2.50 1.0 0.2 37.8 1.0 1.44 13,167 33.6 - 0.5 48 -
2.50 to
<10.00 0.7 0.1 38.4 0.8 4.54 7,098 30.8 - 0.6 81 -
10.00 to
<100.00 0.1 - 37.9 0.1 17.47 1,117 31.1 - 0.1 135 -
100.00
(Default) 0.1 - 66.0 0.1 100.00 1,042 33.8 - 0.1 85 0.1
----------- -------
Sub-total 3.3 0.4 38.9 3.4 5.03 38,020 29.5 - 1.5 45 0.1 0.1
----------- -------
AIRB -
Secured
by
mortgages
on
immovable
property
non-SME
----------- ------- -------- --------
0.00 to
<0.15 191.2 11.1 88.0 204.8 0.07 1,110,935 15.7 - 14.8 7 -
0.15 to
<0.25 33.4 1.7 88.4 35.1 0.21 136,145 16.2 - 4.6 13 -
0.25 to
<0.50 27.3 3.0 40.4 28.7 0.35 126,980 17.2 - 5.2 18 -
0.50 to
<0.75 14.1 0.4 91.6 14.6 0.59 56,837 14.9 - 2.8 19 -
0.75 to
<2.50 21.1 1.0 76.6 22.0 1.36 99,412 13.1 - 5.9 27 0.1
2.50 to
<10.00 6.1 0.1 97.0 6.3 4.42 27,562 11.3 - 2.4 38 -
10.00 to
<100.00 1.8 0.1 99.3 1.9 23.22 16,032 20.1 - 2.4 129 0.1
100.00
(Default) 2.3 - 77.9 2.3 100.00 17,845 23.8 - 2.3 98 0.6
----------- -------
Sub-total 297.3 17.4 79.3 315.7 1.18 1,591,748 15.7 - 40.4 13 0.8 0.2
----------- -------
AIRB -
Qualifying
revolving
retail
exposures
0.00 to
<0.15 5.8 72.5 49.4 41.4 0.06 13,492,492 89.4 - 1.8 4 -
0.15 to
<0.25 1.3 15.7 49.0 8.9 0.20 2,827,957 92.5 - 1.0 11 -
0.25 to
<0.50 2.5 14.2 41.9 8.4 0.36 2,155,649 90.3 - 1.5 18 -
0.50 to
<0.75 2.9 5.3 48.2 5.4 0.61 1,012,194 87.4 - 1.4 26 -
0.75 to
<2.50 6.1 7.8 47.9 9.8 1.43 1,894,368 86.0 - 4.7 48 0.1
2.50 to
<10.00 3.7 1.8 63.8 4.8 4.91 887,239 84.2 - 5.3 111 0.2
10.00 to
<100.00 1.0 0.4 65.2 1.2 30.09 315,052 84.3 - 2.6 209 0.4
100.00
(Default) 0.3 - 25.3 0.3 100.00 151,301 77.9 - 0.5 195 0.2
----------- -------
Sub-total 23.6 117.7 48.5 80.2 1.40 22,736,252 88.8 - 18.8 23 0.9 1.0
----------- -------
AIRB -
Other
SME
----------- ------- ---------- -------- --------
0.00 to
<0.15 0.1 0.4 31.5 0.2 0.09 99,557 73.9 - - 14 -
0.15 to
<0.25 - 0.3 37.6 0.1 0.23 76,713 85.0 - - 31 -
0.25 to
<0.50 0.2 0.5 48.4 0.4 0.38 135,359 76.5 - 0.2 40 -
0.50 to
<0.75 0.2 0.5 58.2 0.5 0.64 126,958 67.2 - 0.2 46 -
0.75 to
<2.50 1.1 1.2 54.9 1.7 1.60 327,051 68.3 - 1.2 69 -
2.50 to
<10.00 1.7 1.1 49.6 2.5 4.85 183,343 59.7 - 1.9 80 0.1
10.00 to
<100.00 0.4 0.1 61.3 0.5 20.11 75,895 76.8 - 0.7 141 0.1
100.00
(Default) 0.3 0.1 77.9 0.3 100.00 19,210 44.3 - 0.5 138 0.2
----------- -------
Sub-total 4.0 4.2 50.3 6.2 9.41 1,044,086 65.3 - 4.7 76 0.4 0.3
----------- -------
AIRB -
Other
non-SME
----------- ------- ---------- -------- --------
0.00 to
<0.15 15.1 14.7 15.8 17.7 0.07 675,819 12.5 - 0.7 4 -
0.15 to
<0.25 8.1 3.7 39.7 9.9 0.20 529,201 24.7 - 1.2 12 -
0.25 to
<0.50 12.2 4.4 24.8 13.5 0.37 459,987 19.0 - 1.6 13 -
0.50 to
<0.75 7.9 1.8 22.8 8.4 0.62 246,120 22.6 - 1.7 20 -
0.75 to
<2.50 13.2 1.7 9.7 13.5 1.31 490,546 24.9 - 4.1 30 -
2.50 to
<10.00 3.5 1.1 23.7 3.9 4.27 238,724 34.0 - 2.0 52 0.1
10.00 to
<100.00 0.8 - 16.4 0.9 23.85 96,236 42.5 - 0.7 86 0.1
100.00
(Default) 0.3 - 59.5 0.3 100.00 36,471 48.4 - 0.4 114 0.2
Sub-total 61.1 27.4 20.9 68.1 1.48 2,773,104 21.0 - 12.4 18 0.4 0.4
----------- -------
Retail AIRB
-
Total at
31 Dec
2019 389.3 167.1 47.3 473.6 1.40 28,183,210 29.6 - 77.8 16 2.6 2.0
----------- -------
Table 32: IRB - Credit risk exposures by portfolio and PD range(1)
('CR6') (continued)
Original
on-balance Off-balance EAD Value
sheet sheet post-CRM Number adjustments
gross exposures Average and Average of Average Average RWA Expected and
exposure pre-CCF CCF post-CCF PD obligors LGD maturity RWAs density loss provisions
PD scale $bn $bn % $bn % % years $bn % $bn $bn
FIRB -
Central
government
and
central banks
0.00 to <0.15 - - 75 0.1 0.03 1 45.0 3.60 - 20 -
Sub-total - - 75 0.1 0.03 1 45.0 3.60 - 20 - -
-----------
FIRB -
Institutions
0.00 to <0.15 0.7 - 29.3 0.6 0.08 2 45.0 2.70 0.2 25 -
0.15 to <0.25 - - 40.9 - 0.22 1 45.0 2.40 - 48 -
0.25 to <0.50 - - 16.9 - 0.37 1 45.0 0.10 - 36 -
Sub-total 0.7 - 31.3 0.6 0.08 4 45.0 2.70 0.2 26 - -
-----------
FIRB -
Corporate
- Other
0.00 to <0.15 10.2 15.5 38.5 17.0 0.08 1,357 44.1 2.10 4.1 24 -
0.15 to <0.25 4.8 6.5 39.9 7.0 0.22 1,431 43.8 2.40 3.3 47 -
0.25 to <0.50 4.6 5.8 28.4 6.1 0.37 1,905 42.8 1.90 3.5 56 -
0.50 to <0.75 4.5 6.8 33.7 6.7 0.63 1,676 39.0 1.60 4.2 63 -
0.75 to <2.50 10.7 10.0 21.4 12.1 1.32 5,329 43.1 1.60 10.8 89 0.1
2.50 to
<10.00 3.7 2.9 20.6 3.7 4.60 1,239 42.4 1.60 4.9 133 0.1
10.00 to
<100.00 0.6 0.5 21.4 0.7 13.62 186 43.7 1.40 1.3 197 -
100.00
(Default) 0.8 0.2 20.7 0.9 100.00 435 43.7 2.10 - - 0.4
Sub-total 39.9 48.2 32.1 54.2 2.59 13,558 42.9 1.90 32.1 59 0.6 0.5
-----------
FIRB - Total
at 31 Dec
2019 40.6 48.2 32.1 54.9 2.55 13,563 43.0 1.90 32.3 59 0.6 0.5
-----------
^ Figures have been prepared on an IFRS 9 transitional basis.
1 Securitisation positions are not included in this table.
2 Slotting exposures are disclosed in Table 34: Specialised
lending on slotting approach ('CR10').
3 The 'Wholesale AIRB - Total' includes non-credit obligation
assets ('NCOA') amounting to $62.4bn of original exposure and EAD,
and $13.3bn of RWAs.
Table 33: IRB - Effect on RWA of credit derivatives used as CRM techniques
('CR7')
At
30 Jun 2020 31 Dec 2019
Pre-credit Pre-credit
derivatives Actual derivatives Actual
RWAs RWAs RWAs RWAs
Footnotes $bn $bn $bn $bn
1 Exposures under FIRB 104.9 103.9 32.3 32.3
2 Central governments and central banks 0.1 0.1 - -
3 Institutions 0.2 0.2 0.2 0.2
6 Corporates - other 104.6 103.6 32.1 32.1
----------
7 Exposures under AIRB 1 412.9 411.9 467.1 465.9
---- ----------
8 Central governments and central banks 41.3 41.3 36.3 36.3
9 Institutions 12.3 12.3 10.8 10.8
11 Corporates - specialised lending 26.0 26.0 26.8 26.8
12 Corporates - other 243.1 242.1 302.1 300.9
13 Retail - secured by real estate SMEs 0.5 0.5 1.5 1.5
14 Retail - secured by real estate non-SMEs 43.4 43.4 40.4 40.4
15 Retail - qualifying revolving 17.5 17.5 18.8 18.8
16 Retail - other SMEs 3.9 3.9 4.7 4.7
17 Retail - other non-SMEs 11.3 11.3 12.4 12.4
19 Other non-credit obligation assets 13.6 13.6 13.3 13.3
20 Total 517.8 515.8 499.4 498.2
---- ----------
1 Securitisation positions are not included in this table.
Table 34: Specialised lending on slotting approach ('CR10')
On-balance Off-balance
sheet sheet Exposure Expected
amount amount Risk weight amount RWAs loss
Regulatory
categories Remaining maturity $bn $bn % $bn $bn $bn
----------- ----------- -------- --------
Less than 2.5
Category 1 years 14.6 2.1 50 15.4 7.7 -
-----------
Equal to or more
than 2.5 years 10.1 1.5 70 10.8 7.6 -
Less than 2.5
Category 2 years 4.4 0.6 70 4.7 3.3 -
Equal to or more
than 2.5 years 2.1 0.4 90 2.2 2.0 -
Less than 2.5
Category 3 years 0.6 - 115 0.6 0.7 -
Equal to or more
than 2.5 years 0.1 - 115 0.1 0.1 -
Less than 2.5
Category 4 years 0.1 - 250 0.1 0.1 -
Equal to or more
than 2.5 years - - 250 - - -
Less than 2.5
Category 5 years 0.3 - - 0.4 - 0.2
Equal to or more
than 2.5 years 0.2 - - 0.3 - 0.2
---------- ----------- ----------- -------- --------
Total at 30 Jun Less than 2.5
2020 years 20.0 2.7 - 21.2 11.8 0.2
---------- ----------- ----------- -------- --------
Equal to or more
than 2.5 years 12.5 1.9 - 13.4 9.7 0.2
---------- ----------- ----------- -------- --------
Less than 2.5
Category 1 years 15.6 2.6 50 16.7 8.4 -
Equal to or more
than 2.5 years 11.5 2.3 70 12.5 8.7 0.1
Less than 2.5
Category 2 years 3.6 0.3 70 3.7 2.6 -
Equal to or more
than 2.5 years 2.0 0.8 90 2.3 2.1 -
Less than 2.5
Category 3 years 0.5 - 115 0.5 0.5 -
Equal to or more
than 2.5 years 0.1 - 115 0.1 0.1 -
Less than 2.5
Category 4 years 0.1 - 250 0.1 0.2 -
Equal to or more
than 2.5 years - - 250 - - -
Less than 2.5
Category 5 years 0.5 - - 0.8 - 0.4
Equal to or more
than 2.5 years - - - 0.1 - -
Total at 31 Dec Less than 2.5
2019 years 20.3 2.9 - 21.8 11.7 0.4
Equal to or more
than 2.5 years 13.6 3.1 - 15.0 10.9 0.1
Counterparty credit risk
Counterparty credit risk ('CCR') risk arises for derivatives and
securities financing transactions ('SFT'). It is calculated in both
the trading and non-trading books, and represents the risk that a
counterparty may default before settlement of the transaction. CCR
is generated primarily in our wholesale global businesses.
Four approaches may be used under CRD IV to calculate exposure
values for CCR: mark-to-market, original exposure, standardised and
IMM. Exposure values calculated under these approaches are used to
determine RWAs. Across the Group, we use the mark-to-market and IMM
approaches.
For further information, a summary of our current policies and
practices for the management of counterparty credit risk is set out
in 'Counterparty credit risk' on page 55 of the Pillar 3
Disclosures at 31 December 2019.
Table 35: Analysis of counterparty credit risk exposure by approach
(excluding centrally cleared exposures)(1) ('CCR1')
Effective
Potential expected
Replacement future positive EAD
cost exposure exposure Multiplier post-CRM RWAs
$bn $bn $bn $bn $bn $bn
1 Mark-to-market 10.6 21.6 - - 32.2 12.7
4 Internal model method - - 34.9 1.4 48.8 18.3
- of which: derivatives and
6 long settlement transactions(2) - - 34.9 1.4 48.8 18.3
----------
Financial collateral comprehensive
9 method (for SFTs) - - - - 45.9 7.4
----------
11 Total at 30 Jun 2020 10.6 21.6 34.9 1.4 126.9 38.4
---- ----------- --------- --------- ---------- --------- ----
1 Mark-to-market 7.6 22.5 - - 30.1 12.4
4 Internal model method - - 34.8 1.4 48.7 18.7
- of which: derivatives and
6 long settlement transactions(2) - - 34.8 1.4 48.7 18.7
Financial collateral comprehensive
9 method (for SFTs) - - - - 50.4 7.9
----
11 Total at 31 Dec 2019 7.6 22.5 34.8 1.4 129.2 39.0
----
1 As the Group does not use the original exposure method, notional values are not reported.
2 Prior to the implementation of SA-CCR, exposures reported here
will be those under the mark-to-market method.
Credit valuation adjustment
Credit valuation adjustments ('CVA') represent the risk of loss
as a result of adverse changes to the credit quality of
counterparties in derivative transactions. Where we have both
specific risk VaR approval and IMM approval for a product, the CVA
VaR approach
has been used to calculate the CVA capital charge.
Where we do not hold both approvals, the standardised approach
has been applied. Certain counterparty exposures are exempt from
CVA, such as non-financial counterparties and sovereigns.
Table 36: Credit valuation adjustment capital charge ('CCR2')
At
30 Jun 2020 31 Dec 2019
EAD EAD
post-CRM RWAs post-CRM RWAs
$bn $bn $bn $bn
Total portfolios subject to the Advanced
1 CVA capital charge 20.9 3.1 22.2 3.1
--- --------- ---- --------- ----
- VaR component (including the 3 ×
2 multiplier) 0.6 0.5
- stressed VaR component (including the
3 3 × multiplier) 2.5 2.6
All portfolios subject to the Standardised
4 CVA capital charge 13.3 0.6 13.6 0.9
--- --------- ---- --------- ----
5 Total subject to the CVA capital charge 34.2 3.7 35.8 4.0
--- --------- ---- --------- ----
The following table presents information on the risk weighting
of CCR exposures under the standardised approach by regulatory
portfolio.
Table 37: Standardised approach - CCR exposures by regulatory portfolio
and risk weights ('CCR3')
Total
credit Of which:
Risk weight 0% 10% 20% 50% 75% 100% 150% Others exposure unrated
Central governments
1 and central banks 4.7 - - - - - - - 4.7 -
Regional government
or local
2 authorities 2.7 - - - - - - - 2.7 -
6 Institutions - - - 0.1 - 0.1 - - 0.2 -
7 Corporates - - - - - 1.5 - - 1.5 1.3
----
Total at 30 Jun
2020 7.4 - - 0.1 - 1.6 - - 9.1 1.3
----
Central governments
1 and central banks 8.8 - - - - - - - 8.8 -
Regional government
or local
2 authorities 2.5 - - - - - - - 2.5 -
----
6 Institutions - - - 0.1 - 0.1 - - 0.2 -
7 Corporates - - - - - 2.1 - - 2.1 1.9
----
Total at 31 Dec
2019 11.3 - - 0.1 - 2.2 - - 13.6 1.9
----
Table 38: IRB - CCR exposures by portfolio and PD scale ('CCR4')
EAD Average Number Average Average RWA
post-CRM PD of obligors LGD maturity RWAs density
PD scale $bn % % years $bn %
AIRB - Central government
and central banks
0.00 to <0.15 12.0 0.03 89 44.7 1.04 0.8 6
--------- ------- ------------ ------- --------- ---- --------
0.15 to <0.25 0.4 0.22 9 45.0 0.42 0.1 28
--------- ------- ------------ ------- --------- ---- --------
0.25 to <0.50 0.1 0.37 8 39.3 1.90 0.1 51
--------- ------- ------------ ------- --------- ---- --------
0.50 to <0.75 - - - - - - -
--------- ------- ------------ ------- --------- ---- --------
0.75 to <2.50 0.3 1.99 8 45.0 1.40 0.3 104
--------- ------- ------------ ------- --------- ---- --------
2.50 to <10.00 - 7.85 4 45.0 8.00 - 218
--------- ------- ------------ ------- --------- ---- --------
10.00 to <100.00 0.3 75.00 1 45.0 1.00 0.4 130
--------- ------- ------------ ------- --------- ---- --------
Sub-total 13.1 2.11 119 44.6 1.00 1.7 13
--------- ------- ------------ ------- --------- ---- --------
AIRB - Institutions
0.00 to <0.15 41.6 0.07 4,305 44.8 1.07 8.0 19
--------- ------- ------------ ------- --------- ---- --------
0.15 to <0.25 2.8 0.22 398 41.3 1.43 1.2 44
--------- ------- ------------ ------- --------- ---- --------
0.25 to <0.50 0.5 0.37 85 45.0 1.30 0.3 58
--------- ------- ------------ ------- --------- ---- --------
0.50 to <0.75 0.4 0.63 83 45.6 1.07 0.3 72
--------- ------- ------------ ------- --------- ---- --------
0.75 to <2.50 0.5 1.14 157 45.0 1.48 0.5 94
--------- ------- ------------ ------- --------- ---- --------
2.50 to <10.00 - 5.07 24 45.4 1.03 - 154
--------- ------- ------------ ------- --------- ---- --------
10.00 to <100.00 - 17.74 11 48.3 2.55 0.1 228
--------- ------- ------------ ------- --------- ---- --------
100.00 (Default) - 100.00 1 45.0 1.00 - -
--------- ------- ------------ ------- --------- ---- --------
Sub-total 45.8 0.11 5,064 44.6 1.10 10.4 23
--------- ------- ------------ ------- --------- ---- --------
AIRB - Corporates
0.00 to <0.15 14.8 0.07 3,542 44.0 2.14 3.5 24
--------- ------- ------------ ------- --------- ---- --------
0.15 to <0.25 5.3 0.22 1,325 45.8 2.07 2.4 46
--------- ------- ------------ ------- --------- ---- --------
0.25 to <0.50 2.1 0.37 641 44.3 1.91 1.2 57
--------- ------- ------------ ------- --------- ---- --------
0.50 to <0.75 1.6 0.63 629 42.1 2.67 1.2 79
--------- ------- ------------ ------- --------- ---- --------
0.75 to <2.50 3.3 1.32 2,152 44.3 1.69 3.2 97
--------- ------- ------------ ------- --------- ---- --------
2.50 to <10.00 0.5 5.01 348 45.7 1.67 0.7 139
--------- ------- ------------ ------- --------- ---- --------
10.00 to <100.00 0.1 20.94 52 48.0 1.72 0.2 244
--------- ------- ------------ ------- --------- ---- --------
100.00 (Default) - 100.00 10 42.7 4.35 - -
--------- ------- ------------ ------- --------- ---- --------
Sub-total 27.7 0.59 8,699 44.3 2.08 12.4 45
--------- ------- ------------ ------- --------- ---- --------
AIRB - Total at 30 Jun
2020 86.6 0.57 13,882 44.5 1.40 24.5 28
--------- ------- ------------ ------- --------- ---- --------
FIRB - Corporates
0.00 to <0.15 20.0 0.08 3,125 44.1 1.72 4.3 21
--------- ------- ------------ ------- --------- ---- --------
0.15 to <0.25 4.2 0.22 754 44.9 1.53 1.6 37
--------- ------- ------------ ------- --------- ---- --------
0.25 to <0.50 1.5 0.37 540 45.0 1.45 0.8 55
--------- ------- ------------ ------- --------- ---- --------
0.50 to <0.75 1.6 0.63 496 45.0 1.58 1.3 79
--------- ------- ------------ ------- --------- ---- --------
0.75 to <2.50 3.2 1.43 1,859 45.0 1.60 3.3 105
--------- ------- ------------ ------- --------- ---- --------
2.50 to <10.00 0.5 4.02 395 45.0 1.63 0.6 140
--------- ------- ------------ ------- --------- ---- --------
10.00 to <100.00 0.1 13.12 57 45.0 1.48 0.2 209
--------- ------- ------------ ------- --------- ---- --------
100.00 (Default) - 100.00 28 45.0 1.12 - -
--------- ------- ------------ ------- --------- ---- --------
FIRB - Total at 30 Jun
2020 31.1 0.42 7,254 44.4 1.66 12.1 39
--------- ------- ------------ ------- --------- ---- --------
Total (all portfolios)
at 30 Jun 2020 117.7 0.53 21,136 44.5 1.47 36.6 31
--------- ------- ------------ ------- --------- ---- --------
Table 38: IRB - CCR exposures by portfolio and PD scale ('CCR4') (continued)
EAD Average Number Average Average RWA
post-CRM PD of obligors LGD maturity RWAs density
PD scale $bn % % years $bn %
AIRB - Central government
and central banks
0.00 to <0.15 10.5 0.02 97 44.6 0.93 0.6 6
0.15 to <0.25 0.2 0.22 12 45.0 1.22 0.1 35
0.25 to <0.50 - 0.37 7 45.0 2.01 - 59
0.50 to <0.75 - 0.63 1 45.0 2.35 - 80
0.75 to <2.50 0.3 1.64 6 45.0 1.77 0.3 104
2.50 to <10.00 - 6.65 2 33.8 7.00 - 195
Sub-total 11.0 0.07 125 44.7 0.96 1.0 9
AIRB - Institutions
0.00 to <0.15 41.0 0.07 4,551 44.4 1.20 8.5 21
0.15 to <0.25 3.0 0.22 409 44.9 1.60 1.4 48
0.25 to <0.50 0.7 0.37 85 46.2 1.50 0.4 65
0.50 to <0.75 0.3 0.63 62 42.8 1.10 0.3 79
0.75 to <2.50 0.4 1.21 130 45.1 2.10 0.4 107
2.50 to <10.00 0.1 4.91 29 47.6 1.10 0.1 151
10.00 to <100.00 - 12.23 8 46.1 2.90 - 229
100.00 (Default) - 100.00 1 45.0 1.00 - 365
Sub-total 45.5 0.12 5,275 44.6 1.20 11.1 24
AIRB - Corporates
0.00 to <0.15 30.5 0.07 5,498 44.1 1.80 6.8 22
0.15 to <0.25 9.7 0.22 1,962 45.7 1.59 4.1 42
0.25 to <0.50 3.9 0.37 1,039 46.0 1.46 2.2 57
0.50 to <0.75 3.1 0.63 941 43.0 1.88 2.5 80
0.75 to <2.50 5.2 1.34 3,493 46.3 1.41 5.3 102
2.50 to <10.00 0.8 3.95 549 48.7 1.73 1.2 152
10.00 to <100.00 - 18.17 63 48.0 1.62 - 230
100.00 (Default) - 100.00 13 39.6 1.96 - -
Sub-total 53.2 0.37 13,558 44.7 1.70 22.1 42
AIRB - Total at 31 Dec
2019 109.7 0.19 19,279 49.0 1.30 34.2 31
FIRB - Corporates
0.00 to <0.15 3.7 0.07 1,188 45.0 1.98 0.8 22
0.15 to <0.25 0.6 0.22 156 45.0 1.59 0.2 41
0.25 to <0.50 0.5 0.37 166 45.0 1.29 0.3 55
0.50 to <0.75 0.2 0.63 119 45.0 1.21 0.1 72
0.75 to <2.50 0.6 1.41 516 45.0 1.80 0.6 101
2.50 to <10.00 0.1 4.86 129 45.0 2.59 0.2 162
10.00 to <100.00 - 10.08 14 45.0 1.03 - 200
100.00 (Default) - 100.00 5 45.0 1.08 - -
FIRB - Total at 31 Dec
2019 5.7 0.44 2,293 45.0 1.85 2.2 39
Total (all portfolios)
at 31 Dec 2019 115.4 0.25 21,572 44.7 1.58 36.4 32
Collateral arrangements
Our policy is to revalue all traded transactions and associated
collateral positions on a daily basis. An independent collateral
management function manages the collateral process, including
pledging and receiving collateral and investigating disputes and
non-receipts. Eligible collateral types are controlled under a
policy to ensure price transparency, price stability, liquidity,
enforceability, independence, reusability and eligibility for
regulatory purposes.
A valuation 'haircut' policy reflects the fact that collateral
may fall in value between the date the collateral was called and
the date of liquidation or enforcement. Approximately 99% of
collateral held as variation margin under credit support annexes is
either cash or liquid government securities.
Table 39: Impact of netting and collateral held on exposure values
('CCR5-A')
Gross positive
fair value Netted
or net current
carrying Netting credit Collateral Net credit
amount benefits exposure held exposure
$bn $bn $bn $bn $bn
1 Derivatives 674.6 505.7 168.9 67.4 101.5
2 SFTs 902.3 - 902.3 856.9 45.4
4 Total at 30 Jun 2020 1,576.9 505.7 1,071.2 924.3 146.9
---
1 Derivatives 595.4 442.8 152.6 51.9 100.7
2 SFTs 865.1 - 865.1 814.6 50.5
4 Total at 31 Dec 2019 1,460.5 442.8 1,017.7 866.5 151.2
---
Table 40: Composition of collateral for CCR exposure ('CCR5-B')
Collateral used in derivative Collateral used
transactions in SFTs
Fair value of Fair value of
collateral received posted collateral
Fair value Fair value
of collateral of posted
Segregated Unsegregated Segregated Unsegregated received collateral
$bn $bn $bn $bn $bn $bn
-------------- -------------- -------------- ---------------- -------------
Cash -
domestic
1 currency - 9.2 - 9.9 68.2 95.3
---
Cash - other
2 currencies - 58.1 - 52.0 280.6 408.9
---
Domestic
3 sovereign debt - 8.1 0.7 7.8 87.7 78.4
---
Other
4 sovereign debt - 9.7 3.1 15.4 366.8 270.1
---
Government
5 agency debt - 0.2 - 0.1 3.2 5.2
---
Corporate
6 bonds - 2.3 0.9 0.9 48.4 11.1
---
Equity
7 securities - 0.1 0.1 - 39.2 32.7
---
Other
8 collateral - 0.5 3.0 1.3 1.8 0.6
--- -------------- ------------ ------------ ------------ -------------- -----------
Total at 30
9 Jun 2020 - 88.2 7.8 87.4 895.9 902.3
--- -------------- ------------ ------------ ------------ -------------- -----------
Cash -
domestic
1 currency - 6.8 - 7.8 57.4 98.6
Cash - other
2 currencies - 48.1 - 45.3 287.4 374.1
Domestic
3 sovereign debt - 7.3 0.5 6.4 90.4 64.7
Other
4 sovereign debt - 5.1 2.8 11.3 327.0 275.4
Government
5 agency debt - 0.2 - 0.1 6.5 1.0
Corporate
6 bonds - 1.0 0.7 0.3 47.2 10.5
Equity
7 securities - 0.2 0.2 - 39.1 40.6
Other
8 collateral - 0.2 2.8 1.6 1.7 0.2
---
Total at 31
9 Dec 2019 - 68.9 7.0 72.8 856.7 865.1
---
Central counterparties
While exchange traded derivatives have been cleared through
central counterparties ('CCPs') for many years, recent regulatory
initiatives designed to reduce systemic risk in the banking system
are directing increasing volumes of OTC derivatives to be cleared
through CCPs.
To manage the significant concentration of risk in CCPs that
results from this, we have developed a risk appetite framework to
manage risk accordingly, at the level of individual CCPs and
globally. A dedicated CCP risk team has been established to manage
the interface with CCPs and undertake in-depth due diligence of the
unique risks associated with these organisations.
Table 41: Exposures to central counterparties ('CCR8')
At
30 Jun 2020 31 Dec 2019
EAD post-CRM RWAs EAD post-CRM RWAs
$bn $bn $bn $bn
Exposures to qualifying central counterparties
1 ('QCCPs') (total) 32.4 1.0 33.4 1.1
2 Exposures for trades at QCCPs (excluding
initial margin and default fund contributions) 12.9 0.3 15.2 0.3
3 - OTC derivatives 4.6 0.1 5.1 0.1
4 - exchange-traded derivatives 4.1 0.1 5.4 0.1
5 - securities financing transactions 4.2 0.1 4.7 0.1
7 Segregated initial margin 7.8 6.9
8 Non-segregated initial margin 11.7 0.2 11.3 0.2
9 Pre-funded default fund contributions - 0.5 - 0.6
Table 42: Credit derivatives exposures ('CCR6')
At
30 Jun 2020 31 Dec 2019
Protection Protection Protection Protection
bought sold bought sold
Footnotes $bn $bn $bn $bn
Notionals
Credit derivative products used for own
credit portfolio
----------
- index credit default swaps 6.3 3.6 9.4 7.7
Total notionals used for own credit portfolio 6.3 3.6 9.4 7.7
---------- --------- ---------
Credit derivative products used for intermediation 1
- index credit default swaps 159.0 140.6 160.7 142.0
--------- ---------
- total return swaps 10.2 9.5 15.4 9.7
--------- ---------
Total notionals used for intermediation 169.2 150.1 176.1 151.7
---------- --------- ---------
Total credit derivative notionals 175.5 153.7 185.5 159.4
---------- --------- ---------
Fair values
- Positive fair value (asset) 2.2 1.4 2.4 2.3
- Negative fair value (liability) (1.8) (3.2) (2.8) (2.8)
---------- --------- ---------
1 These are products where we act as an intermediary for our
clients, enabling them to take a position in the underlying
securities. These do not increase risk for HSBC.
Securitisation
Securitisation strategy
HSBC acts as originator, sponsor, and investor to securitisation
positions. Our strategy is to use securitisation to meet our needs
for aggregate funding or capital management, to the extent that
market conditions, regulatory treatments and other conditions are
suitable, and for customer facilitation.
Securitisations on the banking book follow a detailed due
diligence framework in accordance with the new securitisation
framework. Wholesale Credit Risk conducts the credit approval
process in line with HSBC policies and procedures.
Securitisations on the trading book also follow the due
diligence framework, which accords with the requirements of the
securitisation regulation. Detailed risk limits and criteria are
provided by the Traded Risk function and monitored in line with
HSBC policies and procedures.
HSBC does not provide support to its originated or sponsored
securitisation transactions as a policy.
Securitisation activity
Our roles in the securitisation process are as follows:
-- originator: where we originate the assets being securitised, either directly or indirectly;
-- sponsor: where we establish and manage a securitisation
programme that purchases exposures from third parties; and
-- investor: where we invest in a securitisation transaction
directly or provide derivatives or liquidity facilities to a
securitisation.
HSBC as originator
We are originator of three securitisation programmes, details of
which are given in the table below.
We use SPEs to securitise customer loans and advances and other
debt that we have originated in order to diversify our sources of
funding for asset origination and for capital efficiency purposes.
In such cases, we transfer the loans and advances to the SPEs for
cash, and the SPEs issue debt securities to investors to fund the
cash purchases.
In addition, we use SPEs to mitigate the capital absorbed by
some of the customer loans and advances we have originated. Credit
derivatives and financial guarantees are used to transfer the
credit risk associated with such customer loans and advances, using
an approach commonly known as synthetic securitisation.
Please click on the link below to view the following chart and
Pillar 3 document in full:
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Metrix Portfolio Corporate
HBEU Distribution Plc loans Dec-15 Dec-22 1,115 58 43
Metrix Portfolio Corporate
HBEU Distribution Plc loans Dec-19 Dec-26 2,053 72 45
Metrix Portfolio Corporate
HBUK Distribution Plc loans Dec-19 Dec-26 2,808 119 52
HSBC as sponsor
We are sponsor to two securitisation entities that manage a
securitisation programme, which purchases exposures from third
parties. Details of these can be found in the table below.
We hold all of the commercial paper issued by Solitaire Funding
Limited, which is HSBC's sponsored securitisation entity. These are
considered legacy businesses, and exposures are being repaid as the
securities they hold amortise or are sold.
The Group's exposures to Barion Funding Limited and Malachite
Funding Limited at 31 December 2019 are not significant and limited
to balances associated with the winding-up of these entities.
Further details are available in Note 20 of the financial
statements in the Annual Report and Accounts 2019.
Please click on the link below to view the following chart and
Pillar 3 document in full:
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Solitaire Asset-backed commercial paper Consolidated for
('ABCP') conduit to which regulatory capital
a first-loss letter of credit purposes
and transaction-specific
liquidity facilities are
provided
Regency Multi-seller conduit to which Exposures (including
senior liquidity facilities derivatives and liquidity
and programme-wide credit facilities) are risk
enhancement are provided weighted as securitisation
positions
HSBC as investor
We have exposure to third-party securitisations across a wide
range of sectors in the form of investments, liquidity facilities
and as a derivative counterparty.
Monitoring of securitisation positions
Securitisation positions are managed by dedicated teams that
uses a combination of market standard systems and third-party data
providers to monitor performance data and manage market and credit
risks.
In the case of legacy re-securitisation positions, similar
processes are conducted in respect of the underlying
securitisations.
The liquidity risk of securitised assets is consistently managed
as part of the Group's liquidity and funding risk management
framework.
Securitisation accounting treatment
For accounting purposes, we consolidate structured entities
(including SPEs) when the substance of the relationship indicates
that we control them; that is, we are exposed, or have rights, to
variable returns from our involvement with the structured entity
and have the ability to affect those returns through our power over
the entity.
Full details of these assessments and our accounting policy on
structured entities may be found in Note 1.2(a) and Note 20 on the
financial statements respectively of the Annual Report and Accounts
2019.
We reassess the need to consolidate whenever there is a change
in the substance of the relationship between HSBC and a structured
entity.
HSBC enters into transactions in the normal course of business
by which it transfers financial assets to structured entities.
Depending on the circumstances, these transfers may either result
in these financial assets being fully or partly derecognised, or
continuing to be recognised in their entirety. Full derecognition
occurs when we transfer our contractual right to receive cash flows
from the financial assets, or assume an obligation to pass on the
cash flows from the assets, and transfer substantially all the
risks and rewards of ownership. Only in the event that
derecognition is achieved are
sales and any resultant gains recognised in the financial
statements.
Partial derecognition occurs when we sell or otherwise transfer
financial assets in such a way that some but not substantially all
of the risks and rewards of ownership are transferred and control
is retained. These financial assets are recognised on the balance
sheet to the extent of our continuing involvement and an associated
liability is also recognised. The net carrying amount of the
financial asset and associated liability will be based on either
the amortised cost or the fair value of the rights and obligations
retained by the entity, depending upon the measurement basis of the
financial asset.
Further disclosure of such transfers may be found in Note 17 on
the financial statements of the Annual Report and Accounts
2019.
Valuation of securitisation positions
The process of valuing our investments in securitisation
exposures primarily focuses on quotations from third parties,
observed trade levels and calibrated valuations from market
standard models.
Our hedging and credit risk mitigation strategy, with regards to
retained securitisation and re-securitisation exposures, is to
continually review our positions.
Regulatory treatment
For regulatory purposes, any reduction in RWAs that would be
achieved by our own originated securitisations must receive the
PRA's permission and be justified by a commensurate transfer of
credit risk to third parties. If achieved, the underlying assets
are de-recognised for regulatory purposes and any retained
exposures to the securitisation, including derivatives or liquidity
facilities, are risk weighted as securitisation positions.
For both non-trading book and trading book securitisation
positions we follow the hierarchy of RWA calculation approaches as
described in the securitisation framework. Our originated positions
are all reported under the internal ratings-based approach
('SEC-IRBA').
Our positions in the sponsored Solitaire programme and our
investment in third-party positions are spread across the
standardised approach ('SEC-SA') and the external ratings-based
approach ('SEC-ERBA'). The new securitisation framework came into
force in the EU for new transactions from 1 January 2019. Existing
positions were subject to 'grandfathering' provisions and were
reported under the old approach at 31 December 2019. These
exposures were transferred to the new framework on
1 January 2020. Our exposures subject to the approaches under
the old framework at 31 December 2019 included $9.2bn under the
rating-based method ('RBM'), $5.8bn under the internal assessment
approach ('IAA'), and $1.8bn under the standardised approach
('SA').
For our sponsored positions in Regency we use IAA. An eligible
rating agency methodology, which includes stress factors, is
applied to each asset class in order to derive the equivalent
rating level for each transaction. This methodology is verified by
the Credit Risk function as part of the approval process for each
new transaction. The performance of each underlying asset portfolio
is monitored to confirm that the applicable equivalent rating level
still applies and is independently verified. Our IAA approach is
audited annually by Internal Model Review and is subject to review
by the PRA.
Analysis of securitisation positions
Our involvement in securitisation activities reflects the
following:
-- $6.0bn positions held as synthetic transactions (2019: $7.2 bn);
-- no assets awaiting securitisation and no material realised
losses on securitisation asset disposals during the year;
-- unrealised losses on asset-backed securities ('ABS') of
$0.2bn in the year (2019: $0.2bn), which related to assets within
SPEs that are consolidated for regulatory purposes; and
-- off-balance sheet exposure of $11.0bn (2019: $11.1 bn),
mainly related to contingent liquidity lines provided to
securitisation vehicles where we act as sponsor, with a small
amount from derivative exposures where we are an investor. The
off-balance sheet exposures are held in the non-trading book and
the exposure types are spread across multiple products and
re-securitisations.
Table 43: Securitisation exposures in the non-trading book ('SEC1')
Bank acts as originator Bank acts as sponsor Bank acts as investor
Traditional Synthetic Sub-total Traditional Synthetic Sub-total Traditional Synthetic Sub-total
$bn $bn $bn $bn $bn $bn $bn $bn $bn
---- ------------- ----------- ----------- ------------- ----------- ----------- ------------- ----------- -----------
1 Retail (total) - - - 8.3 - 8.3 12.2 - 12.2
---- ----------- --------- --------- ----------- --------- --------- ----------- --------- ---------
2 * residential mortgage - - - 2.6 - 2.6 4.1 - 4.1
3 * credit card - - - - - - 2.1 - 2.1
4 * other retail exposures - - - 5.7 - 5.7 6.0 - 6.0
6 Wholesale (total) - 6.0 6.0 4.2 - 4.2 3.5 - 3.5
---- ----------- --------- --------- ----------- --------- --------- ----------- --------- ---------
7 * loans to corporates - 6.0 6.0 - - - 0.5 - 0.5
8 * commercial mortgage - - - 0.1 - 0.1 2.4 - 2.4
9 * lease and receivables - - - 3.9 - 3.9 0.5 - 0.5
10 * other wholesale - - - 0.2 - 0.2 0.1 - 0.1
Total at 30 Jun
2020 - 6.0 6.0 12.5 - 12.5 15.7 - 15.7
---- ----------- --------- --------- ----------- --------- --------- ----------- --------- ---------
1 Retail (total) - - - 11.0 - 11.0 10.0 - 10.0
----
2 * residential mortgage - - - 3.7 - 3.7 4.5 - 4.5
3 * credit card - - - - - - 1.5 - 1.5
4 * other retail exposures - - - 7.3 - 7.3 4.0 - 4.0
6 Wholesale (total) - 7.2 7.2 4.6 - 4.6 3.7 - 3.7
----
7 * loans to corporates - 7.2 7.2 - - - 0.1 - 0.1
8 * commercial mortgage - - - 0.1 - 0.1 1.9 - 1.9
9 * lease and receivables - - - 4.3 - 4.3 1.6 - 1.6
10 * other wholesale - - - 0.2 - 0.2 0.1 - 0.1
Total at 31 Dec
2019 - 7.2 7.2 15.6 - 15.6 13.7 - 13.7
----
Table 44: Securitisation exposures in the trading book ('SEC2')
At
30 Jun 2020 31 Dec 2019
Bank acts as investor(1) Bank acts as investor(1)
Traditional Synthetic Sub-total Traditional Synthetic Sub-total
$bn $bn $bn $bn $bn $bn
------------- ----------- ----------- ------------- ----------- -----------
1 Retail (total) 2.2 - 2.2 2.3 - 2.3
----- ----------------------------- ----------- --------- --------- ----------- --------- ---------
2 * residential mortgage 1.8 - 1.8 1.5 - 1.5
3 * credit card 0.1 - 0.1 0.1 - 0.1
4 * other retail exposures 0.3 - 0.3 0.7 - 0.7
6 Wholesale (total) 1.3 - 1.3 1.4 - 1.4
----- ----------------------------- ----------- --------- --------- ----------- --------- ---------
8 * commercial mortgage 0.9 - 0.9 0.9 - 0.9
10 * other wholesale 0.4 - 0.4 0.5 - 0.5
----------- --------- ---------
Total (all portfolios) 3.5 - 3.5 3.7 - 3.7
----- ----------------------------- ----------- --------- --------- ----------- --------- ---------
1 HSBC does not act as originator or sponsor for securitisation exposures in the trading book.
Table 45 presents the Group's exposure in the non-trading book
and associated regulatory capital requirements where the Group acts
as originator or as sponsor.
Table 45: Securitisation exposures in the non-trading book and associated
regulatory capital requirements - bank acting as originator or as sponsor
('SEC3')
Exposure values (by risk Exposure values (by regulatory
weight bands) approach)
>20% >50% >100%
to to to
<=20% 50% 100% 1,250% 1,250% IRB SEC
RW RW RW RW RW RBM SA SEC-IRBA SEC-ERBA IAA SEC-SA 1,250%
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
------- ------ -------- -------- ------ ---------- ---------- ------ -------- --------
Traditional
2 securitisation 8.1 3.5 0.7 0.2 - N/A N/A - 1.3 10.8 0.4 -
---- ------
3 Securitisation 8.1 3.5 0.7 0.2 - N/A N/A - 1.3 10.8 0.4 -
------
- retail
4 underlying 4.8 2.6 0.7 0.2 - N/A N/A - 1.3 6.8 0.2 -
5 - wholesale 3.3 0.9 - - - N/A N/A - - 4.0 0.2 -
Synthetic
9 securitisation 6.0 - - - - N/A N/A 6.0 - - - -
10 Securitisation 6.0 - - - - N/A N/A 6.0 - - - -
---- ------
- retail
11 underlying - - - - - N/A N/A - - - - -
12 - wholesale 6.0 - - - - N/A N/A 6.0 - - - -
Total at 30
1 Jun 2020 14.1 3.5 0.7 0.2 - N/A N/A 6.0 1.3 10.8 0.4 -
---- ------
Traditional
2 securitisation 11.4 3.4 0.7 0.1 - 7.6 0.8 - - 7.1 0.1 -
----
3 Securitisation 11.4 3.4 0.7 0.1 - 7.6 0.8 - - 7.1 0.1 -
- retail
4 underlying 7.2 3.1 0.6 0.1 - 5.5 0.8 - - 4.6 0.1 -
5 - wholesale 4.2 0.3 0.1 - - 2.1 - - - 2.5 - -
Synthetic
9 securitisation 6.9 - 0.3 - - 2.0 - 5.2 - - - -
10 Securitisation 6.9 - 0.3 - - 2.0 - 5.2 - - - -
- retail
11 underlying - - - - - - - - - - -
12 - wholesale 6.9 - 0.3 - - 2.0 - 5.2 - - - -
----
Total at 31
1 Dec 2019 18.3 3.4 1.0 0.1 - 9.6 0.8 5.2 - 7.1 0.1 -
----
RWAs (by regulatory approach) Capital charge after cap
IRB SEC IRB SEC
RBM SA SEC-IRBA SEC-ERBA IAA SEC-SA 1,250% RBM SA SEC-IRBA SEC-ERBA IAA SEC-SA 1,250%
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
Traditional
2 securitisation N/A N/A - 0.7 2.4 0.2 - N/A N/A - 0.1 0.2 - -
3 Securitisation N/A N/A - 0.7 2.4 0.2 - N/A N/A - 0.1 0.2 - -
----- ----- -----
- retail
4 underlying N/A N/A - 0.5 1.7 0.1 - N/A N/A - 0.1 0.1 - -
5 - wholesale N/A N/A - 0.2 0.7 0.1 - N/A N/A - - 0.1 - -
Synthetic
9 securitisation N/A N/A 1.4 - - - 0.3 N/A N/A 0.1 - - - -
10 Securitisation N/A N/A 1.4 - - - 0.3 N/A N/A 0.1 - - - -
- retail
11 underlying N/A N/A - - - - - N/A N/A - - - - -
12 - wholesale N/A N/A 1.4 - - - 0.3 N/A N/A 0.1 - - - -
Total at 30
1 Jun 2020 N/A N/A 1.4 0.7 2.4 0.2 0.3 N/A N/A 0.1 0.1 0.2 - -
Traditional
2 securitisation 1.0 0.6 - - 1.7 - - 0.1 - - - 0.1 - -
3 Securitisation 1.0 0.6 - - 1.7 - - 0.1 - - - 0.1 - -
- retail
4 underlying 0.6 0.6 - - 1.2 - - 0.1 - - - 0.1 - -
5 - wholesale 0.4 - - - 0.5 - - - - - - - - -
Synthetic
9 securitisation 0.4 - 0.9 - - - 0.5 - - 0.1 - - - -
10 Securitisation 0.4 - 0.9 - - - 0.5 - - 0.1 - - - -
- retail
11 underlying - - - - - - - - - - - - - -
12 - wholesale 0.4 - 0.9 - - - 0.5 - - 0.1 - - - -
Total at 31
1 Dec 2019 1.4 0.6 0.9 - 1.7 - 0.5 0.1 - 0.1 0.1 - -
Table 46 presents the Group's exposure in the non-trading book
and associated regulatory capital requirements where the Group acts
as an investor.
Table 46: Securitisation exposures in the non-trading book and associated
capital requirements - bank acting as investor ('SEC4')
Exposure values (by risk Exposure values (by regulatory
weight bands) approach)
>20% >50% >100%
to to to
<=20% 50% 100% 1,250% 1,250% IRB SEC
RW RW RW RW RW RBM SA SEC-IRBA SEC-ERBA IAA SEC-SA 1,250%
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
------- ------ -------- -------- ------ ------ ---------- ---------- ------ -------- --------
Traditional
2 securitisation 11.0 1.5 2.4 0.8 - N/A N/A 0.1 3.8 - 11.8 -
--- ------ ------
3 Securitisation 11.0 1.5 2.4 0.8 - N/A N/A 0.1 3.8 - 11.8 -
------ ------
- retail
4 underlying 9.1 1.5 0.8 0.8 - N/A N/A - 2.0 - 10.2 -
5 - wholesale 1.9 - 1.6 - - N/A N/A 0.1 1.8 - 1.6 -
Total at 30
1 Jun 2020 11.0 1.5 2.4 0.8 - N/A N/A 0.1 3.8 - 11.8 -
--- ------ ------
Traditional
2 securitisation 11.3 1.3 1.0 0.1 - 5.4 1.0 - 1.7 - 5.6
--- --------
3 Securitisation 11.3 1.3 1.0 0.1 - 5.4 1.0 - 1.7 - 5.6
--------
- retail
4 underlying 7.7 1.3 0.8 0.1 - 3.3 1.0 - 1.4 - 4.2
5 - wholesale 3.6 - 0.2 - - 2.1 - - 0.3 - 1.4
Total at 31
1 Dec 2019 11.3 1.3 1.0 0.1 - 5.4 1.0 - 1.7 - 5.6
---
RWAs (by regulatory approach) Capital charge after cap
IRB SEC IRB SEC
RBM SA SEC-IRBA SEC-ERBA IAA SEC-SA 1,250% RBM SA SEC-IRBA SEC-ERBA IAA SEC-SA 1,250%
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
----- ----- ----- ------
Traditional
2 securitisation N/A N/A - 3.2 - 2.2 - N/A N/A - 0.3 - 0.2 -
3 Securitisation N/A N/A - 3.2 - 2.2 - N/A N/A - 0.3 - 0.2 -
----- -----
- retail
4 underlying N/A N/A - 1.8 - 2.0 - N/A N/A - 0.2 - 0.2 -
5 - wholesale N/A N/A - 1.4 - 0.2 - N/A N/A - 0.1 - - -
Total at 30
1 Jun 2020 N/A N/A - 3.2 - 2.2 - N/A N/A - 0.3 - 0.2 -
Traditional
2 securitisation 0.7 0.7 - 0.5 - 1.1 0.2 0.1 0.1 - - - 0.1 -
3 Securitisation 0.7 0.7 - 0.5 - 1.1 0.2 0.1 0.1 - - - 0.1 -
- retail
4 underlying 0.3 0.7 - 0.4 - 0.9 0.2 - 0.1 - - - 0.1 -
5 - wholesale 0.4 - - 0.1 - 0.2 - 0.1 - - - - - -
Total at 31
1 Dec 2019 0.7 0.7 - 0.5 - 1.1 0.2 0.1 0.1 - - - 0.1 -
Market risk
Market risk is the risk that movements in market factors, such
as foreign exchange rates, interest rates, credit spreads, equity
prices and commodity prices, will reduce our income or the value of
our portfolios.
Exposure to market risk is separated into two portfolios:
-- trading portfolios: these comprise positions held for client
servicing and market-making, with the intention of short-term
resale and/or to hedge risks resulting from such positions; and
-- non-trading portfolios: these comprise positions that
primarily arise from the interest rate management of our retail and
commercial banking assets and liabilities, financial investments
measured at fair value through other comprehensive income, debt
instruments measured at amortised cost, and exposures arising from
our insurance operations.
There were no material changes to the policies and practices for
the management of market risk.
The tables below reflect the components of capital requirements
under the standardised approach and the internal model
approach.
For further information, a summary of our current policies and
practices for the management of market risk is set out in 'Market
risk' on page 64 of the Pillar 3 Disclosures at 31 December
2019.
Table 47: Market risk under standardised approach (MR1)
At
30 Jun 31 Dec 30 Jun
2020 2019 2020
-------- -------- ---------------
Capital
RWAs RWAs requirements
$bn $bn $bn
-------- -------- ---------------
Outright products
1 Interest rate risk (general and specific) 1.9 2.6 0.2
2 Equity risk (general and specific) 1.1 0.1 0.1
3 Foreign exchange risk 3.8 3.7 0.3
4 Commodity risk 0.1 0.1 -
Options
6 Delta-plus method 0.1 0.1 -
8 Securitisation (specific risk) 1.4 1.2 0.1
--- -------------------------------------------- ------ ------ -------------
9 Total 8.4 7.8 0.7
--- -------------------------------------------- ------ ------ -------------
The $1.0bn increase in equity risk RWAs is due to increased
hedging and underwriting in 1H20.
Table 48: Market risk under IMA (MR2-A)
At 30 Jun 2020 At 31 Dec 2019
Capital Capital
RWAs requirements RWAs requirements
$bn $bn $bn $bn
1 VaR (higher of values a and b) 7.3 0.6 5.3 0.4
(a) Previous day's VaR 0.1 0.1
(b) Average daily VaR(1) 0.6 0.4
Stressed VaR (higher of values a
2 and b) 10.3 0.8 8.0 0.7
(a) Latest stressed VaR 0.1 0.1
(b) Average stressed VaR(1) 0.8 0.7
Incremental risk charge (higher
3 of values a and b) 7.1 0.5 6.6 0.5
(a) Most recent IRC value 0.5 0.5
(b) Average IRC value(1) 0.5 0.5
5 Other 2.1 0.2 2.2 0.2
---- -------- ------------- --------- -------------
6 Total 26.8 2.1 22.1 1.8
---- -------- ------------- --------- -------------
1 VaR average values are calculated on a 60 business days basis.
SVaR and IRC average values are calculated on a 12-week basis.
The increases in VaR, SVaR and IRC were due to heightened market
volatility during 1H20.
Market risk capital models
HSBC has permission to use a number of market risk capital
models to calculate regulatory capital as listed in the table
below. For regulatory purposes, the trading book comprises all
positions in financial instruments and commodities held with
trading intent and positions where it can be demonstrated that they
hedge positions in the trading book.
HSBC maintains a trading book policy, which defines the minimum
requirements for trading book positions and the process for
classifying positions as trading or non-trading book. Positions in
the trading book are subject to market risk-based rules, i.e.
market risk capital, calculated using regulatory approved models.
Where we do not have permission to use internal models, market risk
capital is calculated using the standardised approach.
If any of the policy criteria are not met, then the position is
categorised as a non-trading book exposure.
Please click on the link below to view the following chart and
Pillar 3 document in full:
http://www.rns-pdf.londonstockexchange.com/rns/6315V_1-2020-8-10.pdf
VaR 99 % 10 day Uses most recent two years' history of daily returns
to determine a loss distribution. The result is scaled,
using the square root of 10, to provide an equivalent
10-day loss.
Stressed 99 % 10 day Stressed VaR is calibrated to a one-year period of
VaR stress observed in history.
IRC 99.9 % 1 year Uses a multi-factor Gaussian Monte-Carlo simulation,
which includes product basis, concentration, hedge
mismatch, recovery rate and liquidity as part of the
simulation process. A minimum liquidity horizon of
three months is applied and is based on a combination
of factors, including issuer type, currency and size
of exposure.
Non-proprietary details of these models are available in the
Financial Services Register on the PRA website.
Table 49: IMA values for trading
portfolios(1) (MR3)
At
30 Jun 31 Dec
2020 2019
$m $m
VaR (10 day 99%)
-------- ---------
1 Maximum value 231.2 185.2
2 Average value 169.8 149.3
3 Minimum value 108.8 116.8
4 Period end 162.1 128.0
-----
Stressed VaR (10 day
99%)
5 Maximum value 227.2 222.8
6 Average value 175.2 172.3
7 Minimum value 132.1 133.1
8 Period end 176.8 222.8
-----
Incremental risk charge
(99.9%)
9 Maximum value 714.1 1,076.9
10 Average value 585.1 706.2
11 Minimum value 501.2 448.9
12 Period end 502.2 465.8
-----
1 Maximum, average and minimum values are calculated on a six-month basis
In 1H20, the period-end values for the three market risk capital
models changed as follows:
-- The increase in value at risk ('VaR') when compared with 2019
was driven by elevated realised volatility in March and April 2020,
which fed into the VaR calibration. However, the risk was actively
managed during the period and the 1H20 period-end VaR remained
within the 2019 operating range. The higher maximum for the period,
when compared with 2019, was due to higher levels of market
volatility in 1H20.
-- The reduction in stressed VaR was primarily due to the lower
contribution of flow rates activities and a larger offset from the
equities business. Stressed VaR peaked when more volatile market
data observed in March and April 2020 was included in the
calibration of the period of stress for stressed VaR calculation.
Stressed VaR reduced at the period-end as equity and rates risks
were actively managed down during 2Q20.
-- The modest increase in the incremental risk charge was
consistent with the normal variability of trading activity and
inventory.
Back-testing
We validate daily the accuracy of our VaR models by back-testing
them against both actual and hypothetical profit and loss.
Hypothetical profit and loss excludes non-modelled items such as
fees, commissions and revenues of intra-day transactions. The
hypothetical profit and loss reflects the profit and loss that
would be realised if positions were held constant from the end of
one trading day to the end of the next. This measure of profit and
loss does not align with how risk is dynamically hedged, and is not
therefore necessarily indicative of the actual performance of the
business.
The actual number of losses in excess of VaR over this period
can therefore be used to gauge how well the models are performing.
We consider enhanced internal monitoring of a VaR model if more
than five loss exceptions occur in a 250-day period.
We back-test our VaR at various levels of our Group entity
hierarchy. Back-testing using the regulatory hierarchy includes
entities that have approval to use VaR in the calculation of market
risk regulatory capital requirement.
HSBC submits separate back-testing results to regulators,
including the PRA and the European Central Bank, based on
applicable frequencies ranging from two business days after an
exception occurs, to quarterly submissions.
In terms of the CRD IV rules, VaR back-testing loss exceptions
count towards the multiplier determined by the PRA for the purposes
of the capital requirement calculation for market risk. The
multiplier is increased if there are five or more loss exceptions
in a 250-day period.
The following graphs show a six-month history for VaR
back-testing exceptions against both actual and hypothetical profit
and loss.
Please click on the link below to view the following chart and
Pillar 3 document in full:
http://www.rns-pdf.londonstockexchange.com/rns/6315V_1-2020-8-10.pdf
Table 50: Comparison of VaR estimates with gains/losses (MR4)
VaR back-testing loss exceptions against actual profit and loss ($m)
Actual profit Back-testing
and loss VaR exception
VaR back-testing loss exceptions against hypothetical profit and loss
($m)
Hypothetical
profit and Back-testing
loss VaR exception
In 1H20, the Group experienced three loss back-testing
exceptions against actual profit and losses. The Group also
experienced eight loss back-testing exceptions against hypothetical
profit and losses. The high number of hypothetical back-testing
exceptions that occurred in March 2020 was primarily due to the
extreme market volatility resulting from the economic impact of the
Covid-19 outbreak, which was significantly greater than the
volatility used in the model calibration.
In recognition of the exceptional market environment, the PRA
has granted temporary relief, valid for six months, that permits UK
firms, including HSBC, to offset the impact of the higher VaR
multiplier resulting from exceptions that occurred after the onset
of the Covid-19 outbreak. This offset is against incremental risks
not- in-VaR market risk capital requirements.
The hypothetical profit and loss reflects the profit and loss
that would be realised if positions were held constant from the end
of one trading day to the end of the next. This measure of profit
and loss does not align with how risk is dynamically hedged, and is
not therefore necessarily indicative of the actual performance of
the business. Accordingly, of the eight loss back-testing
exceptions against hypothetical profit and losses, only the largest
exception in March and one exception in April corresponded to a
loss exception against actual profit and loss. The two loss
exceptions against actual profit and loss that occurred in the
second half of March and the loss exception against actual profit
and loss that occurred in April comprised:
-- a loss exception in March due partly to unprecedented
widening of the gold exchange-for-physical basis, reflecting
Covid-19-related challenges in gold refining and transportation,
which affected HSBC's gold leasing and financing business and other
gold hedging activity leading to mark-to-market losses. Additional
loss drivers on this trading day included a significant reduction
in foreign exchange and equity volatilities, and a material
tightening of credit spreads;
-- a loss exception at the end of March driven mainly by
increases to month-end valuation adjustments, which were
recalibrated to reflect changes in liquidity and bid-offer market
conditions over the course of the month relative to February
month-end; and
-- a loss exception in April due partly to the renewed widening
of the gold exchange-for-physical basis. Additional loss drivers
included lower equity implied volatilities and a reduction in
dividend projections.
Despite the high number of loss exceptions, performance of the
VaR model was in line with expectations when considered in the
context of the extraordinary market movements observed in March and
April 2020. During this period, market risk continued to be managed
using a complementary set of exposure measures and limits,
including stress and scenario analysis. This ensured that the
business was prudently managed and performed well across the
period.
Other information
Abbreviations
The following abbreviated terms are used throughout this
document.
Currencies
$ US dollar
A
AIRB Advanced IRB
AT1 capital Additional tier 1 capital
B
BCBS/Basel Basel Committee on Banking
Committee Supervision
BoE Bank of England
C
CCF(1) Credit conversion factor
CCP Central counterparty
CCR(1) Counterparty credit risk
CCyB(1) Countercyclical capital buffer
CDS(1) Credit default swap
CECL Current expected credit loss
CET1(1) Common equity tier 1
CIU Collective investment undertakings
CMB Commercial Banking, a global
business
CRD IV(1) Capital Requirements Regulation
and Directive
CRM Credit risk mitigation/mitigant
CRR II Revisions to Capital Requirements
Regulation, as implemented
CRR III Revisions to EU legislation
for Basel III reforms
CVA Credit valuation adjustment
E
EAD(1) Exposure at default
EBA European Banking Authority
ECL Expected credit loss
EU European Union
F
FIRB Foundation IRB
FRTB Fundamental review of the
trading book
FSB Financial Stability Board
FSEs Financial Sector Entities
G
GAC Group Audit Committee
GRC Group Risk Committee
Group HSBC Holdings together with
its subsidiary undertakings
G-SIB(1) Global systemically important
bank
G-SII Global systemically important
institution
H
HKMA Hong Kong Monetary Authority
HMT Her Majesty's Treasury
Hong Kong The Hong Kong Special Administrative
Region of the People's Republic
of China
HSBC HSBC Holdings together with
its subsidiary undertakings
I
IAA(1) Internal assessment approach
IFRSs International Financial Reporting
Standards
IMA Internal models approach
IMM(1) Internal model method
IRB(1) Internal ratings based approach
/RBA
IRC(1) Incremental risk charge
L
LCR Liquidity coverage ratio
LGD(1) Loss given default
M
MENA Middle East and North Africa
MREL Minimum requirement for own
funds and eligible liabilities
N
NCOA Non-credit obligation asset
O
OTC(1) Over-the-counter
P
PD(1) Probability of default
PRA(1) Prudential Regulation Authority
(UK)
Q
QCCPs Qualifying central counterparties
R
RAS Risk appetite statement
RBM(1) Ratings-based method
RMM Risk Management Meeting of
the Group Management Board
RNIV Risks not in VaR
RW Risk weights
RWA(1) Risk-weighted asset
S
SA/STD(1) Standardised approach
SA-CCR Standardised approach for
counterparty credit risk
SFM(1) Supervisory formula method
SFT(1) Securities financing transactions
SIC Securities Investment Conduit
SME Small-and medium-sized enterprise
SPE(1) Special purpose entity
SSFA/SFA Simplified supervisory formula
approach
SVaR Stressed value at risk
T
TLAC(1) Total loss absorbing capacity
T1 capital Tier 1 capital
T2 capital Tier 2 capital
U
UK United Kingdom
US United States
V
VaR(1) Value at risk
1 Full definition included in the Glossary published on HSBC website www.hsbc.com/investor-relations/group-results-and-reporting.
Cautionary statement regarding forward-
looking statements
These Pillar 3 Disclosures at 30 June 2020 contain certain
forward-looking statements with respect to HSBC's: financial
condition; results of operations and business, including the
strategic priorities; and 2020 financial, investment and capital
targets described herein.
Statements that are not historical facts, including statements
about HSBC's beliefs and expectations, are forward-looking
statements. Words such as 'expects', 'targets', 'anticipates',
'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential'
and 'reasonably possible', variations of these words and similar
expressions are intended to identify forward-looking statements.
These statements are based on current plans, information, data,
estimates and projections, and therefore undue reliance should not
be placed on them. Forward-looking statements speak only as of the
date they are made. HSBC makes no commitment to revise or update
any forward-looking statements to reflect events or circumstances
occurring or existing after the date of any forward-looking
statements.
Written and/or oral forward-looking statements may also be made
in the periodic reports to the US Securities and Exchange
Commission, summary financial statements to shareholders, proxy
statements, offering circulars and prospectuses, press releases and
other written materials, and in oral statements made by HSBC's
Directors, officers or employees to third parties, including
financial analysts.
Forward-looking statements involve inherent risks and
uncertainties. Readers are cautioned that a number of factors could
cause actual results to differ, in some instances materially, from
those anticipated or implied in any forward-looking statement.
These include, but are not limited to:
-- changes in general economic conditions in the markets in
which we operate, such as continuing or deepening recessions and
fluctuations in employment and creditworthy customers beyond those
factored into consensus forecasts (including, without limitation,
as a result of the Covid-19 outbreak); the Covid-19 outbreak, which
will have adverse impacts on our income due to lower lending and
transaction volumes, lower wealth and insurance manufacturing
revenue, and lower or negative interest rates in markets where we
operate, as well as, more generally, the potential for material
adverse impacts on our financial condition, results of operations,
prospects, liquidity, capital position and credit ratings;
deviations from the market and economic assumptions that form the
basis for our ECL measurements (including, without limitation, as a
result of the Covid-19 outbreak); potential changes in future
dividend policy; changes in foreign exchange rates and interest
rates, including the accounting impact resulting from financial
reporting in respect of hyperinflationary economies; volatility in
equity markets; lack of liquidity in wholesale funding or capital
markets, which may affect our ability to meet our obligations under
financing facilities or to fund new loans, investments and
businesses; geopolitical tensions or diplomatic developments
producing social instability or legal uncertainty, such as the
unrest in Hong Kong, the existing US-China tensions and the
emerging challenges in UK-China relations, which in turn may affect
demand for our products and services and could result in (among
other things) regulatory, reputational and market risks for HSBC;
climate change, which may cause both idiosyncratic and systemic
risks resulting in potential financial impacts; illiquidity and
downward price pressure in national real estate markets; adverse
changes in central banks' policies with respect to the provision of
liquidity support to financial markets; heightened market concerns
over sovereign creditworthiness in over-indebted countries; adverse
changes in the funding status of public or private defined benefit
pensions; consumer perception as to the continuing availability of
credit; exposure to counterparty risk, including third parties
using us as a conduit for illegal activities without our knowledge;
the expected discontinuation of certain key Ibors and the
development of alternative risk-free benchmark rates, which may
require us to enhance our capital position and/or position
additional capital in specific subsidiaries; and price competition
in the market segments we serve;
-- changes in government policy and regulation, including the
monetary, interest rate and other policies of central banks and
other regulatory authorities in the principal markets in which we
operate and the consequences thereof (including, without
limitation, actions taken as a result of the Covid-19 outbreak);
initiatives to change the size, scope of activities and
interconnectedness of financial institutions in connection with the
implementation of stricter regulation of financial institutions in
key markets worldwide; revised capital and liquidity benchmarks,
which could serve to deleverage bank balance sheets and lower
returns available from the current business model and portfolio
mix; imposition of levies or taxes designed to change business mix
and risk appetite; the practices, pricing or responsibilities of
financial institutions serving their consumer markets;
expropriation, nationalisation, confiscation of assets and changes
in legislation relating to foreign ownership; the UK's exit from
the EU, which may result in a prolonged period of uncertainty,
unstable economic conditions and market volatility, including
currency fluctuations; passage of the Hong Kong national security
law and restrictions on telecommunications, as well as the US Hong
Kong Autonomy Act, which have caused tensions between China, the US
and the UK; general changes in government policy that may
significantly influence investor decisions; the costs, effects and
outcomes of regulatory reviews, actions or litigation, including
any additional compliance requirements; and the effects of
competition in the markets where we operate including increased
competition from non-bank financial services companies; and
-- factors specific to HSBC, including our success in adequately
identifying the risks we face, such as the incidence of loan losses
or delinquency, and managing those risks (through account
management, hedging and other techniques); our ability to achieve
our targets, which may result in our failure to achieve any of the
expected benefits of our strategic initiatives; model limitations
or failure, including, without limitation, the impact that the
consequences of the Covid-19 outbreak have had on the performance
and usage of financial models, which may require us to hold
additional capital, incur losses and/or use compensating controls,
such as overlays and overrides, to address model limitations;
changes to the judgements, estimates and assumptions we base our
financial statements on; changes in our ability to meet the
requirements of regulatory stress tests; a reduction in the credit
rating assigned to us or any of our subsidiaries, which could
increase the cost or decrease the availability of our funding and
affect our liquidity position and net interest margin; changes to
the reliability and security of our data management, data privacy,
information and technology infrastructure, including threats from
cyber-attacks, which may impact our ability to service clients and
may result in financial loss, business disruption and/ or loss of
customer services and data; changes in insurance customer behaviour
and insurance claim rates; our dependence on loan payments and
dividends from subsidiaries to meet our obligations; changes in
accounting standards, which may have a material impact on the way
we prepare our financial statements; changes in our ability to
manage third-party, fraud and reputational risks inherent in our
operations; employee misconduct, which may result in regulatory
sanctions and/or reputational or financial harm; and changes in
skill requirements, ways of working and talent shortages, which may
affect our ability to recruit and retain senior management and
diverse and skilled personnel. Effective risk management depends
on, among other things, our ability through stress testing and
other techniques to prepare for events that cannot be captured by
the statistical models it uses; and our success in addressing
operational, legal and regulatory, and litigation challenges; and
other risks and uncertainties we identify in 'Top and emerging
risks' on pages 76 to 81 of the Annual Report and Accounts
2019.
Contacts
Enquiries relating to HSBC's strategy or operations may be
directed to:
Richard O'Connor Mark Phin
Global Head of Investor Relations Head of Investor Relations, Asia-Pacific
HSBC Holdings plc The Hongkong and Shanghai Banking
8 Canada Square Corporation Limited
London E14 5HQ 1 Queen's Road Central
United Kingdom Hong Kong
Telephone: +44 (0) 20 7991 6590 Telephone: +852 2822 4908
Email: investorrelations@hsbc.com Email: investorrelations@hsbc.com.hk
HSBC Holdings plc
8 Canada Square
London E14 5HQ
United Kingdom
Telephone: 44 020 7991 8888
www.hsbc.com
Incorporated in England with limited liability Registered number
617987
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCSFUSASESSESA
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