RNS Number : 2814D
HSBC Holdings PLC
18 February 2020
 

 

 

 

HSBC Holdings plc

Pillar 3 Disclosures at 31 December 2019

 

 

Contents

 

Page

Introduction

3

Highlights

3

Key metrics

4

Pillar 3 disclosures

5

Regulatory developments

5

Risk management

7

Capital and RWAs

13

Capital management

13

Own funds

13

Leverage

15

Pillar 1 minimum capital requirements and RWA flow

17

Minimum requirement for own funds and eligible liabilities

20

Pillar 2 and ICAAP

29

Credit risk

30

Counterparty credit risk

62

Securitisation

66

Market risk

72

Non-financial risk

80

Liquidity

82

Other risks

86

Appendices

 

Appendix I - Additional tables

87

Appendix II - Countercyclical capital buffer

104

Appendix III - Asset encumbrance

105

Appendix IV - Summary of disclosures withheld

106

Other Information

 

Abbreviations

107

Cautionary statement regarding forward-looking statements

109

Contacts

109

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 '$m' and '$bn' represent millions and billions (thousands of millions) of US dollars respectively.

 

 

Tables

 

 

 

 

Ref

Page

1

Key metrics (KM1/IFRS9-FL)

a

4

 

2

Reconciliation of balance sheets - financial accounting to regulatory scope of consolidation

 

9

 

3

Principal entities with a different regulatory and accounting scope of consolidation (LI3)

 

10

 

4

Differences between accounting and regulatory scopes of consolidation and mapping of financial statement categories with regulatory risk categories (LI1)

 

11

 

5

Main sources of differences between regulatory exposure amounts and carrying values in financial statements (LI2)

a

12

 

6

Own funds disclosure

b

13

 

7

Leverage ratio common disclosure (LRCom)

b

15

 

8

Summary reconciliation of accounting assets and leverage ratio exposures (LRSum)

a

16

 

9

Leverage ratio - Split of on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures) (LRSpl)

b

16

 

10

Overview of RWAs (OV1)

b

18

 

11

RWA flow statements of credit risk exposures under the IRB approach (CR8)

 

18

 

12

RWA flow statements of CCR exposures under IMM (CCR7)

 

19

 

13

RWA flow statements of market risk exposures under IMA (MR2-B)

 

19

 

14

Key metrics of the resolution groups (KM2)

 

20

 

15

TLAC composition (TLAC1)

 

21

 

16

HSBC Holdings plc creditor ranking (TLAC3)

 

22

 

17

HSBC UK Bank plc creditor ranking (TLAC2)
 

 

22

 

18

HSBC Bank plc creditor ranking (TLAC2)
 

 

23

 

19

HSBC Asia Holdings Ltd creditor ranking (TLAC3)

 

23

 

20

The Hongkong and Shanghai Banking Corporation Ltd creditor ranking (TLAC2)
 

 

23

 

21

Hang Seng Bank Ltd creditor ranking (TLAC2)
 

 

24

 

22

HSBC North America Holdings Inc. creditor ranking (TLAC3)

 

24

 

23

Credit risk exposure - summary (CRB-B)

a

27

 

24

Credit quality of exposures by exposure classes and instruments (CR1-A)

 

28

 

25

Credit quality of exposures by industry or counterparty types (CR1-B)

 

30

 

26

Credit quality of exposures by geography (CR1-C)

 

31

 

27

Changes in stock of general and specific credit risk adjustments (CR2-A)

 

31

 

28

Changes in stock of defaulted loans and debt securities (CR2-B)

 

32

 

29

Credit quality of forborne exposures
 

 

32

 

30

Credit quality of performing and non-performing exposures by past due days

 

33

 

31

Collateral obtained by taking possession and execution processes

 

33

 

32

Performing and non-performing exposures and related provisions

 

34

 

33

Amount of past due unimpaired and credit-impaired exposures by geographical region
 

 

34

 

34

Geographical breakdown of exposures (CRB-C)

 

35

 

35

Concentration of exposures by industry or counterparty types (CRB-D)

 

37

 

36

Maturity of on-balance sheet exposures (CRB-E)

 

39

 

37

Credit risk mitigation techniques - overview (CR3)

 

41

 

38

Standardised approach - credit conversion factor ('CCF') and credit risk mitigation ('CRM') effects (CR4)

b

41

 

39

Credit risk mitigation techniques - IRB and Standardised

 

42

 

40

IRB - Effect on RWA of credit derivatives used as CRM techniques (CR7)

 

42

 

41

Standardised approach - exposures by asset class and risk weight (CR5)

b

43

 

42

Wholesale IRB credit risk models

 

46

 

43

IRB models - estimated and actual values (wholesale)

 

47

 

44

Retail IRB risk rating systems

 

48

 

45

IRB models - estimated and actual values (retail)

 

50

 

 

 

 

 

 

 

 

 

46

Wholesale IRB exposure - back-testing of probability of default (PD) per portfolio (CR9)

 

51

 

47

Retail IRB exposure - back-testing of probability of default (PD) per portfolio (CR9)

 

53

 

48

Analysis of counterparty credit risk exposure by approach (excluding centrally cleared exposures) (CCR1)

 

55

 

49

Credit valuation adjustment (CVA) capital charge (CCR2)

 

56

 

50

Standardised approach - CCR exposures by regulatory portfolio and risk weights (CCR3)

 

56

 

51

Impact of netting and collateral held on exposure values (CCR5-A)

 

56

 

52

Composition of collateral for CCR exposure (CCR5-B)

 

56

 

53

Credit derivatives exposures (CCR6)

 

57

 

54

Exposures to central counterparties (CCR8)

 

57

 

55

Securitisation exposure - movement in the year

 

59

 

56

Securitisation - asset values and impairments

 

60

 

57

Securitisation exposures in the non-trading book (SEC1)

 

60

 

58

Securitisation exposures in the trading book (SEC2)

 

61

 

59.i

Securitisation exposures in the non-trading book and associated capital requirements - bank acting as originator or sponsor (under the pre-existing framework) (SEC3)

 

61

 

59.ii

Securitisation exposures in the non-trading book and associated capital requirements - bank acting as originator or sponsor (under the new framework) (SEC3)

 

62

 

60.i

Securitisation exposures in the non-trading book and associated capital requirements - bank acting as investor (under the pre-existing framework) (SEC4)

 

63

 

60.ii

Securitisation exposures in the non-trading book and associated capital requirements - bank acting as investor (under the new framework) (SEC4)

 

63

 

61

Market risk under standardised approach (MR1)

 

64

 

62

Market risk under IMA (MR2-A)

 

64

 

63

IMA values for trading portfolios (MR3)

 

67

 

64

Prudential valuation adjustments (PV1)

 

69

 

65

Operational risk RWAs

 

70

 

66

Level and components of HSBC Group consolidated liquidity coverage ratio (LIQ1)

 

72

 

67

Analysis of on-balance sheet encumbered and unencumbered assets
 

 

73

 

68

Non-trading book equity investments

 

75

 

69

Wholesale IRB exposure - by obligor grade

 

76

 

70

PD, LGD, RWA and exposure by country/territory

 

77

 

71

Retail IRB exposure - by internal PD band

 

80

 

72

IRB expected loss and CRAs - by exposure class

b

81

 

73

Credit risk RWAs - by geographical region

b

82

 

74

Standardised exposure - by credit quality step

a

83

 

75

Specialised lending on slotting approach (CR10)

 

83

 

76

IRB - Credit risk exposures by portfolio and PD range (CR6)

a

84

 

77

Counterparty credit risk - RWAs by exposure class, product and geographical region

 

90

 

78

IRB - CCR exposures by portfolio and PD scale (CCR4)

 

91

 

79

Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer
 

 

93

 

80

Countercyclical capital buffer
 

 

93

 

81

A - Assets

 

94

 

81

B - Collateral received

 

94

 

81

C - Encumbered assets/collateral received and associated liabilities

 

94

 

The Group has adopted the EU's regulatory transitional arrangements for International Financial Reporting Standard ('IFRS') 9 Financial instruments. A number of tables in this document report under this arrangement as follows:

a. Some figures (indicated with ^) within the table have been prepared on an IFRS 9 transitional basis.

b. All figures within the table have been prepared on an IFRS 9 transitional basis.

All other tables report numbers on the basis of full adoption of IFRS 9.

 

Introduction

 

Highlights

Common equity tier 1 ('CET1') ratio further strengthened over 4Q19 to 14.7% driven by RWA reduction of $22bn

http://www.rns-pdf.londonstockexchange.com/rns/2814D_1-2020-2-17.pdf

                          

 

 

 

 

For footnotes, see page 4.

 

 

Key metrics

 

Table 1: Key metrics (KM1/IFRS9-FL)

 

 

 

At

 

 

 

31 Dec

30 Sep

30 Jun

31 Mar

31 Dec

Ref*

 

Footnotes

2019

2019

2019

2019

2018

 

Available capital ($bn)

1

 

 

 

 

 

1

Common equity tier 1 ('CET1') capital

^

124.0

 

123.8

 

126.9

 

125.8

 

121.0

 

2

CET1 capital as if IFRS 9 transitional arrangements had not been applied

 

 

123.1

 

122.9

 

126.0

 

124.9

 

120.0

 

3

Tier 1 capital

^

148.4

 

149.7

 

152.8

 

151.8

 

147.1

 

4

Tier 1 capital as if IFRS 9 transitional arrangements had not been applied

 

 

147.5

 

148.8

 

151.9

 

150.9

 

146.1

 

5

Total regulatory capital

^

172.2

 

175.1

 

178.3

 

177.8

 

173.2

 

6

Total capital as if IFRS 9 transitional arrangements had not been applied

 

 

171.3

 

174.2

 

177.4

 

176.9

 

172.2

 

 

Risk-weighted assets ('RWAs') ($bn)

 

 

 

 

 

 

7

Total RWAs

 

843.4

 

865.2

 

886.0

 

879.5

 

865.3

 

8

Total RWAs as if IFRS 9 transitional arrangements had not been applied

 

 

842.9

 

864.7

 

885.5

 

878.9

 

864.7

 

 

Capital ratios (%)

1

 

 

 

 

 

9

CET1

^

14.7

 

14.3

 

14.3

 

14.3

 

14.0

 

10

CET1 as if IFRS 9 transitional arrangements had not been applied

 

 

14.6

 

14.2

 

14.2

 

14.2

 

13.9

 

11

Tier 1

^

17.6

 

17.3

 

17.2

 

17.3

 

17.0

 

12

Tier 1 as if IFRS 9 transitional arrangements had not been applied

 

 

17.5

 

17.2

 

17.2

 

17.2

 

16.9

 

13

Total capital

^

20.4

 

20.2

 

20.1

 

20.2

 

20.0

 

14

Total capital as if IFRS 9 transitional arrangements had not been applied

 

 

20.3

 

20.1

 

20.0

 

20.1

 

19.9

 

 

Additional CET1 buffer requirements as a percentage of RWA (%)

 

 

 

 

 

 

 

 

 

Capital conservation buffer requirement

 

 

2.50

 

2.50

 

2.50

 

2.50

 

1.88

 

 

Countercyclical buffer requirement

 

 

0.61

 

0.69

 

0.68

 

0.67

 

0.56

 

 

Bank G-SIB and/or D-SIB additional requirements

 

 

2.00

 

2.00

 

2.00

 

2.00

 

1.50

 

 

Total of bank CET1 specific buffer requirements

 

 

5.11

 

5.19

 

5.18

 

5.17

 

3.94

 

 

Total capital requirement (%)

 

2

 

 

 

 

 

 

Total capital requirement

 

 

11.0

 

11.0

 

11.0

 

11.0

 

10.9

 

 

CET1 available after meeting the bank's minimum capital requirements

 

8.5

 

8.1

 

8.1

 

8.1

 

7.9

 

 

Leverage ratio

3

 

 

 

 

 

15

Total leverage ratio exposure measure ($bn)

 

 

2,726.5

 

2,708.2

 

2,786.5

 

2,735.2

 

2,614.9

 

16

Leverage ratio (%)

^

5.3

 

5.4

 

5.4

 

5.4

 

5.5

 

17

Leverage ratio as if IFRS 9 transitional arrangements had not been applied (%)

 

 

5.3

 

5.4

 

5.3

 

5.4

 

5.5

 

 

Liquidity Coverage Ratio ('LCR')

 

4

 

 

 

 

 

 

Total high-quality liquid assets ($bn)

 

601.4

 

513.2

 

532.8

 

535.4

 

567.2

 

 

Total net cash outflow ($bn)

 

400.5

 

378.0

 

391.0

 

374.8

 

368.7

 

 

LCR ratio (%)

 

150.2

 

135.8

 

136.3

 

142.9

 

153.8

 

*   The references in this and subsequent tables identify the lines prescribed in the EBA template where applicable and where there is a value.

^    Figures have been prepared on an IFRS 9 transitional basis.

1   Effective 30 June 2019, the capital figures and ratios are reported in accordance with the revised Capital Requirements Regulation and Directive, as implemented ('CRR II'). Prior period capital figures and ratios are reported on a Capital Requirements Regulation and Directive ('CRD IV') transitional basis.

2   Total capital requirement is defined as the sum of Pillar 1 and Pillar 2A capital requirements set by the Prudential Regulation Authority ('PRA'). Our Pillar 2A requirement at 31 December 2019, as per the PRA's Individual Capital Requirement based on a point in time assessment, was 3.0% of RWAs, of which 1.7% was met by CET1. The minimum requirements represent the total capital requirement to be met by CET1.

3   Effective 30 June 2019, the leverage ratio is calculated using the CRR II end point basis for capital.  Prior period leverage ratios are calculated on the CRD IV end point basis for capital.

4   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.

We have adopted the regulatory transitional arrangements, including paragraph four within article 473a of the Capital Requirements Regulation, published by the EU on 27 December 2017 for IFRS 9 'Financial Instruments'. These 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 proportion that banks may add back starts at 95% in 2018, and reduces to 25% by 2022. 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.

The impact is calculated separately for portfolios using the standardised ('STD') and internal ratings based ('IRB') approaches and, for IRB portfolios, there is no add-back to capital unless loan loss allowances exceed regulatory 12-month expected losses. 
Any add-back must be tax affected and accompanied by a recalculation of capital deduction thresholds, exposure and RWAs.

In the current period, the add-back to the capital base amounted to $1.0bn under the STD approach with a tax impact of $0.2bn and a capital deduction threshold impact of $0.1bn. This resulted in a net add-back of $0.9bn.

 

Pillar 3 disclosures

Regulatory framework for disclosure

We are supervised on a consolidated basis in the United Kingdom ('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, who 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 the consolidated Group level, capital is calculated for prudential regulatory reporting purposes using the Basel III framework of the Basel Committee ('Basel') as implemented by the European Union ('EU') in 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 implementation of Basel's framework, so local regulation in 2019 may have been on the basis of Basel I, II or III.

The Basel framework is structured around three 'pillars': the Pillar 1 minimum capital requirements and Pillar 2 supervisory review process are complemented by Pillar 3 market discipline. The aim of Pillar 3 is to produce disclosures that allow market participants to assess the scope of application by banks of the Basel framework and the rules in their jurisdiction, their capital condition, risk exposures and risk management processes, and hence their capital adequacy.

Our Pillar 3 Disclosures at 31 December 2019 comprises both quantitative and qualitative information required under Pillar 3. They are made in accordance with Part Eight of CRR II and the European Banking Authority's ('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 Group's disclosure policy framework as approved by the Group Audit Committee ('GAC'). Information relating to the rationale for withholding certain disclosures is provided in Appendix IV.

 

Comparatives

To give insight into movements during the year, we provide comparative figures for the previous year or period, analytical review 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 RWAs by article 92 of the Capital Requirements Regulation. Table name references and row numbering in tables identify those prescribed in the relevant EBA guidelines where applicable and where there is a value.

Where disclosures have been enhanced, or are new, we do not generally restate or provide prior year 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 comparative disclosures.

Frequency and location

We publish comprehensive Pillar 3 disclosures annually and at interim on our website www.hsbc.com, concurrently with the release of our Annual Report and Accounts and Interim Report. Quarterly earnings releases also include regulatory information in line with the guidelines on the frequency of regulatory disclosures. 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 Annual Report and Accounts 2019 or other locations. 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.

Material risks

Pillar 3 requires all material risks to be disclosed to provide a comprehensive view of a bank's risk profile. In addition to the disclosure in this document, other information on material risks can be found on page 83 of the Annual Report and Accounts 2019. This includes:

•    Credit risk (refer to page 84 of the Annual Report and Accounts 2019)

•    Capital and liquidity risk (refer to page 130 of the Annual Report and Accounts 2019)

•    Market risk (refer to page 135 of the Annual Report and Accounts 2019)

•    Resilience risk (refer to page 143 of the Annual Report and Accounts 2019)

•    Regulatory compliance risk (refer to page 144 of the Annual Report and Accounts 2019)

•    Financial crime and fraud risk (refer to page 145 of the Annual Report and Accounts 2019)

•    Model risk (refer to page 146 of the Annual Report and Accounts 2019)

•    Insurance manufacturing operations risk (refer to page 146 of the Annual Report and Accounts 2019)

Information on climate change risk can be found on page 22 of the Annual Report and Accounts 2019.

Capital buffers

Our geographical breakdown and institution-specific countercyclical capital buffer ('CCyB') disclosure is provided in Appendix II. The G-SIB Indicators disclosure is published annually on our website, www.hsbc.com.

Remuneration

Our remuneration policy, including the remuneration committee membership and activities, remuneration strategy and remuneration details of HSBC's Identified Staff and Material Risk Takers, is set out in the Directors' Remuneration Report on page 184 of the Annual Report and Accounts 2019.

Regulatory developments

The UK's withdrawal from the EU

As a result of the decision of the referendum on 23 June 2016, 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 is currently expected to end on 
31 December 2020. This implementation period may be extended by a further two years, subject to political agreement.

In preparation for the UK leaving without an agreement, a series of statutory instruments were made to transpose into UK law all of the EU laws and regulations that were directly applicable to UK firms on exit day. Although these statutory instruments were prepared for the UK leaving without a deal, it is anticipated that they will form the basis of the UK's regulation after the implementation period has ended; however, these may be subject to change to reflect the introduction of new EU law during the implementation period and the terms of any trade deal between the UK and the EU.

The Basel Committee

In December 2017, Basel published the Basel III Reforms. The package is broadly final, with Basel having completed a recalibration of the market risk RWA regime, the Fundamental Review of the Trading Book ('FRTB'), in January 2019. The remaining outstanding element is the revision of the calibration of the CVA framework, which Basel consulted on in November 2019.

The package aims for a 1 January 2022 implementation, with a five-year transitional provision for the output floor. This floor ensures that, at the end of the transitional period, banks' total

RWAs are 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.

We currently estimate our pre-mitigation RWAs could potentially rise in the range of 5% to 10% as at 1 January 2022 as a result of the regulatory changes. The primary drivers include changes in the market risk, operational risk and credit valuation adjustment methodologies, as well as the potential lack of equivalence for certain investments in funds. We plan to take action to substantially mitigate a significant proportion of the increase.

We estimate that there will be an additional RWA impact as a result of the output floor from 2026.

There remains a significant degree of uncertainty in the impact due to the number of national discretions within Basel's reforms, the need for further supporting technical standards to be developed and the lack of clarity regarding their implementation following the UK's withdrawal from the EU. Furthermore, the impact does not take into consideration the possibility of offsets against Pillar 2, which may arise as the shortcomings within Pillar 1 are addressed.

The Capital Requirements Regulation amendments

In June 2019, the EU enacted the final rules amending the Capital Requirements Regulation, known as the CRR II. This was the EU's implementation of the Financial Stability Board's ('FSB') requirements for Total Loss Absorbing Capacity ('TLAC'), known in Europe as the Minimum Requirement for Own Funds and Eligible Liabilities ('MREL'). Furthermore, it also included changes to the own funds regime.

The CRR II will also implement the first tranche of changes to the EU's legislation to reflect the Basel III Reforms, including the FRTB, 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.

Since Basel's review of the calibration of the FRTB came too late to be included in the final CRR II text, the changes are being incorporated by way of a Delegated Act, which was published in near final format in December 2019.  This introduces the FRTB in the EU as a reporting requirement only until a full impact assessment can be performed. Reporting on the standardised approach will begin 12 months after the enactment of the Delegated Act; whereas reporting on the modelled approaches will begin three years after enactment. A final date for the implementation of the FRTB in the EU has yet to be agreed.

The CRR II applies to HSBC's subsidiaries in the EU. In the UK, only the parts of the CRR II that are in force at the end of the Brexit implementation period will be transposed into UK law. As a result, any elements that are scheduled to enter into force after the end of the implementation period will need to be implemented separately by the UK.

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 ('CRR III'). In 2019, the European Commission ('EC') began consulting on the implementation of the CRR III, which will include reforms to credit risk, operational risk, and the output floor. The EC is expected to produce a draft CRR III text in the second quarter of 2020. The EU implementation will then be subject to an extensive negotiation process with the EU Council and Parliament. As a result, the final form of the rules remains unclear.

It is expected that the Brexit implementation period will have been completed before the CRR III enters into EU law. As a result, the UK will have to implement the remaining Basel III Reforms independently under UK law.

Other developments

In December 2019, the UK's Financial Policy Committee ('FPC') issued the latest Financial Stability Report. In the report, the FPC announced that it will increase the UK's countercyclical buffer from 1% to 2% on 16 December 2020, in order to give the UK more flexibility in times of future stress. It considers that the UK remains in a standard risk environment and as a result, the total loss absorbing capacity in the banking system should remain unchanged, notwithstanding the buffer increase. To this end, the PRA will consult in 2020 on proposals to reduce Pillar 2A requirements to reflect the additional resilience associated with a higher buffer.

The FPC also announced a review of IFRS9 and stress testing to ensure that there is a permanent solution to avoid unwarranted capital increases as a result of the interaction between the two. This may result in amendments to minimum capital requirements and TLAC.

In October 2019, the EBA published a consultation paper on draft guidelines concerning the carve-out of 'structural FX positions' from Pillar 1 market risk RWAs. The guidelines aim to ensure consistency in determining which positions qualify for the Pillar 1 carve out.

In July 2019, the Bank of England ('BoE') published its Resolvability Assessment Framework ('RAF'), which requires firms to develop capabilities to address eight identified barriers to resolvability. Banks are required to assess their resolvability in accordance with the BoE's criteria, submit this assessment by October 2020 and publish a summary by June 2021. Contemporaneously, the BoE will disclose its assessment of each firm's resolvability. The deadline for full compliance with the RAF framework is 1 January 2022.

In April 2019, the PRA issued statements setting out its expectations of how firms should manage the financial risks from climate change, focusing on governance, risk management, scenario analysis and disclosure areas. In particular, there is a requirement that the risk associated with climate change should be assessed and captured in firms' Pillar 2 assessments. The PRA also announced in December 2019 that the effects of climate change will be included in its 2021 stress test and are currently consulting on the form it might take.

Risk management

 

Our risk management framework

 

We use an enterprise-wide risk management framework across the organisation and across all risk types. It is underpinned by our risk culture.

The framework fosters continuous monitoring of the risk environment, and promotes risk awareness and sound operational and strategic decision making. It also ensures we have a consistent approach to monitoring, managing and mitigating the risks we accept and incur in our activities.

Further information on our risk management framework is set out on page 74 of the Annual Report and Accounts 2019. The management and mitigation of principal risks facing the Group is described in our top and emerging risks on page 76 of the Annual Report and Accounts 2019.

Commentary on hedging strategies and associated processes can be found in the Market risk and Securitisation sections of this document.

Culture

HSBC has long recognised the importance of a strong culture. Our  culture is reinforced by our values. It is instrumental in aligning the behaviours of individuals with our attitude to assuming and managing risk, which helps to ensure that our risk profile remains in line with our risk appetite. The fostering of a strong culture is a key responsibility of our senior executives.

Our culture is also reinforced by our approach to remuneration. Individual awards, including those for senior executives, are based on compliance with our values and the achievement of financial and non-financial objectives, which are aligned to our risk appetite and global strategy.

Further information on risk and remuneration is set out on page 207 of the Annual Report and Accounts 2019.

Risk governance

The Board has ultimate responsibility for the effective management of risk and approves our risk appetite. It is advised on risk-related matters by the Group Risk Committee ('GRC') and  the Financial System Vulnerabilities Committee ('FSVC'). The final meeting of the FSVC was held on 15 January 2020, with responsibility for oversight of financial crime risk transferred to the GRC, which will continue to advise the Board on risk-related matters.

The activities of the GRC and the FSVC are set out on pages 178 to 182 of the Annual Report and Accounts 2019.

Executive accountability for the ongoing monitoring, assessment and management of the risk environment, and the effectiveness of the risk management framework resides with the Group Chief Risk Officer ('CRO'). The CRO is supported by the Risk Management Meeting ('RMM') of the Group Management Board.

The management of financial crime risk resides with the Group Chief Compliance Officer ('COO'). The COO is supported by the Financial Crime Risk Management Meeting.

Further information is available on page 145 of the Annual Report and Accounts 2019.

Day-to-day responsibility for risk management is delegated to senior managers with individual accountability for decision making. These senior managers are supported by global functions. All our people have a role to play in risk management. These roles are defined using the three lines of defence model, which takes into account our business and functional structures.

We use a defined executive risk governance structure to ensure appropriate oversight and accountability for risk, which facilitates the reporting and escalation to the RMM.

Further information about the Group's three lines of defence model and executive risk governance structures is available on page 75 of the Annual Report and Accounts 2019.

Risk appetite

Risk appetite is a key component of our management of risk. It describes the type and quantum of risk that the Group is willing to accept in achieving its medium- and long-term strategic goals. At HSBC, risk appetite is managed through a global risk appetite framework and articulated in a risk appetite statement ('RAS'), which is approved biannually by the Board on the advice of the GRC.

Our risk appetite informs our strategic and financial planning process, defining the desired forward-looking risk profile of the Group. It is also integrated within other risk management tools, such as the top and emerging risks report and stress testing, to ensure consistency in risk management.

Information about our risk management tools is set out from page 73 of the Annual Report and Accounts 2019. Details of the Group's overarching risk appetite are set out on page 73 of the Annual Report and Accounts 2019.

Stress testing

HSBC operates a wide-ranging stress testing programme that supports our risk management and capital planning. It includes execution of stress tests mandated by our regulators. Our stress testing is supported by dedicated teams and infrastructure.

Our testing programme assesses our capital strength and enhances our resilience to external shocks. It also helps us understand and mitigate risks, and informs our decision about capital levels. As well as taking part in regulatory driven stress tests, we conduct our own internal stress tests.

The Group stress testing programme is overseen by the GRC, and results are reported, where appropriate, to the RMM and GRC.

Further information about stress testing and details of the Group's regulatory stress test results are set out on page 75 of the Annual Report and Accounts 2019.

Global Risk function

We have a dedicated Global Risk function, headed by the Group Chief Risk Officer, which is responsible for the Group's risk management framework. This includes establishing global policy, monitoring risk profiles, and forward-looking risk identification and management. Global Risk is made up of sub-functions covering all risks to our operations. It is independent from the global businesses in order to provide challenge, appropriate oversight and balance in risk/return decisions. The Global Risk function operates in line with the three lines of defence model.

For further information see page 75 of the Annual Report and Accounts 2019.

Risk management and internal control

systems

 

The Directors are responsible for maintaining and reviewing the effectiveness of risk management and internal control systems, and for determining the aggregate level and risk types they are willing to accept in achieving the Group's business objectives. On behalf of the Board, the GAC has responsibility for oversight of risk management and internal controls over financial reporting, and the GRC has responsibility for oversight of risk management and internal controls other than for financial reporting.

The Directors, through the GRC and the GAC received regular updates and confirmation that management has taken, or was taking, the necessary actions to remediate any failings or weaknesses identified through the operation of our framework of controls.

HSBC's key risk management and internal control procedures are described on page 173 of the Annual Report and Accounts 2019, where the Report of the Directors on the effectiveness of internal controls can also be found.

 

Risk measurement and reporting systems

Our risk measurement and reporting systems are designed to help ensure that risks are comprehensively captured with all the attributes necessary to support well-founded decisions, that those attributes are accurately assessed, and that information is delivered in a timely manner for those risks to be successfully managed and mitigated.

Risk measurement and reporting systems are also subject to a governance framework designed to ensure that their build and implementation are fit for purpose and functioning appropriately. Risk information systems development is a key responsibility of the Global Risk function, while the development and operation of risk rating and management systems and processes are ultimately subject to the oversight of the Board.

We continue to invest significant resources in IT systems and processes in order to maintain and improve our risk management capabilities. Group standards govern the procurement and operation of systems used in our subsidiaries to process risk information within business lines and risk functions.

Risk measurement and reporting structures deployed at Group level are applied throughout global businesses and major operating subsidiaries through a common operating model for integrated risk management and control. This model sets out the respective responsibilities of Group, global business, region and country level risk functions in respect of risk governance and oversight, compliance risks, approval authorities and lending guidelines, global and local scorecards, management information and reporting, and relations with third parties such as regulators, rating agencies and auditors.

Risk analytics and model governance

 

The Global Risk function manages a number of analytics disciplines supporting the development and management of models, including those for risk rating, scoring, economic capital and stress testing; covering different risk types and business segments. The analytics functions formulate technical responses to industry developments and regulatory policy in the field of risk analytics, develops HSBC's global risk models, and oversees local model development and use around the Group toward our implementation targets for IRB approaches.

The Global Model Oversight Committee ('Global MOC') is the primary committee responsible for the oversight of Model Risk globally within HSBC. It serves an important role in providing strategic direction on the management of models and their associated risks to HSBC's businesses globally and is an essential element of the governance structure for model risk management. Global MOC is supported by Functional MOCs at the Global and Regional levels which are responsible for model risk management within their functional areas, including wholesale credit risk, market risk, retail risk, and finance.

The Global MOC meets regularly and reports to RMM. It is chaired by the Group CRO and membership includes the CEOs of the Global Businesses, and senior executives from Risk, Finance and global businesses. Through its oversight of the functional MOCs, it identifies emerging risks for all aspects of the risk rating system, ensuring that model risk is managed within our risk appetite statement, and formally advises RMM on any material model-related issues.

Models are also subject to an independent validation process and governance oversight by the Model Risk Management team within Global Risk. The team provides robust challenge to the modelling approaches used across the Group. It also ensures that the performance of those models is transparent and that their limitations are visible to key stakeholders. The development and use of data and models to meet local requirements are the responsibility of global businesses or functions, as well as regional and/or local entities under the governance of their own management, subject to overall Group policy and oversight.

Regulatory and other expectations continue to evolve with regards to our capability and practice of model risk management. We have benchmarked our capability against leading industry practice and are designing a new target operating model for Model Risk Management ('MRM') function, which sets model risk management policy, standards and model risk appetite.

Further information is available on page 146 of the Annual Report and Accounts 2019.

Linkage to the Annual Report and Accounts

2019

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, profit and loss, and risk-weighted assets 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.

Table 2: Reconciliation of balance sheets - financial accounting to regulatory scope of consolidation

 

 

Accounting

balance

sheet

Deconsolidation

of insurance/

other entities

Consolidation

of banking

associates

Regulatory

balance

sheet

 

Ref †

$m

$m

$m

$m

Assets

 

 

 

 

 

Cash and balances at central banks

 

154,099

 

(26

)

299

 

154,372

 

Items in the course of collection from other banks

 

4,956

 

-

 

-

 

4,956

 

Hong Kong Government certificates of indebtedness

 

38,380

 

-

 

-

 

38,380

 

Trading assets

 

254,271

 

(822

)

-

 

253,449

 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

 

43,627

 

(33,839

)

604

 

10,392

 

-  of which: debt securities eligible as tier 2 issued by Group Financial Sector Entities ('FSEs') that are outside the regulatory scope of consolidation

r

-

 

602

 

-

 

602

 

Derivatives

 

242,995

 

(14

)

93

 

243,074

 

Loans and advances to banks

 

69,203

 

(1,309

)

1,316

 

69,210

 

Loans and advances to customers

 

1,036,743

 

(776

)

12,004

 

1,047,971

 

-  of which: lending eligible as tier 2 to Group FSEs outside the regulatory scope of consolidation

r

-

 

392

 

-

 

392

 

expected credit losses on IRB portfolios

h

(6,703

)

-

 

-

 

(6,703

)

Reverse repurchase agreements - non-trading

 

240,862

 

(42

)

127

 

240,947

 

Financial investments

 

443,312

 

(66,551

)

4,485

 

381,246

 

-  of which: lending eligible as tier 2 to Group FSEs outside the regulatory scope of consolidation

r

-

 

367

 

-

 

367

 

Capital invested in insurance and other entities

 

-

 

2,304

 

-

 

2,304

 

Prepayments, accrued income and other assets

 

136,680

 

(6,636

)

588

 

130,632

 

-  of which: retirement benefit assets

j

8,280

 

-

 

-

 

8,280

 

Current tax assets

 

755

 

-

 

-

 

755

 

Interests in associates and joint ventures

 

24,474

 

(430

)

(4,836

)

19,208

 

-  of which: positive goodwill on acquisition

e

486

 

(13

)

-

 

473

 

Goodwill and intangible assets

e

20,163

 

(9,131

)

1,222

 

12,254

 

Deferred tax assets

f

4,632

 

159

 

14

 

4,805

 

Total assets at 31 Dec 2019

 

2,715,152

 

(117,113

)

15,916

 

2,613,955

 

 

Liabilities and equity

 

 

 

 

 

Hong Kong currency notes in circulation

 

38,380

 

-

 

-

 

38,380

 

Deposits by banks

 

59,022

 

(12

)

372

 

59,382

 

Customer accounts

 

1,439,115

 

2,596

 

14,277

 

1,455,988

 

Repurchase agreements - non-trading

 

140,344

 

-

 

-

 

140,344

 

Items in course of transmission to other banks

 

4,817

 

-

 

-

 

4,817

 

Trading liabilities

 

83,170

 

59

 

-

 

83,229

 

Financial liabilities designated at fair value

 

164,466

 

(4,225

)

-

 

160,241

 

-  of which:

 

 

 

 

 

included in tier 1

n

419

 

-

 

-

 

419

 

included in tier 2

o, q, i

10,130

 

-

 

-

 

10,130

 

Derivatives

 

239,497

 

27

 

127

 

239,651

 

-  of which: debit valuation adjustment

i

95

 

-

 

-

 

95

 

Debt securities in issue

 

104,555

 

(2,246

)

-

 

102,309

 

Accruals, deferred income and other liabilities

 

118,156

 

(2,695

)

819

 

116,280

 

Current tax liabilities

 

2,150

 

(45

)

148

 

2,253

 

Liabilities under insurance contracts

 

97,439

 

(97,439

)

-

 

-

 

Provisions

 

3,398

 

(11

)

46

 

3,433

 

-  of which: credit-related contingent liabilities and contractual commitments on IRB portfolios

h

357

 

-

 

-

 

357

 

Deferred tax liabilities

 

3,375

 

(1,337

)

9

 

2,047

 

Subordinated liabilities

 

24,600

 

2

 

118

 

24,720

 

-  of which:

 

 

 

 

 

included in tier 1

l, n

1,825

 

-

 

-

 

1,825

 

included in tier 2

o, q

21,071

 

-

 

-

 

21,071

 

Total liabilities at 31 Dec 2019

 

2,522,484

 

(105,326

)

15,916

 

2,433,074

 

Equity

 

 

 

 

 

Called up share capital

a

10,319

 

-

 

-

 

10,319

 

Share premium account

a, l

13,959

 

-

 

-

 

13,959

 

Other equity instruments

k

20,871

 

-

 

-

 

20,871

 

Other reserves

c, g

2,127

 

1,913

 

-

 

4,040

 

Retained earnings

b, c

136,679

 

(12,595

)

-

 

124,084

 

Total shareholders' equity

 

183,955

 

(10,682

)

-

 

173,273

 

Non-controlling interests

d, m, n, p

8,713

 

(1,105

)

-

 

7,608

 

Total equity at 31 Dec 2019

 

192,668

 

(11,787

)

-

 

180,881

 

Total liabilities and equity at 31 Dec 2019

 

2,715,152

 

(117,113

)

15,916

 

2,613,955

 

†   The references (a)-(r) identify balance sheet components that are used in the calculation of regulatory capital in Table 6: Own funds disclosure on page 13.

Table 3: Principal entities with a different regulatory and accounting scope of consolidation (LI3)

 

 

 

At 31 Dec 2019

 

 

Principal activities

Method of accounting consolidation

Method of regulatory consolidation

 

Footnotes

Proportional consolidation

Neither consolidated nor deducted

Deducted from capital subject to thresholds

Principal associates

 

 

 

 

 

 

The Saudi British Bank

 

Banking services

 Equity

l

 

 

Principal insurance entities excluded from the regulatory consolidation

 

 

 

 

 

 

HSBC Life (International) Ltd

 

Life insurance manufacturing

 Fully consolidated

 

 

l

HSBC Assurances Vie (France)

 

Life insurance manufacturing

 Fully consolidated

 

 

l

Hang Seng Insurance Company Ltd

 

Life insurance manufacturing

 Fully consolidated

 

 

l

HSBC Insurance (Singapore) Pte Ltd

 

Life insurance manufacturing

 Fully consolidated

 

 

l

HSBC Life (UK) Ltd

 

Life insurance manufacturing

 Fully consolidated

 

 

l

HSBC Life Insurance Company Ltd

 

Life insurance manufacturing

 Fully consolidated

 

 

l

HSBC Life Assurance (Malta) Ltd

 

Life insurance manufacturing

 Fully consolidated

 

 

l

HSBC Seguros S.A. (Mexico)

 

Life insurance manufacturing

 Fully consolidated

 

 

l

Principal SPEs excluded from the regulatory consolidation

1

 

 

 

 

 

Metrix Portfolio Distribution plc

 

Securitisation

 Fully consolidated

 

l

 

Neon Portfolio Distribution DAC

 

Securitisation

 Fully consolidated

 

l

 

Regency Assets Ltd

 

Securitisation

 Fully consolidated

 

l

 

1   These SPEs issued no or de minimis share capital.

Measurement of regulatory exposures

This section sets out the main reasons why the measurement of regulatory exposures is not directly comparable with the financial information presented in the Annual Report and Accounts 2019.

The Pillar 3 Disclosures at 31 December 2019 are prepared in accordance with regulatory capital adequacy concepts and rules, while the Annual Report and Accounts 2019 are prepared in accordance with IFRSs. The purpose of the regulatory balance sheet is to provide a point-in-time ('PIT') value of all on-balance sheet assets.

The regulatory exposure value includes an estimation of risk, and is expressed as the amount expected to be outstanding if and when the counterparty defaults.

Moreover, regulatory exposure classes are based on different criteria from accounting asset types and are therefore not comparable on a line by line basis.

The following tables show in two steps how the accounting values in the regulatory balance sheet link to regulatory exposure at default ('EAD').

Table 4 shows the difference between the accounting and regulatory scope of consolidation, and a breakdown of the accounting balances into the risk types that form the basis for regulatory capital requirements. Table 5 then shows the main differences between the accounting balances and regulatory exposures by regulatory risk type.

 

Table 4: Differences between accounting and regulatory scopes of consolidation and mapping of financial statement categories with

regulatory risk categories (LI1)

 

 

 

Carrying value of items

 

Carrying values as reported in published financial statements

Carrying values under scope of regulatory consolidation1

Subject to the credit risk framework

Subject to the counter-party credit risk framework2

Subject to the securitisation framework3

Subject to the market risk framework

Subject to deduction from capital or not subject to regulatory capital requirements

 

$bn

$bn

$bn

$bn

$bn

$bn

$bn

Assets

 

 

 

 

 

 

 

Cash and balances at central banks

154.1

 

154.4

 

154.4

 

-

 

-

 

-

 

-

 

Items in the course of collection from other banks

5.0

 

5.0

 

5.0

 

-

 

-

 

-

 

-

 

Hong Kong Government certificates of indebtedness

38.4

 

38.4

 

38.4

 

-

 

-

 

-

 

-

 

Trading assets

254.3

 

253.4

 

1.2

 

21.3

 

-

 

253.4

 

-

 

Financial assets designated and otherwise mandatorily measured at fair value

43.6

 

10.4

 

4.2

 

3.9

 

2.3

 

-

 

-

 

Derivatives

243.0

 

243.1

 

-

 

242.0

 

1.1

 

243.1

 

-

 

Loans and advances to banks

69.2

 

69.2

 

68.5

 

-

 

0.7

 

-

 

-

 

Loans and advances to customers

1,036.7

 

1,048.0

 

1,021.5

 

2.9

 

23.6

 

-

 

-

 

Reverse repurchase agreements - non-trading

240.9

 

240.9

 

-

 

240.9

 

-

 

-

 

-

 

Financial investments

443.3

 

381.2

 

381.2

 

-

 

-

 

-

 

-

 

Capital invested in insurance and other entities

-

 

2.3

 

1.5

 

-

 

-

 

-

 

0.8

 

Prepayments, accrued income and other assets

136.7

 

130.6

 

47.1

 

55.6

 

-

 

14.8

 

19.5

 

Current tax assets

0.8

 

0.8

 

0.8

 

-

 

-

 

-

 

-

 

Interests in associates and joint ventures

24.5

 

19.2

 

11.6

 

-

 

-

 

-

 

7.6

 

Goodwill and intangible assets

20.1

 

12.3

 

-

 

-

 

-

 

-

 

12.0

 

Deferred tax assets

4.6

 

4.8

 

6.6

 

-

 

-

 

-

 

(1.8

)

Total assets at 31 Dec 2019

2,715.2

 

2,614.0

 

1,742.0

 

566.6

 

27.7

 

511.3

 

38.1

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Hong Kong currency notes in circulation

38.4

 

38.4

 

-

 

-

 

-

 

-

 

38.4

 

Deposits by banks

59.0

 

59.4

 

-

 

-

 

-

 

-

 

59.4

 

Customer accounts

1,439.1

 

1,456.0

 

-

 

-

 

-

 

-

 

1,456.0

 

Repurchase agreements - non-trading

140.3

 

140.3

 

-

 

140.3

 

-

 

-

 

-

 

Items in course of transmission to other banks

4.8

 

4.8

 

-

 

-

 

-

 

-

 

4.8

 

Trading liabilities

83.2

 

83.2

 

-

 

10.3

 

-

 

83.2

 

-

 

Financial liabilities designated at FV

164.5

 

160.2

 

-

 

-

 

-

 

62.1

 

98.1

 

Derivatives

239.5

 

239.7

 

-

 

239.7

 

-

 

239.7

 

-

 

Debt securities in issue

104.6

 

102.3

 

-

 

-

 

-

 

-

 

102.3

 

Accruals, deferred income, and other liabilities

118.2

 

116.3

 

-

 

56.6

 

-

 

-

 

59.7

 

Current tax liabilities

2.1

 

2.3

 

-

 

-

 

-

 

-

 

2.3

 

Liabilities under insurance contract

97.4

 

-

 

-

 

-

 

-

 

-

 

-

 

Provisions

3.4

 

3.4

 

0.6

 

-

 

-

 

-

 

2.8

 

Deferred tax liabilities

3.4

 

2.1

 

2.0

 

-

 

-

 

-

 

2.3

 

Subordinated liabilities

24.6

 

24.7

 

-

 

-

 

-

 

-

 

24.7

 

Total liabilities at 31 Dec 2019

2,522.5

 

2,433.1

 

2.6

 

446.9

 

-

 

385.0

 

1,850.8

 

1   The amounts shown in the column 'Carrying values under scope of regulatory consolidation' do not equal the sum of the amounts shown in the remaining columns of this table for line items 'Derivatives', 'Trading assets' and 'Prepayments, accrued income and other assets' as some of the assets in this column are subject to regulatory capital charges for both CCR and market risk.

2   The amounts shown in the column 'Subject to the counterparty credit risk framework' include both non-trading book and trading book.

3   The amounts shown in the column 'Subject to the securitisation framework' are non-trading book positions. Trading book securitisation positions are included in the market risk column.

 

Table 5: Main sources of differences between regulatory exposure amounts and carrying values in financial statements (LI2)

 

 

 

Of which items subject to:

 

 

Total

Credit risk framework

CCR framework

Securitisation framework

 

Footnotes

$bn

$bn

$bn

$bn

Carrying value of assets within scope of regulatory consolidation

1

2,575.9

 

1,742.0

 

566.6

 

27.7

 

Carrying value of liabilities within scope of regulatory consolidation

1

582.3

 

2.6

 

446.9

 

-

 

Net carrying value within scope of regulatory consolidation

 

1,993.6

 

1,739.4

 

119.7

 

27.7

 

Off-balance sheet amounts and potential future exposure for counterparty risk

 

865.5

 

275.6

 

52.9

 

11.2

 

Differences in netting rules

 

4.1

 

10.1

 

(6.0

)

-

 

Differences due to financial collateral on standardised approach

 

(5.2

)

(5.2

)

-

 

-

 

Differences due to expected credit losses on IRB approach

 

6.5

 

6.5

 

-

 

-

 

Differences due to EAD modelling and other differences

 

5.3

 

7.7

 

-

 

(2.4

)

Differences due to credit risk mitigation

 

(10.8

)

-

 

(10.8

)

-

 

Exposure values considered for regulatory purposes at 31 Dec 2019

 

2,859.0

 

2,034.1

 

155.8

 

36.5

 

1   Excludes amounts subject to deduction from capital or not subject to regulatory capital requirements.

Explanations of differences between accounting and regulatory exposure amounts

Off-balance sheet amounts and potential future exposure for counterparty risk

Off-balance sheet amounts subject to credit risk and securitisation regulatory frameworks include undrawn portions of committed facilities, various trade finance commitments and guarantees. We apply a credit conversion factor ('CCF') to these items and add potential future exposures ('PFE') for counterparty credit risk.

Differences in netting rules

The increase from carrying value due to differences in netting rules is the reversal of amounts deducted from gross loans and advances to customers in the published financial statements in accordance with the offsetting criteria of IAS 32 'Financial instruments: presentation'.

Differences due to financial collateral

Exposure value under the standardised approach is calculated after deducting credit risk mitigation whereas accounting value is before such deductions.

Differences due to expected credit losses

The carrying value of assets is net of credit risk adjustments. The regulatory exposure value under IRB approaches is before deducting credit risk adjustments.

Differences due to EAD modelling

The carrying value of assets is usually measured at amortised cost or fair value as at the balance sheet date. For certain IRB models, the exposure value used as EAD is the projected value over the next year.

Differences due to credit risk mitigation

In counterparty credit risk ('CCR'), differences arise between accounting carrying values and regulatory exposure as a result of the application of credit risk mitigation and the use of modelled exposures.

Explanation of differences between accounting fair value and regulatory prudent valuation

Fair value is defined as the best estimate of the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Some fair value adjustments already reflect valuation uncertainty to some degree. These are market data uncertainty, model uncertainty and concentration adjustments.

However, it is recognised that a variety of valuation techniques using stressed assumptions and combined with the range of plausible market parameters at a given point in time may still generate unexpected uncertainty beyond fair value.

A series of additional valuation adjustments ('AVAs') are therefore required to reach a specified degree of confidence (the 'prudent value') set by regulators that differs both in terms of scope and measurement from HSBC's own quantification for disclosure purposes.

AVAs should consider at the minimum: market price uncertainty, bid-offer (close-out) uncertainty, model risk, concentration, administrative costs, unearned credit spreads and investing and funding costs.

AVAs are not limited to level 3 exposures, for which a 95% uncertainty range is already computed and disclosed, but must also be calculated for any exposure for which the exit price cannot be determined with a high degree of certainty. Table 64 presents further information on the prudent valuation adjustment.

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. Subject to the above, there is no current or foreseen impediment to HSBC Holdings' ability to provide such investments.

Each subsidiary manages its own capital to support its planned business growth and meet its local regulatory requirements within the context of the Group capital plan. Capital generated by subsidiaries in excess of planned requirements is returned to HSBC Holdings, normally by way of dividends, in accordance with the Group's capital plan.

During 2019, the Group's subsidiaries paid dividends consistent with their financial performance and local regulatory regimes, informed by the Group's capital plan. No significant restrictions are envisaged with respect to the payment of planned dividends or payments.

However, the ability of subsidiaries to pay dividends or advance monies to HSBC Holdings depends on, among other things, their respective local regulatory capital and banking requirements, exchange controls, statutory reserves, and financial and operating performance. None of our subsidiaries that are excluded from the regulatory consolidation have capital resources below their minimum regulatory requirement. HSBC Holdings has not entered into any Group Financial Support Agreements pursuant to the application of early intervention measures under the Bank Recovery and Resolution Directive.

All capital securities included in the capital base of HSBC have either been issued as fully compliant CRD IV securities (on an end point basis) or in accordance with the rules and guidance in the PRA's previous General Prudential Sourcebook, which are included in the capital base by virtue of the application of CRR II. 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 with reference to our balance sheet on 31 December 2019. This is in addition to the full terms and conditions of our securities, also available on our website.

For further details of our approach to capital risk management, please see page 130 of the Annual Report and Accounts 2019.

Own funds

 

Table 6: Own funds disclosure

 

 

 

 

At
31 Dec
At

 

 

 

31 Dec

2019

31 Dec
2018

Ref*

 

Ref †

$m

$m

 

Common equity tier 1 ('CET1') capital: instruments and reserves

 

 

 

1

Capital instruments and the related share premium accounts

 

22,873

 

22,384

 

 

-  ordinary shares

a

22,873

 

22,384

 

2

Retained earnings

b

127,188

 

121,180

 

3

Accumulated other comprehensive income (and other reserves)

c

1,735

 

3,368

 

5

Minority interests (amount allowed in consolidated CET1)

d

4,865

 

4,854

 

5a

Independently reviewed interim net profits net of any foreseeable charge or dividend

b

(3,381

)

3,697

 

6

Common equity tier 1 capital before regulatory adjustments

 

153,280

 

155,483

 

 

Common equity tier 1 capital: regulatory adjustments

 

 

 

7

Additional value adjustments1

 

(1,327

)

(1,180

)

8

Intangible assets (net of related deferred tax liability)

e

(12,372

)

(17,323

)

10

Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability)

f

(1,281

)

(1,042

)

11

Fair value reserves related to gains or losses on cash flow hedges

g

(41

)

135

 

12

Negative amounts resulting from the calculation of expected loss amounts

h

(2,424

)

(1,750

)

14

Gains or losses on liabilities valued at fair value resulting from changes in own credit standing

i

2,450

 

298

 

15

Defined benefit pension fund assets

j

(6,351

)

(6,070

)

16

Direct and indirect holdings of own CET1 instruments2

 

(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

 

(7,928

)

(7,489

)

28

Total regulatory adjustments to common equity tier 1

 

(29,314

)

(34,461

)

29

Common equity tier 1 capital

 

123,966

 

121,022

 

 

Additional tier 1 ('AT1') capital: instruments

 

 

 

30

Capital instruments and the related share premium accounts

 

20,871

 

22,367

 

31

-  classified as equity under IFRSs

k

20,871

 

22,367

 

33

Amount of qualifying items and the related share premium accounts subject to phase out

from AT1

l

2,305

 

2,297

 

 

 

 

 

 

 

 

 

Table 6: Own funds disclosure (continued)

 

 

 

 

At

 

 

 

31 Dec

2019

31 Dec
2018

Ref*

 

Ref †

$m

$m

34

Qualifying tier 1 capital included in consolidated AT1 capital (including minority interests not included in CET1) issued by subsidiaries and held by third parties

m, n

1,277

 

1,516

 

35

-  of which: instruments issued by subsidiaries subject to phase out

n

1,218

 

1,298

 

36

Additional tier 1 capital before regulatory adjustments

 

24,453

 

26,180

 

 

Additional tier 1 capital: regulatory adjustments

 

 

 

37

Direct and indirect holdings of own AT1 instruments2

 

(60

)

(60

)

43

Total regulatory adjustments to additional tier 1 capital

 

(60

)

(60

)

44

Additional tier 1 capital

 

24,393

 

26,120

 

45

Tier 1 capital (T1 = CET1 + AT1)

 

148,359

 

147,142

 

 

Tier 2 capital: instruments and provisions

 

 

 

46

Capital instruments and the related share premium accounts

o

20,525

 

20,249

 

 

-  of which: instruments grandfathered under CRR II

 

7,067

 

N/A

48

Qualifying own funds instruments included in consolidated T2 capital (including minority interests and AT1 instruments not included in CET1 or AT1) issued by subsidiaries and held by third parties4

p, q

4,667

 

6,480

 

49

-  of row 48: instruments issued by subsidiaries subject to phase out

q

2,251

 

1,585

 

 

-  of row 48: instruments issued by subsidiaries grandfathered under CRR II

 

1,452

 

N/A

51

Tier 2 capital before regulatory adjustments

 

25,192

 

26,729

 

 

Tier 2 capital: regulatory adjustments

 

 

 

52

Direct and indirect holdings of own T2 instruments2

 

(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

(1,361

)

(593

)

57

Total regulatory adjustments to tier 2 capital

 

(1,401

)

(633

)

58

Tier 2 capital

 

23,791

 

26,096

 

59

Total capital (TC = T1 + T2)

 

172,150

 

173,238

 

60

Total risk-weighted assets

 

843,395

 

865,318

 

 

Capital ratios and buffers

 

 

 

61

Common equity tier 1

 

14.7%

14.0%

62

Tier 1

 

17.6%

17.0%

63

Total capital

 

20.4%

20.0%

64

Institution specific buffer requirement

 

5.11%

3.94%

65

-  capital conservation buffer requirement

 

2.50%

1.88%

66

-  counter-cyclical buffer requirement

 

0.61%

0.56%

67a

-  Global Systemically Important Institution ('G-SII') buffer

 

2.00%

1.50%

68

Common equity tier 1 available to meet buffers

 

8.5%

7.9%

 

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)

 

2,938

 

2,534

 

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)

 

13,189

 

12,851

 

75

Deferred tax assets arising from temporary differences (amount below 10% threshold, net of related tax liability)

 

4,529

 

4,956

 

 

Applicable caps on the inclusion of provisions in tier 2

 

 

 

77

Cap on inclusion of credit risk adjustments in T2 under standardised approach

 

2,163

 

2,200

 

79

Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach

 

3,128

 

3,221

 

 

Capital instruments subject to phase-out arrangements (only applicable until 1 Jan 2022)

 

 

 

82

Current cap on AT1 instruments subject to phase out arrangements

 

5,191

 

6,921

 

83

Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)

 

122

 

-

 

84

Current cap on T2 instruments subject to phase out arrangements

 

2,737

 

5,131

 

 

†   The references (a) - (r) identify balance sheet components in Table 2: Reconciliation of balance sheets - financial accounting to regulatory scope of consolidation on page 9 which are used in the calculation of regulatory capital.

1   Additional value adjustments are deducted from CET1. These are calculated on all 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 is drawn from numerous lines of 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.

4   Eligible instruments issued by subsidiaries previously reported in row 46 'Capital instruments and the related share premium accounts' are now reported here. For comparative purposes, 2018 data have been re-presented to reflect this change.

At 31 December 2019, our CET1 ratio increased to 14.7% from 14.0% at 31 December 2018. CET1 capital increased during the year by $2.9bn, mainly as a result of:

•    capital generation of $6.0bn through profits

•    a fall in the deduction for intangible assets of $4.9bn. This was primarily due to $7.3bn of goodwill impairment, partly offset by an increase in internally generated software;

•    a $1.5bn increase in FVOCI reserve; and

•    favourable foreign currency translation differences of $1.0bn.

These increases were partly offset by:

•    dividends and scrip of $9.0bn;

•    share buy-back of $1.0bn; and

•    an increase in the deduction for excess expected loss $0.7bn.

RWAs reduced by $21.9bn during the year. Excluding foreign currency translation differences, the remaining decrease of $26.9bn was primarily driven by methodology and policy changes and model updates which reduced RWAs by $39.9bn. These reductions were partly offset by increases of $12.7bn from movements in asset quality and size, including both RWA increases due to overall lending growth and reductions as a result of active portfolio management.

Leverage

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 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, to ensure that any excessive risk is highlighted, assessed and mitigated appropriately. The risk appetite profile report is presented monthly to the RMM and the GRC.

Our approach to risk appetite is described on page 73 of the Annual Report and Accounts 2019.

Table 7: Leverage ratio common disclosure (LRCom)

 

 

 

At 31 Dec

 

 

 

2019^

2018

Ref*

 

Footnotes

$bn

$bn

 

On-balance sheet exposures (excluding derivatives and SFT)

 

 

 

1

On-balance sheet items (excluding derivatives, SFTs and fiduciary assets, but including collateral)

 

2,119.1

 

2,012.5

 

2

(Asset amounts deducted in determining tier 1 capital)

 

(30.5

)

(33.8

)

3

Total on-balance sheet exposures (excluding derivatives, SFTs and fiduciary assets)

 

2,088.6

 

1,978.7

 

 

Derivative exposures

 

 

 

4

Replacement cost associated with all derivatives transactions (i.e. net of eligible cash variation margin)

 

53.5

 

44.2

 

5

Add-on amounts for potential future exposure ('PFE') associated with all derivatives transactions (mark-to-market method)

 

162.1

 

154.1

 

6

Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to IFRSs

 

8.3

 

5.9

 

7

(Deductions of receivables assets for cash variation margin provided in derivatives transactions)

 

(43.1

)

(21.5

)

8

(Exempted central counterparty ('CCP') leg of client-cleared trade exposures)

 

(53.2

)

(38.0

)

9

Adjusted effective notional amount of written credit derivatives

 

159.4

 

160.9

 

10

(Adjusted effective notional offsets and add-on deductions for written credit derivatives)

 

(150.4

)

(153.4

)

11

Total derivative exposures

 

136.6

 

152.2

 

 

Securities financing transaction exposures

 

 

 

12

Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions

1

451.0

 

429.8

 

13

(Netted amounts of cash payables and cash receivables of gross SFT assets)

1

(196.1

)

(184.5

)

14

Counterparty credit risk exposure for SFT assets

 

10.7

 

11.3

 

16

Total securities financing transaction exposures

 

265.6

 

256.6

 

 

Other off-balance sheet exposures

 

 

 

17

Off-balance sheet exposures at gross notional amount

 

865.5

 

829.8

 

18

(Adjustments for conversion to credit equivalent amounts)

 

(629.8

)

(602.4

)

19

Total off-balance sheet exposures

 

235.7

 

227.4

 

 

Capital and total exposures

 

 

 

20

Tier 1 capital

 

144.8

 

143.5

 

21

Total leverage ratio exposure

 

2,726.5

 

2,614.9

 

22

Leverage ratio (%)

 

5.3

 

5.5

 

EU-23

Choice of transitional arrangements for the definition of the capital measure

 

Fully phased-in

Fully phased-in

^    Figures have been prepared on an IFRS 9 transitional basis.

1   At 31 December 2018, netting of $180.9bn relating to SFT assets was recognised. This had no impact on the total leverage ratio exposure. Comparatives have been restated.

Our leverage ratio calculated in accordance with the Capital Requirements Regulation was 5.3% at 31 December 2019, down from 5.5% at 31 December 2018. The increase in exposure was primarily due to growth in customer lending and financial investments.

At 31 December 2019, the Group's leverage ratio measured under the PRA's UK leverage framework was 5.7%. This measure excludes qualifying central bank balances from the calculation of exposure.

 

At 31 December 2019, our UK minimum leverage ratio requirement of 3.25% under the PRA's UK leverage framework was supplemented by an additional leverage ratio buffer of 0.7% and a countercyclical leverage ratio buffer of 0.2%. These additional buffers translated into capital values of $17.7bn and $5.4bn respectively. We exceeded these leverage requirements.

For further details of the UK leverage ratio, please see page 155 of the Annual Report and Accounts 2019.

 

The following table provides a reconciliation of the total assets in our published balance sheet under IFRS and the total leverage exposure:

Table 8: Summary reconciliation of accounting assets and leverage ratio exposures (LRSum)

 

 

At 31 Dec

 

 

2019

2018

Ref*

 

$bn

$bn

1

Total assets as per published financial statements

2,715.2

 

2,558.1

 

 

Adjustments for:

 

 

2

-  entities which are consolidated for accounting purposes but are outside the scope of regulatory consolidation

(101.2

)

(89.5

)

4

-  derivative financial instruments

(106.4

)

(55.6

)

5

-  securities financing transactions ('SFT')

2.8

 

(5.1

)

6

-  off-balance sheet items (i.e. conversion to credit equivalent amounts of off-balance sheet exposures)

235.7

 

227.4

 

7

-  other

(19.6

)

(20.4

)

8

Total leverage ratio exposure

2,726.5

 

2,614.9

 

 

The table below provides a breakdown of on-balance sheet exposures excluding derivatives, SFTs and exempted exposures, by asset class:

Table 9: Leverage ratio - Split of on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures) (LRSpl)

 

 

At 31 Dec

 

 

2019

2018

Ref*

 

$bn

$bn

EU-1

Total on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures)

2,076.0

 

1,991.0

 

EU-2

trading book exposures

230.8

 

218.5

 

EU-3

banking book exposures

1,845.2

 

1,772.5

 

 

'banking book exposures' comprises:

 

 

EU-4

covered bonds

2.6

 

1.6

 

EU-5

exposures treated as sovereigns

539.3

 

507.3

 

EU-6

exposures to regional governments, multilateral development banks ('MDB'), international organisations and public sector entities not treated as sovereigns

9.4

 

9.3

 

EU-7

institutions

59.3

 

66.8

 

EU-8

secured by mortgage of immovable property

330.4

 

300.0

 

EU-9

retail exposures

106.2

 

82.8

 

EU-10

corporate

603.2

 

614.3

 

EU-11

exposures in default

9.9

 

9.1

 

EU-12

other exposures (e.g. equity, securitisations and other non-credit obligation assets)

184.9

 

181.3

 

Pillar 1 minimum capital requirements and

RWA flow

Pillar 1 covers the minimum capital resource requirements for credit risk, counterparty credit risk, equity, securitisation, market

risk and operational risk. These requirements are expressed in terms of RWAs. The table provides information on the scope of permissible approaches and our adopted approach by risk type.

 

 

 

Credit risk

The Basel framework applies three approaches of increasing sophistication to the calculation of Pillar 1 credit risk capital requirements. The most basic level, the standardised approach, requires banks to use external credit ratings to determine the risk weightings applied to rated counterparties. Other counterparties are grouped into broad categories and standardised risk weightings are applied to these categories. The next level, the foundation IRB ('FIRB') approach, 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 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 determining PD and in quantifying EAD and LGD.

For consolidated Group reporting, we have adopted the AIRB approach for the majority of our business.

Some portfolios remain on the standardised or FIRB approaches:

•     pending the issuance of local regulations or model approval;

•     following supervisory prescription of a non-advanced approach; or

•     under exemptions from IRB treatment.

 

 

 

 

Counterparty credit risk

Four approaches to calculating CCR and determining exposure values are defined by Basel: mark-to-market, original exposure, standardised and internal model method ('IMM'). These exposure values are used to determine capital requirements under one of the three approaches to credit risk: standardised, FIRB or AIRB.

We use the mark-to-market and IMM approaches for CCR. Details of the IMM permission we have received from the PRA can be found in the Financial Services Register on the PRA website. Our aim is to increase the proportion of positions on IMM over time.

Equity

For the non-trading book, equity exposures can be assessed under standardised or IRB approaches.

For Group reporting purposes, all non-trading book equity exposures are treated under the standardised approach.

Securitisation

Basel specifies two approaches for calculating credit risk requirements for securitisation positions in non-trading books: the standardised approach and the IRB approach, which incorporates the ratings based method ('RBM'), the internal assessment approach ('IAA') and the supervisory formula method ('SFM'). Securitisation positions in the trading book are treated within the market risk framework, using the CRD IV standard rules.

On 1 January 2019, the new securitisation framework came into force in the EU for new transactions. This framework prescribes the following approaches:

•      internal ratings-based approach ('SEC-IRBA');

•      external ratings-based approach ('SEC-ERBA');

•      internal assessment approach ('IAA'); and

•      standardised approach ('SEC-SA').

From 1 January 2020, all transactions will be subject to the new framework.

For the majority of the non-trading book securitisation positions, we use the IRB approach, and within this principally the RBM, with lesser amounts on the IAA and the SFM. We also use the standardised approach for an immaterial amount of non-trading book positions. We follow the CRD IV standard rules for the securitisation positions in the trading book.

Our exposures subject to the new framework in 2019 include exposures under SEC-IRBA,SEC-ERBA, IAA and SEC-SA.

Market risk

Market risk capital requirements are calculated using a combination of standard rules and the internal models approach ('IMA'). The latter involves the use of internal value at risk ('VaR') models to measure market risks and determine the appropriate capital requirement. The internal model approach also includes stressed VaR ('SVaR') and incremental risk charge ('IRC'). HSBC does not use or need a Comprehensive Risk Model ('CRM').

The market risk capital requirement is measured using internal market risk models, where approved by the PRA, or under the standard rules. Our internal market risk models comprise VaR, stressed VaR and IRC. Non-proprietary details of the scope of our IMA permission are available in the Financial Services Register on the PRA website. We are in compliance with the requirements regarding i) rules and procedures for inclusion of positions within trading books and ii) application of prudent valuation adjustments to trading book positions.

 

 

Operational risk

Basel allows firms to calculate their operational risk capital requirement under the basic indicator approach, the standardised approach or the advanced measurement approach.

We currently use the standardised approach in determining our operational risk capital requirement. We have in place an operational risk model that is used for economic capital calculation purposes.

 

Table 10: Overview of RWAs (OV1)

 

 

At

 

 

31 Dec

30 Sep

31 Dec

 

 

2019

2019

2019

 

 

RWAs

RWAs

Capital

required

 

 

$bn

$bn

$bn

1

Credit risk (excluding counterparty credit risk)

624.3

 

636.6

 

50.0

 

2

-  standardised approach

126.1

 

129.3

 

10.1

 

3

-  foundation IRB approach

32.3

 

31.0

 

2.6

 

4

-  advanced IRB approach

465.9

 

476.3

 

37.3

 

6

Counterparty credit risk

43.9

 

49.6

 

3.5

 

7

-  mark-to-market

20.6

 

23.4

 

1.7

 

10

-  internal model method

18.7

 

20.4

 

1.5

 

11

-  risk exposure amount for contributions to the default fund of a central counterparty

0.6

 

0.5

 

-

 

12

-  credit valuation adjustment

4.0

 

5.3

 

0.3

 

13

Settlement risk

0.2

 

0.2

 

-

 

14

Securitisation exposures in the non-trading book

8.3

 

6.9

 

0.7

 

15

-  IRB ratings based method

1.8

 

2.2

 

0.1

 

17

-  IRB internal assessment approach

0.6

 

1.0

 

0.1

 

18

-  standardised approach

1.3

 

1.3

 

0.1

 

14a

-  exposures subject to the new securitisation framework1

4.6

 

2.4

 

0.4

 

19

Market risk

29.9

 

36.9

 

2.4

 

20

-  standardised approach

7.8

 

8.1

 

0.6

 

21

-  internal models approach

22.1

 

28.8

 

1.8

 

23

Operational risk

92.8

 

91.1

 

7.4

 

25

-  standardised approach

92.8

 

91.1

 

7.4

 

27

Amounts below the thresholds for deduction (subject to 250% risk weight)

44.0

 

43.9

 

3.5

 

29

Total

843.4

 

865.2

 

67.5

 

1   On 1 January 2019, a new securitisation framework came into force in the EU for new transactions. Existing positions are subject to 'grandfathering' provisions and will transfer to the new framework on 1 January 2020. Our exposures subject to the approaches under the new framework at 31 December 2019 include $1.7bn under the external ratings-based approach, $5.2bn under the internal ratings-based approach, $7.1bn under the internal assessment approach, and $5.8bn under the standardised approach.

Credit risk (including amounts below the thresholds for deduction)

RWAs decreased by $12.2bn in the fourth quarter of the year including an increase of $16.6bn due to foreign currency translation differences. Excluding foreign currency translation differences, the remaining decrease of $28.8bn was primarily driven by asset size decreases of $13.7bn, reflecting active portfolio management, and reductions of $7.3bn due to changes to methodology and policy. These included the effect of risk parameter refinements and securitisation transactions. A further reduction of $5.7bn was due to model updates, especially to global corporate and Private Banking models.

Counterparty credit risk

Counterparty credit risk (including settlement risk) RWAs decreased by $5.7bn primarily due to management initiatives totalling $3.5bn - including hedging, improved collateral recognition and parameter refinements. In addition, lower derivative exposures reduced RWAs by $1.7bn.

Securitisation

The $1.4bn RWA increase is primarily due to new securitisation transactions. During the period, exposures moved from the pre-existing securitisation framework to the new framework due to new deals on existing facilities.

Market risk

RWAs decreased by $7bn mainly due to reductions in sovereign and flow credit portfolio exposures.

Operational risk

RWAs increased by $1.7bn primarily due to increased contributions from Retail Banking and Wealth Management ('RBWM') and Commercial Banking ('CMB') reflecting income growth in those businesses between 2016 and 2019, partly offset by a $0.9bn fall in RWAs caused by an approved change to operational risk methodology.

Table 11: RWA flow statements of credit risk exposures under the IRB approach¹ (CR8)

 

 

RWAs

Capital

required

 

 

$bn

$bn

1

At 1 Oct 2019

507.3

 

40.6

 

2

Asset size

(11.8

)

(0.9

)

3

Asset quality

(2.2

)

(0.2

)

4

Model updates

(3.1

)

(0.2

)

5

Methodology and policy

(6.0

)

(0.5

)

7

Foreign exchange movements

14.0

 

1.1

 

9

At 31 Dec 2019

498.2

 

39.9

 

1   Securitisation positions are not included in this table.

RWAs under the IRB approach decreased by $9.1bn in the fourth quarter of the year, including an increase of $14.0bn due to foreign currency translation differences. The remaining decrease of $23.1bn (excluding foreign currency translation differences) was principally due to:

•    an $11.8bn asset size reduction in RWAs largely due to active portfolio management;

•    a $6.0bn fall in RWAs due to methodology and policy changes - reflecting securitisation transactions, risk parameter refinements and improved collateral recognition; and

•    a $3.1bn decrease in RWAs from model updates, mainly to our global corporate model.

 

Table 12: RWA flow statements of CCR exposures under IMM (CCR7)

 

 

RWAs

Capital

required

 

 

$bn

$bn

1

At 1 Oct 2019

25.0

 

2.0

 

2

Asset size

(2.7

)

(0.3

)

3

Asset quality

(0.1

)

-

 

4

Model updates

(0.1

)

-

 

5

Methodology and policy

(0.3

)

-

 

9

At 31 Dec 2019

21.8

 

1.7

 

RWAs under the IMM decreased by $3.2bn primarily due to management initiatives, including hedging and parameter refinements, and lower derivative exposure.

Table 13: RWA flow statements of market risk exposures under IMA (MR2-B)

 

 

VaR

Stressed
VaR

IRC

Other

Total
RWAs

Total capital required

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

At 1 Oct 2019

6.0

 

8.6

 

10.6

 

3.6

 

28.8

 

2.3

 

2

Movement in risk levels

(0.6

)

(0.5

)

(4.0

)

(0.7

)

(5.8

)

(0.4

)

4

Methodology and policy

(0.1

)

(0.1

)

-

 

(0.7

)

(0.9

)

(0.1

)

8

At 31 Dec 2019

5.3

 

8.0

 

6.6

 

2.2

 

22.1

 

1.8

 

RWAs under the IMA decreased by $6.7bn mainly due to reductions in sovereign and flow credit portfolio exposures.

Minimum requirement for own funds and

eligible liabilities

Overview and requirements

From 1 January 2019, a requirement for total loss-absorbing capacity ('TLAC') was introduced, as defined in the final standards adopted by the Financial Stability Board. 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 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 - namely the European resolution group, the Asian resolution group and the US resolution group. 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.

Resolution structure

 

 

 

 

European resolution group

HSBC Holdings plc

HSBC UK Holdings Limited

 

HSBC Bank plc

 

HSBC UK Bank plc

 

HSBC France

 

Asian resolution group

HSBC Asia Holdings Limited

The Hongkong and Shanghai Banking Corporation Limited

 

Hang Seng Bank Limited

 

US resolution group

HSBC North America Holdings Inc

N/A

 

 

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.

We expect the indicative, external MREL requirements applying to the Group from 2020 to 2021 to 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's confirmation and its review of the MREL framework in 2020.

Further details of our approach to capital management may be found in  'Capital management' on page 152 of the Annual Report and Accounts 2019.

  

Key metrics of the resolution groups

The table below provides a summary of key prudential metrics of the European, Asian and US resolution groups.

Table 14: Key metrics of the resolution groups (KM2)

 

 

Resolution groups

 

 

European1

 

Asian2

 

US3

 

 

At

31 Dec 2019

At

30 Sep 2019

At

30 Jun 2019

 

At

31 Dec 2019

At

30 Sep 2019

At

30 Jun 2019

 

At

31 Dec 2019

At

30 Sep 2019

At

30 Jun 2019

1

Total loss absorbing capacity ('TLAC') available ($m)

94,583

 

95,474

 

97,256

 

 

98,753

 

97,244

 

97,040

 

 

29,843

 

30,184

 

31,739

 

1a

Fully loaded ECL accounting model TLAC

available ($m)

94,439

 

95,282

 

97,055

 

 

98,753

 

97,244

 

97,040

 

 

N/A

N/A

N/A

2

Total RWA at the level of the resolution group ($m)

297,431

 

316,766

 

321,149

 

 

366,076

 

370,590

 

371,100

 

 

128,705

 

139,016

 

140,762

 

3

TLAC as a percentage of RWA (row1/row2) (%)

31.8

 

30.1

 

30.3

 

 

27.0

 

26.2

 

26.1

 

 

23.2

 

21.7

 

22.5

 

3a

Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model RWA (%)

31.8

 

30.1

 

30.2

 

 

27.0

 

26.2

 

26.1

 

 

N/A

N/A

N/A

4

Leverage exposure measure at the level of the resolution group ($m)

1,166,576

 

1,132,679

 

1,176,134

 

 

1,036,243

 

1,024,554

 

1,041,168

 

 

331,869

 

372,556

 

362,621

 

5

TLAC as a percentage of leverage exposure measure (row1/row4) (%)

8.1

 

8.4

 

8.3

 

 

9.5

 

9.5

 

9.3

 

 

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 (%)

8.1

 

8.4

 

8.3

 

 

9.5

 

9.5

 

9.3

 

 

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

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

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

N/A

 

N/A

N/A

N/A

1   The European resolution group reports in accordance with 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 ('HKMA') 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') corresponding to IFRS 9 is not yet effective. Leverage exposure and ratio are calculated under the US supplementary leverage ratio rules.

Given the preferred MPE resolution strategy, and the fact that the BoE framework includes requirements set on the basis of HSBC group consolidated position, the following table presents data for both the consolidated Group and the resolution groups. 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 15: TLAC composition (TLAC1)

 

 

 

 

At 31 Dec 2019

 

 

 

At 30 June 2019

 

 

Group1

 

Resolution group

 

Group1

 

Resolution group

 

 

European1

Asian2

US3

 

European1

Asian2

US3

 

Regulatory capital elements of TLAC and adjustments ($m)

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital before adjustments

123,966

 

110,263

63,156

16,753

 

126,949

 

116,222

61,561

18,649

 

Deduction of CET1 exposures between MPE resolution groups and other group entities

-

 

 

100,028

-

 

-

 

 

-

 

 

102,699

-

 

-

 

1

Common equity tier 1 capital ('CET1')

123,966

 

10,235

63,156

16,753

 

126,949

 

13,523

61,561

18,649

2

Additional tier 1 capital ('AT1') before TLAC adjustments

24,393

 

23,515

5,855

2,240

 

25,878

 

25,089

5,837

2,240

4

Other adjustments

-

 

 

6,673

-

 

-

 

 

-

 

 

7,940

-

 

-

 

5

AT1 instruments eligible under the TLAC framework (row 2 minus row 3 minus row 4)

24,393

 

16,842

5,855

2,240

 

25,878

 

17,149

5,837

2,240

6

Tier 2 capital ('T2') before TLAC adjustments

23,791

 

24,957

7,892

4,643

 

25,432

 

25,167

8,074

5,503

7

Amortised portion of T2 instruments where remaining maturity > 1 year

579

 

579

-

 

-

 

 

1,257

 

302

-

 

-

 

8

T2 capital ineligible as TLAC as issued out of subsidiaries to third parties

-

 

 

-

 

400

 

-

 

 

-

 

 

-

 

400

 

-

 

9

Other adjustments

164

 

 

8,087

-

 

1,793

 

-

 

 

7,947

-

 

2,653

10

T2 instruments eligible under the TLAC framework (row 6 plus row 7 minus row 8 minus row 9)

24,206

 

17,449

7,492

2,850

 

26,689

 

17,522

7,674

2,850

11

TLAC arising from regulatory capital

172,566

 

44,526

76,503

21,843

 

179,516

 

48,194

75,072

23,739

 

Non-regulatory capital elements of TLAC ($m)

 

 

 

 

 

 

 

 

 

 

 

12

External TLAC instruments issued directly by the bank and subordinated to excluded liabilities

81,192

 

50,057

22,257

8,000

 

80,046

 

49,062

21,970

8,000

17

TLAC arising from non-regulatory capital instruments before adjustments

81,192

 

50,057

22,257

 

8,000

 

 

80,046

 

49,062

21,970

 

8,000

 

 

Non-regulatory capital elements of TLAC: adjustments ($m)

 

 

 

 

 

 

 

 

 

 

 

18

TLAC before deductions

253,757

 

94,583

98,760

 

29,843

 

 

259,562

 

97,256

97,042

 

31,739

 

19

Deductions of exposures between MPE resolution groups that correspond to items eligible for TLAC

-

 

 

-

 

7

 

-

 

 

-

 

 

-

 

2

 

-

 

20

Deduction of investments in own other TLAC liabilities

80

 

-

 

-

 

-

 

 

43

 

-

 

-

 

-

 

21

Other adjustments to TLAC

-

 

 

-

 

-

 

-

 

 

-

 

 

-

 

-

 

-

 

22

TLAC after deductions (row 18 minus row 19 minus row 20 minus row 21)

253,677

 

94,583

98,753

29,843

 

 

259,519

 

97,256

97,040

31,739

 

 

Risk-weighted assets and leverage exposure measure for TLAC purposes ($m)

 

 

 

 

 

 

 

 

 

 

 

23

Total risk-weighted assets

843,395

 

297,431

366,076

128,705

 

 

885,971

 

321,149

371,100

140,762

 

24

Leverage exposure measure

2,726,542

 

1,166,576

1,036,243

331,869

 

 

2,786,468

 

1,176,134

1,041,168

362,621

 

 

TLAC ratios and buffers (%)

 

 

 

 

 

 

 

 

 

 

 

25

TLAC (as a percentage of risk-weighted assets)

30.1%

 

31.8%

27.0%

23.2%

 

29.3%

 

30.3%

26.1%

22.5%

26

TLAC (as a percentage of leverage exposure)

9.3%

 

8.1%

9.5%

9.0%

 

9.3%

 

8.3%

9.3%

8.8%

27

CET1 (as a percentage of risk-weighted assets) available after meeting the resolution group's minimum capital and TLAC requirements4

8.5%

 

N/A

N/A

5.2%

 

8.1%

 

N/A

N/A

4.5%

28

Institution-specific buffer requirement expressed as a percentage of risk-weighted assets

5.1%

 

N/A

N/A

2.5%

 

5.2%

 

N/A

N/A

2.5%

29

-  of which: capital conservation buffer requirement

2.5%

 

N/A

N/A

2.5%

 

2.5%

 

N/A

N/A

2.5%

30

-  of which: bank specific countercyclical buffer requirement

0.6%

 

N/A

N/A

N/A

 

0.7%

 

N/A

N/A

N/A

31

-  of which: higher loss absorbency (G-SIB) requirement

2.0%

 

N/A

N/A

N/A

 

2.0%

 

N/A

N/A

N/A

1   The Group and European resolution group reports in accordance with CRR II. Unless otherwise stated all figures are calculated using the EU's regulatory transitional arrangements for IFRS 9 in article 473a. Investments by the European resolution group in the regulatory capital or TLAC of other group companies are deducted from the corresponding form of capital in rows 1, 4 & 9. Buffer requirements are reported as 'Not applicable' as none have yet been set for the European resolution group.

2   Reporting for the Asian resolution group follows HKMA 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') corresponding to IFRS 9 is not yet effective. Leverage exposure and ratio are calculated under the US supplementary leverage ratio rules. Other adjustments for the US resolution group relate to allowances for loan and lease losses that are not TLAC eligible and Tier 2 instruments that currently do not qualify as TLAC. Under the US Final TLAC rules, in addition to the risk-weighted assets component of the TLAC requirement, the US resolution group is subject to an external 2.5% TLAC buffer that is similar to the capital conservation buffer.

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 31 December 2019. 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, https://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 16: HSBC Holdings plc creditor ranking (TLAC3)

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

 

1

 

2

 

3

4

 

 

 

 

(most junior)

 

 

(most senior)

1

Description of creditor ranking

Footnotes

Ordinary shares1

Preference shares and AT1 instruments

Subordinated notes

Senior notes and other pari passu liabilities

 

2

Total capital and liabilities net of credit risk mitigation

 

10,319

 

23,633

 

20,816

 

82,234

 

137,002

 

3

-  of row 2 that are excluded liabilities

2

-

 

-

 

-

 

412

 

412

 

4

Total capital and liabilities less excluded liabilities (row 2 minus row 3)

 

10,319

 

23,633

 

20,816

 

81,822

 

136,590

 

5

-  of row 4 that are potentially eligible as TLAC

 

10,319

 

23,633

 

20,816

 

80,031

 

134,799

 

6

-  of row 5 with 1 year ? residual maturity < 2 years

 

-

 

-

 

-

 

15,658

 

15,658

 

7

-  of row 5 with 2 years ? residual maturity < 5 years

 

-

 

-

 

2,000

 

30,341

 

32,341

 

8

-  of row 5 with 5 years ? residual maturity < 10 years

 

-

 

-

 

7,525

 

27,290

 

34,815

 

9

-  of row 5 with residual maturity ? 10 years, but excluding perpetual securities

 

-

 

-

 

10,391

 

6,742

 

17,133

 

10

-  of row 5 that are perpetual securities

 

10,319

 

23,633

 

900

 

-

 

34,852

 

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 accruals for service company recharges.

Table 17: HSBC UK Bank plc creditor ranking (TLAC2)
 

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

 

1

 

2

 

3

 

4

 

 

 

Footnotes

(most junior)

 

 

(most senior)

1

Is the resolution entity the creditor/investor?

1

 No

 No

 No

 No

 

2

Description of creditor ranking

 

Ordinary 
shares2

AT1 instruments

Subordinated loans

Senior subordinated loans

 

3

Total capital and liabilities net of credit risk mitigation

 

-

 

2,903

 

3,881

 

8,619

 

15,403

 

4

-  of row 3 that are excluded liabilities

 

-

 

-

 

-

 

-

 

-

 

5

Total capital and liabilities less excluded liabilities (row 3 minus row 4)

 

-

 

2,903

 

3,881

 

8,619

 

15,403

 

6

-  of row 5 that are eligible as TLAC

 

-

 

2,903

 

3,881

 

8,619

 

15,403

 

7

-  of row 6 with 1 year ? residual maturity < 2 years

 

-

 

-

 

-

 

-

 

-

 

8

-  of row 6 with 2 years ? residual maturity < 5 years

 

-

 

-

 

-

 

-

 

-

 

9

-  of row 6 with 5 years ? residual maturity < 10 years

 

-

 

-

 

1,700

 

4,627

 

6,327

 

10

-  of row 6 with residual maturity ? 10 years, but excluding perpetual securities

 

-

 

-

 

2,181

 

3,992

 

6,173

 

11

-  of row 6 that are perpetual securities

 

-

 

2,903

 

-

 

-

 

2,903

 

1   The entity's capital and TLAC are owned by HSBC UK Holdings Limited.

2   The nominal value of ordinary shares is £50,002. This excludes the value of share premium and reserves attributable to ordinary shareholders.

Table 18: HSBC Bank plc creditor ranking (TLAC2)
 

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

 

1

 

2

 

3

 

4

 

 

 

Footnotes

(most junior)

 

 

(most senior)

1

Is the resolution entity the creditor/investor?

1

No

No

No

No

 

2

Description of creditor ranking

 

Ordinary shares2

Third Dollar preference shares and AT1 instruments

Undated primary capital notes

Subordinated notes and subordinated loans

 

3

Total capital and liabilities net of credit risk mitigation

 

1,054

 

5,203

 

1,550

 

18,381

 

26,188

 

4

-  of row 3 that are excluded liabilities

 

-

 

-

 

-

 

-

 

-

 

5

Total capital and liabilities less excluded liabilities (row 3 minus row 4)

 

1,054

 

5,203

 

1,550

 

18,381

 

26,188

 

6

-  of row 5 that are eligible as TLAC

 

1,054

 

5,203

 

1,550

 

18,381

 

26,188

 

7

-  of row 6 with 1 year ? residual maturity < 2 years

 

-

 

-

 

-

 

450

 

450

 

8

-  of row 6 with 2 years ? residual maturity < 5 years

 

-

 

-

 

-

 

11,003

 

11,003

 

9

-  of row 6 with 5 years ? residual maturity < 10 years

 

-

 

-

 

-

 

3,391

 

3,391

 

10

-  of row 6 with residual maturity ? 10 years, but excluding perpetual securities

 

-

 

-

 

-

 

2,215

 

2,215

 

11

-  of row 6 that are perpetual securities

 

1,054

 

5,203

 

1,550

 

1,322

 

9,129

 

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.

Asian resolution group

The Asian resolution group comprises HSBC Asia Holdings Ltd, The Hongkong & 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 19: HSBC Asia Holdings Ltd creditor ranking¹ (TLAC3)

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

1

 

2

 

3

4

 

 

 

(most junior)

 

 

(most senior)

1

Description of creditor ranking

Ordinary shares2

AT1 instruments
 

Tier 2 instruments
 

 

LAC loans

 

2

Total capital and liabilities net of credit risk mitigation

56,587

 

5,700

 

1,780

 

21,177

 

85,244

 

3

-  of row 2 that are excluded liabilities

-

 

-

 

-

 

-

 

-

 

4

Total capital and liabilities less excluded liabilities (row 2 minus row 3)

56,587

 

5,700

 

1,780

 

21,177

 

85,244

 

5

-  of row 4 that are potentially eligible as TLAC

56,587

 

5,700

 

1,780

 

21,177

 

85,244

 

6

-  of row 5 with 1 year ? residual maturity < 2 years

-

 

-

 

-

 

-

 

-

 

7

-  of row 5 with 2 years ? residual maturity < 5 years

-

 

-

 

-

 

9,828

 

9,828

 

8

-  of row 5 with 5 years ? residual maturity < 10 years

-

 

-

 

-

 

9,349

 

9,349

 

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.

Table 20: The Hongkong and Shanghai Banking Corporation Ltd creditor ranking (TLAC2)
 

 

 

Creditor ranking ($m)

Sum of
1 to 5

 

 

1

 

2

 

3

 

4

 

5

 

 

 

(most junior)

 

 

 

(most senior)

1

Is the resolution entity the creditor/investor?

Yes

Yes

No1

Yes

Yes

 

2

Description of creditor ranking

Ordinary shares2

AT1 instruments

Primary capital notes

Tier 2 instruments

LAC loans

 

3

Total capital and liabilities net of credit risk mitigation

22,125

 

5,700

 

400

 

1,780

 

21,177

 

51,182

 

4

-  of row 3 that are excluded liabilities

-

 

-

 

-

 

-

 

-

 

-

 

5

Total capital and liabilities less excluded liabilities (row 3 minus row 4)

22,125

 

5,700

 

400

 

1,780

 

21,177

 

51,182

 

6

-  of row 5 that are eligible as TLAC

22,125

 

5,700

 

-

 

1,780

 

21,177

 

50,782

 

7

-  of row 6 with 1 year ? residual maturity < 2 years

-

 

-

 

-

 

-

 

-

 

-

 

8

-  of row 6 with 2 years ? residual maturity < 5 years

-

 

-

 

-

 

-

 

9,828

 

9,828

 

9

-  of row 6 with 5 years ? residual maturity < 10 years

-

 

-

 

-

 

-

 

9,349

 

9,349

 

10

-  of row 6 with residual maturity ? 10 years, but excluding perpetual securities

-

 

-

 

-

 

1,780

 

2,000

 

3,780

 

11

-  of row 6 that are perpetual securities

22,125

 

5,700

 

-

 

-

 

-

 

27,825

 

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 21: Hang Seng Bank Ltd creditor ranking (TLAC2)
 

 

 

 

 

Creditor ranking ($m)

Sum of
1 to 3

 

 

 

1

 

2

 

3

 

 

 

Footnotes

(most junior)

 

(most senior)

1

Is the resolution entity the creditor/investor?

1

No

No

No

 

2

Description of creditor ranking

 

Ordinary shares2

AT1 instruments

LAC loans

 

3

Total capital and liabilities net of credit risk mitigation

 

1,240

 

1,500

 

2,503

 

5,243

 

4

-  of row 3 that are excluded liabilities

 

-

 

-

 

-

 

-

 

5

Total capital and liabilities less excluded liabilities (row 3 minus row 4)

 

1,240

 

1,500

 

2,503

 

5,243

 

6

-  of row 5 that are eligible as TLAC

 

1,240

 

1,500

 

2,503

 

5,243

 

7

-  of row 6 with 1 year ? residual maturity < 2 years

 

-

 

-

 

-

 

-

 

8

-  of row 6 with 2 years ? residual maturity < 5 years

 

-

 

-

 

-

 

-

 

9

-  of row 6 with 5 years ? residual maturity < 10 years

 

-

 

-

 

2,103

 

2,103

 

10

-  of row 6 with residual maturity ? 10 years, but excluding perpetual securities

 

-

 

-

 

400

 

400

 

11

-  of row 6 that are perpetual securities

 

1,240

 

1,500

 

-

 

2,740

 

1   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 22: HSBC North America Holdings Inc. creditor ranking¹ (TLAC3)

 

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

 

1

 

2

 

3

4

 

 

 

 

(most junior)

 

 

(most senior)

1

Description of creditor ranking

Footnotes

Common stock2

Preferred stock

Subordinated loans

Senior unsecured loans and other pari passu liabilities

 

2

Total capital and liabilities net of credit risk mitigation

 

-

 

2,240

 

2,850

 

8,333

 

13,423

 

3

-  of row 2 that are excluded liabilities

3

-

 

-

 

-

 

183

 

183

 

4

Total capital and liabilities less excluded liabilities (row 2 minus row 3)

 

-

 

2,240

 

2,850

 

8,150

 

13,240

 

5

-  of row 4 that are potentially eligible as TLAC

 

-

 

2,240

 

2,850

 

8,000

 

13,090

 

6

-  of row 5 with 1 year ? residual maturity < 2 years

 

-

 

-

 

-

 

-

 

-

 

7

-  of row 5 with 2 years ? residual maturity < 5 years

 

-

 

-

 

-

 

3,500

 

3,500

 

8

-  of row 5 with 5 years ? residual maturity < 10 years

 

-

 

-

 

2,850

 

4,500

 

7,350

 

9

-  of row 5 with residual maturity ? 10 years, but excluding perpetual

    securities

 

-

 

-

 

-

 

-

 

-

 

10

-  of row 5 that are perpetual 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.

Pillar 2 and ICAAP

Pillar 2

We conduct an Internal Capital Adequacy Assessment Process ('ICAAP') to determine a forward-looking assessment of our capital requirements given our business strategy, risk profile, risk appetite and capital plan. This process incorporates the Group's risk management processes and governance framework. Our base capital plan undergoes stress testing. This, coupled with our economic capital framework and other risk management practices, is used to assess our internal capital adequacy requirements and inform our view of our internal capital planning buffer. The ICAAP is formally approved by the Board, which has the ultimate responsibility for the effective management of risk and approval of HSBC's risk appetite.

The ICAAP is reviewed by the PRA and by a college of supervisors, as part of the joint risk assessment and decision process, during the Supervisory Review and Evaluation Process. This process occurs periodically to enable the regulator to define the individual capital requirement ('ICR') (previously known as the individual capital guidance ('ICG')) or minimum capital requirements for HSBC and to define the PRA buffer, where required. Under the revised Pillar 2 PRA regime, which came into effect from 
1 January 2017, the capital planning buffer has been replaced with a 'PRA buffer'. This is not intended to duplicate the CRD IV buffers and, where necessary, will be set according to vulnerability in a stress scenario, as identified and assessed through the annual PRA stress testing exercise.

The processes of internal capital adequacy assessment and supervisory review lead to a final determination by the PRA of the ICR and any PRA buffer that may be required.

Pillar 2 comprises Pillar 2A and Pillar 2B. Pillar 2A considers, in addition to the minimum capital requirements for Pillar 1 risks described above, any supplementary requirements for those risks and any requirements for risk categories not captured by Pillar 1. The risk categories covered under Pillar 2A depend on the specific circumstances of a firm and the nature and scale of its business.

Pillar 2B consists of guidance from the PRA on the capital buffer a firm would require in order to remain above its ICR in adverse circumstances that may be largely outside the firm's normal and direct control; for example, during a period of severe but plausible downturn stress, when asset values and the firm's capital surplus may become strained. This is quantified via any PRA buffer requirement the PRA may consider necessary. The assessment of this is informed by stress tests and a rounded judgement of a firm's business model, also taking into account the PRA's view of a firm's options and capacity to protect its capital position under stress; for instance, through capital generation. Where the PRA assesses that a firm's risk management and governance are significantly weak, it may also increase the PRA buffer to cover the risks posed by those weaknesses until they are addressed. The PRA buffer is intended to be drawn upon in times of stress, and its use is not of itself a breach of capital requirements that would trigger automatic restrictions on distributions. In specific circumstances, the PRA should agree a plan with a firm for its restoration over an agreed timescale.

Internal capital adequacy assessment

The Board manages the Group ICAAP and, together with RMM and GRC, it examines the Group's risk profile from both a regulatory and economic capital viewpoint. They aim to ensure that capital resources:

•    remain sufficient to support our risk profile and outstanding commitments;

•    meet current regulatory requirements, and that HSBC is well placed to meet those expected in the future;

•    allow the group to remain adequately capitalised in the event of a severe economic downturn stress scenario; and

•    remain consistent with our strategic and operational goals, and our shareholder and investor expectations.

The minimum regulatory capital that we are required to hold is determined by the rules and guidance established by the PRA for the consolidated Group and by local regulators for individual Group companies. These capital requirements are a primary factor in influencing and shaping the business planning process, in which RWA targets are established for our global businesses in accordance with the Group's strategic direction and risk appetite.

Economic capital is the internally calculated capital requirement that we deem necessary to support the risks to which we are exposed. The economic capital assessment is a more risk-sensitive measure than the regulatory minimum, and takes account of the substantial diversification of risk accruing from our operations. Both the regulatory and the economic capital assessments rely upon the use of models that are integrated into our risk management processes. Our economic capital models are calibrated to quantify the level of capital that is sufficient to absorb potential losses over a one-year time horizon to a 99.95% level of confidence for our banking and trading activities, to a 99.5% level of confidence for our insurance activities and pension risks, and to a 99.9% level of confidence for our operational risks.

The ICAAP and its constituent economic capital calculations are examined by the PRA as part of its Supervisory Review and Evaluation Process. This examination informs the regulator's view of our Pillar 2 capital requirements.

Preserving our strong capital position remains a priority, and the level of integration of our risk and capital management helps to optimise our response to business demand for regulatory and economic capital. Risks that are explicitly assessed through economic capital are credit risk (including CCR), market risk, operational risk, interest rate risk in the banking book ('IRRBB'), insurance risk, pension risk and structural foreign exchange risk.

Credit risk

Overview and responsibilities

Credit risk represents our largest regulatory capital requirement.

The principal objectives of our credit risk management function are:

•    to maintain across HSBC a strong culture of responsible lending and a robust credit risk policy and control framework;

•    to both partner and challenge our businesses in defining, implementing and continually re-evaluating our credit risk appetite under actual and stress scenario conditions; and

•    to ensure there is independent, expert scrutiny of credit risks, their costs and their mitigation.

The credit risk functions within Wholesale Credit and Market Risk and RBWM are the constituent parts of Global Risk that support the Group CRO in overseeing credit risks. Their major duties comprise undertaking independent reviews of large and high-risk credit proposals, overseeing large exposure policy and reporting on our wholesale and retail credit risk management disciplines. They also own our credit policy and credit systems programmes, oversee portfolio management and report on risk matters to senior executive management and regulators.

These credit risk functions work closely with other parts of Global Risk; for example, with Operational Risk on the internal control framework and with Risk Strategy on the risk appetite process. In addition, they work jointly with Risk Strategy and Global Finance on stress testing.

The credit responsibilities of Global Risk are described on page 75 of the Annual Report and Accounts 2019.

Group-wide, the credit risk functions comprise a network of credit risk management offices reporting within regional risk functions. They fulfil an essential role as independent risk control units distinct from business line management in providing objective scrutiny of risk rating assessments, credit proposals for approval and other risk matters.

Our credit risk procedures operate through a hierarchy of personal credit limit approval authorities. Operating company chief executives, acting under authorities delegated by their boards and Group standards, are accountable for credit risk and other risks in their business. In turn, chief executives delegate authority to operating company chief risk officers and management teams on an individual basis. Each operating company is responsible for the quality and performance of its credit portfolios in accordance with Group standards. Above these thresholds of delegated personal credit limited approval authorities, approval must be sought from the regional and, as appropriate, the global credit risk function.

Credit risk management

Our exposure to credit risk arises from a wide range of customer and products, and the risk rating systems in place to measure and monitor these risks are correspondingly diverse. Senior management receives a variety of reports on our credit risk exposures, including expected credit losses, total exposures and RWAs, as well as updates on specific portfolios that are considered to have heightened credit risk.

Credit risk exposures are generally measured and managed in portfolios of either customer types or product categories. Risk rating systems are designed to assess the default propensity of, and loss severity associated with, distinct customers who are typically managed as individual relationships or, in the case of retail business exposures, on a product portfolio basis.

Risk rating systems for retail exposures are generally quantitative in nature, applying techniques such as behavioural analysis across product portfolios comprising large numbers of homogeneous transactions. Rating systems for individually managed relationships typically use customer financial statements and market data analysis, but also qualitative elements and a final subjective overlay to better reflect any idiosyncratic elements of the customer's risk profile.

See 'Application of the IRB Approach' on page 44 for more information.

A fundamental principle of our policy and approach is that analytical risk rating systems and scorecards are all valuable tools at the disposal of management.

The credit process provides for at least an annual review of facility limits granted. Review may be more frequent, as required by circumstances such as the emergence of adverse risk factors.

We constantly seek to improve the quality of our risk management. Group IT systems that process credit risk data continue to be enhanced in order to deliver both comprehensive management information in support of business strategy and solutions to evolving regulatory reporting requirements.

Group standards govern the process through which risk rating systems are initially developed, judged fit for purpose, approved and implemented. They also govern the conditions under which analytical risk model outcomes can be overridden by decision takers and the process of model performance monitoring and reporting. The emphasis is on an effective dialogue between business line and risk management, suitable independence of decision takers, and a good understanding and robust challenge on the part of senior management.

Like other facets of risk management, analytical risk rating systems are not static. They are subject to review and modification in light of the changing environment, the greater availability and quality of data, and any deficiencies identified through internal and external regulatory review. Structured processes and metrics are in place to capture relevant data and feed this into continuous model improvement.

See 'Model performance' on page 51 for more information.

Credit risk models governance

All new or materially changed IRB capital models require the PRA's approval, as set out in more detail on page 44. Throughout HSBC, such models fall directly under the remit of the global functional MOCs, operating in line with HSBC's model risk policy, and under the oversight of the Global MOC.

Both the Wholesale and RBWM MOCs require all credit risk models for which they are responsible to be approved by delegated senior managers with notification to the committees that retain the responsibility for oversight.

Global Risk sets internal standards for the development, validation, independent review, approval, implementation and performance monitoring of credit risk rating models. Independent reviews of our models are performed by our Independent Model Review function which is separate from our Risk Analytics functions that are responsible for the development of models.

We are designing a new target operating model for the MRM function, which sets model risk management policy, standards and model risk appetite.

Further information is available on page 146 of the Annual Report and Accounts 2019.

Compliance with Group standards is subject to examination by Risk oversight and review from within the Risk function itself, and by Internal Audit.

Dilution risk

Dilution risk is the risk that an amount receivable is reduced through cash or non-cash credit to the obligor, and arises mainly from factoring and invoice discounting transactions.

Where there is recourse to the seller, we treat these transactions as loans secured by the collateral of the debts purchased and do not report dilution risk for them. For our non-recourse portfolio we obtain an indemnity from the seller that indemnifies us against this risk. Moreover, factoring transactions involve lending at a discount to the face-value of the receivables, which provides protection against dilution risk. 

The table below provides a summary of credit risk exposure by exposure class and approach. Further information on credit risk exposure by industry and geography can be found in the Concentration risk section on page 35.

Table 23: Credit risk exposure - summary (CRB-B)

 

 

At 31 Dec 2019

 

At 31 Dec 2018

 

 

Net carrying

values

Average

net carrying

values3

RWAs^

Capital

required

RWA density

 

Net carrying

values

Average

net carrying

values3

RWAs^

Capital

required

RWA density

 

Footnotes

$bn

$bn

$bn

$bn

%

 

$bn

$bn

$bn

$bn

%

IRB advanced approach

 

1,935.3

 

1,892.4

 

452.6

 

36.2

 

29

 

 

1,844.5

 

1,812.1

 

468.2

 

37.4

 

32

 

-  central governments and central banks

 

346.3

 

343.9

 

36.3

 

2.9

 

11

 

 

331.7

 

315.4

 

36.9

 

3.0

 

11

 

-  institutions

 

74.7

 

82.4

 

10.8

 

0.9

 

16

 

 

80.6

 

88.0

 

14.2

 

1.1

 

19

 

-  corporates

1

959.9

 

958.1

 

327.7

 

26.2

 

50

 

 

948.9

 

932.0

 

345.1

 

27.5

 

52

 

-  total retail

 

554.4

 

508.0

 

77.8

 

6.2

 

16

 

 

483.3

 

476.7

 

72.0

 

5.8

 

17

 

Secured by mortgages on immovable property SME

 

3.6

 

3.6

 

1.5

 

0.1

 

45

 

 

3.5

 

3.2

 

1.8

 

0.1

 

54

 

Secured by mortgages on immovable property non-SME

 

314.5

 

298.9

 

40.4

 

3.2

 

13

 

 

285.9

 

280.9

 

37.2

 

3.0

 

13

 

Qualifying revolving retail

 

140.3

 

135.1

 

18.8

 

1.5

 

23

 

 

132.1

 

129.1

 

17.3

 

1.4

 

23

 

Other SME

 

7.9

 

7.8

 

4.7

 

0.4

 

76

 

 

7.5

 

8.7

 

4.8

 

0.4

 

76

 

Other non-SME

 

88.1

 

62.6

 

12.4

 

1.0

 

18

 

 

54.3

 

54.8

 

10.9

 

0.9

 

24

 

IRB securitisation positions

 

20.2

 

25.0

 

3.7

 

0.3

 

19

 

 

29.7

 

31.0

 

6.3

 

0.5

 

21

 

IRB non-credit obligation assets

 

62.4

 

60.1

 

13.3

 

1.1

 

21

 

 

56.9

 

59.2

 

10.8

 

0.9

 

19

 

IRB foundation approach

 

88.3

 

82.1

 

32.3

 

2.6

 

59

 

 

78.4

 

76.5

 

30.5

 

2.4

 

61

 

-  central governments and central banks

 

-

 

-

 

-

 

-

 

20

 

 

-

 

-

 

-

 

-

 

25

 

-  institutions

 

0.7

 

0.6

 

0.2

 

-

 

26

 

 

0.5

 

0.3

 

0.2

 

-

 

35

 

-  corporates

 

87.6

 

81.5

 

32.1

 

2.6

 

59

 

 

77.9

 

76.2

 

30.3

 

2.4

 

61

 

Standardised approach

 

525.3

 

518.3

 

174.7

 

14.0

 

45

 

 

501.8

 

501.9

 

175.3

 

14.1

 

48

 

-  central governments and central banks

 

176.9

 

164.5

 

11.2

 

0.9

 

6

 

 

163.9

 

182.5

 

12.5

 

1.0

 

7

 

-  regional governments or local authorities

 

8.9

 

7.9

 

1.6

 

0.1

 

18

 

 

7.3

 

5.7

 

1.3

 

0.1

 

19

 

-  public sector entities

 

16.6

 

14.1

 

-

 

-

 

-

 

 

12.2

 

7.6

 

-

 

-

 

-

 

-  multilateral development banks

 

0.1

 

0.1

 

-

 

-

 

-

 

 

0.2

 

0.2

 

-

 

-

 

2

 

-  international organisations

 

1.6

 

1.5

 

-

 

-

 

-

 

 

1.6

 

2.0

 

-

 

-

 

-

 

-  institutions

 

2.4

 

2.8

 

0.9

 

0.1

 

58

 

 

3.4

 

3.0

 

1.2

 

0.1

 

52

 

-  corporates

 

159.8

 

181.4

 

72.5

 

5.8

 

94

 

 

179.4

 

168.4

 

79.2

 

6.3

 

94

 

-  retail

 

70.7

 

67.0

 

14.4

 

1.2

 

74

 

 

63.8

 

66.2

 

14.8

 

1.2

 

74

 

-  secured by mortgages on immovable property

 

33.4

 

32.1

 

12.0

 

1.0

 

37

 

 

32.0

 

30.3

 

11.3

 

0.9

 

37

 

-  exposures in default

 

3.4

 

3.1

 

4.1

 

0.3

 

114

 

 

3.0

 

3.0

 

3.8

 

0.3

 

117

 

-  items associated with particularly high risk

 

5.5

 

5.3

 

7.9

 

0.6

 

150

 

 

4.8

 

4.2

 

6.9

 

0.6

 

150

 

-  securitisation positions

 

16.3

 

8.1

 

4.6

 

0.4

 

28

 

 

2.7

 

2.5

 

2.1

 

0.2

 

82

 

-  collective investment undertakings ('CIU')

 

0.4

 

0.5

 

0.4

 

-

 

100

 

 

0.6

 

0.6

 

0.6

 

0.1

 

100

 

-  equity exposures

2

16.4

 

16.2

 

36.3

 

2.9

 

220

 

 

15.6

 

13.2

 

35.0

 

2.8

 

223

 

-  other items

 

12.9

 

13.7

 

8.8

 

0.7

 

68

 

 

11.3

 

12.5

 

6.6

 

0.5

 

58

 

Total

 

2,631.5

 

2,577.9

 

676.6

 

54.2

 

33

 

 

2,511.3

 

2,480.7

 

691.1

 

55.3

 

35

 

^    Figures have been prepared on an IFRS 9 transitional basis.

1   Corporates includes specialised lending exposures which are reported in more detail in Table 75: Specialised lending on slotting approach (CR10).

2   Equity exposures include investments that are risk weighted at 250%.

3   Average net carrying values are calculated by aggregating net carrying values of the last five quarters and dividing by five.

 

Credit quality

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 mainly concentrated in the higher quality bands.  The following tables present information on the credit quality of exposures by exposure class, industry and geography. For further detail on the credit quality of STD exposures, refer to Table 41 and 74. Information on the credit quality of IRB exposures can be found in Table 76.

Table 24: Credit quality of exposures by exposure classes and instruments¹ (CR1-A)

 

 

Gross carrying values of

Specific credit risk adjustments

 

Write-offs in the year2

Credit risk adjustment charges of the period2

Net carrying values

 

 

Defaulted exposures

Non-defaulted exposures

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

Central governments and central banks

-

 

346.4

 

0.1

 

-

 

-

 

346.3

 

2

Institutions

-

 

75.4

 

-

 

-

 

-

 

75.4

 

3

Corporates

6.9

 

1,044.9

 

4.3

 

0.9

 

1.0

 

1,047.5

 

4

-  of which: specialised lending

1.1

 

50.8

 

0.5

 

-

 

-

 

51.4

 

6

Retail

3.4

 

553.0

 

2.0

 

0.8

 

1.1

 

554.4

 

7

- Secured by real estate property

2.4

 

316.0

 

0.3

 

-

 

-

 

318.1

 

8

   SMEs

0.1

 

3.6

 

0.1

 

-

 

-

 

3.6

 

9

   Non-SMEs

2.3

 

312.4

 

0.2

 

-

 

-

 

314.5

 

10

- Qualifying revolving retail

0.3

 

141.0

 

1.0

 

0.4

 

0.6

 

140.3

 

11

- Other retail

0.7

 

96.0

 

0.7

 

0.4

 

0.5

 

96.0

 

12

   SMEs

0.4

 

7.8

 

0.3

 

0.2

 

0.2

 

7.9

 

13

   Non-SMEs

0.3

 

88.2

 

0.4

 

0.2

 

0.3

 

88.1

 

15

Total IRB approach

10.3

 

2,019.7

 

6.4

 

1.7

 

2.1

 

2,023.6

 

16

Central governments and central banks

-

 

176.9

 

-

 

-

 

-

 

176.9

 

17

Regional governments or local authorities

-

 

8.9

 

-

 

-

 

-

 

8.9

 

18

Public sector entities

-

 

16.6

 

-

 

-

 

-

 

16.6

 

19

Multilateral development banks

-

 

0.1

 

-

 

-

 

-

 

0.1

 

20

International organisations

-

 

1.6

 

-

 

-

 

-

 

1.6

 

21

Institutions

-

 

2.4

 

-

 

-

 

-

 

2.4

 

22

Corporates

3.7

 

160.3

 

2.0

 

0.5

 

0.2

 

162.0

 

24

Retail

1.0

 

71.7

 

1.4

 

0.7

 

0.8

 

71.3

 

25

-  of which: SMEs

-

 

1.3

 

0.1

 

-

 

-

 

1.2

 

26

Secured by mortgages on immovable property

0.7

 

33.5

 

0.2

 

-

 

-

 

34.0

 

27

-  of which: SMEs

-

 

0.1

 

-

 

-

 

-

 

0.1

 

28

Exposures in default

5.4

 

-

 

2.0

 

1.2

 

1.0

 

3.4

 

29

Items associated with particularly high risk

0.1

 

5.4

 

-

 

-

 

-

 

5.5

 

32

Collective investment undertakings ('CIU')

-

 

0.4

 

-

 

-

 

-

 

0.4

 

33

Equity exposures

-

 

16.4

 

-

 

-

 

-

 

16.4

 

34

Other exposures

-

 

12.9

 

-

 

-

 

-

 

12.9

 

35

Total standardised approach

5.5

 

507.1

 

3.6

 

1.2

 

1.0

 

509.0

 

36

Total at 31 Dec 2019

15.8

 

2,526.8

 

10.0

 

2.9

 

3.1

 

2,532.6

 

 

-  of which: loans

14.6

 

1,274.0

 

9.4

 

2.9

 

3.1

 

1,279.2

 

 

-  of which: debt securities

-

 

377.4

 

0.1

 

-

 

-

 

377.3

 

 

-  of which: off-balance sheet exposures

1.2

 

837.5

 

0.5

 

-

 

-

 

838.2

 

 

 

Table 24: Credit quality of exposures by exposure classes and instruments¹ (CR1-A) (continued)

 

 

Gross carrying values of

Specific credit risk adjustments

 

Write-offs in the year2

Credit risk adjustment charges of the period2

Net carrying values

 

 

Defaulted exposures

Non-defaulted exposures

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

Central governments and central banks

-

 

331.8

 

0.1

 

-

 

-

 

331.7

 

2

Institutions

-

 

81.1

 

-

 

-

 

-

 

81.1

 

3

Corporates

6.9

 

1,024.0

 

4.1

 

0.8

 

0.5

 

1,026.8

 

4

-  of which: specialised lending

0.8

 

49.3

 

0.4

 

-

 

0.1

 

49.7

 

6

Retail

3.3

 

481.8

 

1.8

 

0.7

 

0.9

 

483.3

 

7

- Secured by real estate property

2.5

 

287.3

 

0.4

 

-

 

0.1

 

289.4

 

8

   SMEs

0.1

 

3.5

 

0.1

 

-

 

0.1

 

3.5

 

9

   Non-SMEs

2.4

 

283.8

 

0.3

 

-

 

-

 

285.9

 

10

- Qualifying revolving retail

0.1

 

132.7

 

0.7

 

0.3

 

0.4

 

132.1

 

11

- Other retail

0.7

 

61.8

 

0.7

 

0.4

 

0.4

 

61.8

 

12

SMEs

0.3

 

7.5

 

0.3

 

0.2

 

0.2

 

7.5

 

13

Non-SMEs

0.4

 

54.3

 

0.4

 

0.2

 

0.2

 

54.3

 

15

Total IRB approach

10.2

 

1,918.7

 

6.0

 

1.5

 

1.4

 

1,922.9

 

16

Central governments and central banks

-

 

163.9

 

-

 

-

 

-

 

163.9

 

17

Regional governments or local authorities

-

 

7.3

 

-

 

-

 

-

 

7.3

 

18

Public sector entities

-

 

12.2

 

-

 

-

 

-

 

12.2

 

19

Multilateral development banks

-

 

0.2

 

-

 

-

 

-

 

0.2

 

20

International organisations

-

 

1.6

 

-

 

-

 

-

 

1.6

 

21

Institutions

-

 

3.4

 

-

 

-

 

-

 

3.4

 

22

Corporates

3.3

 

180.0

 

2.1

 

0.3

 

0.4

 

181.2

 

24

Retail

1.1

 

64.9

 

1.5

 

0.7

 

0.5

 

64.5

 

25

-  of which: SMEs

-

 

1.2

 

-

 

-

 

-

 

1.2

 

26

Secured by mortgages on immovable property

0.6

 

32.1

 

0.2

 

-

 

-

 

32.5

 

27

-  of which: SMEs

-

 

0.1

 

-

 

-

 

-

 

0.1

 

28

Exposures in default

5.1

 

-

 

2.1

 

1.0

 

0.8

 

3.0

 

29

Items associated with particularly high risk

0.1

 

4.7

 

-

 

-

 

-

 

4.8

 

32

Collective investment undertakings ('CIU')

-

 

0.6

 

-

 

-

 

-

 

0.6

 

33

Equity exposures

-

 

15.6

 

-

 

-

 

-

 

15.6

 

34

Other exposures

-

 

11.3

 

-

 

-

 

-

 

11.3

 

35

Total standardised approach

5.1

 

497.8

 

3.8

 

1.0

 

0.9

 

499.1

 

36

Total at 31 Dec 2018

15.3

 

2,416.5

 

9.8

 

2.5

 

2.3

 

2,422.0

 

 

-  of which: loans

13.7

 

1,233.4

 

9.1

 

2.5

 

2.3

 

1,238.0

 

 

-  of which: debt securities

-

 

348.5

 

-

 

-

 

-

 

348.5

 

 

-  of which: off-balance sheet exposures

1.6

 

798.7

 

0.6

 

-

 

-

 

799.7

 

1   Securitisation positions and non-credit obligation assets are not included in this table.

2   Presented on a year-to-date basis.

 

 

 

Table 25: Credit quality of exposures by industry or counterparty types¹, ² (CR1-B)

 

 

 

Gross carrying values of

 

 

 

 

 

 

 

Defaulted exposures

Non-defaulted exposures

Specific credit risk adjustments

 

Write-offs in the year3

Credit risk adjustment charges of the period3

Net carrying values

 

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

Agriculture

 

0.3

 

9.7

 

0.2

 

-

 

-

 

9.8

 

2

Mining & oil extraction

 

0.4

 

41.1

 

0.3

 

-

 

-

 

41.2

 

3

Manufacturing

 

1.8

 

261.3

 

1.4

 

0.6

 

0.8

 

261.7

 

4

Utilities

 

0.2

 

32.2

 

0.1

 

0.1

 

-

 

32.3

 

5

Water supply

 

-

 

3.4

 

-

 

-

 

-

 

3.4

 

6

Construction

 

1.2

 

46.1

 

0.6

 

0.2

 

0.1

 

46.7

 

7

Wholesale & retail trade

 

2.1

 

204.3

 

1.3

 

0.3

 

0.3

 

205.1

 

8

Transportation & storage

 

0.4

 

44.6

 

0.2

 

-

 

-

 

44.8

 

9

Accommodation & food services

 

0.3

 

29.0

 

0.1

 

0.1

 

0.1

 

29.2

 

10

Information & communication

 

-

 

16.8

 

0.1

 

-

 

-

 

16.7

 

11

Financial & insurance

 

0.4

 

535.0

 

0.3

 

-

 

0.1

 

535.1

 

12

Real estate

 

1.2

 

196.0

 

0.7

 

-

 

0.1

 

196.5

 

13

Professional activities

 

0.1

 

28.0

 

0.1

 

-

 

-

 

28.0

 

14

Administrative service

 

2.0

 

154.9

 

0.9

 

-

 

0.1

 

156.0

 

15

Public admin & defence

 

0.2

 

214.1

 

0.2

 

-

 

(0.2

)

214.1

 

16

Education

 

-

 

3.6

 

-

 

-

 

-

 

3.6

 

17

Human health & social work

 

0.2

 

7.1

 

0.1

 

-

 

-

 

7.2

 

18

Arts & entertainment

 

-

 

7.0

 

-

 

0.1

 

-

 

7.0

 

19

Other services

 

0.2

 

17.6

 

0.1

 

-

 

0.1

 

17.7

 

20

Personal

 

4.8

 

631.6

 

3.3

 

1.5

 

1.6

 

633.1

 

21

Extra-territorial bodies

 

-

 

43.4

 

-

 

-

 

-

 

43.4

 

22

Total at 31 Dec 2019

 

15.8

 

2,526.8

 

10.0

 

2.9

 

3.1

 

2,532.6

 

 

 

 

 

 

 

 

 

 

1

Agriculture

 

0.3

 

8.6

 

0.1

 

-

 

-

 

8.8

 

2

Mining & oil extraction

 

0.5

 

40.9

 

0.3

 

0.1

 

(0.1

)

41.1

 

3

Manufacturing

 

2.0

 

255.6

 

1.4

 

0.4

 

0.3

 

256.2

 

4

Utilities

 

0.1

 

31.5

 

0.2

 

-

 

-

 

31.4

 

5

Water supply

 

-

 

3.6

 

-

 

-

 

-

 

3.6

 

6

Construction

 

1.4

 

39.8

 

0.6

 

-

 

0.2

 

40.6

 

7

Wholesale & retail trade

 

2.2

 

203.4

 

1.3

 

0.3

 

0.4

 

204.3

 

8

Transportation & storage

 

0.4

 

45.0

 

0.2

 

-

 

0.1

 

45.2

 

9

Accommodation & food services

 

0.4

 

27.2

 

0.2

 

-

 

-

 

27.4

 

10

Information & communication

 

-

 

18.8

 

0.1

 

-

 

0.1

 

18.7

 

11

Financial & insurance

 

0.3

 

531.4

 

0.2

 

0.1

 

(0.1

)

531.5

 

12

Real estate

 

1.0

 

189.3

 

0.6

 

-

 

0.2

 

189.7

 

13

Professional activities

 

0.2

 

28.5

 

0.1

 

-

 

0.1

 

28.6

 

14

Administrative service

 

1.1

 

146.3

 

0.9

 

0.1

 

0.1

 

146.5

 

15

Public admin & defence

 

0.4

 

192.0

 

0.4

 

-

 

-

 

192.0

 

16

Education

 

-

 

3.5

 

-

 

-

 

-

 

3.5

 

17

Human health & social work

 

0.2

 

6.9

 

0.1

 

-

 

-

 

7.0

 

18

Arts & entertainment

 

-

 

8.5

 

-

 

-

 

-

 

8.5

 

19

Other services

 

0.2

 

13.0

 

0.1

 

-

 

-

 

13.1

 

20

Personal

 

4.6

 

572.8

 

3.0

 

1.5

 

1.0

 

574.4

 

21

Extra-territorial bodies

 

-

 

49.9

 

-

 

-

 

-

 

49.9

 

22

Total at 31 Dec 2018

 

15.3

 

2,416.5

 

9.8

 

2.5

 

2.3

 

2,422.0

 

1   Securitisation positions and non-credit obligation assets are not included in this table.

2   The industry classifications of this disclosure have been revised. 31 December 2018 data has been restated to be on a consistent basis with the current year.

3   Presented on a year-to-date basis.

 

Table 26: Credit quality of exposures by geography1 (CR1-C)

 

 

Gross carrying values of

 

 

 

 

 

 

Defaulted exposures

Non-defaulted exposures

Specific credit risk adjustments

 

Write-offs in the year2

Credit risk adjustment charges of the period2

Net carrying values

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

Europe

7.1

 

811.5

 

3.8

 

1.1

 

1.2

 

814.8

 

2

- United Kingdom

4.6

 

505.5

 

2.7

 

0.8

 

1.0

 

507.4

 

3

- France

1.2

 

136.5

 

0.6

 

0.1

 

0.2

 

137.1

 

4

- Other countries

1.3

 

169.5

 

0.5

 

0.2

 

-

 

170.3

 

5

Asia

2.5

 

1,056.3

 

2.3

 

0.6

 

0.8

 

1,056.5

 

6

- Hong Kong

0.7

 

531.7

 

0.9

 

0.2

 

0.4

 

531.5

 

7

- China

0.3

 

163.3

 

0.4

 

0.1

 

0.2

 

163.2

 

8

- Singapore

0.2

 

76.5

 

0.2

 

-

 

0.1

 

76.5

 

9

- Australia

0.2

 

59.4

 

0.1

 

-

 

-

 

59.5

 

10

- Other countries

1.1

 

225.4

 

0.7

 

0.3

 

0.1

 

225.8

 

11

MENA

3.5

 

145.2

 

2.1

 

0.4

 

0.1

 

146.6

 

12

North America

1.9

 

439.8

 

0.7

 

0.2

 

0.3

 

441.0

 

13

- United States of America

1.2

 

311.0

 

0.4

 

0.2

 

0.2

 

311.8

 

14

- Canada

0.3

 

112.5

 

0.2

 

-

 

0.1

 

112.6

 

15

- Other countries

0.4

 

16.3

 

0.1

 

-

 

-

 

16.6

 

16

Latin America

0.8

 

60.3

 

1.1

 

0.6

 

0.7

 

60.0

 

17

Other geographical areas

-

 

13.7

 

-

 

-

 

-

 

13.7

 

18

Total at 31 Dec 2019

15.8

 

2,526.8

 

10.0

 

2.9

 

3.1

 

2,532.6

 

 

 

 

 

 

 

 

 

1

Europe

6.7

 

780.1

 

3.8

 

0.9

 

1.0

 

783.0

 

2

- United Kingdom

4.1

 

474.2

 

2.4

 

0.8

 

0.9

 

475.9

 

3

- France

1.0

 

127.2

 

0.6

 

0.1

 

-

 

127.6

 

4

- Other countries

1.6

 

178.7

 

0.8

 

-

 

0.1

 

179.5

 

5

Asia

2.8

 

1,001.7

 

2.1

 

0.6

 

0.8

 

1,002.4

 

6

- Hong Kong

0.9

 

497.5

 

0.7

 

0.3

 

0.1

 

497.7

 

7

- China

0.3

 

157.3

 

0.3

 

0.1

 

0.2

 

157.3

 

8

- Singapore

0.2

 

71.9

 

0.2

 

-

 

0.1

 

71.9

 

9

- Australia

0.2

 

52.5

 

0.2

 

-

 

-

 

52.5

 

10

- Other countries

1.2

 

222.5

 

0.7

 

0.2

 

0.4

 

223.0

 

11

MENA

2.9

 

137.3

 

2.3

 

0.3

 

0.3

 

137.9

 

12

North America

2.0

 

419.4

 

0.6

 

0.2

 

(0.1

)

420.8

 

13

- United States of America

1.3

 

295.1

 

0.3

 

0.1

 

-

 

296.1

 

14

- Canada

0.2

 

107.5

 

0.2

 

0.1

 

-

 

107.5

 

15

- Other countries

0.5

 

16.8

 

0.1

 

-

 

(0.1

)

17.2

 

16

Latin America

0.9

 

62.9

 

1.0

 

0.5

 

0.3

 

62.8

 

17

Other geographical areas

-

 

15.1

 

-

 

-

 

-

 

15.1

 

18

Total at 31 Dec 2018

15.3

 

2,416.5

 

9.8

 

2.5

 

2.3

 

2,422.0

 

1   Amounts shown by geographical region and country/territory in this table are based on the country/territory of residence of the counterparty. Securitisation positions and non-credit obligation assets are not included in this table.

2   Presented on a year-to-date basis.

 

Table 27: Changes in stock of general and specific credit risk adjustments (CR2-A)

 

 

 

Twelve months to 31 Dec

 

 

 

2019

2018

 

 

 

Accumulated specific credit risk adjustments

Accumulated general

credit risk adjustments

Accumulated specific

credit risk adjustments

Accumulated general

credit risk adjustments

 

 

Footnotes

$bn

$bn

$bn

$bn

1

Opening balance at the beginning of the period

 

9.8

 

-

 

10.4

 

-

 

2

Increases due to amounts set aside for estimated loan losses during the period

1

3.1

 

-

 

2.3

 

-

 

4

Decreases due to amounts taken against accumulated credit risk adjustments

 

(2.9

)

-

 

(2.5

)

-

 

6

Impact of exchange rate differences

 

-

 

-

 

(0.4

)

-

 

9

Closing balance at the end of the period

 

10.0

 

-

 

9.8

 

-

 

10

Recoveries on credit risk adjustments recorded directly to the statement of profit or loss

 

0.4

 

-

 

0.4

 

-

 

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)

 

 

 

Twelve months to 31 Dec
 

 

 

 

2019

2018

 

 

 

Gross carrying value

Gross
 carrying 
value

 

 

Footnotes

$bn

$bn

1

Defaulted loans and debt securities at the beginning of the period

 

13.7

 

15.1

 

2

Loans and debt securities that have defaulted since the last reporting period

 

6.5

 

5.7

 

3

Returned to non-defaulted status

 

(1.0

)

(1.3

)

4

Amounts written off

 

(2.9

)

(2.5

)

5

Other changes

1

(0.1

)

(0.8

)

7

Repayments

 

(1.6

)

(2.5

)

6

Defaulted loans and debt securities at the end of the period

 

14.6

 

13.7

 

1   Other changes include foreign exchange movements and changes in assets held for sale in default.

Non-performing and forborne exposures

Tables 29 to 32 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, however, 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.

 

Table 29: Credit quality of forborne exposures
 

 

 

Gross carrying amount/nominal amount

 

Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions

 

Collateral received and financial guarantees received on forborne exposures

 

 

Performing forborne

Non-performing forborne

 

On performing forborne exposures

On non-performing forborne exposures

 

Total

Of which forborne non-performing exposures

 

 

Total

Of which defaulted

Of which impaired

 

 

 

$bn

$bn

$bn

$bn

 

$bn

$bn

 

$bn

$bn

 

At 31 Dec 2019

 

 

 

 

 

 

 

 

 

 

1

Loans and advances

1.7

 

5.7

 

5.7

 

5.7

 

 

-

 

(1.8

)

 

3.2

 

2.4

 

2

Central banks

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

3

General governments

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

4

Credit institutions

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

5

Other financial corporations

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

6

Non-financial 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

 

8

Debt securities

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

9

Loan commitments given

-

 

0.1

 

0.1

 

0.1

 

 

-

 

-

 

 

0.1

 

0.1

 

10

Total

1.7

 

5.8

 

5.8

 

5.8

 

 

-

 

(1.8

)

 

3.3

 

2.5

 

Table 30 presents an analysis of performing and non-performing exposures by days past due. The gross non-performing loan ('NPL') ratio at 31 Dec 2019 was 0.94% calculated in line with the EBA guidelines.

Table 30: Credit quality of performing and non-performing exposures by past due days

 

 

Gross carrying amount/nominal amount1

 

 

Performing exposures

 

Non-performing exposures

 

 

Total

Not past due or past due ? 30 days

Past due > 30 days ? 90 days

 

Total

Unlikely to pay but not past due or past due ? 90 days

Past due > 90 days ? 180 days

Past due > 180 days ? 1 year

Past due > 1 year ? 2 years

Past due > 2 years ? 5 years

Past due > 5 years ? 7 years

Past due > 7 years

of which: defaulted

 

 

$bn

$bn

$bn

 

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

 

At 31 Dec 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Loans and 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

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

3

General governments

9.9

 

9.9

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

4

Credit institutions

126.0

 

126.0

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5

Other financial corporations

238.5

 

238.4

 

0.1

 

 

0.3

 

0.3

 

-

 

-

 

-

 

-

 

-

 

-

 

0.3

 

6

Non-financial 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

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

11

General governments

229.9

 

229.9

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

12

Credit institutions

36.8

 

36.8

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

13

Other financial corporations

41.0

 

41.0

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

14

Non-financial corporations

6.6

 

6.6

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

15

Off-balance-sheet 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

-

 

17

General governments

2.7

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

18

Credit institutions

56.3

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

19

Other financial corporations

54.9

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

20

Non-financial 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