|
|||
|
|
|
|
Contents
|
|||
|
Page
|
||
Impact
of IFRS 9
|
1
|
||
IAS
39/IAS 37 allowances to IFRS 9 ECL walk
|
1
|
||
Transition
to IFRS 9 'Financial Instruments'
|
2
|
||
Credit
risk profile
|
3
|
||
Measurement
uncertainty and sensitivity analysis of ECL estimates
|
7
|
||
Credit
quality of financial instruments
|
10
|
||
Impact
on regulatory capital
|
14
|
||
Technical
appendix – Transition disclosures required by accounting
standards
|
16
|
||
Cautionary
statement regarding forward-looking statements
|
26
|
|
|
Impact of IFRS 9
|
|
|
●
|
a decrease of $2,232m from additional impairment
allowances;
|
|
|
●
|
an increase of $908m from the remeasurement of financial assets and
liabilities as a consequence of classification changes, mainly from
revoking fair value accounting designations for certain long-dated
issued debt instruments; and
|
|
|
●
|
an increase in net deferred tax assets of $320m.
|
|
|
IAS 39/IAS 37 allowances to IFRS 9 ECL walk
|
|
|
1
|
POCI - Purchased or originated credit impaired
|
|
||
|
|
|
1
|
HSBC Holdings plc IFRS 9
2018
|
|
|
Transition to IFRS 9 'Financial Instruments'
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
2
|
|
|
Credit risk profile
|
|
|||||||||||||
|
|
|
|
|
|
||||||||
Summary of financial instruments to which the impairment
requirements in IFRS 9 are applied
|
|||||||||||||
|
Gross carrying/nominal amount
|
|
Allowance
for ECL1
|
|
|||||||||
|
$m
|
|
$m
|
|
|||||||||
Loans
and advances to customers at amortised cost
|
959,080
|
|
(9,343
|
)
|
|||||||||
–
personal
|
375,069
|
|
(3,047
|
)
|
|||||||||
–
corporate and commercial
|
520,137
|
|
(6,053
|
)
|
|||||||||
–
non-bank financial institutions
|
63,874
|
|
(243
|
)
|
|||||||||
Loans
and advances to banks at amortised cost
|
82,582
|
|
(23
|
)
|
|||||||||
Other
financial assets measured at amortised cost
|
557,864
|
|
(114
|
)
|
|||||||||
–
cash and balances at central banks
|
180,624
|
|
(3
|
)
|
|||||||||
–
items in the course of collection from other banks
|
6,628
|
|
—
|
|
|||||||||
–
Hong Kong Government certificates of indebtedness
|
34,186
|
|
—
|
|
|||||||||
–
reverse repurchase agreements – non-trading
|
201,553
|
|
—
|
|
|||||||||
–
financial investments
|
59,539
|
|
(16
|
)
|
|||||||||
–
prepayments, accrued income and other assets2
|
75,334
|
|
(95
|
)
|
|||||||||
Total gross carrying amount on balance sheet
|
1,599,526
|
|
(9,480
|
)
|
|||||||||
Loan
and other credit related commitments
|
501,361
|
|
(376
|
)
|
|||||||||
–
personal
|
196,093
|
|
(14
|
)
|
|||||||||
–
corporate and commercial
|
262,391
|
|
(355
|
)
|
|||||||||
–
financial
|
42,877
|
|
(7
|
)
|
|||||||||
Financial
guarantees and similar contracts
|
89,382
|
|
(161
|
)
|
|||||||||
–
personal
|
791
|
|
(4
|
)
|
|||||||||
–
corporate and commercial
|
78,102
|
|
(153
|
)
|
|||||||||
–
financial
|
10,489
|
|
(4
|
)
|
|||||||||
Total nominal amount off-balance sheet3
|
590,743
|
|
(537
|
)
|
|||||||||
At 1 Jan 2018
|
2,190,269
|
|
(10,017
|
)
|
|||||||||
|
|
|
|||||||||||
|
Fair value
|
|
Memorandum allowance for
ECL4
|
|
|||||||||
|
$m
|
|
$m
|
|
|||||||||
At 1 Jan 2018
|
|
|
|
|
|||||||||
Debt
instruments measured at fair value through other comprehensive
income
|
322,163
|
|
(184
|
)
|
|||||||||
|
|
|
|
|
|
||||||||
1
|
As explained further on page 19 of the Technical Appendix, the
total ECL is recognised in the loss allowance for the financial
asset unless the total ECL exceeds the gross carrying amount of the
financial asset, in which case the ECL is recognised as a
provision.
|
|
|
|
|
|
|
|
2
|
Includes only those financial instruments which are subject to the
impairment requirements of IFRS 9. ‘Prepayments, accrued
income and other assets’ as presented within the consolidated
balance sheet on page 22 includes both financial and non-financial
assets.
|
|
|
3
|
Represents the maximum amount at risk should the contracts be fully
drawn upon and clients default.
|
|
|
4
|
For debt instruments measured at FVOCI, the allowance for ECL is a
memorandum item. The debt instruments continue to be measured at
fair value. The accounting for financial assets measured at FVOCI
is explained further on page 17 of the Technical
Appendix.
|
|
||
|
|
|
3
|
HSBC Holdings plc IFRS 9
2018
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of credit risk (excluding debt instruments measured at
FVOCI) by stage distribution and ECL coverage by industry
sector
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Gross carrying/nominal
amount1
|
|
|
Allowance for ECL
|
|
|
ECL coverage %
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Stage 1
|
|
Stage 2
|
|
Of which:
|
|
Of which:
|
|
Stage 3
|
|
POCI3
|
|
Total
|
|
|
Stage 1
|
|
Stage 2
|
|
Of which:
|
|
Of which:
|
|
Stage 3
|
|
POCI3
|
|
Total
|
|
|
Stage 1
|
Stage 2
|
Of which:
|
Of which:
|
Stage 3
|
POCI3
|
Total
|
||||||||||||||||||||||||||||||||||||
|
|
|
1 to 29 DPD2
|
|
30 and > DPD2
|
|
|
|
|
|
|
|
1 to 29 DPD2
|
|
30 and > DPD2
|
|
|
|
|
|
|
|
1 to 29 DPD2
|
30 and > DPD2
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
|
%
|
%
|
%
|
%
|
%
|
%
|
%
|
||||||||||||||||||||||||||||||||||||
Loans
and advances to customers at amortised cost
|
871,566
|
|
72,658
|
|
2,393
|
|
2,447
|
|
13,882
|
|
974
|
|
959,080
|
|
|
(1,309
|
)
|
(2,201
|
)
|
(261
|
)
|
(261
|
)
|
(5,591
|
)
|
(242
|
)
|
(9,343
|
)
|
|
0.2
|
3.0
|
10.9
|
10.7
|
40.3
|
24.8
|
1.0
|
||||||||||||||||||||||||||||||||||||
–
personal
|
354,305
|
|
16,354
|
|
1,683
|
|
1,428
|
|
4,410
|
|
—
|
|
375,069
|
|
|
(581
|
)
|
(1,156
|
)
|
(218
|
)
|
(230
|
)
|
(1,310
|
)
|
—
|
|
(3,047
|
)
|
|
0.2
|
7.1
|
13.0
|
16.1
|
29.7
|
—
|
0.8
|
||||||||||||||||||||||||||||||||||||
–
corporate and commercial
|
456,837
|
|
53,262
|
|
684
|
|
977
|
|
9,064
|
|
974
|
|
520,137
|
|
|
(701
|
)
|
(1,037
|
)
|
(42
|
)
|
(31
|
)
|
(4,073
|
)
|
(242
|
)
|
(6,053
|
)
|
|
0.2
|
1.9
|
6.1
|
3.2
|
44.9
|
24.8
|
1.2
|
||||||||||||||||||||||||||||||||||||
–
non-bank financial institutions
|
60,424
|
|
3,042
|
|
26
|
|
42
|
|
408
|
|
—
|
|
63,874
|
|
|
(27
|
)
|
(8
|
)
|
(1
|
)
|
—
|
|
(208
|
)
|
—
|
|
(243
|
)
|
|
—
|
0.3
|
3.8
|
—
|
51.0
|
—
|
0.4
|
||||||||||||||||||||||||||||||||||||
Loans
and advances to banks at amortised cost
|
81,027
|
|
1,540
|
|
7
|
|
66
|
|
15
|
|
—
|
|
82,582
|
|
|
(17
|
)
|
(4
|
)
|
(2
|
)
|
—
|
|
(2
|
)
|
—
|
|
(23
|
)
|
|
—
|
0.3
|
28.6
|
—
|
13.3
|
—
|
—
|
||||||||||||||||||||||||||||||||||||
Other
financial assets measured at amortised cost
|
556,185
|
|
1,517
|
|
133
|
|
46
|
|
155
|
|
7
|
|
557,864
|
|
|
(28
|
)
|
(4
|
)
|
—
|
|
(1
|
)
|
(82
|
)
|
—
|
|
(114
|
)
|
|
—
|
0.3
|
—
|
2.2
|
52.9
|
—
|
—
|
||||||||||||||||||||||||||||||||||||
Loan
and other credit related commitments
|
475,986
|
|
24,330
|
|
|
|
999
|
|
46
|
|
501,361
|
|
|
(126
|
)
|
(183
|
)
|
|
|
(67
|
)
|
—
|
|
(376
|
)
|
|
—
|
0.8
|
|
|
6.7
|
—
|
0.1
|
||||||||||||||||||||||||||||||||||||||||
–
personal
|
194,320
|
|
1,314
|
|
|
|
459
|
|
—
|
|
196,093
|
|
|
(13
|
)
|
(1
|
)
|
|
|
—
|
|
—
|
|
(14
|
)
|
|
—
|
0.1
|
|
|
—
|
—
|
—
|
||||||||||||||||||||||||||||||||||||||||
–
corporate and commercial
|
240,854
|
|
20,951
|
|
|
|
540
|
|
46
|
|
262,391
|
|
|
(108
|
)
|
(180
|
)
|
|
|
(67
|
)
|
—
|
|
(355
|
)
|
|
—
|
0.9
|
|
|
12.4
|
—
|
0.1
|
||||||||||||||||||||||||||||||||||||||||
–
financial
|
40,812
|
|
2,065
|
|
|
|
—
|
|
—
|
|
42,877
|
|
|
(5
|
)
|
(2
|
)
|
|
|
—
|
|
—
|
|
(7
|
)
|
|
—
|
0.1
|
|
|
—
|
—
|
—
|
||||||||||||||||||||||||||||||||||||||||
Financial
guarantee and similar contracts
|
77,921
|
|
11,014
|
|
|
|
413
|
|
34
|
|
89,382
|
|
|
(36
|
)
|
(47
|
)
|
|
|
(78
|
)
|
—
|
|
(161
|
)
|
|
—
|
0.4
|
|
|
18.9
|
—
|
0.2
|
||||||||||||||||||||||||||||||||||||||||
–
personal
|
768
|
|
18
|
|
|
|
5
|
|
—
|
|
791
|
|
|
—
|
|
(2
|
)
|
|
|
(2
|
)
|
—
|
|
(4
|
)
|
|
—
|
11.1
|
|
|
40.0
|
—
|
0.5
|
||||||||||||||||||||||||||||||||||||||||
–
corporate and commercial
|
67,596
|
|
10,064
|
|
|
|
408
|
|
34
|
|
78,102
|
|
|
(35
|
)
|
(44
|
)
|
|
|
(74
|
)
|
—
|
|
(153
|
)
|
|
0.1
|
0.4
|
|
|
18.1
|
—
|
0.2
|
||||||||||||||||||||||||||||||||||||||||
–
financial
|
9,557
|
|
932
|
|
|
|
—
|
|
—
|
|
10,489
|
|
|
(1
|
)
|
(1
|
)
|
|
|
(2
|
)
|
—
|
|
(4
|
)
|
|
—
|
0.1
|
|
|
—
|
—
|
—
|
||||||||||||||||||||||||||||||||||||||||
At 1 Jan 2018
|
2,062,685
|
|
111,059
|
|
|
|
15,464
|
|
1,061
|
|
2,190,269
|
|
|
(1,516
|
)
|
(2,439
|
)
|
|
|
(5,820
|
)
|
(242
|
)
|
(10,017
|
)
|
|
0.1
|
2.2
|
|
|
37.6
|
22.8
|
0.5
|
||||||||||||||||||||||||||||||||||||||||
1
|
Represents the maximum amount at risk should the contracts be fully
drawn upon and clients default.
|
|
|
2
|
Days past due ('DPD'). Up to date accounts in Stage 2 are not shown
in amounts presented above.
|
|
|
3
|
Purchased or originated credit-impaired ('POCI').
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
4
|
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Personal lending – geographical summary of loans and advances
at amortised cost by stage distribution and ECL
coverage
|
||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
|
Gross carrying amount
|
Allowance for ECL
|
|
|||||||||||||||||||||||||||||||
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
|
ECL coverage
|
|||||||||||||||||
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
%
|
|||||||||||||||||
First lien residential mortgages
|
266,879
|
|
8,299
|
|
2,921
|
|
278,099
|
|
(60
|
)
|
(67
|
)
|
(533
|
)
|
(660
|
)
|
0.2
|
|||||||||||||||||
Europe
|
123,925
|
|
1,647
|
|
1,203
|
|
126,775
|
|
(14
|
)
|
(34
|
)
|
(272
|
)
|
(320
|
)
|
0.3
|
|||||||||||||||||
– of which: UK
|
117,725
|
|
1,170
|
|
876
|
|
119,771
|
|
(8
|
)
|
(22
|
)
|
(155
|
)
|
(185
|
)
|
0.2
|
|||||||||||||||||
Asia
|
106,926
|
|
2,289
|
|
247
|
|
109,462
|
|
(36
|
)
|
(11
|
)
|
(26
|
)
|
(73
|
)
|
0.1
|
|||||||||||||||||
– of which: Hong Kong
|
69,460
|
|
748
|
|
36
|
|
70,244
|
|
—
|
|
—
|
|
(3
|
)
|
(3
|
)
|
—
|
|||||||||||||||||
MENA
|
2,081
|
|
79
|
|
214
|
|
2,374
|
|
(2
|
)
|
(2
|
)
|
(117
|
)
|
(121
|
)
|
5.1
|
|||||||||||||||||
North
America
|
32,021
|
|
4,191
|
|
1,118
|
|
37,330
|
|
(4
|
)
|
(13
|
)
|
(109
|
)
|
(126
|
)
|
0.3
|
|||||||||||||||||
Latin
America
|
1,926
|
|
93
|
|
139
|
|
2,158
|
|
(4
|
)
|
(7
|
)
|
(9
|
)
|
(20
|
)
|
0.9
|
|||||||||||||||||
Credit cards
|
22,576
|
|
2,797
|
|
422
|
|
25,795
|
|
(298
|
)
|
(663
|
)
|
(273
|
)
|
(1,234
|
)
|
4.8
|
|||||||||||||||||
Europe
|
9,470
|
|
643
|
|
89
|
|
10,202
|
|
(84
|
)
|
(124
|
)
|
(42
|
)
|
(250
|
)
|
2.5
|
|||||||||||||||||
– of which: UK
|
9,051
|
|
617
|
|
87
|
|
9,755
|
|
(82
|
)
|
(120
|
)
|
(39
|
)
|
(241
|
)
|
2.5
|
|||||||||||||||||
Asia
|
9,871
|
|
1,420
|
|
99
|
|
11,390
|
|
(121
|
)
|
(253
|
)
|
(58
|
)
|
(432
|
)
|
3.8
|
|||||||||||||||||
– of which: Hong Kong
|
6,707
|
|
1,121
|
|
18
|
|
7,846
|
|
(37
|
)
|
(187
|
)
|
(16
|
)
|
(240
|
)
|
3.1
|
|||||||||||||||||
MENA
|
1,239
|
|
152
|
|
140
|
|
1,531
|
|
(41
|
)
|
(86
|
)
|
(103
|
)
|
(230
|
)
|
15.0
|
|||||||||||||||||
North
America
|
816
|
|
206
|
|
15
|
|
1,037
|
|
(9
|
)
|
(49
|
)
|
(11
|
)
|
(69
|
)
|
6.7
|
|||||||||||||||||
Latin
America
|
1,180
|
|
376
|
|
79
|
|
1,635
|
|
(43
|
)
|
(151
|
)
|
(59
|
)
|
(253
|
)
|
15.5
|
|||||||||||||||||
Other personal lending
|
64,850
|
|
5,258
|
|
1,067
|
|
71,175
|
|
(223
|
)
|
(426
|
)
|
(504
|
)
|
(1,153
|
)
|
1.6
|
|||||||||||||||||
Europe
|
29,501
|
|
2,234
|
|
453
|
|
32,188
|
|
(79
|
)
|
(108
|
)
|
(188
|
)
|
(375
|
)
|
1.2
|
|||||||||||||||||
– of which: UK
|
8,459
|
|
1,440
|
|
151
|
|
10,050
|
|
(74
|
)
|
(92
|
)
|
(66
|
)
|
(232
|
)
|
2.3
|
|||||||||||||||||
Asia
|
27,281
|
|
1,411
|
|
312
|
|
29,004
|
|
(43
|
)
|
(102
|
)
|
(108
|
)
|
(253
|
)
|
0.9
|
|||||||||||||||||
– of which: Hong Kong
|
18,601
|
|
772
|
|
127
|
|
19,500
|
|
(34
|
)
|
(62
|
)
|
(29
|
)
|
(125
|
)
|
0.6
|
|||||||||||||||||
MENA
|
2,607
|
|
248
|
|
111
|
|
2,966
|
|
(21
|
)
|
(35
|
)
|
(93
|
)
|
(149
|
)
|
5.0
|
|||||||||||||||||
North
America
|
3,582
|
|
469
|
|
102
|
|
4,153
|
|
(16
|
)
|
(35
|
)
|
(27
|
)
|
(78
|
)
|
1.9
|
|||||||||||||||||
Latin
America
|
1,879
|
|
896
|
|
89
|
|
2,864
|
|
(64
|
)
|
(146
|
)
|
(88
|
)
|
(298
|
)
|
10.4
|
|||||||||||||||||
At
1 Jan 2018
|
354,305
|
|
16,354
|
|
4,410
|
|
375,069
|
|
(581
|
)
|
(1,156
|
)
|
(1,310
|
)
|
(3,047
|
)
|
0.8
|
|
||
|
|
|
5
|
HSBC Holdings plc IFRS 9
2018
|
|
||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Wholesale lending – geographical summary of loans and
advances at amortised cost by stage distribution and ECL
coverage
|
||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||
|
Gross carrying amount
|
Allowance for ECL
|
|
|||||||||||||||||||||||||||||||||||||||
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
ECL coverage
|
|||||||||||||||||||||
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
%
|
|||||||||||||||||||||
Corporate and Commercial
|
456,837
|
|
53,262
|
|
9,064
|
|
974
|
|
520,137
|
|
(701
|
)
|
(1,037
|
)
|
(4,073
|
)
|
(242
|
)
|
(6,053
|
)
|
1.2
|
|||||||||||||||||||||
Europe
|
161,907
|
|
14,455
|
|
4,925
|
|
558
|
|
181,845
|
|
(359
|
)
|
(497
|
)
|
(1,869
|
)
|
(99
|
)
|
(2,824
|
)
|
1.6
|
|||||||||||||||||||||
– of which: UK
|
114,999
|
|
10,340
|
|
3,377
|
|
297
|
|
129,013
|
|
(298
|
)
|
(435
|
)
|
(1,197
|
)
|
(19
|
)
|
(1,949
|
)
|
1.5
|
|||||||||||||||||||||
Asia
|
224,858
|
|
23,040
|
|
1,480
|
|
158
|
|
249,536
|
|
(181
|
)
|
(158
|
)
|
(967
|
)
|
(24
|
)
|
(1,330
|
)
|
0.5
|
|||||||||||||||||||||
– of which: Hong Kong
|
139,554
|
|
14,636
|
|
590
|
|
124
|
|
154,904
|
|
(89
|
)
|
(90
|
)
|
(399
|
)
|
(22
|
)
|
(600
|
)
|
0.4
|
|||||||||||||||||||||
MENA
|
15,035
|
|
4,910
|
|
1,361
|
|
218
|
|
21,524
|
|
(47
|
)
|
(105
|
)
|
(856
|
)
|
(115
|
)
|
(1,123
|
)
|
5.2
|
|||||||||||||||||||||
North
America
|
43,993
|
|
9,756
|
|
1,018
|
|
—
|
|
54,767
|
|
(24
|
)
|
(255
|
)
|
(251
|
)
|
—
|
|
(530
|
)
|
1.0
|
|||||||||||||||||||||
Latin
America
|
11,044
|
|
1,101
|
|
280
|
|
40
|
|
12,465
|
|
(90
|
)
|
(22
|
)
|
(130
|
)
|
(4
|
)
|
(246
|
)
|
2.0
|
|||||||||||||||||||||
Non-bank financial institutions
|
60,424
|
|
3,042
|
|
408
|
|
—
|
|
63,874
|
|
(27
|
)
|
(8
|
)
|
(208
|
)
|
—
|
|
(243
|
)
|
0.4
|
|||||||||||||||||||||
Europe
|
28,063
|
|
932
|
|
305
|
|
—
|
|
29,300
|
|
(7
|
)
|
(3
|
)
|
(145
|
)
|
—
|
|
(155
|
)
|
0.5
|
|||||||||||||||||||||
– of which: UK
|
24,007
|
|
828
|
|
230
|
|
—
|
|
25,065
|
|
(4
|
)
|
(3
|
)
|
(140
|
)
|
—
|
|
(147
|
)
|
0.6
|
|||||||||||||||||||||
Asia
|
22,578
|
|
759
|
|
26
|
|
—
|
|
23,363
|
|
(6
|
)
|
(3
|
)
|
(18
|
)
|
—
|
|
(27
|
)
|
0.1
|
|||||||||||||||||||||
– of which: Hong Kong
|
11,874
|
|
602
|
|
26
|
|
—
|
|
12,502
|
|
(3
|
)
|
(1
|
)
|
(18
|
)
|
—
|
|
(22
|
)
|
0.2
|
|||||||||||||||||||||
MENA
|
1,038
|
|
1
|
|
68
|
|
—
|
|
1,107
|
|
(10
|
)
|
(1
|
)
|
(39
|
)
|
—
|
|
(50
|
)
|
4.5
|
|||||||||||||||||||||
North
America
|
7,609
|
|
1,346
|
|
9
|
|
—
|
|
8,964
|
|
(1
|
)
|
(1
|
)
|
(6
|
)
|
—
|
|
(8
|
)
|
0.1
|
|||||||||||||||||||||
Latin
America
|
1,136
|
|
4
|
|
—
|
|
—
|
|
1,140
|
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
0.3
|
|||||||||||||||||||||
Banks
|
81,027
|
|
1,540
|
|
15
|
|
—
|
|
82,582
|
|
(17
|
)
|
(4
|
)
|
(2
|
)
|
—
|
|
(23
|
)
|
—
|
|||||||||||||||||||||
Europe
|
12,886
|
|
342
|
|
15
|
|
—
|
|
13,243
|
|
(5
|
)
|
(2
|
)
|
(2
|
)
|
—
|
|
(9
|
)
|
0.1
|
|||||||||||||||||||||
– of which: UK
|
4,563
|
|
261
|
|
—
|
|
—
|
|
4,824
|
|
(3
|
)
|
(1
|
)
|
—
|
|
—
|
|
(4
|
)
|
0.1
|
|||||||||||||||||||||
Asia
|
49,598
|
|
475
|
|
—
|
|
—
|
|
50,073
|
|
(6
|
)
|
(1
|
)
|
—
|
|
—
|
|
(7
|
)
|
—
|
|||||||||||||||||||||
– of which: Hong Kong
|
20,318
|
|
132
|
|
—
|
|
—
|
|
20,450
|
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
(4
|
)
|
—
|
|||||||||||||||||||||
MENA
|
6,402
|
|
72
|
|
—
|
|
—
|
|
6,474
|
|
(1
|
)
|
(1
|
)
|
—
|
|
—
|
|
(2
|
)
|
—
|
|||||||||||||||||||||
North
America
|
8,690
|
|
642
|
|
—
|
|
—
|
|
9,332
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
—
|
|||||||||||||||||||||
Latin
America
|
3,451
|
|
9
|
|
—
|
|
—
|
|
3,460
|
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
(4
|
)
|
0.1
|
|||||||||||||||||||||
At
1 Jan 2018
|
598,288
|
|
57,844
|
|
9,487
|
|
974
|
|
666,593
|
|
(745
|
)
|
(1,049
|
)
|
(4,283
|
)
|
(242
|
)
|
(6,319
|
)
|
0.9
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
6
|
|
|
Measurement uncertainty and sensitivity
analysis of ECL estimates
|
|
|
●
|
Economic risk assessment – We develop a shortlist of the
downside and upside economic and political risks most relevant to
HSBC and the IFRS 9 measurement objective. These risks include
local and global economic/political risks that together impact on
economies that materially matter to HSBC, namely UK, euro area,
Hong Kong, China and US. We compile this list by monitoring
developments in the global economy, assessing the risks identified
in HSBC's top and emerging risks, and through external and internal
consultations with subject matter experts.
|
|
|
●
|
Scenario generation – For the Central scenario, we obtain a
pre-defined set of economic forecasts from the average forecast
taken from the consensus forecast survey of professional
forecasters. Paths for the Outer scenarios are benchmarked to the
Central scenario and reflect the economic risk assessment. Scenario
probabilities reflect management judgement and are informed by data
analysis ofpast recessions (transitions in and out of recession)
and the current economic outlook. For any scenario, the key
assumptions made and the accompanying paths represent our 'best
estimate' of a scenario at a specified probability. Suitable
narratives are developed for the Central scenario and the paths of
the Outer scenarios.
|
|
|
●
|
Variable enrichment – We expand each scenario through
enrichment of variables. This includes the production of 400+
variables that are required by the businesses. The external vendor
expands these scenarios by using as inputs the agreed scenario
narratives and the variables aligned to these narratives.
Scenarios, once expanded, continue to be benchmarked to the latest
events and information. Late breaking events could lead to revision
of scenarios to reflect management judgement.
|
|
|
●
|
Expected average rates of growth over the 2018–2022 period
are lower than those experienced in the recent past for the UK,
China, Hong Kong, Canada and the UAE. For the UK, this forecast
reflects current views on the UK's exit from the EU, while for
China, this suggests rebalancing at a pace in line with
expectations.
|
|
|
●
|
French GDP forecasts are stronger for the forecast period compared
with recent history. Supportive factors include the recent cyclical
upswing, longer-term expectations of reform and euro-area
recovery.
|
|
||
|
|
|
7
|
HSBC Holdings plc IFRS 9
2018
|
|
|||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Central scenario (average 2018–2022)
|
|||||||||||||||||||||||||||||||||
|
UK
|
|
France
|
|
Hong
Kong
|
|
Mainland
China
|
|
UAE
|
|
US
|
|
Canada
|
|
Mexico
|
|
|||||||||||||||||
GDP
growth rate (%)
|
1.8
|
|
1.5
|
|
2.4
|
|
5.8
|
|
3.5
|
|
2.1
|
|
1.8
|
|
2.7
|
|
|||||||||||||||||
Inflation
(%)
|
2.2
|
|
N/A
|
|
2.5
|
|
2.3
|
|
2.9
|
|
2.1
|
|
2.0
|
|
3.5
|
|
|||||||||||||||||
Unemployment
(%)
|
5.2
|
|
8.6
|
|
3.4
|
|
4.0
|
|
N/A
|
|
4.6
|
|
6.3
|
|
4.0
|
|
|||||||||||||||||
House
price growth (%)
|
2.8
|
|
3.9
|
|
3.6
|
|
5.4
|
|
6.2
|
|
3.6
|
|
3.1
|
|
6.2
|
|
|
|||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Upside scenario (average 2018–2022)
|
|||||||||||||||||||||||||||||||||
|
UK
|
|
France
|
|
Hong
Kong
|
|
Mainland
China
|
|
UAE
|
|
US
|
|
Canada
|
|
Mexico
|
|
|||||||||||||||||
GDP
growth rate (%)
|
2.5
|
|
1.9
|
|
2.8
|
|
6.0
|
|
4.0
|
|
2.7
|
|
2.2
|
|
3.2
|
|
|||||||||||||||||
Inflation
(%)
|
2.5
|
|
N/A
|
|
2.9
|
|
2.7
|
|
3.3
|
|
2.4
|
|
2.2
|
|
3.9
|
|
|||||||||||||||||
Unemployment
(%)
|
4.8
|
|
8.3
|
|
3.2
|
|
3.7
|
|
N/A
|
|
4.1
|
|
6.1
|
|
3.6
|
|
|||||||||||||||||
House
price growth (%)
|
4.0
|
|
4.6
|
|
4.0
|
|
6.9
|
|
7.7
|
|
4.9
|
|
4.3
|
|
6.8
|
|
|
|||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Downside scenario (average 2018–2022)
|
|||||||||||||||||||||||||||||||||
|
UK
|
|
France
|
|
Hong
Kong
|
|
Mainland
China
|
|
UAE
|
|
US
|
|
Canada
|
|
Mexico
|
|
|||||||||||||||||
GDP
growth rate (%)
|
1.2
|
|
1.1
|
|
2.0
|
|
5.5
|
|
3.0
|
|
1.3
|
|
1.6
|
|
2.1
|
|
|||||||||||||||||
Inflation
(%)
|
1.8
|
|
N/A
|
|
2.2
|
|
2.0
|
|
2.6
|
|
1.8
|
|
1.9
|
|
3.1
|
|
|||||||||||||||||
Unemployment
(%)
|
5.6
|
|
9.0
|
|
3.8
|
|
4.2
|
|
N/A
|
|
5.1
|
|
6.7
|
|
4.5
|
|
|||||||||||||||||
House
price growth (%)
|
0.9
|
|
0.8
|
|
1.7
|
|
3.0
|
|
4.5
|
|
1.1
|
|
0.6
|
|
5.4
|
|
|
|
US
|
|
|
UK
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
8
|
|
|
Hong Kong
|
|
|
Mainland China
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||
IFRS 9 ECL as compared to Central scenario ECL
|
|||||||||||||
Country of booking
|
Central scenario ECL
|
|
IFRS 9 ECL
|
|
Difference
|
|
|||||||
|
$m
|
|
$m
|
|
$m
|
|
|||||||
UK
|
2,751
|
|
3,068
|
|
317
|
|
|||||||
Mexico
|
761
|
|
779
|
|
18
|
|
|||||||
US
|
587
|
|
590
|
|
3
|
|
|||||||
Hong
Kong
|
1,050
|
|
1,035
|
|
(15
|
)
|
|||||||
Other
|
4,720
|
|
4,729
|
|
9
|
|
|||||||
Total
|
9,869
|
|
10,201
|
|
332
|
|
|
|
●
|
Alternative scenario (a): While the Central scenario reflects
current consensus forecasts, there is the potential for large
forecast revisions in the coming quarters, as economic and
political events unfold. The consensus Downside scenario was
modelled as an alternative to the consensus Central scenario to
understand the impact of a significant downward shift in consensus
forecasts.
|
|
|
●
|
Alternative scenario (b): Management modelled a further downside
scenario of similar severity to but longer duration than the
consensus Downside scenario, to reflect the risk that in a downside
scenario there may be a longer term impact on growth than that
currently envisaged.
|
|
|
●
|
Alternative scenario (c): Finally, management modelled an
alternative severe downside scenario reflecting a deeper cyclical
shock resulting in a steep depreciation in sterling and an increase
in inflation with an associated monetary policy
response.
|
|
||
|
|
|
9
|
HSBC Holdings plc IFRS 9
2018
|
|
|||||||||
|
|
|
|
|
|
|
|||
UK
|
|||||||||
|
GDP growth %
|
|
Unemployment level %
|
|
|||||
Consensus
upside (5 year average)
|
2.5
|
|
4.8
|
|
|||||
Consensus
central (5 year average)
|
1.8
|
|
5.2
|
|
|||||
Consensus
downside (central under Alternative (a)) (most severe
value)
|
0.1
|
|
6.3
|
|
|||||
Alternative
(b) (most severe value)
|
(1.0
|
)
|
7.2
|
|
|||||
Alternative
(c) (most severe value)
|
(2.4
|
)
|
8.9
|
|
|
|
Credit quality of financial instruments
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
10
|
|
|||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Distribution of financial instruments to which the impairment
requirements in IFRS 9 are applied, by credit quality and
stage allocation
|
|||||||||||||||||||||||||||||||||||
|
Gross carrying/notional amount
|
|
|
||||||||||||||||||||||||||||||||
|
Strong
|
|
Good
|
|
Satisfactory
|
|
Sub-standard
|
|
Credit- impaired
|
|
Total
|
|
Allowance for ECL
|
|
Net
|
|
|||||||||||||||||||
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
|||||||||||||||||||
Loans
and advances to customers at amortised cost
|
479,067
|
|
227,146
|
|
220,089
|
|
17,922
|
|
14,856
|
|
959,080
|
|
(9,343
|
)
|
949,737
|
|
|||||||||||||||||||
–
stage 1
|
475,881
|
|
211,084
|
|
180,002
|
|
4,599
|
|
—
|
|
871,566
|
|
(1,309
|
)
|
870,257
|
|
|||||||||||||||||||
–
stage 2
|
3,186
|
|
16,062
|
|
40,087
|
|
13,323
|
|
—
|
|
72,658
|
|
(2,201
|
)
|
70,457
|
|
|||||||||||||||||||
–
stage 3
|
—
|
|
—
|
|
—
|
|
—
|
|
13,882
|
|
13,882
|
|
(5,591
|
)
|
8,291
|
|
|||||||||||||||||||
–
POCI
|
—
|
|
—
|
|
—
|
|
—
|
|
974
|
|
974
|
|
(242
|
)
|
732
|
|
|||||||||||||||||||
Loans
and advances to banks at amortised cost
|
70,959
|
|
7,692
|
|
3,890
|
|
26
|
|
15
|
|
82,582
|
|
(23
|
)
|
82,559
|
|
|||||||||||||||||||
–
stage 1
|
70,024
|
|
7,351
|
|
3,642
|
|
10
|
|
—
|
|
81,027
|
|
(17
|
)
|
81,010
|
|
|||||||||||||||||||
–
stage 2
|
935
|
|
341
|
|
248
|
|
16
|
|
—
|
|
1,540
|
|
(4
|
)
|
1,536
|
|
|||||||||||||||||||
–
stage 3
|
—
|
|
—
|
|
—
|
|
—
|
|
15
|
|
15
|
|
(2
|
)
|
13
|
|
|||||||||||||||||||
–
POCI
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||||
Other
financial assets measured at amortised cost
|
469,898
|
|
47,347
|
|
39,595
|
|
862
|
|
162
|
|
557,864
|
|
(114
|
)
|
557,750
|
|
|||||||||||||||||||
–
stage 1
|
469,691
|
|
47,019
|
|
38,929
|
|
546
|
|
—
|
|
556,185
|
|
(28
|
)
|
556,157
|
|
|||||||||||||||||||
–
stage 2
|
207
|
|
328
|
|
666
|
|
316
|
|
—
|
|
1,517
|
|
(4
|
)
|
1,513
|
|
|||||||||||||||||||
–
stage 3
|
—
|
|
—
|
|
—
|
|
—
|
|
155
|
|
155
|
|
(82
|
)
|
73
|
|
|||||||||||||||||||
–
POCI
|
—
|
|
—
|
|
—
|
|
—
|
|
7
|
|
7
|
|
—
|
|
7
|
|
|||||||||||||||||||
Loan
and other credit-related commitments
|
297,683
|
|
121,508
|
|
74,694
|
|
6,431
|
|
1,045
|
|
501,361
|
|
(376
|
)
|
500,985
|
|
|||||||||||||||||||
–
stage 1
|
294,958
|
|
115,008
|
|
64,429
|
|
1,591
|
|
—
|
|
475,986
|
|
(126
|
)
|
475,860
|
|
|||||||||||||||||||
–
stage 2
|
2,725
|
|
6,500
|
|
10,265
|
|
4,840
|
|
—
|
|
24,330
|
|
(183
|
)
|
24,147
|
|
|||||||||||||||||||
–
stage 3
|
—
|
|
—
|
|
—
|
|
—
|
|
999
|
|
999
|
|
(67
|
)
|
932
|
|
|||||||||||||||||||
–
POCI
|
—
|
|
—
|
|
—
|
|
—
|
|
46
|
|
46
|
|
—
|
|
46
|
|
|||||||||||||||||||
Financial
guarantees and similar contracts
|
35,537
|
|
27,084
|
|
23,366
|
|
2,948
|
|
447
|
|
89,382
|
|
(161
|
)
|
89,221
|
|
|||||||||||||||||||
–
stage 1
|
33,558
|
|
25,009
|
|
18,095
|
|
1,259
|
|
—
|
|
77,921
|
|
(36
|
)
|
77,885
|
|
|||||||||||||||||||
–
stage 2
|
1,979
|
|
2,075
|
|
5,271
|
|
1,689
|
|
—
|
|
11,014
|
|
(47
|
)
|
10,967
|
|
|||||||||||||||||||
–
stage 3
|
—
|
|
—
|
|
—
|
|
—
|
|
413
|
|
413
|
|
(78
|
)
|
335
|
|
|||||||||||||||||||
–
POCI
|
—
|
|
—
|
|
—
|
|
—
|
|
34
|
|
34
|
|
—
|
|
34
|
|
|||||||||||||||||||
At 1 Jan 2018
|
1,353,144
|
|
430,777
|
|
361,634
|
|
28,189
|
|
16,525
|
|
2,190,269
|
|
(10,017
|
)
|
2,180,252
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Debt instruments at FVOCI1
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
–
stage 1
|
297,753
|
|
6,678
|
|
12,941
|
|
2,450
|
|
—
|
|
319,822
|
|
(28
|
)
|
319,794
|
|
|||||||||||||||||||
–
stage 2
|
208
|
|
108
|
|
147
|
|
1,826
|
|
—
|
|
2,289
|
|
(142
|
)
|
2,147
|
|
|||||||||||||||||||
–
stage 3
|
—
|
|
—
|
|
—
|
|
—
|
|
584
|
|
584
|
|
(14
|
)
|
570
|
|
|||||||||||||||||||
–
POCI
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||||||
At 1 Jan 2018
|
297,961
|
|
6,786
|
|
13,088
|
|
4,276
|
|
584
|
|
322,695
|
|
(184
|
)
|
322,511
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
1
|
For the purposes of this disclosure gross carrying value is defined
as the amortised cost of a financial asset, before adjusting for
any loss allowance. As such the gross carrying value of debt
instruments at FVOCI as presented above will not reconcile to the
balance sheet as it excludes fair value gains and
losses.
|
|
|
|
|
|
|
|
|
|
|
Quality classification definitions
● ‘Strong’
exposures demonstrate a strong capacity to meet financial
commitments, with negligible or low probability of
default.
● ‘Good’
exposures demonstrate a good capacity to meet financial
commitments, with low default risk.
● ‘Satisfactory’
exposures require closer monitoring and demonstrate an average to
fair capacity to meet financial commitments, with moderate default
risk.
● ‘Sub-standard’
exposures require varying degrees of special attention and default
risk is of greater concern.
● ‘Credit-impaired’
exposures have been assessed as impaired.
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
Credit quality classification
|
|||||||||||||||||
|
|
Debt securities
and other bills
|
Wholesale lending
|
Retail lending
|
|||||||||||||
|
|
External
credit rating
|
Internal
credit rating
|
12-month Basel probability of
default %
|
|
Internal
credit rating
|
12 month probability- weighted PD %
|
|
|||||||||
Quality classification
|
|
|
|
|
|
|
|||||||||||
Strong
|
|
A- and above
|
CRR1 to CRR2
|
0.000 - 0.169
|
|
Band 1 and 2
|
0.000 - 0.500
|
|
|||||||||
Good
|
|
BBB+ to BBB-
|
CRR3
|
0.170 - 0.740
|
|
Band 3
|
0.501 - 1.500
|
|
|||||||||
Satisfactory
|
|
BB+ to B and unrated
|
CRR4 to CRR5
|
0.741 - 4.914
|
|
Band 4 and 5
|
1.501 - 20.000
|
|
|||||||||
Sub-standard
|
|
B- to C
|
CRR6 to CRR8
|
4.915 - 99.999
|
|
Band 6
|
20.001 - 99.999
|
|
|||||||||
Credit-impaired
|
|
Default
|
CRR9 to CRR10
|
100.000
|
|
Band 7
|
100.000
|
|
|
||
|
|
|
11
|
HSBC Holdings plc IFRS 9
2018
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Personal lending – credit risk profile by internal PD band
for loans and advances at amortised cost
|
|||||||||||||||||||||||||||||||||||||||
|
|
Gross carrying amount
|
Allowance for ECL
|
|
|||||||||||||||||||||||||||||||||||
|
PD range1
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
|
ECL coverage
|
|||||||||||||||||||||
|
%
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
%
|
|||||||||||||||||||||
First lien residential mortgages
|
|
266,879
|
|
8,299
|
|
2,921
|
|
278,099
|
|
(60
|
)
|
(67
|
)
|
(533
|
)
|
(660
|
)
|
0.2
|
|||||||||||||||||||||
Band
1
|
0.000 to 0.250
|
235,249
|
|
339
|
|
—
|
|
235,588
|
|
(43
|
)
|
(1
|
)
|
—
|
|
(44
|
)
|
—
|
|||||||||||||||||||||
Band
2
|
0.251 to 0.500
|
17,350
|
|
535
|
|
—
|
|
17,885
|
|
(3
|
)
|
(2
|
)
|
—
|
|
(5
|
)
|
—
|
|||||||||||||||||||||
Band
3
|
0.501 to 1.500
|
9,316
|
|
3,975
|
|
—
|
|
13,291
|
|
(7
|
)
|
(6
|
)
|
—
|
|
(13
|
)
|
0.1
|
|||||||||||||||||||||
Band
4
|
1.501 to 5.000
|
3,524
|
|
1,236
|
|
—
|
|
4,760
|
|
(6
|
)
|
(8
|
)
|
—
|
|
(14
|
)
|
0.3
|
|||||||||||||||||||||
Band
5
|
5.001 to 20.000
|
1,414
|
|
1,177
|
|
—
|
|
2,591
|
|
(1
|
)
|
(21
|
)
|
—
|
|
(22
|
)
|
0.8
|
|||||||||||||||||||||
Band
6
|
20.001 to 99.999
|
26
|
|
1,037
|
|
—
|
|
1,063
|
|
—
|
|
(29
|
)
|
—
|
|
(29
|
)
|
2.7
|
|||||||||||||||||||||
Band
7
|
100.000
|
—
|
|
—
|
|
2,921
|
|
2,921
|
|
—
|
|
—
|
|
(533
|
)
|
(533
|
)
|
18.2
|
|||||||||||||||||||||
Other
personal lending
|
|
87,426
|
|
8,055
|
|
1,489
|
|
96,970
|
|
(521
|
)
|
(1,089
|
)
|
(777
|
)
|
(2,387
|
)
|
2.5
|
|||||||||||||||||||||
Band
1
|
0.000 to 0.250
|
41,026
|
|
369
|
|
—
|
|
41,395
|
|
(73
|
)
|
—
|
|
—
|
|
(73
|
)
|
0.2
|
|||||||||||||||||||||
Band
2
|
0.251 to 0.500
|
9,761
|
|
342
|
|
—
|
|
10,103
|
|
(48
|
)
|
—
|
|
—
|
|
(48
|
)
|
0.5
|
|||||||||||||||||||||
Band
3
|
0.501 to 1.500
|
20,971
|
|
657
|
|
—
|
|
21,628
|
|
(117
|
)
|
(1
|
)
|
—
|
|
(118
|
)
|
0.5
|
|||||||||||||||||||||
Band
4
|
1.501 to 5.000
|
12,930
|
|
2,091
|
|
—
|
|
15,021
|
|
(172
|
)
|
(157
|
)
|
—
|
|
(329
|
)
|
2.2
|
|||||||||||||||||||||
Band
5
|
5.001 to 20.000
|
2,719
|
|
3,403
|
|
—
|
|
6,122
|
|
(111
|
)
|
(469
|
)
|
—
|
|
(580
|
)
|
9.5
|
|||||||||||||||||||||
Band
6
|
20.001 to 99.999
|
19
|
|
1,193
|
|
—
|
|
1,212
|
|
—
|
|
(462
|
)
|
—
|
|
(462
|
)
|
38.1
|
|||||||||||||||||||||
Band
7
|
100.000
|
—
|
|
—
|
|
1,489
|
|
1,489
|
|
—
|
|
—
|
|
(777
|
)
|
(777
|
)
|
52.2
|
|||||||||||||||||||||
At
1 Jan 2018
|
|
354,305
|
|
16,354
|
|
4,410
|
|
375,069
|
|
(581
|
)
|
(1,156
|
)
|
(1,310
|
)
|
(3,047
|
)
|
0.8
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
1
|
12 month point-in-time (PiT) PD adjusted for multiple economic
scenarios.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
12
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Wholesale lending – credit risk profile by obligor grade for
loans and advances at amortised cost
|
|||||||||||||||||||||||||||||||||||||||
|
Basel one-year PD range
|
Gross carrying amount
|
Allowance for ECL
|
ECL coverage
|
Mapped external rating
|
||||||||||||||||||||||||||||||||||
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
|||||||||||||||||||
|
%
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
%
|
|
||||||||||||||||
Corporate
& commercial
|
|
456,837
|
|
53,262
|
|
9,064
|
|
974
|
|
520,137
|
|
(701
|
)
|
(1,037
|
)
|
(4,073
|
)
|
(242
|
)
|
(6,053
|
)
|
1.2
|
|
||||||||||||||||
CRR
1
|
0.000 to 0.053
|
43,578
|
|
440
|
|
—
|
|
—
|
|
44,018
|
|
(7
|
)
|
(3
|
)
|
—
|
|
—
|
|
(10
|
)
|
—
|
AA- and above
|
||||||||||||||||
CRR
2
|
0.054 to 0.169
|
96,876
|
|
1,016
|
|
—
|
|
—
|
|
97,892
|
|
(25
|
)
|
(1
|
)
|
—
|
|
—
|
|
(26
|
)
|
—
|
A+ to A-
|
||||||||||||||||
CRR
3
|
0.170 to 0.740
|
163,453
|
|
10,373
|
|
—
|
|
—
|
|
173,826
|
|
(173
|
)
|
(86
|
)
|
—
|
|
—
|
|
(259
|
)
|
0.1
|
BBB+ to BBB-
|
||||||||||||||||
CRR
4
|
0.741 to 1.927
|
107,755
|
|
16,368
|
|
—
|
|
20
|
|
124,143
|
|
(256
|
)
|
(232
|
)
|
—
|
|
—
|
|
(488
|
)
|
0.4
|
BB+ to BB-
|
||||||||||||||||
CRR
5
|
1.928 to 4.914
|
41,042
|
|
14,337
|
|
—
|
|
—
|
|
55,379
|
|
(190
|
)
|
(192
|
)
|
—
|
|
—
|
|
(382
|
)
|
0.7
|
BB- to B
|
||||||||||||||||
CRR
6
|
4.915 to 8.860
|
2,641
|
|
6,363
|
|
—
|
|
27
|
|
9,031
|
|
(35
|
)
|
(272
|
)
|
—
|
|
(1
|
)
|
(308
|
)
|
3.4
|
B-
|
||||||||||||||||
CRR
7
|
8.861 to 15.000
|
881
|
|
2,528
|
|
—
|
|
—
|
|
3,409
|
|
(6
|
)
|
(107
|
)
|
—
|
|
—
|
|
(113
|
)
|
3.3
|
CCC+
|
||||||||||||||||
CRR
8
|
15.001 to 99.999
|
611
|
|
1,837
|
|
—
|
|
—
|
|
2,448
|
|
(9
|
)
|
(144
|
)
|
—
|
|
—
|
|
(153
|
)
|
6.3
|
CCC to C
|
||||||||||||||||
CRR
9/10
|
100.000
|
—
|
|
—
|
|
9,064
|
|
927
|
|
9,991
|
|
—
|
|
—
|
|
(4,073
|
)
|
(241
|
)
|
(4,314
|
)
|
43.2
|
D
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Non-bank financial institutions
|
|
60,424
|
|
3,042
|
|
408
|
|
—
|
|
63,874
|
|
(27
|
)
|
(8
|
)
|
(208
|
)
|
—
|
|
(243
|
)
|
0.4
|
|
||||||||||||||||
CRR
1
|
0.000 to 0.053
|
14,210
|
|
1
|
|
—
|
|
—
|
|
14,211
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
—
|
AA- and above
|
||||||||||||||||
CRR
2
|
0.054 to 0.169
|
17,831
|
|
144
|
|
—
|
|
—
|
|
17,975
|
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
(2
|
)
|
—
|
A+ to A-
|
||||||||||||||||
CRR
3
|
0.170 to 0.740
|
17,344
|
|
1,057
|
|
—
|
|
—
|
|
18,401
|
|
(7
|
)
|
—
|
|
—
|
|
—
|
|
(7
|
)
|
—
|
BBB+ to BBB-
|
||||||||||||||||
CRR
4
|
0.741 to 1.927
|
6,167
|
|
1,102
|
|
—
|
|
—
|
|
7,269
|
|
(4
|
)
|
(2
|
)
|
—
|
|
—
|
|
(6
|
)
|
0.1
|
BB+ to BB-
|
||||||||||||||||
CRR
5
|
1.928 to 4.914
|
4,451
|
|
373
|
|
—
|
|
—
|
|
4,824
|
|
(4
|
)
|
(3
|
)
|
—
|
|
—
|
|
(7
|
)
|
0.1
|
BB- to B
|
||||||||||||||||
CRR
6
|
4.915 to 8.860
|
417
|
|
345
|
|
—
|
|
—
|
|
762
|
|
(9
|
)
|
(2
|
)
|
—
|
|
—
|
|
(11
|
)
|
1.4
|
B-
|
||||||||||||||||
CRR
7
|
8.861 to 15.000
|
4
|
|
8
|
|
—
|
|
—
|
|
12
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
CCC+
|
||||||||||||||||
CRR
8
|
15.001 to 99.999
|
—
|
|
12
|
|
—
|
|
—
|
|
12
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
(1
|
)
|
8.3
|
CCC to C
|
||||||||||||||||
CRR
9/10
|
100.000
|
—
|
|
—
|
|
408
|
|
—
|
|
408
|
|
—
|
|
—
|
|
(208
|
)
|
—
|
|
(208
|
)
|
51.0
|
D
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Banks
|
|
81,027
|
|
1,540
|
|
15
|
|
—
|
|
82,582
|
|
(17
|
)
|
(4
|
)
|
(2
|
)
|
—
|
|
(23
|
)
|
—
|
|
||||||||||||||||
CRR
1
|
0.000 to 0.053
|
55,343
|
|
529
|
|
—
|
|
—
|
|
55,872
|
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
(4
|
)
|
—
|
AA- and above
|
||||||||||||||||
CRR
2
|
0.054 to 0.169
|
14,681
|
|
406
|
|
—
|
|
—
|
|
15,087
|
|
(5
|
)
|
(2
|
)
|
—
|
|
—
|
|
(7
|
)
|
—
|
A+ to A-
|
||||||||||||||||
CRR
3
|
0.170 to 0.740
|
7,351
|
|
341
|
|
—
|
|
—
|
|
7,692
|
|
(5
|
)
|
(1
|
)
|
—
|
|
—
|
|
(6
|
)
|
0.1
|
BBB+ to BBB-
|
||||||||||||||||
CRR
4
|
0.741 to 1.927
|
3,072
|
|
47
|
|
—
|
|
—
|
|
3,119
|
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
0.1
|
BB+ to BB-
|
||||||||||||||||
CRR
5
|
1.928 to 4.914
|
570
|
|
201
|
|
—
|
|
—
|
|
771
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
(1
|
)
|
0.1
|
BB- to B
|
||||||||||||||||
CRR
6
|
4.915 to 8.860
|
4
|
|
13
|
|
—
|
|
—
|
|
17
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
B-
|
||||||||||||||||
CRR
7
|
8.861 to 15.000
|
2
|
|
1
|
|
—
|
|
—
|
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
CCC+
|
||||||||||||||||
CRR
8
|
15.001 to 99.999
|
4
|
|
2
|
|
—
|
|
—
|
|
6
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
CCC to C
|
||||||||||||||||
CRR
9/10
|
100.000
|
—
|
|
—
|
|
15
|
|
—
|
|
15
|
|
—
|
|
—
|
|
(2
|
)
|
—
|
|
(2
|
)
|
13.3
|
D
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
At
1 Jan 2018
|
|
598,288
|
|
57,844
|
|
9,487
|
|
974
|
|
666,593
|
|
(745
|
)
|
(1,049
|
)
|
(4,283
|
)
|
(242
|
)
|
(6,319
|
)
|
0.9
|
|
|
||
|
|
|
13
|
HSBC Holdings plc IFRS 9
2018
|
|
||||||||
|
||||||||
Impact on regulatory capital
|
||||||||
|
||||||||
|
|
|
|
|
|
|
|
|
Key capital metrics
|
||||||||
|
|
At
|
||||||
|
|
31 Dec 2017
|
|
1 Jan 2018
|
|
1 Jan 2018
|
|
|
|
Footnotes
|
IAS 39
|
|
IFRS 9 transitional
|
|
IFRS 9 full adoption
|
|
|
Own funds ($bn)
|
1
|
|
|
|
||||
Common
equity tier 1 capital
|
|
126.1
|
|
127.3
|
|
126.3
|
|
|
Tier 1
capital
|
|
151.0
|
|
152.1
|
|
151.1
|
|
|
Total
capital
|
|
182.4
|
|
183.1
|
|
182.1
|
|
|
Risk-weighted assets ($bn)
|
|
|
|
|
||||
Credit
risk
|
|
685.2
|
|
686.0
|
|
685.5
|
|
|
–
Internal ratings based ('IRB') approach
|
|
510.7
|
|
510.6
|
|
510.6
|
|
|
–
Standardised ('STD') approach
|
|
174.5
|
|
175.4
|
|
174.9
|
|
|
Counterparty
credit risk
|
|
54.5
|
|
54.5
|
|
54.5
|
|
|
Market
risk
|
|
38.9
|
|
38.9
|
|
38.9
|
|
|
Operational
risk
|
|
92.7
|
|
92.7
|
|
92.7
|
|
|
Total risk-weighted assets
|
|
871.3
|
|
872.1
|
|
871.6
|
|
|
Capital ratios (%)
|
1
|
|
|
|
||||
Common
equity tier 1
|
|
14.48
|
|
14.60
|
|
14.49
|
|
|
Tier
1
|
|
17.32
|
|
17.44
|
|
17.34
|
|
|
Total
capital
|
|
20.93
|
|
21.00
|
|
20.90
|
|
|
Leverage ratio
|
2
|
|
|
|
||||
Leverage
ratio total exposure ($bn)
|
|
2,557.1
|
|
2,556.4
|
|
2,556.3
|
|
|
Leverage
ratio (%)
|
|
5.58
|
|
5.63
|
|
5.59
|
|
|
|
1
|
Own funds and capital ratios are presented on a CRD IV transitional
basis at 31 December 2017 for consistency.
|
|
|
2
|
Leverage ratio is calculated on a fully phased-in
basis.
|
|
|
●
|
a $1.1bn increase due to
classification and measurement changes;
|
|
|
●
|
a $1.2bn decrease due to a rise in impairment allowances;
and
|
|
|
●
|
a $0.3bn increase primarily due to the impact of these changes on
deferred tax.
|
|
|
●
|
a decrease of $2.4bn for additional allowances; and
|
|
|
●
|
an increase of $1.2bn due to lower deductions from CET1 for excess
expected loss.
|
|
|
●
|
for the internal ratings based ('IRB') exposures, impairment
allowances increase by $1.2bn. This reduces the deduction from CET1
for excess expected loss by the same amount;
|
|
|
●
|
for the Standardised ('STD') exposures, impairment allowances
increase by $1.2bn. This reduces RWAs by $0.9bn.
|
|
|
●
|
the Group’s CET1 ratio increases by 1bp as a result of the
$0.2bn increase in CET1, the effect of which is reduced by the
$0.3bn increase in RWAs.
|
|
|
●
|
the Group’s leverage ratio increases by 1bp. The $0.2bn
increase in tier 1 capital is magnified by a reduction of $0.8bn in
the Group’s total leverage exposure.
|
|
|
●
|
the increase in loan loss allowances on day one of IFRS 9 adoption;
plus
|
|
|
●
|
any subsequent increase in expected credit losses in the
non-credit-impaired book thereafter.
|
|
|
●
|
12bps in the Group’s CET1 ratio; and
|
|
|
●
|
5bps in the Group’s leverage ratio.
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
14
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Own funds disclosure
|
|||||||||||||||||
|
|
At
|
|||||||||||||||
|
|
31 Dec 2017
|
|
1 Jan 2018
|
|
1 Jan 2018
|
|
||||||||||
|
|
IAS 39
|
|
IFRS 9 Transitional
|
|
IFRS 9 Full Adoption
|
|
||||||||||
Ref¹
|
|
$m
|
|
$m
|
|
$m
|
|
||||||||||
|
Common equity tier 1 (‘CET1’) capital: instruments and
reserves
|
|
|
|
|||||||||||||
2
|
Retained
earnings
|
124,679
|
|
125,206
|
|
124,302
|
|
||||||||||
5a
|
Independently
reviewed interim net profits net of any foreseeable charge or
dividend
|
608
|
|
608
|
|
608
|
|
||||||||||
|
Other
CET1: instruments and reserves
|
33,270
|
|
33,109
|
|
33,109
|
|
||||||||||
6
|
Common equity tier 1 capital before regulatory
adjustments
|
158,557
|
|
158,923
|
|
158,019
|
|
||||||||||
|
Common equity tier 1 capital: regulatory adjustments
|
|
|
|
|||||||||||||
10
|
Deferred
tax assets that rely on future profitability excluding those
arising from temporary differences (net of related tax
liability)
|
(1,181
|
)
|
(1,181
|
)
|
(1,181
|
)
|
||||||||||
12
|
Negative
amounts resulting from the calculation of expected loss
amounts
|
(2,820
|
)
|
(1,637
|
)
|
(1,637
|
)
|
||||||||||
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)
|
(7,553
|
)
|
(7,409
|
)
|
(7,499
|
)
|
||||||||||
|
Other
regulatory adjustments
|
(20,859
|
)
|
(21,386
|
)
|
(21,387
|
)
|
||||||||||
28
|
Total regulatory adjustments to common equity tier 1
|
(32,413
|
)
|
(31,613
|
)
|
(31,704
|
)
|
||||||||||
29
|
Common equity tier 1 capital
|
126,144
|
|
127,310
|
|
126,315
|
|
||||||||||
36
|
Additional
tier 1 capital before regulatory adjustments
|
24,922
|
|
24,922
|
|
24,922
|
|
||||||||||
43
|
Total
regulatory adjustments to additional tier 1 capital
|
(112
|
)
|
(112
|
)
|
(112
|
)
|
||||||||||
44
|
Additional tier 1 capital
|
24,810
|
|
24,810
|
|
24,810
|
|
||||||||||
45
|
Tier 1 capital (T1 = CET1 + AT1)
|
150,954
|
|
152,120
|
|
151,125
|
|
||||||||||
51
|
Tier 2 capital before regulatory adjustments
|
31,932
|
|
31,517
|
|
31,517
|
|
||||||||||
57
|
Total regulatory adjustments to tier 2 capital
|
(503
|
)
|
(503
|
)
|
(503
|
)
|
||||||||||
58
|
Tier 2 capital
|
31,429
|
|
31,014
|
|
31,014
|
|
||||||||||
59
|
Total capital (TC = T1 + T2)
|
182,383
|
|
183,134
|
|
182,139
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
1
|
The references identify the lines prescribed in the European
Banking Authority (“EBA”) template, which are
applicable and where there is a value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
15
|
HSBC Holdings plc IFRS 9
2018
|
|
||
|
||
Technical appendix
|
||
|
||
|
||
Transition disclosures required by accounting
standards
|
||
|
|
|
1.1
|
Basis of preparation
|
|
|
|
●
|
fair value designations for financial liabilities have been revoked
where the accounting mismatch no longer exists, as required by IFRS
9;
|
|
|
●
|
fair value designations have been revoked for certain long-dated
securities where accounting mismatches continue to exist, but where
HSBC has revoked the designation as permitted by IFRS 9 since it
will better mitigate the accounting mismatch by undertaking fair
value hedge accounting.
|
|
|
●
|
We have considered market practices for the presentation of certain
financial liabilities which contain both deposit and derivative
components. We have concluded that a change in accounting policy
and presentation from ‘trading customer accounts and other
debt securities in issue’ would be appropriate, since it
would better align with the presentation of similar financial
instruments by peers and therefore provide more relevant
information about the effect of these financial liabilities on our
financial position and performance. As a result, rather than being
classified as held for trading, we will designate these financial
liabilities as at fair value through profit or loss since they are
managed and their performance evaluated on a fair value basis. A
further consequence of this change in presentation is that the
effects of changes in the liabilities’ credit risk will be
presented in Other comprehensive income with the remaining effect
presented in profit or loss in accordance with Group accounting
policy adopted in 2017 (following the adoption of the requirements
in IFRS 9 relating to the presentation of gains and losses on
financial liabilities designated at fair value).
|
|
|
●
|
Cash collateral, margin and settlement accounts have been
reclassified from ‘Trading assets’ and ‘Loans and
advances to banks and customers’ to ‘Prepayments,
accrued income and other assets’ and from ‘Trading
liabilities’ and ‘Deposits by banks' and 'Customer
accounts‘ to ‘Accruals, deferred income and other
liabilities’. The change in presentation for financial assets
is in accordance with IFRS 9 and the change in presentation for
financial liabilities is considered to provide more relevant
information, given the change in presentation for the financial
assets. The change in presentation for financial liabilities has
had no effect on measurement of these items and therefore on
retained earnings or profit for any period.
|
|
|
●
|
Certain stock borrowing assets have been reclassified from
‘Loans and advances to banks and customers’ to
‘Trading assets’. The change in measurement is a
result of the determination of the global business model for this
activity in accordance with IFRS 9 and will align the presentation
throughout the Group.
|
|
|
1.2
|
Summary of significant accounting policies
|
|
|
(d)
|
Financial instruments measured at amortised cost
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
16
|
|
|
(e)
|
Financial assets measured at fair value through other comprehensive
income (‘FVOCI’)
|
|
|
(f)
|
Equity securities measured at fair value with fair value movements
presented in OCI
|
|
|
(g)
|
Financial instruments designated at fair value
|
|
|
●
|
the use of the designation removes or significantly reduces an
accounting mismatch;
|
|
|
●
|
when a group of financial assets and liabilities or a group of
financial liabilities is managed and its performance is evaluated
on a fair value basis, in accordance with a documented risk
management or investment strategy; and
|
|
|
●
|
where the financial liability contains one or more non-closely
related embedded derivatives.
|
|
|
●
|
Long-term debt issues.
|
|
|
●
|
Financial assets and financial liabilities under unit-linked and
non-linked investment contracts.
|
|
|
(h)
|
Derivatives
|
|
|
(i)
|
Impairment of amortised cost and FVOCI financial
assets
|
|
|
●
|
contractual payments of either principal or interest are past due
for more than 90 days;
|
|
|
●
|
there are other indications that the borrower is unlikely to pay
such as that a concession has been granted to the borrower for
economic or legal reasons relating to the borrower’s
financial condition; and
|
|
|
●
|
the loan is otherwise considered to be in default.
|
|
||
|
|
|
17
|
HSBC Holdings plc IFRS 9
2018
|
|
||
|
|
|
Origination CRR
|
Significance trigger – PD to increase by
|
|
0.1–1.2
|
15bps
|
|
2.1–3.3
|
30 bps
|
|
Greater than 3.3 and not impaired
|
|
2x
|
|
|||
|
|
|
|
Origination CRR
|
Additional significance criteria – Number of CRR grade
notches deterioration required to identify as significant credit
deterioration (stage 2) (> or equal to)
|
||
0.1
|
5 notches
|
||
1.1–4.2
|
4 notches
|
||
4.3–5.1
|
3 notches
|
||
5.2–7.1
|
2 notches
|
||
7.2–8.2
|
1 notch
|
||
8.3
|
0 notch
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
18
|
|
|||||
|
|
|
|
||
Model
|
Regulatory capital
|
IFRS 9
|
|||
PD
|
● Through
the cycle (represents long-run average PD throughout a full
economic cycle)
● The
definition of default includes a backstop of 90+ days past
due, although this has been modified to 180+ days past due for some
portfolios, particularly UK and US mortgages
|
● Point
in time (based on current conditions, adjusted to take into
account estimates of future conditions that will impact
PD)
● Default
backstop of 90+ days past due for all portfolios
|
|||
EAD
|
● Cannot
be lower than current balance
|
● Amortisation
captured for term products
|
|||
LGD
|
● Downturn
LGD (consistent losses expected to be suffered during a severe but
plausible economic downturn)
● Regulatory
floors may apply to mitigate risk of underestimating downturn LGD
due to lack of historical data
● Discounted
using cost of capital
● All
collection costs included
|
● Expected
LGD (based on estimate of loss given default including the expected
impact of future economic conditions such as changes in value of
collateral)
● No
floors
● Discounted
using the original effective interest rate of the loan
● Only
costs associated with obtaining/selling collateral
included
|
|||
Other
|
|
● Discounted
back from point of default to balance sheet date
|
|
||
|
|
|
19
|
HSBC Holdings plc IFRS 9
2018
|
|
|
1.3
|
Differences between IAS 39 and IFRS 9
|
|
|||||
|
|
|
|
||
|
IAS 39
|
IFRS 9
|
|||
Classification criteria
|
Financial assets are measured at amortised cost (loans &
receivables and held to maturity), FVOCI (AFS), or fair value
through profit or loss (derivatives and trading) based on the
nature of the instrument and the purpose for which it is held.
Embedded derivatives are separated from their host contract unless
the contract as a whole is measured at fair value through profit or
loss. The fair value option applieswhere there are non-closely
related embedded derivatives that are not bifurcated, financial
instruments are managed on a fair value basis or where measuring at
fair value through profit or loss would reduce or eliminate an
accounting mismatch. AFS is the default category.
|
Debt instruments are measured at amortised cost or FVOCI based on
their contractual terms and the business model in which they are
held as set out in the accounting policies above. The concept of
embedded derivatives does not apply to financial assets. Therefore,
the fair value option only applies where it would reduce or
eliminate an accounting mismatch. Fair value through profit or loss
is the default category.
Equity securities are measured at fair value through profit or loss
unless the option has been exercised to measure at FVOCI as set out
in the accounting policies above.
|
|||
Presentation
|
Upon disposal of AFS securities (debt instruments and equity
securities) the cumulative gains or losses in other comprehensive
income are recognised in profit or loss.
|
Upon disposal of debt instruments measured at FVOCI the cumulative
gains or losses in other comprehensive income are recognised in
profit or loss. Cumulative gains or losses in other comprehensive
income are not recognised in profit or loss on the disposal of
equity securities measured at FVOCI.
|
|
|
●
|
loans and advances to banks and to customers and non-trading
reverse repurchase agreements that are classified as loans and
receivables under IAS 39 are measured at amortised cost under IFRS
9;
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
20
|
|
|
●
|
financial assets designated at Fair Value through Profit and Loss
('FVPL') remain at FVPL, because it is required under IFRS 9 or the
designation will continue;
|
|
|
●
|
debt securities classified as available for sale are measured at
amortised cost or FVOCI, with a small minority at FVPL either
because of their contractual cash flow characteristics or the
business model within which they are held;
|
|
|
●
|
debt securities classified as held to maturity are measured at
amortised cost;
|
|
|
●
|
Treasury and other eligible bills classified as available for sale
are measured at amortised cost or FVOCI depending upon the business
model in which they are held; and
|
|
|
●
|
all equity securities remain measured at fair value. A significant
majority have fair value movements shown in profit or loss, while a
minority have fair value movements presented in other
|
|
|||||
|
|
|
|
||
|
IAS 39
|
IFRS 9
|
|||
Scope
|
For amortised cost assets, impairment is recognised when there is
objective evidence of impairment. Losses are measured by comparing
the carrying amount with the discounted future cash flows. Losses
which may arise from future events are not recognised.
For available-for-sale financial assets, impairment is recognised
when there is objective evidence of a shortfall in the recovery of
future cash flows. Impairment is measured as the decrease in fair
value below the original cost at initial recognition.
|
The same recognition and measurement requirements apply to both
amortised cost and FVOCI financial assets. Impairment is not
recognised on equity securities which are measured at FVOCI.
Impairment is recognised for all financial assets in scope at
either 12-month ECL or lifetime ECL. All reasonable and supportable
information, including information about past events, current
conditions and reasonable and supportable forecasts of economic
conditions at the reporting date is used in measuring
ECL.
|
|||
Application
|
Accounting policies generally make a distinction between
individually significant loans and homogeneous groups of loans
which are assessed collectively.
|
The distinction between individual and collective assessment is
less relevant. In general, whether loans are managed through
wholesale credit risk systems or retail credit risk systems is
relevant because of differences in the types of information
available and the way credit risk is managed.
|
|||
Impaired/Stage 3
|
The criteria used to determine whether there is objective evidence
of impairment are the same for individually significant loans
assessed under IAS 39 and for IFRS 9.
The determination of the realisable value of security is based on
the most recently updated market value at the time the impairment
assessment is performed and is not adjusted for expected future
changes in market prices.
Statistical methods are used to determine impairment losses on a
collective basis for homogeneous groups of loans that are not
considered individually significant using either roll rate
methodologies or historical loss rate experience for loans. Under
these methodologies, impairment allowances are recognised at a
portfolio level. However, loans are classified as impaired for
presentation purposes when they are more than 90 days past due or
have been renegotiated for credit risk reasons. For retail loans,
an exception is made for individual loans that are in arrears by
more than 90 days but have been individually assessed to have no
indications of impairment, and these are not classified as
impaired.
|
The stage 3 population is consistent with impaired loans under IAS
39 which are considered individually significant.
For wholesale loans, individual discounted cash flow calculations
continue to be performed. However, the net realisable value of
security is adjusted for expected future changes in market and the
losses reflecting cash flows under different scenarios are
probability- weighted to determine the ECL rather than using the
best estimate of cash flows.
For the retail population, stage 3 is determined by considering the
relevant objective evidence, primarily whether contractual payments
of either principal or interest are past due for more than 90 days,
or a concession has been granted to the borrower for economic or
legal reasons relating to the borrower’s financial condition,
or the loan is otherwise considered to be in default.
The impairment allowance is determined by the same calculation used
for stage 2, with the probability of default set to 1. The result
may, therefore, not be the same as that determined by the IAS 39
statistical methods and the population disclosed as stage 3 will
not necessarily correspond with that disclosed as impaired in
accordance with IAS 39.
The accounting policies setting out the criteria for loans to be
transferred to stage 3 and for POCI financial assets are set out in
policy (i) on page 17.
|
|||
Stage 2
|
This is not an IAS 39 concept.
|
The accounting policies setting out the criteria for loans to be
transferred to Stage 2 and the measurement of lifetime ECL are set
out in policy (i) on page 17.
|
|||
Stage 1
|
This is not an IAS 39 concept. However, incurred but not yet
identified impairment is assessed loans for which no evidence of
impairment has been specifically identified by estimating a
collective allowance determined after taking into account factors
including the estimated period between impairment occurring and the
loss being identified. This is assessed empirically on a periodic
basis and may vary over time. Similarly, for homogeneous groups of
loans and advances which are assessed under IAS 39 on a collective
basis, the inherent loss is determined using risk factors including
the period of time between loss identification and write-off which
is regularly benchmarked against actual outcomes.
|
Financial assets which are not considered to have significantly
increased in credit risk have loss allowances measured at an amount
equal to 12-month ECL. This 12-month time horizon is likely to be
equal to or longer than the period estimated under IAS 39
(typically between 6 and 12 months). The measurement of 12-month
ECL is set out in policy (i) on page 17.
|
|
||
|
|
|
21
|
HSBC Holdings plc IFRS 9
2018
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Reconciliation of consolidated balance sheet at 31 December 2017
and 1 January 2018
|
|||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
IFRS 9 reclassification to
|
|
IFRS 9 remeasurement including
expected credit losses4
|
|
IFRS 9 carrying amount at 1 Jan 2018
|
|
||||||||||||||||||||||||||
|
|
|
|
IAS 39 carrying amount at 31 Dec 2017
|
|
Other changes in classification
|
|
Fair value through profit and loss
|
|
Fair value through other comprehensive income
|
|
Amortised cost
|
|
Carrying amount post reclassification
|
|
||||||||||||||||||||||||
|
Footnotes
|
IAS 39 measurement category
|
IFRS 9 measurement category
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Cash
and balances at central banks
|
|
Amortised cost
|
Amortised cost
|
180,624
|
|
—
|
|
—
|
|
—
|
|
—
|
|
180,624
|
|
(3
|
)
|
180,621
|
|
||||||||||||||||||||
Items
in the course of collection from other banks
|
|
Amortised cost
|
Amortised cost
|
6,628
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,628
|
|
—
|
|
6,628
|
|
||||||||||||||||||||
Hong
Kong Government certificates of indebtedness
|
|
Amortised cost
|
Amortised cost
|
34,186
|
|
—
|
|
—
|
|
—
|
|
—
|
|
34,186
|
|
—
|
|
34,186
|
|
||||||||||||||||||||
Trading
assets
|
1, 3
|
FVPL
|
FVPL
|
287,995
|
|
4,329
|
|
9
|
|
—
|
|
(37,924
|
)
|
254,409
|
|
1
|
|
254,410
|
|
||||||||||||||||||||
Financial
assets designated and otherwise mandatorily measured at fair value
through profit or loss
|
2,5,6,7
|
FVPL
|
FVPL
|
29,464
|
|
313
|
|
10,055
|
|
(3
|
)
|
(115
|
)
|
39,714
|
|
32
|
|
39,746
|
|
||||||||||||||||||||
Derivatives
|
|
FVPL
|
FVPL
|
219,818
|
|
—
|
|
—
|
|
—
|
|
—
|
|
219,818
|
|
—
|
|
219,818
|
|
||||||||||||||||||||
Loans
and advances to banks
|
1, 2, 3
|
Amortised cost
|
Amortised cost
|
90,393
|
|
(7,099
|
)
|
(712
|
)
|
—
|
|
—
|
|
82,582
|
|
(23
|
)
|
82,559
|
|
||||||||||||||||||||
Loans
and advances to customers
|
1, 2, 3
|
Amortised cost
|
Amortised cost
|
962,964
|
|
(7,458
|
)
|
(3,903
|
)
|
—
|
|
24
|
|
951,627
|
|
(1,890
|
)
|
949,737
|
|
||||||||||||||||||||
Reverse
repurchase agreements – non-trading
|
|
Amortised cost
|
Amortised cost
|
201,553
|
|
—
|
|
—
|
|
—
|
|
—
|
|
201,553
|
|
—
|
|
201,553
|
|
||||||||||||||||||||
Financial
investments
|
5
|
FVOCI (Available for sale – debt instruments)
|
FVOCI
|
332,240
|
|
—
|
|
(3,131
|
)
|
83
|
|
(7,026
|
)
|
322,166
|
|
(3
|
)
|
322,163
|
|
||||||||||||||||||||
6
|
FVOCI (Available for sale – equity instruments)
|
FVOCI
|
3,917
|
|
—
|
|
(2,104
|
)
|
—
|
|
—
|
|
1,813
|
|
—
|
|
1,813
|
|
|||||||||||||||||||||
5
|
Amortised cost
|
Amortised cost
|
52,919
|
|
—
|
|
—
|
|
(80
|
)
|
7,141
|
|
59,980
|
|
(457
|
)
|
59,523
|
|
|||||||||||||||||||||
Prepayments,
accrued income and other assets
|
1, 7
|
Amortised cost
|
Amortised cost
|
67,191
|
|
9,915
|
|
(214
|
)
|
—
|
|
37,900
|
|
114,792
|
|
(15
|
)
|
114,777
|
|
||||||||||||||||||||
Current
tax assets
|
|
N/A
|
N/A
|
1,006
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,006
|
|
—
|
|
1,006
|
|
||||||||||||||||||||
Interests
in associates and joint ventures
|
8
|
N/A
|
N/A
|
22,744
|
|
—
|
|
—
|
|
—
|
|
—
|
|
22,744
|
|
(213
|
)
|
22,531
|
|
||||||||||||||||||||
Goodwill
and intangible assets
|
9
|
N/A
|
N/A
|
23,453
|
|
—
|
|
—
|
|
—
|
|
—
|
|
23,453
|
|
(79
|
)
|
23,374
|
|
||||||||||||||||||||
Deferred
tax assets
|
|
N/A
|
N/A
|
4,676
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,676
|
|
38
|
|
4,714
|
|
||||||||||||||||||||
Total assets
|
|
|
|
2,521,771
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,521,771
|
|
(2,612
|
)
|
2,519,159
|
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
22
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Reconciliation for consolidated balance sheet at 31 December 2017
and 1 January 2018 (continued)
|
|||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
IFRS 9 reclassification to
|
Carrying amount post reclassification
|
|
IFRS 9 remeasurement including
expected credit losses4
|
|
IFRS 9 carrying amount at 1 Jan 2018
|
|
|||||||||||||||||||||||||||
|
|
IAS 39 carrying amount at 31 Dec 2017
|
|
Other changes in classification
|
|
Fair value through profit and loss
|
|
Fair value through other comprehensive income
|
|
Amortised cost
|
|
||||||||||||||||||||||||||||
|
Footnotes
|
IAS 39 measurement category
|
IFRS 9 measurement category
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
||||||||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Hong
Kong currency notes in circulation
|
|
Amortised cost
|
Amortised cost
|
34,186
|
|
—
|
|
—
|
|
—
|
|
—
|
|
34,186
|
|
—
|
|
34,186
|
|
||||||||||||||||||||
Deposits
by banks
|
1
|
Amortised cost
|
Amortised cost
|
69,922
|
|
(5,430
|
)
|
—
|
|
—
|
|
—
|
|
64,492
|
|
—
|
|
64,492
|
|
||||||||||||||||||||
Customer
accounts
|
1
|
Amortised cost
|
Amortised cost
|
1,364,462
|
|
(4,235
|
)
|
—
|
|
—
|
|
—
|
|
1,360,227
|
|
—
|
|
1,360,227
|
|
||||||||||||||||||||
Repurchase
agreements – non-trading
|
|
Amortised cost
|
Amortised cost
|
130,002
|
|
—
|
|
—
|
|
—
|
|
—
|
|
130,002
|
|
—
|
|
130,002
|
|
||||||||||||||||||||
Items
in the course of transmission to other banks
|
|
Amortised cost
|
Amortised cost
|
6,850
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,850
|
|
—
|
|
6,850
|
|
||||||||||||||||||||
Trading
liabilities
|
1, 11
|
FVPL
|
FVPL
|
184,361
|
|
(103,497
|
)
|
—
|
|
—
|
|
—
|
|
80,864
|
|
—
|
|
80,864
|
|
||||||||||||||||||||
Financial
liabilities designated at fair value
|
9, 10, 11
|
FVPL
|
FVPL
|
94,429
|
|
59,267
|
|
—
|
|
—
|
|
(9,699
|
)
|
143,997
|
|
9
|
|
144,006
|
|
||||||||||||||||||||
Derivatives
|
|
FVPL
|
FVPL
|
216,821
|
|
—
|
|
—
|
|
—
|
|
—
|
|
216,821
|
|
—
|
|
216,821
|
|
||||||||||||||||||||
Debt
securities in issue
|
10
|
Amortised cost
|
Amortised cost
|
64,546
|
|
—
|
|
—
|
|
—
|
|
2,095
|
|
66,641
|
|
(105
|
)
|
66,536
|
|
||||||||||||||||||||
Accruals,
deferred income and other liabilities
|
1, 10
|
Amortised cost
|
Amortised cost
|
45,907
|
|
53,895
|
|
—
|
|
—
|
|
124
|
|
99,926
|
|
—
|
|
99,926
|
|
||||||||||||||||||||
Current
tax liabilities
|
|
N/A
|
N/A
|
928
|
|
—
|
|
—
|
|
—
|
|
—
|
|
928
|
|
—
|
|
928
|
|
||||||||||||||||||||
Liabilities
under insurance contracts
|
9
|
N/A
|
N/A
|
85,667
|
|
—
|
|
—
|
|
—
|
|
—
|
|
85,667
|
|
(69
|
)
|
85,598
|
|
||||||||||||||||||||
Provisions
|
|
N/A
|
N/A
|
4,011
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,011
|
|
284
|
|
4,295
|
|
||||||||||||||||||||
Deferred
tax liabilities
|
|
N/A
|
N/A
|
1,982
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,982
|
|
(282
|
)
|
1,700
|
|
||||||||||||||||||||
Subordinated
liabilities
|
10
|
Amortised cost
|
Amortised cost
|
19,826
|
|
—
|
|
—
|
|
—
|
|
7,480
|
|
27,306
|
|
(1,445
|
)
|
25,861
|
|
||||||||||||||||||||
Total liabilities
|
|
|
|
2,323,900
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,323,900
|
|
(1,608
|
)
|
2,322,292
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
IAS 39 carrying amount at 31 Dec 2017
|
|
IFRS 9 reclassification
|
|
Carrying amount post reclassification
|
|
IFRS 9 remeasurement including expected credit losses
|
|
Carrying amount at 1 January 2018
|
|
||||||||||||
|
Footnote
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
||||||||||||
Equity
|
|
|
|
|
|
|
|||||||||||||||||
Called
up share capital
|
|
10,160
|
|
—
|
|
10,160
|
|
—
|
|
10,160
|
|
||||||||||||
Share
premium account
|
|
10,177
|
|
—
|
|
10,177
|
|
—
|
|
10,177
|
|
||||||||||||
Other
equity instruments
|
|
22,250
|
|
—
|
|
22,250
|
|
—
|
|
22,250
|
|
||||||||||||
Other
reserves
|
12
|
7,664
|
|
(960
|
)
|
6,704
|
|
(61
|
)
|
6,643
|
|
||||||||||||
Retained
earnings
|
|
139,999
|
|
960
|
|
140,959
|
|
(902
|
)
|
140,057
|
|
||||||||||||
Total Shareholders Equity
|
|
190,250
|
|
—
|
|
190,250
|
|
(963
|
)
|
189,287
|
|
||||||||||||
Non-controlling
interests
|
|
7,621
|
|
—
|
|
7,621
|
|
(41
|
)
|
7,580
|
|
||||||||||||
Total equity
|
|
197,871
|
|
—
|
|
197,871
|
|
(1,004
|
)
|
196,867
|
|
|
||
|
|
|
23
|
HSBC Holdings plc IFRS 9
2018
|
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Reconciliation of impairment allowance under IAS 39 and provision
under IAS 37 to expected credit losses under IFRS 9
|
|||||||||||||||||||||||||||
|
|
Reclassification to
|
Remeasurement
|
Total
|
|
||||||||||||||||||||||
|
Fair value through profit and loss
|
|
Fair value through other comprehensive income
|
|
Amortised cost
|
|
Stage 3
|
|
Stage 1 & Stage 2
|
|
|||||||||||||||||
|
IAS 39 measurement category
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
||||||||||||||
Financial assets at amortised cost
|
|
|
|
|
|
|
|
||||||||||||||||||||
IAS 39
impairment allowance at 31 Dec 2017
|
|
|
|
|
|
|
7,532
|
|
|||||||||||||||||||
Cash
and balances at central banks
|
Amortised cost (Loans and receivables)
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
3
|
|
||||||||||||||
Items
in the course of collection from other banks
|
Amortised cost (Loans and receivables)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||||||||
Hong
Kong Government certificates of indebtedness
|
Amortised cost (Loans and receivables)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||||||||
Loans
and advances to banks
|
Amortised cost (Loans and receivables)
|
—
|
|
—
|
|
—
|
|
1
|
|
22
|
|
23
|
|
||||||||||||||
Loans
and advances to customers
|
Amortised cost (Loans and receivables)
|
(31
|
)
|
—
|
|
—
|
|
629
|
|
1,261
|
|
1,859
|
|
||||||||||||||
Reverse
repurchase agreements – non-trading
|
Amortised cost (Loans and receivables)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||||||||
Financial
investments
|
Amortised cost (Held to maturity)
|
—
|
|
—
|
|
3
|
|
—
|
|
13
|
|
16
|
|
||||||||||||||
Prepayments,
accrued income and other assets
|
Amortised cost (Loans and receivables)
|
—
|
|
—
|
|
—
|
|
—
|
|
47
|
|
47
|
|
||||||||||||||
Expected
credit loss allowance at 1 Jan 2018
|
|
|
|
|
|
|
9,480
|
|
|||||||||||||||||||
Loan commitments and financial guarantee contracts
|
|
|
|
|
|
|
|
||||||||||||||||||||
IAS 37
provisions at 31 Dec 2017
|
|
|
|
|
|
|
253
|
|
|||||||||||||||||||
Provisions
(loan commitments and financial guarantees)
|
N/A
|
N/A
|
|
N/A
|
|
N/A
|
|
74
|
|
210
|
|
284
|
|
||||||||||||||
Expected
credit loss provision at 1 Jan 2018
|
|
|
|
|
|
|
537
|
|
|
|||
|
|
|
|
HSBC Holdings plc IFRS 9
2018
|
24
|
|
||
|
|
|
Footnotes to the Technical appendix
|
||
1
|
Cash collateral, margin and settlement accounts of $37,900m have
been reclassified from ‘Trading assets’ to
‘Prepayments, accrued income and other assets’ as a
result of the assessment of business model in accordance with IFRS
9.
Cash collateral, margin and settlement accounts previously
presented as ‘Loans and advances to banks' of $5,939m and
'Loans and advances to customers’ of $3,976m have been
represented in ‘Prepayments, accrued income and other
assets’ to ensure consistent presentation of all such
balances.Cash collateral, margin and settlement accounts previously
presented as ‘Trading liabilities’ of $44,230m,
‘Deposits by banks' of $5,430m and 'Customer accounts' of
$4,235m have been represented in 'Accruals, deferred income and
other liabilities’. This change in presentation for
financial liabilities is considered to provide more relevant
information, given the change in presentation for the financial
assets.
These changes in presentation for financial assets and liabilities
have had no effect on measurement of these items and therefore on
'Retained earnings'.
|
|
2
|
'Loans and advances to customers' of $3,903m and 'Loans and
advances to banks' of $712m did not meet the 'solely payments of
principal and interest' (‘SPPI’) requirement for
amortised cost classification under IFRS 9. As a result, these
financial assets were reclassified to ‘Financial assets
designated and otherwise mandatorily measured at fair value through
profit or loss’
|
|
3
|
Stock borrowing assets of $4,642m have been reclassified from
‘Loans and advances to banks and customers’ to
‘Trading assets’. The change in measurement is a
result of the determination of the global business model for this
activity in accordance with IFRS 9 and will align the presentation
throughout the Group.
|
|
4
|
IFRS 9 expected credit losses have decreased net assets by $2,232m
principally comprising of $1,890m reduction in the carrying value
of assets classified as 'Loans and advances to customers' and $284m
increase in 'Provisions' relating to expected credit losses on loan
commitments and financial guarantee contracts.
|
|
5
|
Debt instruments of $3,131m previously classified as available for
sale under IAS 39 did not meet the SPPI requirement for FVOCI
classification. As a result, these financial assets were classified
as ‘Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss’ upon adoption
of IFRS 9. Debt instruments of $7,026m previously classified as
available for sale under IAS 39, have been reclassified to
amortised cost as a result of ‘hold to collect’
business model classification under IFRS 9. This resulted in a
$441m downward remeasurement of the financial assets now measured
at amortised cost excluding expected credit losses.
|
|
6
|
$2,104m of available for sale non-traded equity instruments have
been reclassified as ‘Financial assets designated and
otherwise mandatorily measured at fair value through profit or
loss’ in accordance with IFRS 9. The Group has elected to
apply the FVOCI option under IFRS 9 for the remaining
$1,813m.
|
|
7
|
$214m of other financial assets measured at amortised cost under
IAS 39 did not meet the SPPI requirement for amortised cost
classification under IFRS 9. As a result, these financial assets
were classified as ‘Financial assets designated and otherwise
mandatorily measured at fair value through profit or
loss’.
|
8
|
'Interests in associates and joint ventures' includes the
consequential downward remeasurement of our interests in associates
and joint ventures as a result of these entities applying IFRS 9 of
$213m. This estimate is subject to change.
|
|
9
|
Changes in the classification and measurement of financial assets
held in our insurance business and the recognition of ECL under
IFRS 9 has resulted in secondary impacts on the present value of
in-force long-term insurance business ('PVIF') and liabilities to
holders of insurance and investment contracts. The gross carrying
value of PVIF reported in ‘Goodwill and intangible
assets’ and liabilities reported in ‘Liabilities under
insurance contracts’ has decreased by $79m and $69m
respectively. Liabilities reported under ‘Financial
liabilities designated at fair value’ have increased by
$9m.
|
|
10
|
As permitted by IFRS 9, fair value designations have been revoked
for certain long-dated liabilities where the accounting mismatch
will be better mitigated by undertaking fair value hedge
accounting, resulting in reclassifications of $7,110m from
'Financial liabilities designated at fair value’ to
'Subordinated liabilities' measured at amortised cost and $2,095m
from ‘Financial liabilities designated at fair value’
to ‘Debt securities in issue’ measured at amortised
cost. A further $124m of associated accrued interest has been
reclassified to ‘Accruals, deferred income and other
liabilities’. In addition, as required by IFRS 9, fair value
designations have been revoked where accounting mismatches no
longer exist, resulting in a further $370m of ‘Subordinated
liabilities' being measured at amortised cost. Together, these
changes result in the financial liabilities now being measured at
amortised cost, decreasing 'Debt securities in issue' by $105m and
'Subordinated Liabilities' by $1,445m.
|
|
11
|
We have considered market practices for the presentation of
$59,267m of financial liabilities which contain both deposit and
derivative components. We have concluded that a change in
accounting policy and presentation from ‘Trading
liabilities’ would be appropriate, since it would better
align with the presentation of similar financial instruments by
peers and therefore provide more relevant information about the
effect of these financial liabilities on our financial position and
performance. As a result, rather than being classified as held for
trading, we will designate these financial liabilities as at fair
value through profit or loss since they are managed and their
performance evaluated on a fair value basis.
|
|
12
|
While IFRS 9 ECL has no effect on the carrying value of FVOCI
financial assets, which remain measured at fair value, the adoption
of IFRS 9 results in a transfer from the FVOCI reserve (formerly
AFS reserve) to retained earnings to reflect the cumulative
impairment recognised in profit or loss in accordance with IFRS 9
(net of impairment losses previously recognised in profit or loss
under IAS 39). The amount transferred from 'Other reserves' to
'Retained earnings' was $61m. The resulting cumulative expected
credit losses recognised in ‘Retained earnings’ on
financial assets measured at FVOCI on adoption of IFRS 9 is $184m.
In addition, the cumulative AFS reserve relating to financial
investments reclassified to 'Financial assets designated and
otherwise mandatorily measured at fair value through profit or
loss’ in accordance with IFRS 9 has been transferred to
retained earnings.
|
|
||
|
|
|
25
|
HSBC Holdings plc IFRS 9
2018
|
|
|
Cautionary statement regarding
forward-looking statements
|
|
|
●
|
Changes in general economic conditions in the markets in which
we operate, such as continuing or deepening recessions and
fluctuations in employment beyond those factored into consensus
forecasts; changes in foreign exchange rates and interest rates;
volatility in equity markets; lack of liquidity in wholesale
funding markets; 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; and consumer perception as to the continuing availability
of credit 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; 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; changes in bankruptcy legislation in the principal
markets in which we operate and the consequences thereof; general
changes in government policy that may significantly influence
investor decisions; extraordinary government actions as a result of
current market turmoil; other unfavourable political or diplomatic
developments producing social instability or legal uncertainty
which in turn may affect demand for our products and services; the
costs, effects and outcomes of product 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, including securities firms.
|
|
|
●
|
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). 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 63 to 66
of the Annual Report and Accounts
2017.
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HSBC Holdings plc IFRS 9
2018
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26
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HSBC
Holdings plc
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By:
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Name:
Ben J S Mathews
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Title:
Group Company Secretary
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Date:
27 February
2018
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