TIDM48CF
RNS Number : 5915Q
HSBC Bank plc
21 February 2023
Our businesses
HSBC provides a comprehensive range of banking and related
financial services to its customers through its global businesses.
The products and services offered to customers are organised by
these global businesses.
Our operating model has the following material segments: WPB;
CMB; a GBM business which is further split into three reportable
segments MSS, GB and GBM Other reflecting the reorganisation of the
GBM management structure during 2021 and a Corporate Centre. These
segments are supported by Digital Business Services and eleven
global functions, including Risk, Finance, Compliance, Legal,
Marketing and Human Resources. These business segment are our
reportable segments under IFRS 8 'Operating Segments'.
By operating segment:
Adjusted profit/(loss) before tax
2022
GBM Corporate
MSS GB Other CMB WPB Centre Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net operating
income
before change in
expected
credit losses
and other
credit
impairment
charges 2,413 1,571 (8) 1,432 1,492 (118) 6,782
- of which: net
interest
income/(expense) (54) 903 (16) 925 710 (564) 1,904
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Change in
expected credit
losses and other
credit
impairment
charges (1) (153) (1) (54) (7) (6) (222)
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Net operating
income/(expense) 2,412 1,418 (9) 1,378 1,485 (124) 6,560
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Total operating
expenses (1,940) (932) (318) (593) (908) (115) (4,806)
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Operating
profit/(loss) 472 486 (327) 785 577 (239) 1,754
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Share of loss in
associates
and joint
ventures - - (2) - - (28) (30)
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Adjusted
profit/(loss)
before tax 472 486 (329) 785 577 (267) 1,724
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
%% %% % %
----------------- ------------------------------ -------------------------------- ------------------------- -------------------------------- ------------------------------- -------------------------- -------------------------------
Adjusted cost
efficiency
ratio 80.4 59.3 n/a 41.4 60.9 70.9
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
2021
Net operating
income/(expense)
before change in
expected
credit losses
and other
credit
impairment
charges(1) 2,055 1,367 579 1,095 1,275 (41) 6,330
- of which: net
interest
income/(expense) (232) 568 224 649 567 (22) 1,754
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Change in
expected credit
losses and other
credit
impairment
charges 1 140 5 7 23 (2) 174
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Net operating
income/(expense) 2,056 1,507 584 1,102 1,298 (43) 6,504
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Total operating
expenses (2,064) (918) (485) (612) (975) (64) (5,118)
Operating
profit/(loss) (8) 589 99 490 323 (107) 1,386
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Share of profit
in associates
and joint
ventures - - - - - 191 191
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Adjusted
profit/(loss)
before tax (8) 589 99 490 323 84 1,577
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
%% %% % %
----------------- ------------------------------ -------------------------------- ------------------------- -------------------------------- ------------------------------- -------------------------- -------------------------------
Adjusted cost
efficiency
ratio 100.4 67.2 83.9 55.9 76.5 80.9
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
2020
----------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net operating
income/(expense)
before change in
expected
credit losses
and other
credit
impairment
charges(1) 1,968 1,381 624 1,133 1,035 (144) 5,997
- of which: net
interest
income/(expense) (96) 651 46 686 664 (53) 1,898
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Change in
expected credit
losses and other
credit
impairment
charges 1 (448) (4) (322) (39) 4 (808)
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Net operating
income/(expense) 1,969 933 620 811 996 (140) 5,189
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Total operating
expenses (1,949) (878) (672) (659) (1,128) (86) (5,372)
Operating
profit/(loss) 20 55 (52) 152 (132) (226) (183)
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Share of profit
in associates
and joint
ventures - - - - - (1) (1)
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
Adjusted
profit/(loss)
before tax 20 55 (52) 152 (132) (227) (184)
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
%% %% % %
----------------- ------------------------------ -------------------------------- ------------------------- -------------------------------- ------------------------------- -------------------------- -------------------------------
Adjusted cost
efficiency
ratio 99.0 63.6 107.7 58.2 109.0 89.6
----------------- ------------------------------ --------------------------------- -------------------------- --------------------------------- -------------------------------- -------------------------- --------------------------------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as revenue.
It includes inter-segment revenue which is eliminated in Corporate
centre, amounting to GBP120m (2021: GBP124m; 2020: GBP167m).
Reported external net operating income is attributed to
countries on the basis of the location of the branch responsible
for reporting the results or advancing the funds:
2022 2021 2020
GBPm GBPm GBPm
-------------------------------------------- ---------------------- ----------------------- -----------------------
Reported external net operating income by
country 4,646 6,120 5,900
-------------------------------------------- ---------------------- ----------------------- -----------------------
- United Kingdom 3,161 2,937 2,914
--------------------------------------------
- France(1) 171 1,677 1,528
--------------------------------------------
- Germany 732 887 814
- Other countries(1) 582 619 644
-------------------------------------------- ---------------------- -----------------------
1 2022 balances include losses on disposal of businesses
classified as held-for-sale as part of a broader restructuring of
our European business.
Adjusted results reconciliation
2022 2021 2020
---------------------------------------------------------------------- -------------------------------------------------------------------- ---------------------------------------------------------------------------
Significant Significant Significant
Adjusted items Reported Adjusted items Reported Adjusted items Reported
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------------------- ---------------------- ---------------------- --------------------- ---------------------- --------------------- ------------------------ ----------------------- ------------------------
Revenue(1) 6,782 (2,136) 4,646 6,330 (210) 6,120 5,997 (97) 5,900
-------------- ---------------------- ---------------------- ---------------------- --------------------- ---------------------- --------------------- ------------------------ ----------------------- ------------------------
ECL (222) - (222) 174 - 174 (808) - (808)
-------------- ---------------------- ---------------------- ---------------------- --------------------- ---------------------- --------------------- ------------------------ ----------------------- ------------------------
Operating
expenses (4,806) (547) (5,353) (5,118) (344) (5,462) (5,372) (1,333) (6,705)
-------------- ---------------------- ---------------------- ---------------------- --------------------- ---------------------- --------------------- ------------------------ ----------------------- ------------------------
Share of
profit/(loss)
in associates
and joint
ventures (30) - (30) 191 - 191 (1) - (1)
-------------- ---------------------- ---------------------- ---------------------- --------------------- ---------------------- --------------------- ------------------------ ----------------------- ------------------------
Profit/(loss)
before tax 1,724 (2,683) (959) 1,577 (554) 1,023 (184) (1,430) (1,614)
-------------- ---------------------- ---------------------- ---------------------- --------------------- ---------------------- --------------------- ------------------------ ----------------------- ------------------------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
Adjusted profit/(loss) reconciliation
---------------------------
2022 2021 2020
GBPm GBPm GBPm
--------------------------------- ------------------------- --------------------------- ---------------------------
Year ended 31 Dec
--------------------------------- ------------------------- --------------------------- ---------------------------
Adjusted profit/(loss) before tax 1,724 1,577 (184)
--------------------------------- ------------------------- --------------------------- ---------------------------
Significant items (2,683) (554) (1,430)
- fair value movements on
financial instruments(1) 43 (5) (3)
- European restructurings (2,034) (23) -
---------------------------------
- restructuring and other related
costs (692) (526) (773)
---------------------------------
- settlements and provisions in
connection with
legal and regulatory matters - - (9)
---------------------------------
- impairment of other intangible
assets - - (645)
Reported profit/(loss) before tax (959) 1,023 (1,614)
--------------------------------- ------------------------- --------------------------- ---------------------------
1 Includes fair value movements on non-qualifying hedges and
debit valuation adjustments on derivatives.
Balance sheet by business
GBM Corporate
MSS GB Other CMB WPB Centre Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- ----------------------- --------------------- ------------------------- --------------------- --------------------- ------------------------- ---------------------
31 Dec
2022
---------- ----------------------- --------------------- ------------------------- --------------------- --------------------- ------------------------- ---------------------
Loans and
advances
to
customers 2,785 37,523 115 25,219 6,826 146 72,614
---------- ----------------------- --------------------- ------------------------- --------------------- --------------------- ------------------------- ---------------------
Customer
accounts 45,320 79,606 5,903 55,749 29,211 159 215,948
---------- ----------------------- --------------------- ------------------------- --------------------- --------------------- ------------------------- ---------------------
31 Dec
2021
---------- ----------------------- --------------------- ------------------------- --------------------- --------------------- ------------------------- ---------------------
Loans and
advances
to
customers 2,016 37,685 197 23,529 27,574 176 91,177
---------- ----------------------- --------------------- ------------------------- --------------------- --------------------- ------------------------- ---------------------
Customer
accounts 34,243 74,179 4,355 50,297 41,939 228 205,241
---------- ----------------------- --------------------- ------------------------- --------------------- --------------------- ------------------------- ---------------------
10 Trading assets
--- ------------------------------------------------------------------------------------------------------------------------------------------
The group The bank
---------------------------------------------- ----------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
--------------------------------------------- --------------------- ----------------------- --------------------- -----------------------
Treasury and other eligible bills 3,712 2,451 3,061 1,872
--------------------------------------------- --------------------- ----------------------- --------------------- -----------------------
Debt securities 21,873 27,004 13,960 17,794
--------------------------------------------- --------------------- ----------------------- --------------------- -----------------------
Equity securities 38,330 40,930 35,407 38,570
--------------------------------------------- --------------------- ----------------------- --------------------- -----------------------
Trading securities 63,915 70,385 52,428 58,236
--------------------------------------------- --------------------- ----------------------- --------------------- -----------------------
Loans and advances to banks(1) 3,987 4,142 3,872 3,559
--------------------------------------------- --------------------- ----------------------- --------------------- -----------------------
Loans and advances to customers(1) 11,976 9,179 11,323 8,995
--------------------------------------------- --------------------- ----------------------- --------------------- -----------------------
At 31 Dec 79,878 83,706 67,623 70,790
--------------------------------------------- --------------------- ----------------------- --------------------- -----------------------
1 Loans and advances to banks and customers include reverse
repos, stock borrowing and other accounts.
11 Fair values of financial instruments carried at fair value
----------------------------------------------------------
Control framework
Fair values are subject to a control framework designed to
ensure that they are either determined or validated by a function
independent of the risk taker.
For all financial instruments where fair values are determined
by reference to externally quoted prices or observable pricing
inputs to models, independent price determination or validation is
utilised. In inactive markets, the group will source alternative
market information to validate the financial instrument's fair
value, with greater weight given to information that is considered
to be more relevant and reliable. The factors that are considered
in this regard are, inter alia:
-- the extent to which prices may be expected to represent genuine traded or tradable prices;
-- the degree of similarity between financial instruments;
-- the degree of consistency between different sources;
-- the process followed by the pricing provider to derive the data;
-- the elapsed time between the date to which the market data
relates and the balance sheet date; and
-- the manner in which the data was sourced.
For fair values determined using valuation models, the control
framework may include, as applicable, development or validation by
independent support functions of: (i) the logic within valuation
models; (ii) the inputs to these models; (iii) any adjustments
required outside the valuation models; and (iv) where possible,
model outputs. Valuation models are subject to a process of due
diligence and calibration before becoming operational and are
calibrated against external market data on an ongoing basis.
Financial liabilities measured at fair value
In certain circumstances, the group records its own debt in
issue at fair value, based on quoted prices in an active market for
the specific instrument. When quoted market prices are unavailable,
the own debt in issue is valued using valuation techniques, the
inputs for which are based either on quoted prices in an inactive
market for the instrument or are estimated by comparison with
quoted prices in an active market for similar instruments. In both
cases, the fair value includes the effect of applying the credit
spread that is appropriate to the group's liabilities.
Structured notes issued and certain other hybrid instruments are
included within trading liabilities and are measured at fair value.
The spread applied to these instruments is derived from the spreads
at which the group issues structured notes.
Fair value hierarchy
Fair values of financial assets and liabilities are determined
according to the following hierarchy:
-- Level 1 - valuation technique using quoted market price:
financial instruments with quoted prices for identical instruments
in active markets that HSBC can access at the measurement date.
-- Level 2 - valuation technique using observable inputs:
financial instruments with quoted prices for similar instruments in
active markets or quoted prices for identical or similar
instruments in inactive markets and financial instruments valued
using models where all significant inputs are observable.
-- Level 3 - valuation technique with significant unobservable
inputs: financial instruments valued using valuation techniques
where one or more significant inputs are unobservable.
Financial instruments carried at fair value and bases of valuation
2022 2021
------------------------------------------------------------------------ ---------------------------------------------------------------------------
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
The group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Recurring
fair value
measurements
at 31 Dec
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Assets
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Trading
assets 52,493 24,647 2,738 79,878 59,813 22,549 1,344 83,706
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Financial
assets
designated
and
otherwise
mandatorily
measured at
fair value
through
profit or
loss 6,183 6,380 3,318 15,881 6,332 9,146 3,171 18,649
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Derivatives 2,296 221,205 1,737 225,238 1,987 137,418 1,816 141,221
Financial
investments 19,007 8,902 1,447 29,356 29,668 10,235 1,387 41,290
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Liabilities
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Trading
liabilities 26,258 14,592 415 41,265 32,886 12,967 580 46,433
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Financial
liabilities
designated
at fair
value 938 23,888 2,461 27,287 1,020 30,467 2,121 33,608
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
Derivatives 1,744 214,645 2,478 218,867 1,105 135,809 2,454 139,368
------------- ------------------ ---------------- ------------------ -------------- ----------------- ----------------- ------------------- ----------------
The bank
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recurring
fair value
measurements
at 31 Dec
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Assets
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Trading
assets 41,524 23,940 2,159 67,623 49,435 20,021 1,334 70,790
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Financial
assets
designated
and
otherwise
mandatorily
measured at
fair value
through
profit or
loss 252 1,094 272 1,618 298 2,556 361 3,215
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Derivatives 2,037 192,778 1,899 196,714 1,413 122,422 1,952 125,787
Financial
investments 11,214 976 71 12,261 21,806 1,346 53 23,205
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Liabilities
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Trading
liabilities 11,771 13,591 403 25,765 19,367 11,240 554 31,161
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Financial
liabilities
designated
at fair
value - 17,565 1,850 19,415 - 19,306 1,563 20,869
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Derivatives 1,691 189,908 1,737 193,336 1,066 123,863 2,722 127,651
------------- -------------------- ------------------ -------------------- ---------------- -------------------- ----------------- --------------------- -----------------
Transfers between Level 1 and Level 2 fair values
Assets Liabilities
---------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------
Designated
and
otherwise
mandatorily
measured
at fair value
through Designated
Financial Trading profit or Trading at fair
investments assets loss Derivatives liabilities value Derivatives
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- ----------------------------- -------------------------- ------------------------------------------- -------------------------- -------------------------- -------------------------- --------------------------
At 31 Dec
2022
---------- ----------------------------- -------------------------- ------------------------------------------- -------------------------- -------------------------- -------------------------- --------------------------
Transfers 126 1,194 - 39 - - -
from Level
1 to Level
2
---------- ----------------------------- -------------------------- ------------------------------------------- -------------------------- -------------------------- -------------------------- --------------------------
Transfers 189 682 - 32 - - -
from Level
2 to Level
1
---------- ----------------------------- -------------------------- ------------------------------------------- -------------------------- -------------------------- -------------------------- --------------------------
At 31 Dec
2021
---------- ----------------------------- -------------------------- ------------------------------------------- -------------------------- -------------------------- -------------------------- --------------------------
Transfers
from
Level
1 to
Level 2 366 1,731 757 - 27 - -
---------- ----------------------------- -------------------------- ------------------------------------------- -------------------------- -------------------------- -------------------------- --------------------------
Transfers 244 990 399 - 91 - -
from
Level
2 to
Level 1
---------- ----------------------------- -------------------------- ------------------------------------------- -------------------------- -------------------------- -------------------------- --------------------------
Transfers between levels of the fair value hierarchy are deemed
to occur at the end of each quarterly reporting period. Transfers
into and out of levels of the fair value hierarchy are normally
attributable to observability of valuation inputs and price
transparency.
Fair value adjustments
Fair value adjustments are adopted when the group determines
there are additional factors considered by market participants that
are not incorporated within the valuation model. Movements in the
level of fair value adjustments do not necessarily result in the
recognition of profits or losses within the income statement, such
as when models are enhanced and fair value adjustments may no
longer be required.
Fair value adjustments
2022 2021
MSS Corporate MSS Corporate
GBPm GBPm GBPm GBPm
------------------------------------ -------------------------- --------------------------- -------------------------- ----------------------------
Type of adjustment
------------------------------------ -------------------------- --------------------------- -------------------------- ----------------------------
Risk-related 359 33 505 31
------------------------------------ -------------------------- --------------------------- -------------------------- ----------------------------
* bid-offer 188 - 190 -
------------------------------------
* uncertainty 50 - 37 1
------------------------------------
* credit valuation adjustment 98 29 99 26
------------------------------------
* debt valuation adjustment (64) - (27) -
------------------------------------
* funding fair value adjustment 87 4 206 4
------------------------------------
- - - -
* other
------------------------------------ -------------------------- --------------------------- --------------------------
Model-related 31 - 19 -
------------------------------------ -------------------------- --------------------------- -------------------------- ----------------------------
* model limitation 31 - 19 -
------------------------------------
- - - -
* other
------------------------------------ -------------------------- --------------------------- --------------------------
Inception profit (Day 1 P&L
reserves) 64 - 65 -
------------------------------------ -------------------------- --------------------------- -------------------------- ----------------------------
At 31 Dec 454 33 589 31
------------------------------------ -------------------------- --------------------------- -------------------------- ----------------------------
Bid-offer
IFRS 13 'Fair value measurement' requires use of the price
within the bid-offer spread that is most representative of fair
value. Valuation models will typically generate mid-market values.
The bid-offer adjustment reflects the extent to which bid-offer
costs would be incurred if substantially all residual net portfolio
market risks were closed using available hedging instruments or by
disposing of or unwinding the position.
Uncertainty
Certain model inputs may be less readily determinable from
market data, and/or the choice of model itself may be more
subjective. In these circumstances, an adjustment may be necessary
to reflect the likelihood that market participants would adopt more
conservative values for uncertain parameters and/or model
assumptions than those used in the valuation model.
Credit and debit valuation adjustments
The CVA is an adjustment to the valuation of over-the-counter
('OTC') derivative contracts to reflect the possibility that the
counterparty may default, and that the group may not receive the
full market value of the transactions.
The DVA is an adjustment to the valuation of OTC derivative
contracts to reflect the possibility that HSBC may default, and
that it may not pay the full market value of the transactions.
HSBC calculates a separate CVA and DVA for each legal entity,
and for each counterparty to which the entity has exposure. With
the exception of central clearing parties, all third-party
counterparties are included in the CVA and DVA calculations, and
these adjustments are not netted across the Group's entities.
HSBC calculates the CVA by applying the probability of default
('PD') of the counterparty, conditional on the non-default of HSBC,
to HSBC's expected positive exposure to the counterparty and
multiplying the result by the loss expected in the event of
default.
Conversely, HSBC calculates the DVA by applying the PD of HSBC,
conditional on the non-default of the counterparty, to the expected
positive exposure of the counterparty to HSBC and multiplying the
result by the proportional loss expected in the event of default.
Both calculations are performed over the life of the potential
exposure.
For most products, HSBC uses a simulation methodology, which
incorporates a range of potential exposures over the life of the
portfolio, to calculate the expected positive exposure to a
counterparty. The simulation methodology includes credit mitigants,
such as counterparty netting agreements and collateral agreements
with the counterparty. The methodologies do not, in general,
account for 'wrong-way risk', which arises when the underlying
value of the derivative prior to any CVA is positively correlated
to the PD of the counterparty. When there is significant wrong-way
risk, a trade-specific approach is applied to reflect this risk in
the valuation.
Funding fair value adjustment
The FFVA is calculated by applying future market funding spreads
to the expected future funding exposure of any uncollateralised
component of the OTC derivative portfolio. The expected future
funding exposure is calculated by a simulation methodology, where
available, and is adjusted for events that may terminate the
exposure, such as the default of HSBC or the counterparty. The FFVA
and DVA are calculated independently.
Model limitation
Models used for portfolio valuation purposes may be based upon a
simplified set of assumptions that do not capture all current and
future material market characteristics. In these circumstances,
model limitation adjustments are adopted.
Inception profit (Day 1 P&L reserves)
Inception profit adjustments are adopted when the fair value
estimated by a valuation model is based on one or more significant
unobservable inputs. The accounting for inception profit
adjustments is discussed in Note 1.
Fair value valuation bases
Financial instruments measured at fair value using a valuation technique
with significant unobservable inputs - Level 3
Assets Liabilities
--------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------
Designated
and otherwise
mandatorily
measured
at fair
Held value through Designated
Financial for profit Held at fair
Investments trading or loss Derivatives Total for trading value Derivatives Total
The group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
Private
equity
including
strategic
investments 85 59 3,058 - 3,202 104 - - 104
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
Asset-backed
securities 275 170 78 - 523 - - - -
Structured
notes - - - - - - 2,461 - 2,461
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
Derivatives - - - 1,737 1,737 - - 2,478 2,478
Other
portfolios 1,087 2,509 182 - 3,778 311 - - 311
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
At 31 Dec
2022 1,447 2,738 3,318 1,737 9,240 415 2,461 2,478 5,354
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
Private
equity
including
strategic
investments 79 1 2,898 - 2,978 7 - - 7
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
Asset-backed
securities 495 97 - - 592 - - - -
Structured
notes - - - - - - 2,120 - 2,120
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
Derivatives - - - 1,816 1,816 - - 2,454 2,454
Other
portfolios 813 1,246 273 - 2,332 573 1 - 574
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
At 31 Dec
2021 1,387 1,344 3,171 1,816 7,718 580 2,121 2,454 5,155
------------- ----------------------- --------------------- ------------------------------ ---------------------- ------------------- ------------------------ ----------------------------- ---------------------- ---------------------
The bank
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Private
equity
including
strategic
investments 54 58 272 - 384 103 - - 103
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Asset-backed
securities 17 170 - - 187 - - - -
Structured
notes - - - - - - 1,850 - 1,850
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Derivatives - - - 1,899 1,899 - - 1,728 1,728
Other
portfolios - 1,931 - - 1,931 300 - 9 309
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
At 31 Dec
2022 71 2,159 272 1,899 4,401 403 1,850 1,737 3,990
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Private
equity
including
strategic
investments 53 - 353 - 406 6 - - 6
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Asset-backed
securities - 97 - - 97 - - - -
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Structured
notes - - - - - - 1,563 - 1,563
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Derivatives - - - 1,952 1,952 - - 2,722 2,722
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Other
portfolios - 1,237 8 - 1,245 548 - - 548
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
At 31 Dec
2021 53 1,334 361 1,952 3,700 554 1,563 2,722 4,839
------------- ----------------------- ------------------- -------------------------------- ---------------------- ------------------- ------------------------ --------------------------- ------------------------ ---------------------
Level 3 instruments are present in both ongoing and legacy
businesses. Loans held for securitisation, certain derivatives and
predominantly all Level 3 Asset-backed securities are legacy
positions. HSBC has the capability to hold these positions.
Private equity including strategic investments
The investment's fair value is estimated: on the basis of an
analysis of the investee's financial position and results, risk
profile, prospects and other factors; by reference to market
valuations for similar entities quoted in an active market; the
price at which similar companies have changed ownership; or from
published net asset values ('NAVs') received. If necessary,
adjustments are made to the NAV of funds to obtain the best
estimate of fair value.
Asset-backed securities
While quoted market prices are generally used to determine the
fair value of these securities, valuation models are used to
substantiate the reliability of the limited market data available
and to identify whether any adjustments to quoted market prices are
required. For certain ABSs, such as residential mortgage-backed
securities, the valuation uses an industry standard model with
assumptions relating to prepayment speeds, default rates and loss
severity based on collateral type, and performance, as appropriate.
The valuations output is benchmarked for consistency against
observable data for securities of a similar nature.
Structured notes
The fair value of Level 3 structured notes is derived from the
fair value of the underlying debt security, and the fair value of
the embedded derivative is determined as described in the paragraph
below on derivatives. These structured notes comprise principally
equity-linked notes, issued by HSBC, which provide the counterparty
with a return linked to the performance of equity securities and
other portfolios. Examples of the unobservable parameters include
long-dated equity volatilities and correlations between equity
prices, and interest and foreign exchange rates.
Derivatives
OTC derivative valuation models calculate the present value of
expected future cash flows, based upon 'no-arbitrage' principles.
For many vanilla derivative products, the modelling approaches used
are standard across the industry. For more complex derivative
products, there may be some differences in market practice. Inputs
to valuation models are determined from observable market data,
wherever possible, including prices available from exchanges,
dealers, brokers or providers of consensus pricing. Certain inputs
may not be observable in the market directly, but can be determined
from observable prices through model calibration procedures or
estimated from historical data or other sources.
Reconciliation of fair value measurements in Level 3 of the fair
value hierarchy
Movement in Level 3 financial instruments
Assets Liabilities
--------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------
Designated
and
otherwise
mandatorily
measured
at fair
value
through Designated
Financial Trading profit Trading at fair
Investments assets or loss Derivatives liabilities value Derivatives
The group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
At 1 Jan 2022 1,387 1,344 3,171 1,816 580 2,121 2,454
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Total gains/(losses)
on assets and total (gains)/losses
on liabilities recognised
in profit or loss (6) (415) (84) 564 (223) (638) 723
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
* net income from financial instruments held for
trading or managed on a fair value basis - (415) - 564 (223) - 723
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - (84) - - (638) -
------------------------------------------------------------
* gains less losses from financial investments at fair
value through other comprehensive income (6) - - - - - -
Total gains/(losses)
recognised in other comprehensive
income ('OCI')(1) (145) 12 238 3 1 29 17
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
- financial investments:
fair value gains/(losses) (232) - - - - - -
- exchange differences 87 12 238 3 1 29 17
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- --------------------------
Purchases 601 2,067 562 - 151 - -
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
New issuances - - - - 7 1,705 -
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Sales (142) (716) (594) - (120) (78) -
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Settlements (90) (323) (51) (731) (407) (575) (701)
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Transfers out (199) (283) (2) (473) (15) (564) (582)
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Transfers in 41 1,052 78 558 441 461 567
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
At 31 Dec 2022 1,447 2,738 3,318 1,737 415 2,461 2,478
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Unrealised gains/(losses)
recognised in profit
or loss relating to assets
and liabilities held
at 31 Dec 2022 - (5) 49 565 2 30 2,339
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
* trading income/(expense) excluding net interest
income - (5) - 565 2 - 2,339
------------------------------------------------------------
* net income/(expense) from other financial instruments
designated at fair value - - 49 - - 30 -
At 1 Jan 2021 1,635 1,611 3,467 1,974 118 1,150 3,096
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Total gains/(losses)
on assets and total (gains)/losses
on liabilities recognised
in profit or loss 15 (77) 148 1,608 11 (316) 1,362
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
* net income from financial instruments held for
trading or managed on a fair value basis - (77) - 1,608 11 - 1,362
------------------------------------------------------------
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 148 - - (316) -
------------------------------------------------------------
* gains less losses from financial investments at fair
value through other comprehensive income 15 - - - - - -
Total gains/(losses)
recognised in other comprehensive
income ('OCI')(1) (75) (4) (152) (6) (1) (32) (8)
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
- financial investments: (27) - - - - - -
fair value gains/(losses)
------------------------------------------------------------
- exchange differences (48) (4) (152) (6) (1) (32) (8)
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- --------------------------
Purchases 555 686 543 - 742 1 -
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
New issuances - - - - 25 2,213 -
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Sales (417) (209) (813) - (3) (20) -
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Settlements (109) (506) (5) (1,722) (504) (1,053) (2,343)
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Transfers out (218) (668) (41) (368) (5) (137) (465)
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Transfers in 1 511 24 330 197 315 812
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
At 31 Dec 2021 1,387 1,344 3,171 1,816 580 2,121 2,454
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
Unrealised gains/(losses)
recognised in profit
or loss relating to assets
and liabilities held
at 31 Dec 2021 - (11) 51 846 - 102 (721)
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- -------------------------- --------------------------
* trading income/(expense) excluding net interest
income - (11) - 846 - - (721)
------------------------------------------------------------
* net income from other financial instruments
designated at fair value - - 51 - - 102 -
------------------------------------------------------------ -------------------------- -------------------------- -------------------------------- --------------------------- -------------------------- --------------------------
1 Included in 'financial investments: fair value gains/(losses)'
in the current year and 'exchange differences' in the consolidated
statement of comprehensive income.
Transfers between levels of the fair value hierarchy are deemed
to occur at the end of each quarterly reporting period. Transfers
into and out of levels of the fair value hierarchy are primarily
attributable to observability of valuation inputs and price
transparency.
Movement in Level 3 financial instruments (continued)
Assets Liabilities
---------------------------------------------- ------------------------------------
Designated
and
otherwise
mandatorily
measured
at fair
value
through Designated
Financial Trading profit Trading at fair
Investments Assets or loss Derivatives Liabilities value Derivatives
The bank GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
At 1 Jan 2022 53 1,334 361 1,952 554 1,563 2,722
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Total gains/(losses)
on assets and total (gains)/losses
on liabilities recognised
in profit or loss 2 (419) (91) 665 (216) (569) 45
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
* net income from financial instruments held for
trading or managed on a fair value basis - (419) - 665 (216) - 45
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - (91) - - (569) -
------------------------------------------------------------
* gains less losses from financial investments at fair
value through other comprehensive income 2 - - - - - -
Total gains/(losses)
recognised in other comprehensive
income ('OCI')(1) 1 - 24 - - - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
1 - - - - - -
* financial investments: fair value gains/(losses)
- exchange differences - - 24 - - - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ----------
Purchases - 1,495 - - 151 - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
New issuances - - - - - 1,682 -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Sales - (659) (12) - (120) - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Settlements - (323) (8) (850) (392) (557) (1,025)
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Transfers out - (283) (2) (541) (15) (471) (606)
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Transfers in 15 1,014 - 673 441 202 601
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
At 31 Dec 2022 71 2,159 272 1,899 403 1,850 1,737
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Unrealised gains/(losses)
recognised in profit
or loss relating to assets
and liabilities held
at 31 Dec 2022 - - - 688 - 19 3,020
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
* trading income/(expense) excluding net interest
income - - - 688 - - 3,020
------------------------------------------------------------
* net income/(expense) from other financial instruments
designated at fair value - - - - - 19 -
At 1 Jan 2021 141 1,583 311 2,032 103 651 3,287
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Total gains/(losses)
on assets and total (gains)/losses
on liabilities recognised
in profit or loss 1 (76) 77 1,730 12 (246) 1,443
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
* net income from financial instruments held for
trading or managed on a fair value basis - (76) - 1,730 12 - 1,443
------------------------------------------------------------
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 77 - - (246) -
------------------------------------------------------------
* gains less losses from financial investments at fair
value through other comprehensive income 1 - - - - - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ----------
Total gains/(losses)
recognised in other comprehensive
income ('OCI')(1) (1) (3) (11) - - - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
(1) - - - - - -
* financial investments: fair value gains/(losses)
------------------------------------------------------------
* exchange differences - (3) (11) - - - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ----------
Purchases - 683 2 - 741 - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
New issuances - - - - - 2,128 -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Sales (2) (186) (13) - - - -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Settlements (3) (505) (5) (1,778) (494) (950) (2,297)
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Transfers out (83) (668) - (375) (5) (153) (511)
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Transfers in - 506 - 343 197 133 800
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
At 31 Dec 2021 53 1,334 361 1,952 554 1,563 2,722
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
Unrealised gains/(losses)
recognised in profit
or loss relating to assets
and liabilities held
at 31 Dec 2021 - (11) 1 973 - 46 (949)
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ---------- -----------
* trading income/(expense) excluding net interest
income - (11) - 973 - - (949)
------------------------------------------------------------
* net income from other financial instruments
designated at fair value - - 1 - - 46 -
------------------------------------------------------------ ----------- ------- ----------- ----------- ----------- ----------
1 Included in 'financial investments: fair value gains/(losses)'
in the current year and 'exchange differences' in the consolidated
statement of comprehensive income.
Transfers between levels of the fair value hierarchy are deemed
to occur at the end of each quarterly reporting period. Transfers
into and out of levels of the fair value hierarchy are primarily
attributable to observability of valuation inputs and price
transparency.
Effect of changes in significant unobservable assumptions to
reasonably possible alternatives
Sensitivity of Level 3 fair values to reasonably possible alternative
assumptions
2022 2021
------------------------------------------------------------------------------------ ----------------------------------------------------------------------------------
Reflected Reflected
in in
profit or Reflected profit or Reflected
loss in OCI loss in OCI
------------------------------------------ ---------------------------------------- ---------------------------------------- ----------------------------------------
Un- Un- Un- Un-
Favourable favourable Favourable favourable Favourable favourable Favourable favourable
changes changes changes changes changes changes changes changes
The group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------------- -------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Derivatives,
trading assets
and trading
liabilities(1) 201 (261) - - 92 (70) - -
--------------- -------------------- -------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Designated and
otherwise
mandatorily
measured at
fair value
through profit
or loss 236 (235) - - 247 (247) - -
--------------- -------------------- -------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Financial
investments 9 (9) 27 (19) 15 (15) 51 (50)
--------------- -------------------- -------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Year ended 31
Dec 446 (505) 27 (19) 354 (332) 51 (50)
--------------- -------------------- -------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
The bank
Derivatives,
trading assets
and trading
liabilities(1) 193 (253) - - 93 (72) - -
--------------- ------------------- ------------------- ------------------- -------------------- --- ------------------- --------------------- ---------------------
Designated and
otherwise
mandatorily
measured at
fair value
through profit
or loss 45 (45) - - 64 (64) - -
--------------- ------------------- ------------------- ------------------- -------------------- --- ------------------- --------------------- ---------------------
Financial
investments - - 14 (6) 0 - 6 (5)
--------------- ------------------- ------------------- ------------------- -------------------- --- ------------------- --------------------- ---------------------
Year ended 31
Dec 238 (298) 14 (6) 157 (136) 6 (5)
--------------- ------------------- ------------------- ------------------- -------------------- --- ------------------- --------------------- ---------------------
1 Derivatives, trading assets and trading liabilities are
presented as one category to reflect the manner in which these
instruments are risk managed.
Sensitivity of Level 3 fair values to reasonably possible alternative
assumptions by instrument type
2022 2021
-------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------
Reflected Reflected
in in
profit or Reflected profit or Reflected
loss in OCI loss in OCI
------------------------------------------ ------------------------------------------ -------------------------------------------- --------------------------------------------
Favourable Un-favourable Favourable Un-favourable Favourable Un-favourable Favourable Un-favourable
changes changes changes changes changes changes changes changes
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- -------------------- -------------------- -------------------- -------------------- --------------------- --------------------- --------------------- ---------------------
Private
equity
including
strategic
investments 225 (389) 8 (7) 232 (234) 7 (7)
------------- -------------------- -------------------- -------------------- -------------------- --------------------- --------------------- --------------------- ---------------------
Asset-backed
securities 28 (17) 12 (5) 39 (20) 1 -
Structured
notes 5 (5) - - 6 (6) - -
------------- -------------------- -------------------- -------------------- -------------------- --------------------- --------------------- --------------------- ---------------------
Derivatives 44 (44) - - 29 (34) - -
Other
portfolios 144 (50) 7 (7) 48 (38) 43 (43)
------------- -------------------- -------------------- -------------------- -------------------- --------------------- --------------------- --------------------- ---------------------
Total 446 (505) 27 (19) 354 (332) 51 (50)
------------- -------------------- -------------------- -------------------- -------------------- --------------------- --------------------- --------------------- ---------------------
The sensitivity analysis aims to measure a range of fair values
consistent with the application of a 95% confidence interval.
Methodologies take account of the nature of the valuation technique
employed, as well as the availability and reliability of observable
proxy and historical data.
When the fair value of a financial instrument is affected by
more than one unobservable assumption, the above table reflects the
most favourable or the most unfavourable change from varying the
assumptions individually.
Key unobservable inputs to Level 3 financial instruments
Quantitative information about significant unobservable inputs in Level
3 valuations
Fair value 2022 2021
----------------------------------------- ---------------- ------------------
Full Full range
range of inputs
Assets Liabilities of inputs
---------- ------------ ---------------- ------------------
GBPm GBPm Key Lower Higher Lower Higher
Valuation unobservable
techniques inputs
--------------- ------------------- -------------------- ---------- ------------ -------- ------ ---------- ------
Private equity
including
strategic
investments 3,202 104 See below See below N/A N/A N/A N/A
--------------- ------------------- -------------------- ---------- ------------ -------- ------ ---------- ------
Asset-backed 523 -
securities
--------------- ------------------- -------------------- ---------- ------------ -------- ------ ---------- ------
Market
- CLO/CDO(1) 156 - proxy Bid quotes - 92 - 100
Market
- Other ABSs 367 - proxy Bid quotes - 99 - 100
Structured
notes - 2,461
--------------- ------------------- -------------------- ---------- ------------ -------- ------ ---------- ------
Model -
- equity-linked Option Equity
notes model Volatility 6% 99% 6% 124%
--------------- ---------- ------------ -------- ------ ---------- ------
Equity
- 2,042 Correlation 32% 99% 34% 99%
--------------- ---------- ------------ -------- ------ ---------- ------
- fund-linked Model - Fund
notes Option Volatility
- - model
--------------- ---------- ------------ -------- ------ ---------- ------
Model -
- FX-linked Option FX
notes - 3 model Volatility 3% 20% 3% 99%
--------------- ---------- ------------ -------- ------ ---------- ------
- other - 416
--------------- ------------------- -------------------- ---------- ------------ -------- ------ ---------- ------
Derivatives 1,737 2,478
- Interest rate
derivatives: 507 633
--------------- ------------ -------- ------ ---------- ------
Model -
securitisation Discounted Constant
swaps 215 173 cash flow Prepayment 5% 10% 5% 50%
--------------- ---------- ------------ -------- ------ ---------- ------
Model -
long-dated Option IR
swaptions 44 56 model Volatility 9% 33% 15% 35%
--------------- ---------- ------------ -------- ------ ---------- ------
other 248 404
--------------- ---------- ------------ -------- ------ ---------- ------
- FX
derivatives: 447 304
--------------- ---------- ------------ -------- ------ ---------- ------
Model -
Option FX
FX options 418 294 model Volatility 3% 46% 2% 99%
--------------- ---------- ------------ -------- ------ ---------- ------
other 29 10
--------------- ---------- ------------ -------- ------ ---------- ------
- Equity
derivatives: 688 1,324
--------------- ---------- ------------ -------- ------ ---------- ------
long-dated Model -
single Option Equity
stock options 344 376 model Volatility 7% 153% 4% 138%
--------------- ---------- ------------ -------- ------ ---------- ------
other(2) 344 948
--------------- ---------- ------------ -------- ------ ---------- ------
- Credit
derivatives: 95 217
--------------- ---------- ------------ -------- ------ ---------- ------
other 95 217
--------------- ------------------- -------------------- ---------- ------------ -------- ------ ---------- ------
Other
portfolios 3,778 311
--------------- ------------------- -------------------- ---------- ------------ -------- ------ ---------- ------
Model -
- repurchase Discounted
agreements 387 272 cash flow IR Curve 1% 9% 1% 5%
- other(3) 3,391 39
--------------- ------------------- -------------------- ------------ -------- ------ ---------- ------
At 31 Dec 9,240 5,354
--------------- ------------------- -------------------- ---------- ------------ -------- ------ ---------- ------
1 Collateralised loan obligation/collateralised debt
obligation.
2 Other Equity Derivatives consists mainly of Swaps and OTC Options.
3 Other consists of various instruments including investment in
funds, repurchase agreement and bonds.
Private equity including strategic investments
Given the bespoke nature of the analysis in respect of each
holding, it is not practical to quote a range of key unobservable
inputs. The key unobservable inputs would be price and correlation.
The valuation approach includes using a range of inputs that
include company specific financials, traded comparable companies
multiples, published net asset values and qualitative assumptions,
which are not directly comparable or quantifiable.
Prepayment rates
Prepayment rates are a measure of the anticipated future speed
at which a loan portfolio will be repaid in advance of the due
date. They vary according to the nature of the loan portfolio and
expectations of future market conditions, and may be estimated
using a variety of evidence, such as prepayment rates implied from
proxy observable security prices, current or historical prepayment
rates and macroeconomic modelling.
Market proxy
Market proxy pricing may be used for an instrument when specific
market pricing is not available, but there is evidence from
instruments with common characteristics. In some cases, it might be
possible to identify a specific proxy, but more generally evidence
across a wider range of instruments will be used to understand the
factors that influence current market pricing and the manner of
that influence.
Volatility
Volatility is a measure of the anticipated future variability of
a market price. It varies by underlying reference market price, and
by strike and maturity of the option.
Certain volatilities, typically those of a longer-dated nature,
are unobservable and estimated from observable data. The range of
unobservable volatilities reflects the wide variation in volatility
inputs by reference market price. The core range is significantly
narrower than the full range because these examples with extreme
volatilities occur relatively rarely within the HSBC portfolio.
Correlation
Correlation is a measure of the inter-relationship between two
market prices, and is expressed as a number between minus one and
one. It is used to value more complex instruments where the payout
is dependent upon more than one market price. There is a wide range
of instruments for which correlation is an input, and consequently
a wide range of both same-asset correlations and cross-asset
correlations is used. In general, the range of same-asset
correlations will be narrower than the range of cross-asset
correlations.
Unobservable correlations may be estimated based upon a range of
evidence, including consensus pricing services, HSBC trade prices,
proxy correlations and examination of historical price
relationships. The range of unobservable correlations quoted in the
table reflects the wide variation in correlation inputs by market
price pair.
Credit spread
Credit spread is the premium over a benchmark interest rate
required by the market to accept lower credit quality. In a
discounted cash flow model, the credit spread increases the
discount factors applied to future cash flows, thereby reducing the
value of an asset. Credit spreads may be implied from market prices
and may not be observable in more illiquid markets.
Inter-relationships between key unobservable inputs
Key unobservable inputs to Level 3 financial instruments may not
be independent of each other. As described above, market variables
may be correlated. This correlation typically reflects the manner
in which different markets tend to react to macroeconomic or other
events. Furthermore, the effect of changing market variables on the
HSBC portfolio will depend on HSBC's net risk position in respect
of each variable.
12 Fair values of financial instruments not carried at fair value
--------------------------------------------------------------
Fair values of financial instruments not carried at fair value and
bases of valuation
Fair value
-------------------------------------------------------------------------------------------------------------------------------------------------------------------
Quoted Significant
market Observable unobservable
Carrying price inputs inputs
amount Level 1 Level 2 Level 3 Total
The group GBPm GBPm GBPm GBPm GBPm
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
At 31 Dec
2022
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Assets
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Loans and
advances to
banks 17,109 - 17,112 - 17,112
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Loans and
advances to
customers 72,614 - - 72,495 72,495
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Reverse
repurchase
agreements
-
non-trading 53,949 - 53,949 - 53,949
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Financial
investments
- at
amortised
cost 3,248 2,336 848 8 3,192
Liabilities
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Deposits by
banks 20,836 - 20,900 - 20,900
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Customer
accounts 215,948 - 215,955 - 215,955
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Repurchase
agreements
-
non-trading 32,901 - 32,901 - 32,902
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Debt
securities
in issue 7,268 - 7,124 132 7,256
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Subordinated
liabilities 14,528 - 14,434 - 14,434
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
At 31 Dec
2021
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Assets
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Loans and
advances to
banks 10,784 - 10,786 - 10,786
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Loans and
advances to
customers 91,177 - - 91,276 91,276
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Reverse
repurchase
agreements
-
non-trading 54,448 - 54,448 - 54,448
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Financial
investments
- at
amortised
cost 10 2 - 8 10
Liabilities
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Deposits by
banks 32,188 - 32,102 - 32,102
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Customer
accounts 205,241 - 205,236 - 205,236
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Repurchase
agreements
-
non-trading 27,259 - 27,259 - 27,259
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Debt
securities
in issue 9,428 - 9,286 144 9,430
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Subordinated
liabilities 12,488 - 13,118 - 13,118
------------- --------------------------------------- ---------------------------------------- -------------------------------------- ---------------------------------------- ---------------------------------------
Fair values of selected financial instruments not carried at fair value
and bases of valuation - assets and disposal groups held for sale
Fair value
------------------------------------------------------------------------------------------------------------------------------------------------------------------
Quoted Significant
market Observable unobservable
Carrying price inputs inputs
amount Level 1 Level 2 Level 3 Total
$m $m $m $m $m
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
At 31 Dec
2022
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Assets
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Loans and
advances to
banks 127 - 131 - 131
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Loans and
advances to
customers 21,067 - - 19,481 19,481
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Reverse
repurchase
agreements
-
non-trading 208 - 208 - 208
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Liabilities
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Deposits by
banks 2 - 2 - 2
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Customer
accounts 20,478 - 20,393 - 20,393
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Debt
securities
in issue 1,100 - 1,100 - 1,100
------------ ---------------------------------------- -------------------------------------- ---------------------------------------- -------------------------------------- ----------------------------------------
Fair values of financial instruments not carried at fair value and
bases of valuation
Fair value
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Quoted Significant
market Observable unobservable
Carrying price inputs inputs
amount Level 1 Level 2 Level 3 Total
The bank GBPm GBPm GBPm GBPm GBPm
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
At 31 Dec
2022
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Assets
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Loans and
advances to
banks 14,486 - 14,508 - 14,508
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Loans and
advances to
customers 36,992 - - 36,875 36,875
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Reverse
repurchase
agreements
-
non-trading 43,055 - 43,055 - 43,055
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Financial
investments
- at
amortised
cost 6,378 1,984 4,305 - 6,289
Liabilities
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Deposits by
banks 13,594 - 13,594 - 13,594
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Customer
accounts 141,714 - 141,714 - 141,714
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Repurchase
agreements
-
non-trading 29,638 - 29,638 - 29,638
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Debt
securities
in issue 4,656 - 4,656 - 4,656
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Subordinated
liabilities 14,252 - 14,139 - 14,139
At 31 Dec
2021
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Assets
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Loans and
advances to
banks 6,778 - 6,881 - 6,881
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Loans and
advances to
customers 33,936 - - 33,921 33,921
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Reverse
repurchase
agreements
-
non-trading 39,708 - 39,708 - 39,708
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Financial
investments
- at
amortised
cost(1) 3,337 - 3,300 - 3,300
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Liabilities
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Deposits by
banks 14,655 - 14,655 - 14,655
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Customer
accounts 124,706 - 124,706 - 124,706
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Repurchase
agreements
-
non-trading 22,344 - 22,344 - 22,344
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Debt
securities
in issue 5,658 - 5,658 - 5,658
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
Subordinated
liabilities 12,218 - 12,851 - 12,851
------------- ----------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -----------------------------------
1 Fair value of Financial investment is represented to include the impact of inter-company.
Other financial instruments not carried at fair value are
typically short-term in nature and reprice to current market rates
frequently. Accordingly, their carrying amount is a reasonable
approximation of fair value. They include cash and balances at
central banks and items in the course of collection from and
transmission to other banks, all of which are measured at amortised
cost.
Valuation
Fair value is an estimate of the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. It
does not reflect the economic benefits and costs that HSBC expects
to flow from an instrument's cash flow over its expected future
life. Our valuation methodologies and assumptions in determining
fair values for which no observable market prices are available may
differ from those of other companies.
Loans and advances to banks and customers
To determine the fair value of loans and advances to banks and
customers, loans are segregated, as far as possible, into
portfolios of similar characteristics. Fair values are based on
observable market transactions, when available. When they are
unavailable, fair values are estimated using valuation models
incorporating a range of input assumptions. These assumptions may
include: value estimates from third-party brokers reflecting
over-the-counter trading activity; forward-looking discounted cash
flow models, taking account of expected customer prepayment rates,
using assumptions that HSBC believes are consistent with those that
would be used by market participants in valuing such loans; new
business rates estimates for similar loans; and trading inputs from
other market participants including observed primary and secondary
trades. From time to time, we may engage a third-party valuation
specialist to measure the fair value of a pool of loans.
The fair value of loans reflects expected credit losses at the
balance sheet date and estimates of market participants'
expectations of credit losses over the life of the loans, and the
fair value effect of repricing between origination and the balance
sheet date. For credit impaired loans, fair value is estimated by
discounting the future cash flows over the time period they are
expected to be recovered.
Financial investments
The fair values of listed financial investments are determined
using bid market prices. The fair values of unlisted financial
investments are determined using valuation techniques that
incorporate the prices and future earnings streams of equivalent
quoted securities.
Deposits by banks and customer accounts
The fair values of on-demand deposits are approximated by their
carrying value. For deposits with longer-term maturities, fair
values are estimated using discounted cash flows, applying current
rates offered for deposits of similar remaining maturities.
Debt securities in issue and subordinated liabilities
Fair values are determined using quoted market prices at the
balance sheet date where available, or by reference to quoted
market prices for similar instruments. When quoted market prices
are unavailable, these instruments are valued using valuation
techniques, the inputs for which are derived from observable market
data and, where relevant, from assumptions in respect of
unobservable inputs.
Repurchase and reverse repurchase agreements - non-trading
Fair values approximate carrying amounts as balances are
generally short dated.
13 Financial assets designated and otherwise mandatorily measured
at fair value through profit or loss
--------------------------------------------------------------
The group The bank
----------------------------------------------------------------------------------- -------------------------------------------------------------------------------------
2022 2021 2022 2021
------------------------------------------ --------------------------------------- -------------------------------------------- ---------------------------------------
Designated Designated
Designated at fair Designated at fair
at fair value value and at fair value value and
and otherwise otherwise and otherwise otherwise
mandatorily mandatorily mandatorily mandatorily
measured at measured measured at measured
fair value at fair value fair value at fair value
GBPm GBPm GBPm GBPm
----------- ------------------------------------------ --------------------------------------- -------------------------------------------- ---------------------------------------
Securities 14,581 15,738 318 418
- debt 1,975 2,584 44 146
securities
-----------
- equity 12,606 13,154 274 272
securities
----------- ------------------------------------------ --------------------------------------- --------------------------------------------
Loans and 971 2,613 971 2,498
advances to
banks
and
customers
----------- ------------------------------------------ --------------------------------------- -------------------------------------------- ---------------------------------------
Other 329 298 329 299
----------- ------------------------------------------ --------------------------------------- -------------------------------------------- ---------------------------------------
At 31 Dec 15,881 18,649 1,618 3,215
----------- ------------------------------------------ --------------------------------------- -------------------------------------------- ---------------------------------------
14 Derivatives
-----------
Notional contract amounts and fair values of derivatives by product
contract type
Notional contract Fair value - Assets Fair value - Liabilities
amount
------------------------------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Trading Hedging Trading Hedging Total Trading Hedging Total
The group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Foreign
exchange 6,101,153 582 88,244 2 88,246 (86,119) (57) (86,176)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Interest
rate 10,141,018 56,144 206,689 433 207,122 (201,419) (819) (202,238)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Equities 465,626 - 7,751 - 7,751 (8,175) - (8,175)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Credit 146,522 - 865 - 865 (1,012) - (1,012)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Commodity
and
other 57,594 - 1,053 - 1,053 (1,065) - (1,065)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Offset
(Note 28) (79,799) 79,799
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
At 31 Dec
2022 16,911,913 56,726 304,602 435 225,238 (297,790) (876) (218,867)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Foreign
exchange 4,737,254 4,045 49,775 266 50,041 (48,613) (67) (48,680)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Interest
rate 8,727,934 39,553 99,744 144 99,888 (96,297) (270) (96,567)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Equities 498,980 - 9,718 - 9,718 (11,881) - (11,881)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Credit 134,440 - 1,582 - 1,582 (2,159) - (2,159)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Commodity
and
other 42,677 - 681 - 681 (770) - (770)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Offset
(Note 28) (20,689) 20,689
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
At 31 Dec
2021 14,141,285 43,598 161,500 410 141,221 (159,720) (337) (139,368)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
The notional contract amounts of derivatives held for trading
purposes and derivatives designated in hedge accounting
relationships indicate the nominal value of transactions
outstanding at the balance sheet date; they do not represent
amounts at risk.
Derivative asset and liability fair values increased during
2022, driven by yield curve movements and changes in foreign
exchange rates.
Notional contract Fair value - Assets Fair value - Liabilities
amount
------------------------------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Trading Hedging Trading Hedging Total Trading Hedging Total
The bank GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Foreign
exchange 6,049,682 582 87,459 2 87,461 (84,885) (56) (84,941)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Interest
rate 7,665,449 33,408 158,492 244 158,736 (157,315) (780) (158,095)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Equities 439,588 - 7,626 - 7,626 (7,325) - (7,325)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Credit 144,972 - 847 - 847 (982) - (982)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Commodity
and
other 57,346 - 1,051 - 1,051 (1,000) - (1,000)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Offset (59,007) 59,007
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
At 31 Dec
2022 14,357,037 33,990 255,475 246 196,714 (251,507) (836) (193,336)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Foreign
exchange 4,713,729 3,829 48,651 247 48,898 (47,771) (67) (47,838)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Interest
rate 6,846,965 27,206 80,798 193 80,991 (80,281) (240) (80,521)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Equities 478,832 - 9,153 - 9,153 (11,896) - (11,896)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Credit 132,582 - 1,558 - 1,558 (2,121) - (2,121)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Commodity
and
other 41,308 - 677 - 677 (765) - (765)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Offset (15,490) 15,490
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
At 31 Dec
2021 12,213,416 31,035 140,837 440 125,787 (142,834) (307) (127,651)
---------- --------------------- -------------------------- ------------------------- --------------------------- ------------------------- ------------------------- -------------------------- -------------------------
Use of derivatives
We undertake derivatives activity for three primary purposes: to
create risk management solutions for clients, to manage the
portfolio risks arising from client business, and to manage and
hedge our own risks.
Trading derivatives
Most of the group's derivative transactions relate to sales and
trading activities. Sales activities include the structuring and
marketing of derivative products to customers to enable them to
take, transfer, modify or reduce current or expected risks. Trading
activities include market-making and risk management. Market-making
entails quoting bid and offer prices to other market participants
for the purpose of generating revenues based on spread and
volume.
Risk management activity is undertaken to manage the risk
arising from client transactions, with the principal purpose of
retaining client margin. Other derivatives classified as held for
trading include non-qualifying hedging derivatives.
Substantially all of the group's derivatives entered into with
subsidiaries are managed in conjunction with financial liabilities
designated at fair value.
Derivatives valued using models with unobservable inputs
The difference between the fair value at initial recognition
(the transaction price) and the value that would have been derived
had the valuation techniques used for subsequent measurement been
applied at initial recognition, less subsequent releases, is in the
following table:
Unamortised balance of derivatives valued using models with significant
unobservable inputs
The group The bank
--------------------------------------------------------- --------------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
------------- --------------------------- ---------------------------- -------------------------- ----------------------------
Unamortised
balance at 1
Jan 64 60 64 56
------------- --------------------------- ---------------------------- -------------------------- ----------------------------
Deferral on
new
transactions 110 156 99 155
------------- --------------------------- ---------------------------- -------------------------- ----------------------------
Recognised in
the income
statement
during
the year: (111) (152) (107) (147)
------------- --------------------------- ---------------------------- -------------------------- ----------------------------
-
amortisation (59) (88) (56) (88)
-------------
- subsequent
to
unobservable
inputs
becoming
observable - (2) - (2)
-------------
- maturity,
termination
or
offsetting
derivative (52) (60) (51) (57)
-------------
- risk hedged - (2) - -
------------- --------------------------- ---------------------------- --------------------------
Exchange 1 - - -
differences
and other
------------- --------------------------- ---------------------------- -------------------------- ----------------------------
Unamortised
balance at
31 Dec(1) 64 64 56 64
------------- --------------------------- ---------------------------- -------------------------- ----------------------------
1 This amount is yet to be recognised in the consolidated income statement.
Hedge accounting derivatives
The group applies hedge accounting to manage the following
risks: interest rate and foreign exchange. The Report of the
Directors - Risk presents more details on how these risks arise and
how they are managed by the group.
Hedged risk components
HSBC designates a portion of cash flows of a financial
instrument or a group of financial instruments for a specific
interest rate or foreign currency risk component in a fair value or
cash flow hedge. The designated risks and portions are either
contractually specified or otherwise separately identifiable
components of the financial instrument that are reliably
measurable. Risk-free or benchmark interest rates generally are
regarded as being both separately identifiable and reliably
measurable, except for the IBOR Reform transition where HSBC
designates Alternative Benchmark Rates as the hedged risk which may
not have been separately identifiable upon initial designation,
provided HSBC reasonably expects it will meet the requirement
within 24 months from the first designation date. The designated
risk component accounts for a significant portion of the overall
changes in fair value or cash flows of the hedged item(s).
Fair value hedges
The group enters into fixed-for-floating-interest-rate swaps to
manage the exposure to changes in fair value due to movements in
market interest rates on certain fixed rate financial instruments
which are not measured at fair value through profit or loss,
including debt securities held and issued.
Hedging instrument by hedged risk
Hedging instrument
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Carrying amount
------------------------------------------------------------------------------------------------
The group Notional Assets Liabilities Change in
amount(1) fair value(2)
-------------
Hedged GBPm GBPm GBPm Balance sheet GBPm
risk presentation
--------- -------------------------------------------- ------------------------------------------------ ---------------------------------------------- ------------- ------------------------------------------
Interest
rate(3) 26,649 428 (799) Derivatives 981
--------- -------------------------------------------- ------------------------------------------------ ---------------------------------------------- ------------- ------------------------------------------
At 31 Dec 26,649 428 (799) 981
2022
--------- -------------------------------------------- ------------------------------------------------ ------------------------------------------------------------- ------------------------------------------
Interest
rate(3) 24,486 139 (270) Derivatives 159
--------- --------------------------------------------- ------------------------------------------------- ----------------------------------------------- ------------ -------------------------------------------
At 31 Dec 24,486 139 (270) 159
2021
--------- --------------------------------------------- ------------------------------------------------- ------------------------------------------------------------- -------------------------------------------
1 The notional contract amounts of derivatives designated in
qualifying hedge accounting relationships indicate the nominal
value of transactions outstanding at the balance sheet date; they
do not represent amounts at risk.
2 Used in effectiveness testing; comprising the full fair value
change of the hedging instrument not excluding any component.
3 The hedged risk 'interest rate' includes inflation risk.
Hedged item by hedged risk
Hedged item Ineffectiveness
--------------------------------------------
Accumulated
fair value
hedge adjustments
included in
Carrying amount carrying amount(2)
---------------------------------------------------- ------------------------------------------------------
The group Assets Liabilities Assets Liabilities Change Recognised
in fair in profit
value(1) and loss
Hedged GBPm GBPm GBPm GBPm GBPm GBPm Profit
risk Balance sheet and loss
presentation presentation
Net income
from
financial
instruments
Financial held for
assets trading
at fair value or managed
through other on a fair
Interest comprehensive value
rate(3) 15,446 - (1,095) - income (1,850) 31 basis
--------- -------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------ ------------------------------ ------------
Loans and
advances
- - - - to banks -
--------- -------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------ ------------------------------ ------------
Loans and
advances
713 - (31) - to customers (40)
-------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------
431 - (15) - Reverse Repos (14)
-------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------
Debt
securities
- 1,576 - (169) in issue 398
-------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------
Subordinated
liabilities
and
deposits by
- 5,686 - (659) banks(4) 556
--------- -------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------ ------------------------------ ------------
At 31
Dec 2022 16,590 7,262 (1,141) (828) (950) 31
--------- -------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------ ------------------------------ ------------
Net income
from financial
Financial instruments
assets held for
at fair trading
value through or managed
other on a fair
Interest comprehensive value
rate(3) 14,099 - 167 - income (278) (9) basis
--------- -------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------ ------------------------------ --------------
Loans and
advances
to
1 - (2) - banks (2)
--------- ------------------------------ ------------
Loans and
advances
997 - 7 - to customers (16)
-------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------
Debt
securities
- 2,844 - 71 in issue 24
-------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------
Subordinated
liabilities
and
deposits by
- 5,841 - (77) banks(4) 104
--------- -------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------ ------------------------------ ------------
At 31 Dec
2021 15,097 8,685 172 (6) (168) (9)
--------- -------------------------- ------------------------ -------------------------- -------------------------- ------------- ------------------------------ ------------------------------ --------------
1 Used in effectiveness assessment; comprising amount
attributable to the designated hedged risk that can be a risk
component.
2 The accumulated amounts of fair value adjustments remaining in
the statement of financial position for hedged items that have
ceased to be adjusted for hedging gains and losses were GBP10m
(2021: GBP21m) for 'Financial assets at fair value through other
comprehensive income', is nil (2021: nil) for 'Deposits by banks'
and GBP13m (2021: GBP19m) for 'Debt securities in issue'.
3 The hedged risk 'interest rate' includes inflation risk.
4 The notional amount of non-dynamic fair value hedges was
GBP6,312m (2021: GBP5,886m) of which the weighted-average maturity
is March 2026 and the weighted average swap rate is 0.06% (2021:
0.06%) (negative). GBP6,312m (2021: GBP5,886m) of these hedges are
internal to HSBC Group and composed by internal funding between
HSBC Holdings and the group.
Hedging instrument by hedged risk
Hedging instrument
Carrying amount
--------------------------------------------------------------------------------------------
The bank Notional Assets Liabilities Change in
amount(1) fair value(2)
Hedged GBPm GBPm GBPm Balance sheet GBPm
risk presentation
Interest
rate(3) 18,391 242 (773) Derivatives 466
--------- ----------------------------------------- --------------------------------------------- --------------------------------------------- ------------- --------------------------------------------
At 31 Dec 18,391 242 (773) 466
2022
--------- ----------------------------------------- --------------------------------------------- ------------------------------------------------------------ --------------------------------------------
Interest
rate(3) 18,016 188 (234) Derivatives 27
--------- ------------------------------------------ ---------------------------------------------- ---------------------------------------------- ------------ ----------------------------------------------
At 31 Dec 18,016 188 (234) 27
2021
--------- ------------------------------------------ ---------------------------------------------- ------------------------------------------------------------ ----------------------------------------------
1 The notional contract amounts of derivatives designated in
qualifying hedge accounting relationships indicate the nominal
value of transactions outstanding at the balance sheet date; they
do not represent amounts at risk.
2 Used in effectiveness testing; comprising the full fair value
change of the hedging instrument not excluding any component.
3 The hedged risk 'interest rate' includes inflation risk.
Hedged item by hedged risk
Hedged item Ineffectiveness
--------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------
Accumulated
fair value hedge
adjustments
included in
Carrying amount carrying amount(2)
----------------------------------------------------- -----------------------------------------------------
Change Recognised
in fair in profit
The bank Assets Liabilities Assets Liabilities value(1) and loss
Hedged Profit
risk Balance sheet and loss
GBPm GBPm GBPm GBPm presentation GBPm GBPm presentation
Financial
assets
at fair value
through other
Interest comprehensive
rate(3) 9,072 - (642) - income (1,389) 31
--------- ---------------------------- ------------
Loans and
advances
7 - 3 - to customers -
--------- -------------------------- ------------------------- -------------------------- ------------------------- ------------- ---------------------------- ----------------------------
- - - - Reverse Repos -
-------------------------- ------------------------- -------------------------- ------------------------- ------------- ----------------------------
Debt
securities
- 1,576 - (169) in issue 398
-------------------------- ------------------------- -------------------------- ------------------------- ------------- ----------------------------
Net income
from
financial
instruments
held for
Subordinated trading
liabilities or managed
and deposits on a fair
- 5,653 - (659) by banks(4) 556 value basis
--------- -------------------------- ------------------------- -------------------------- ------------------------- ------------- ---------------------------- ---------------------------- ------------
At 31
Dec 2022 9,079 7,229 (639) (828) (435) 31
--------- -------------------------- ------------------------- -------------------------- ------------------------- ------------- ---------------------------- ---------------------------- ------------
Hedged item by hedged risk (continued)
Hedged item Ineffectiveness
------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------------------------------
Accumulated
fair value hedge
adjustments
included in
carrying
Carrying amount amount(2)
------------------------------------------------------ ------------------------------------------------------
The bank Assets Liabilities Assets Liabilities Recognised
Change in
in fair profit
value(1) and loss
Hedged GBPm GBPm GBPm GBPm GBPm GBPm Profit
risk Balance sheet and loss
presentation presentation
Net income
from
Financial financial
assets instruments
at fair held for
value through trading
other or managed
Interest comprehensive on a fair
rate(3) 9,232 - 159 - income (163) (8) value basis
--------- ------------------------------ ------------
Loans and
advances
6 - - - to customers -
--------- --------------------------- ------------------------- ------------------------- --------------------------- ------------- ----------------------------- ------------------------------ ------------
Debt
securities
- 2,844 - 71 in issue 24
--------------------------- ------------------------- ------------------------- --------------------------- ------------- -----------------------------
Subordinated
liabilities
and deposits
- 5,810 - (77) by banks(4) 104
--------- --------------------------- ------------------------- ------------------------- --------------------------- ------------- ----------------------------- ------------------------------ ------------
At 31 Dec
2021 9,238 8,654 159 (6) (35) (8)
--------- --------------------------- ------------------------- ------------------------- --------------------------- ------------- ----------------------------- ------------------------------ ------------
1 Used in effectiveness assessment; comprising amount
attributable to the designated hedged risk that can be a risk
component.
2 The accumulated amounts of fair value adjustments remaining in
the statement of financial position for hedged items that have
ceased to be adjusted for hedging gains and losses were GBP10m
(2021: GBP21m) for 'Financial assets at fair value through other
comprehensive income', nil (2021: nil) for 'Deposits by banks' and
GBP13m (2021: GBP19m) for 'Debt securities in issue'.
3 The hedged risk 'interest rate' includes inflation risk.
4 The notional amount of non-dynamic fair value hedges was
GBP6,312m (2021: GBP5,886m), of which the weighted-average maturity
is March 2026 and the weighted average swap rate is 0.06% (2021:
0.06%) (negative). Those hedges are internal to HSBC Group and
composed by internal funding between HSBC Holdings and the
group.
Cash flow hedges
The group's cash flow hedging instruments consist principally of
interest rate swaps and cross-currency swaps that are used to
manage the variability in future interest cash flows of non-trading
financial assets and liabilities, arising due to changes in market
interest rates and foreign-currency basis.
The group applies macro cash flow hedging for interest-rate risk
exposures on portfolios of replenishing current and forecasted
issuances of non-trading assets and liabilities that bear interest
at variable rates, including rolling such instruments. The amounts
and timing of future cash flows, representing both principal and
interest flows, are projected for each portfolio of financial
assets and liabilities on the basis of their contractual terms and
other relevant factors, including estimates of prepayments and
defaults. The aggregate cash flows representing both principal
balances and interest cash flows across all portfolios are used to
determine the effectiveness and ineffectiveness. Macro cash flow
hedges are considered to be dynamic hedges.
The group also hedges the variability in future cash-flows on
foreign-denominated financial assets and liabilities arising due to
changes in foreign exchange market rates with cross-currency swaps;
these are considered dynamic hedges.
Hedging instrument by hedged risk(4)
Hedging instrument Hedged Ineffectiveness
item
-----------------------------
Carrying amount
---------------------------------------------------------------- ------------
Change Change Recognised
Notional in fair in fair in profit
The group amount(1) Assets Liabilities value(2) value(3) and loss
------------
Hedged GBPm GBPm GBPm Balance Profit
risk sheet and loss
presentation GBPm GBPm GBPm presentation
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
Net income
from
financial
instruments
held for
trading
or managed
Foreign on a fair
exchange 582 2 (57) Derivatives (84) (84) - value basis
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
Interest
rate 29,495 5 (20) (1,345) (1,334) (11)
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
At 31 Dec
2022 30,077 7 (77) (1,429) (1,418) (11)
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
Net income
from
financial
instruments
held for
trading
or managed
Foreign on a fair
exchange 4,042 266 (67) Derivatives 127 127 - value basis
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
Interest
rate 15,067 5 (2) (178) (167) (11)
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
At 31 Dec
2021 19,109 271 (69) (51) (40) (11)
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
Hedging instrument Hedged Ineffectiveness
item
-----------------------------
Carrying amount
---------------------------------------------------------------- ------------
Change Change Recognised
Notional in fair in fair in profit
The bank amount(1) Assets Liabilities value(2) value(3) and loss
------------
GBPm GBPm GBPm Balance Profit
Hedged sheet and loss
risk presentation GBPm GBPm GBPm presentation
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
Foreign
exchange 582 2 (56) Derivatives (84) (84) -
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
Net income
from
financial
instruments
held for
trading
or managed
Interest on a fair
rate 15,017 2 (7) (1,021) (1,021) - value basis
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
At 31 Dec
2022 15,599 4 (63) (1,105) (1,105) -
--------- --------------------------- ------------------------------- ------------------------------- ------------ ----------------------------- ----------------------------- ----------------------------- ------------
Hedging instrument by hedged risk(4) (continued)
Hedging instrument Hedged Ineffectiveness
item
----------------------------- ---------------------------------------------
Carrying amount
---------------------------------------------------------------- ------------
Change Change Recognised
Notional in fair in fair in profit
The bank amount(1) Assets Liabilities value(2) value(3) and loss
------------
GBPm GBPm GBPm Balance Profit
Hedged sheet and loss
risk presentation GBPm GBPm GBPm presentation
--------- -------------------------- ------------------------------- ------------------------------- ------------ ------------------------------- ----------------------------- ------------------------------- ------------
Net income
from
financial
instruments
held for
trading
or managed
Foreign on a fair
exchange 3,829 247 (67) Derivatives 127 127 - value basis
--------- -------------------------- ------------------------------- ------------------------------- ------------ ------------------------------- ----------------------------- ------------------------------- ------------
Interest
rate 9,190 5 (2) (119) (116) (3)
--------- -------------------------- ------------------------------- ------------------------------- ------------ ------------------------------- ----------------------------- ------------------------------- ------------
At 31 Dec
2021 13,019 252 (69) 8 11 (3)
--------- -------------------------- ------------------------------- ------------------------------- ------------ ------------------------------- ----------------------------- ------------------------------- ------------
1 The notional contract amounts of derivatives designated in
qualifying hedge accounting relationships indicate the nominal
value of transactions outstanding at the balance sheet date; they
do not represent amounts at risk.
2 Used in effectiveness testing; comprising the full fair value
change of the hedging instrument not excluding any component.
3 Used in effectiveness assessment; comprising amount
attributable to the designated hedged risk that can be a risk
component.
4 The amounts in the above table predominantly represent the bank's exposure.
Sources of hedge ineffectiveness may arise from basis risk
including, but not limited to timing differences between the hedged
items and hedging instruments, and hedges using instruments with a
non-zero fair value.
Reconciliation of equity and analysis of other comprehensive income
by risk type
Interest Foreign
rate exchange
GBPm GBPm
------------------------------------------- ----------------------------------- ------------------------------------
Cash flow hedging reserve at 1 Jan 2022 32 (39)
------------------------------------------- ----------------------------------- ------------------------------------
Fair value (losses)/gains (1,334) (84)
------------------------------------------- ----------------------------------- ------------------------------------
Fair value (gains) reclassified from cash
flow hedge
reserve to income statement in respect of:
------------------------------------------- ----------------------------------- ------------------------------------
- hedged items that have affected profit or
loss 53 74
Income taxes 348 -
Cash flow hedging reserve at 31 Dec 2022 (901) (49)
------------------------------------------- ----------------------------------- ------------------------------------
Cash flow hedging reserve at 1 Jan 2021 147 11
------------------------------------------ ------------------------------------ ------------------------------------
Fair value gains/(losses) (167) 127
------------------------------------------ ------------------------------------ ------------------------------------
Fair value (gains)/losses reclassified
from cash flow
hedge reserve to income statement in
respect of:
------------------------------------------ ------------------------------------ ------------------------------------
- hedged items that have affected profit
or loss (25) (177)
Income taxes 77 -
Cash flow hedging reserve at 31 Dec 2021 32 (39)
------------------------------------------ ------------------------------------ ------------------------------------
Interest rate benchmark reform: amendments to IFRS 9 and IAS 39
'Financial Instruments'
HSBC has applied both the first set of amendments ('Phase 1')
and the second set of amendments ('Phase 2') to IFRS 9 and IAS 39
applicable to hedge accounting. The hedge accounting relationships
that are affected by Phase 1 and Phase 2 amendments are presented
in the balance sheet as 'Financial assets designated and otherwise
mandatorily measured at fair value through other comprehensive
income', 'Loans and advances to customers', 'Debt securities in
issue' and 'Deposits by banks'. The notional value of the
derivatives impacted by the Ibors reform, including those
designated in hedge accounting relationships, is disclosed on page
31 in the section 'Financial instruments impacted by the Ibor
reform'. For further details of Ibor transition, see 'Top and
emerging risks' on page 28.
During 2022, the group transitioned all of its hedging
instruments referencing sterling Libor, European Overnight Index
Average rate ('Eonia') and Japanese yen Libor. The group also
transitioned some of the hedging instruments referencing US dollar
Libor. There is no significant judgement applied for these
benchmarks to determine whether and when the transition uncertainty
has been resolved.
The most significant Ibor benchmark in which the group continues
to have hedging instruments is US dollar Libor. The transition out
of US dollar Libor hedging derivatives has been largely completed
by the end of 2022. These transitions do not necessitate new
approaches compared with any of the mechanisms used so far for
transition and it will not be necessary to change the transition
risk management strategy.
For some of the Ibors included under the 'Other' header, in the
table below, judgment has been needed to establish whether a
transition is required, since there are Ibor benchmarks which are
subject to computation methodology improvements and insertion of
fallback provisions without full clarity being provided by their
administrators on whether these Ibor benchmarks will be
demised.
The notional amounts of Interest Rate derivatives designated in
hedge accounting relationships do not represent the extent of the
risk exposure managed by the group but they are expected to be
directly affected by market-wide Ibor reform and in scope of Phase
1 amendments and are shown in the table below. The cross-currency
swaps designated in hedge accounting relationships and affected by
Ibor reform are not significant and have not been presented
below.
Hedging instrument impacted by Ibor Reform
Hedging instrument
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Impacted by Ibor Reform
----------------------------------------------------------------------------------------------------------------------------------------------------------------
EUR(2) GBP USD Other(3) Total NOT Impacted
by Ibor Notional
Reform Amount(1)
The GBPm GBPm GBPm GBPm GBPm GBPm GBPm
group
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
Fair
Value
Hedges 7,581 - 225 105 7,911 18,738 26,649
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
Cash
Flow
Hedges 7,359 - - - 7,359 22,136 29,495
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
At 31
Dec
2022 14,940 - 225 105 15,270 40,874 56,144
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
Fair
Value
Hedges 6,407 - 336 124 6,867 17,619 24,486
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
Cash
Flow
Hedges 5,877 - - - 5,877 9,190 15,067
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
At 31
Dec
2021 12,284 - 336 124 12,744 26,809 39,553
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
The
bank
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
Fair
Value
Hedges 5,184 - 4 104 5,292 13,099 18,391
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
Cash
Flow
Hedges - - - - - 15,017 15,017
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
At 31
Dec
2022 5,184 - 4 104 5,292 28,116 33,408
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
Fair
Value
Hedges 4,920 - 6 124 5,050 12,966 18,016
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
Cash
Flow
Hedges - - - - - 9,190 9,190
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
At 31
Dec
2021 4,920 - 6 124 5,050 22,156 27,206
------- ------------------------------ ------------------------------ -------------------------------- ------------------------------ ------------------------------ --------------------------- ---------------------------
1 The notional contract amounts of derivatives designated in
qualifying hedge accounting relationships indicate the nominal
value of transactions outstanding at the balance sheet date; they
do not represent amounts at risk.
2 The notional contract amounts of euro interest rate
derivatives impacted by Ibor reform mainly comprise hedges with a
Euribor benchmark, which are Fair value hedges of GBP7,581m (31 Dec
2021: GBP6,407m) and Cash flow hedges GBP7,359m (31 Dec 2021:
GBP5,877m).
3 Other benchmarks impacted by Ibor reform comprise derivatives
that are expected to transition, but do not have a published
cessation date.
15 Financial investments
---------------------
Carrying amount of financial investments
The group The bank
--------------------------------------------------------------------------- --------------------------------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
--------------- ----------------------------------- -------------------------------------- ------------------------------------ ------------------------------------
Financial
investments
measured
at fair value
through other
comprehensive
income 29,356 41,290 12,261 23,205
---------------- ----------------------------------- -------------------------------------- ------------------------------------ ------------------------------------
- treasury and
other eligible
bills 1,447 2,229 693 1,441
----------------
- debt
securities 27,710 38,924 11,514 21,711
----------------
- equity
securities 109 103 54 53
----------------
- other
instruments(1) 90 34 - -
---------------- ----------------------------------- -------------------------------------- ------------------------------------
Debt instruments
measured at
amortised
cost 3,248 10 6,378 3,337
---------------- ----------------------------------- -------------------------------------- ------------------------------------ ------------------------------------
- treasury and
other eligible
bills 1,030 2 976 -
----------------
- debt
securities(2) 2,218 8 5,402 3,337
At 31 Dec 32,604 41,300 18,639 26,542
---------------- ----------------------------------- -------------------------------------- ------------------------------------ ------------------------------------
1 'Other instruments' are comprised of loans and advances.
2 The GBP4.2bn (2021: GBP3.3bn) of debt securities in the bank
relates to Senior Non-Preferred debt issued by HSBC Continental
Europe to comply with Single Resolution Board requirements on
Minimum Required Eligible Liabilities.
Equity instruments measured at fair value through other comprehensive
income
Instruments held
at year end
----------------------------------------------------------------------------
Fair Dividends
value recognised
Type of equity instruments GBPm GBPm
---------------------------------------- -------------------------------------- ------------------------------------
Business facilitation 77 -
Investments required by central 31 -
institutions
---------------------------------------- -------------------------------------- ------------------------------------
Others 1 -
---------------------------------------- -------------------------------------- ------------------------------------
At 31 Dec 2022 109 -
---------------------------------------- -------------------------------------- ------------------------------------
Business facilitation 76 -
---------------------------------------- -------------------------------------- ------------------------------------
Investments required by central 26 -
institutions
---------------------------------------- -------------------------------------- ------------------------------------
Others 1 -
---------------------------------------- -------------------------------------- ------------------------------------
At 31 Dec 2021 103 -
---------------------------------------- -------------------------------------- ------------------------------------
16 Assets pledged, collateral received and assets transferred
----------------------------------------------------------
Assets pledged(1)
Financial assets pledged as collateral
The group The bank
---------------------------------------------------------------- ------------------------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Treasury
bills and
other
eligible
securities 1,649 990 877 990
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Loans and
advances
to banks 3,300 - 3,300 -
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Loans and
advances
to
customers 4,996 18,403 - -
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Debt
securities 17,407 20,247 9,699 11,415
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Equity
securities 25,408 23,612 25,014 25,452
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Cash
collateral 45,034 29,963 32,255 22,961
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Other 330 298 329 298
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Assets
pledged at
31 Dec 98,124 93,513 71,474 61,116
----------- ------------------------------ -------------------------------- -------------------------------- --------------------------------
Financial assets pledged as collateral which the counterparty has the
right to sell or repledge
The group The bank
----------------------------------------------------------- -------------------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
------------ ---------------------------- ----------------------------- ---------------------------- -------------------------------
Trading
assets 38,896 39,594 32,371 35,311
------------ ---------------------------- ----------------------------- ---------------------------- -------------------------------
Financial
investments 3,588 1,436 1,974 542
------------ ---------------------------- ----------------------------- ---------------------------- -------------------------------
At 31 Dec 42,484 41,030 34,345 35,853
------------ ---------------------------- ----------------------------- ---------------------------- -------------------------------
Assets pledged as collateral includes all assets categorised as
encumbered in the disclosure on page 84 except for assets held for
sale.
The amount of assets pledged to secure liabilities may be
greater than the book value of assets utilised as collateral. For
example, in the case of securitisations and covered bonds, the
amount of liabilities issued, plus mandatory
over-collateralisation, is less than the book value of the pool of
assets available for use as collateral. This is also the case where
assets are placed with a custodian or a settlement agent that has a
floating charge over all the assets placed to secure any
liabilities under settlement accounts.
These transactions are conducted under terms that are usual and
customary to collateralised transactions including, where relevant,
standard securities lending and borrowing, repurchase agreements
and derivative margining. The group places both cash and non-cash
collateral in relation to derivative transactions.
Collateral received(1)
The fair value of assets accepted as collateral, relating
primarily to standard securities lending, reverse repurchase
agreements and derivative margining, that the group is permitted to
sell or repledge in the absence of default was GBP180,233m (2021:
GBP202,794m) (the bank: 2022: GBP154,376m; 2021: GBP167,737m). The
fair value of any such collateral sold or repledged was GBP136,777m
(2021: GBP151,378m) (the bank: 2022: GBP113,917m; 2021:
GBP120,436m).
The group is obliged to return equivalent securities. These
transactions are conducted under terms that are usual and customary
to standard securities lending, reverse repurchase agreements and
derivative margining.
Assets transferred(1)
The assets pledged include transfers to third parties that do
not qualify for derecognition, notably secured borrowings such as
debt securities held by counterparties as collateral under
repurchase agreements and equity securities lent under securities
lending agreements, as well as swaps of equity and debt securities.
For secured borrowings, the transferred asset collateral continues
to be recognised in full and a related liability, reflecting the
group's obligation to repurchase the assets for a fixed price at a
future date is also recognised on the balance sheet.
Where securities are swapped, the transferred asset continues to
be recognised in full. There is no associated liability as the
non-cash collateral received is not recognised on the balance
sheet. The group is unable to use, sell or pledge the transferred
assets for the duration of these transactions, and remains exposed
to interest rate risk and credit risk on these pledged assets. The
counterparty's recourse is not limited to the transferred
assets.
Transferred financial assets not qualifying for full derecognition
and associated financial liabilities
Carrying amount
of:
-----------------------------------------------------------
Transferred Associated
assets liabilities
The group GBPm GBPm
------------------------------ ---------------------------- -----------------------------
At 31 Dec 2022
------------------------------ ---------------------------- -----------------------------
Repurchase agreements 13,349 13,371
------------------------------ ---------------------------- -----------------------------
Securities lending agreements 29,171 3,442
At 31 Dec 2021
------------------------------ ---------------------------- -----------------------------
Repurchase agreements 11,710 11,732
------------------------------ ---------------------------- -----------------------------
Securities lending agreements 29,321 2,129
------------------------------ ---------------------------- -----------------------------
1 Excludes assets classified as held for sale.
Transferred financial assets not qualifying for full derecognition
and associated financial liabilities
Carrying amount
of:
------------------------------------------------------------
Transferred Associated
assets liabilities
The bank GBPm GBPm
------------------------------ ----------------------------- -----------------------------
At 31 Dec 2022
------------------------------ ----------------------------- -----------------------------
Repurchase agreements 5,795 5,795
------------------------------ ----------------------------- -----------------------------
Securities lending agreements 28,550 3,467
At 31 Dec 2021
------------------------------ ----------------------------- -----------------------------
Repurchase agreements 4,489 4,488
------------------------------ ----------------------------- -----------------------------
Securities lending agreements 31,365 2,132
------------------------------ ----------------------------- -----------------------------
17 Interests in associates and joint ventures
------------------------------------------
Principal associates of the group and the bank
Business Growth Fund Group plc ('BGF') is a principal associate
of the group. BGF is an independent company, established in 2011 to
provide investment to growing small to medium-sized British
businesses. BGF is backed by five of the UK's main banking groups:
Barclays, HSBC, Lloyds, RBS and Standard Chartered. At 31 Dec 2022,
the group had a 24.62% interest in the equity capital of BGF. Share
of (Loss)/profit in BGF is GBP(22)m (2021: GBP192m; 2020: GBP5m)
and carrying amount of interest in BGF is GBP673m (2021: GBP702m;
2020: GBP471m).
Interests in joint ventures
A list of all associates is set out on page 189.
18 Investments in subsidiaries
---------------------------
Main subsidiaries of HSBC Bank plc(1)
At 31 Dec 2022
---------------------------------------------------------
HSBC Bank
plc's interest
in equity
capital
---------------- ---------------
Country of
incorporation
or registration % Share class
------------------------------------- ---------------- ---------------------- ---------------
HSBC Investment Bank Holdings Limited England and 100.00 GBP1 Ordinary
Wales
HSBC Life (UK) Limited England and 100.00 GBP1 Ordinary
Wales
------------------------------------- ---------------- ---------------------- ---------------
HSBC Trinkaus & Burkhardt GmbH Germany 99.99 EUR1 Ordinary
------------------------------------- ---------------- ---------------------- ---------------
HSBC Continental Europe France 99.99 EUR5 Actions
------------------------------------- ---------------- ---------------------- ---------------
HSBC Bank Malta p.l.c Malta 70.03 EUR0.3 Ordinary
------------------------------------- ---------------- ---------------------- ---------------
1 Main subsidiaries are either held directly or indirectly via intermediate holding companies.
All the above prepare their financial statements up to 31
December. Details of all group subsidiaries, as required under
Section 409 of the Companies Act 2006, are set out in Note 36. The
principal countries of operation are the same as the countries of
incorporation.
Impairment testing of investments in subsidiaries
At each reporting period end, HSBC Bank plc reviews investments
in subsidiaries for indicators of impairment. An impairment is
recognised when the carrying amount exceeds the recoverable amount
for that investment.
The recoverable amount is the higher of the investment's fair
value less costs of disposal and its value in use, in accordance
with the requirements of IAS 36. The value in use is calculated by
discounting management's cash flow projections for the
investment.
The cash flows represent the Free Cash Flows ('FCF') based on
the subsidiary's binding capital requirements.
-- The cash flow projections for each investment are based on
the latest approved plans, which includes forecast capital
available for distribution based on the capital requirements of the
subsidiary taking into account minimum and core capital
requirements. Our cash flow projections include known
climate-related opportunities and costs associated with our
sustainable offering. A long term growth rate is used to
extrapolate the free cash flows in perpetuity.
-- The growth rate reflects inflation for the country within
which the investment operates and is based on the long-term average
growth rates.
-- The rate used to discount the cash flows is based on the cost
of capital assigned to each investment, which is derived using a
capital asset pricing model ('CAPM'). CAPM depends on a number of
inputs reflecting financial and economic variables, including the
risk-free rate and a premium to reflect the inherent risk of the
business being evaluated. These variables are based on the market's
assessment of the economic variables and management's judgement.
The discount rates for each investment are refined to reflect the
rates of inflation for the countries within which the investment
operates. In addition, for the purposes of testing investments for
impairment, management supplements this process by comparing the
discount rates derived using the internally generated CAPM, with
cost of capital rates produced by external sources for businesses
operating in similar markets.
During 2022, an additional investment of GBP3.4bn is made in
HSBC Continental Europe. Further, an impairment reversal of GBP2bn
was recognised in the fourth quarter as a result of the impairment
test performed which relates to the investment in subsidiary i.e.
HSBC Continental Europe. This was due to updates to inputs and
assumptions in the model used to estimate value-in-use ('VIU') and
increase in forecast free cash flows, resulting from acquisition of
HSBC Bank Malta plc and HSBC Trinkaus & Burkhardt GmbH as well
as interest rates rise in the Eurozone. No investments in
subsidiaries were impaired or reversed in 2021. There is no impact
on the group financial statement due to these transactions.
Impairment test results
Investments Carrying Value in Discount Long-term Headroom
amount use rate growth rate
HSBC GBPm GBPm % % GBPm
Continental
Europe
------------ ---------------------------------------- ---------------------------------------- --------------- --------------- -------------------------------------------
At 31 Dec
2022 7,743 11,507 9.95 1.56 3,764
------------ ---------------------------------------- ---------------------------------------- --------------- --------------- -------------------------------------------
At 31 Dec 4,331 4,429 8.34 1.53 98
2021
------------ ---------------------------------------- ---------------------------------------- --------------- --------------- -------------------------------------------
Sensitivities of key assumptions in calculating VIU
At 31 December 2022, the investment in HSBC Continental Europe
was sensitive to reasonably possible changes in the key assumptions
supporting the recoverable amount.
In making an estimate of reasonably possible changes to
assumptions, management considers the available evidence in respect
of each input to the model. These include the external range of
observable discount rates, historical performance against forecast,
and risks attaching to the key assumptions underlying cash flow
projections.
The following table presents a summary of the key assumptions
underlying the most sensitive inputs to the model for HSBC
Continental Europe, the key risks attaching to each, and details of
a reasonably possible change to assumptions where, in the opinion
of management, there is a sufficient headroom to cover the changes
which could not result in an impairment.
Reasonably possible changes in key assumptions
=================================================================================================================================================================================================
Investment
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
HSBC Free Cash
Continental Flows * Level of interest rates and yield curves. * Customer remediation and regulatory actions. * FCF projections decrease by 10% .
Europe projections
* Competitors' positions within the market. * Achievement of strategic actions relating to revenue * Achievement of revenue and cost targets.
and costs.
* Level and change in unemployment rates.
----------- ----------- ----------------------------------------------------------- ---------------------------------------------------------- ----------------------------------------------
Discount
rate * Discount rate used is a reasonable estimate of a * External evidence arises to suggest that the rate * Discount rate increases by 1%.
suitable market rate for the profile of the business. used is not appropriate to the business.
----------- ----------- ----------------------------------------------------------- ---------------------------------------------------------- ----------------------------------------------
Sensitivity of VIU to reasonably possible changes in key assumptions
and changes to current assumptions to reduce headroom to nil
Increase/(decrease)
------------ ---------------------------------- --------------------------------- --------------------------------------------------------------------
Investments Carrying Value in Discount Free Cash
amount use rate flows
------------ ---------------------------------- --------------------------------- ------------------------------------- -----------------------------
At 31 Dec GBPm GBPm bps %
2022
------------ ---------------------------------- --------------------------------- ------------------------------------- -----------------------------
HSBC
Continental
Europe 7,743 11,507 614 (33.3)
------------ ---------------------------------- --------------------------------- ------------------------------------- -----------------------------
19 Structured entities
-------------------
The group is mainly involved with both consolidated and
unconsolidated structured entities through the securitisation of
financial assets, conduits and investment funds, established either
by the group or a third party.
Consolidated structured entities
Total assets of the group's consolidated structured entities, split
by entity type
HSBC managed
Conduits Securitisations funds Other Total
GBPm GBPm GBPm GBPm GBPm
----- --------------------------- ----------------------------- --------------------------- ----------------------------- ---------------------------
At 31
Dec
2022 3,479 192 3,981 463 8,115
At 31
Dec
2021 3,233 287 4,653 568 8,741
----- --------------------------- ----------------------------- --------------------------- ----------------------------- ---------------------------
Conduits
The group has established and manages two types of conduits:
securities investment conduits ('SICs') and multi-seller
conduits.
Securities investment conduits
The SICs purchase highly rated ABSs to facilitate tailored
investment opportunities.
At 31 Dec 2022, Solitaire, the group's principal SIC held
GBP1.1bn of ABSs (2021: GBP1.2bn). It is currently funded entirely
by commercial paper ('CP') issued to the group. At 31 Dec 2022, the
group held GBP1.3bn of CP (2021: GBP1.3bn).
Multi-seller conduits
The group's multi-seller conduit was established to provide
access to flexible market-based sources of finance for its clients.
Currently, the group bears risk equal to transaction-specific
facility offered to the multi-seller conduits, amounting to
GBP4.7bn at 31 December 2022 (2021: GBP4.6bn). First loss
protection is provided by the originator of the assets, and not by
the group, through transaction-specific credit enhancements. A
layer of secondary loss protection is provided by the group in the
form of programme-wide enhancement facilities.
Securitisations
The group uses structured entities to securitise customer loans
and advances it originates in order to diversify the sources of
funding for asset origination and capital efficiency purposes. The
loans and advances are transferred by the group to the structured
entities for cash or synthetically through credit default swaps,
and the structured entities issue debt securities to investors.
HSBC managed funds
The group together with other HSBC entities has established a
number of money market and non-money market funds. Where it is
deemed to be acting as principal rather than agent in its role as
investment manager, the group controls these funds.
Other
The group has entered into a number of transactions in the
normal course of business, which include asset and structured
finance transactions where it has control of the structured entity.
In addition, the group is deemed to control a number of third-party
managed funds through its involvement as a principal in the
funds.
Unconsolidated structured entities
The term 'unconsolidated structured entities' refers to all
structured entities not controlled by the group. The group enters
into transactions with unconsolidated structured entities in the
normal course of business to facilitate customer transactions and
for specific investment opportunities.
Nature and risks associated with the group's interests in unconsolidated
structured entities
HSBC Non-HSBC
managed managed
Securitisations funds funds Other Total
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
Total asset
values of the
entities
(GBPm)
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
0 - 400 2 155 966 12 1,135
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
400 - 1,500 1 55 757 1 814
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
1,500 - 4,000 - 19 304 - 323
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
4,000 - 20,000 - 16 155 - 171
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
20,000+ - 3 14 - 17
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
Number of
entities at 31
Dec 2022 3 248 2,196 13 2,460
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
GBPm GBPm GBPm GBPm GBPm
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
Total assets
in relation to
the
group's
interests in
the
unconsolidated
structured
entities 220 4,671 4,425 925 10,241
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
- trading
assets - 1 104 - 105
--------------
- financial
assets
designated and
otherwise
mandatorily
measured at
fair value - 4,665 3,869 - 8,534
--------------
- loans and - - - - -
advances to
banks
--------------
- loans and
advances to
customers 220 - 452 497 1,169
--------------
- financial
investments - 5 - - 5
--------------
- other assets - - - 428 428
-------------- ------------------------------ ------------------------------ ------------------------------ -----------------------------
Total
liabilities in
relation to
the group's
interests in
the
unconsolidated
structured
entities - 4 - - 4
Other
off-balance
sheet
commitments 34 - 571 24 629
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
The group's
maximum
exposure at
31 Dec 2022 254 4,667 4,996 949 10,866
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
Total asset
values of the
entities
(GBPm)
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
0 - 400 2 157 1,194 14 1,367
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
400 - 1,500 - 81 774 - 855
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
1,500 - 4,000 - 16 354 - 370
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
4,000 - 20,000 - 12 149 - 161
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
20,000+ - 2 9 - 11
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
Number of
entities at 31
Dec 2021 2 268 2,480 14 2,764
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
GBPm GBPm GBPm GBPm GBPm
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
Total assets
in relation to
the
group's
interests in
the
unconsolidated
structured
entities 193 4,414 5,225 631 10,463
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
- trading
assets - 1 1,807 - 1,808
--------------
- financial
assets
designated at
fair value - 4,409 3,273 - 7,682
- loans and
advances to
customers 193 - 49 631 873
--------------
- financial
investments - 4 96 - 100
--------------
- other assets - - - - -
-------------- ------------------------------ ------------------------------ ------------------------------ -----------------------------
Total
liabilities in
relation to
group's
interests in
the
unconsolidated
structured
entities - - 2 - 2
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
Other
off-balance
sheet
commitments 20 4 916 38 978
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
The group's
maximum
exposure at
31 Dec 2021 213 4,418 6,139 669 11,439
-------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------- ------------------------------
The maximum exposure to loss from the group's interests in
unconsolidated structured entities represents the maximum loss it
could incur as a result of its involvement with these entities
regardless of the probability of the loss being incurred.
-- For commitments, guarantees and written credit default swaps,
the maximum exposure to loss is the notional amount of potential
future losses.
-- For retained and purchased investments and loans to
unconsolidated structured entities, the maximum exposure to loss is
the carrying value of these interests at the balance sheet
reporting date.
The maximum exposure to loss is stated gross of the effects of
hedging and collateral arrangements entered into to mitigate the
group's exposure to loss.
Securitisations
The group has interests in unconsolidated securitisation
vehicles through holding notes issued by these entities. In
addition, the group has investments in ABSs issued by third-party
structured entities.
HSBC managed funds
The group together with other HSBC entities establishes and
manages money market funds and non-money market investment funds to
provide customers with investment opportunities. The group, as fund
manager, may be entitled to receive management and performance fees
based on the assets under management. The group may also retain
units in these funds.
Non-HSBC managed funds
The group purchases and holds units of third-party managed funds
in order to facilitate business and meet customer needs.
Other
The group has established structured entities in the normal
course of business, such as structured credit transactions for
customers, to provide finance to public and private sector
infrastructure projects, and for asset and structured finance
transactions.
In addition to the interests disclosed above, the group enters
into derivative contracts, reverse repos and stock borrowing
transactions with structured entities. These interests arise in the
normal course of business for the facilitation of third-party
transactions and risk management solutions.
Group sponsored structured entities
The amount of assets transferred to and income received from
such sponsored entities during 2022 and 2021 was not
significant.
20 Goodwill and intangible assets
------------------------------
The group The bank
------------------------------------------------------ ------------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
----------- -------------------------- -------------------------- -------------------------- --------------------------
Goodwill - - 19 19
----------- -------------------------- -------------------------- -------------------------- --------------------------
Present
value of
in-force
long-term
insurance
business 1,076 811 - -
----------- -------------------------- -------------------------- -------------------------- --------------------------
Other
intangible
assets(1) 91 83 22 15
----------- -------------------------- -------------------------- -------------------------- --------------------------
At 31 Dec 1,167 894 41 34
----------- -------------------------- -------------------------- -------------------------- --------------------------
1 Included within the group's other intangible assets is
internally generated software with a net carrying value of GBP87m
(2021: GBP77m). During 2022, capitalisation of internally generated
software was GBP47m (2021: GBP46m), impairment was GBP21m (2021:
GBP45m) and amortisation was GBP34m (2021: GBP15m).
Present value of in-force long-term insurance business
When calculating the present value of in-force long-term
('PVIF') insurance business, expected cash flows are projected
after adjusting for a variety of assumptions made by each insurance
operation to reflect local market conditions and management's
judgement of future trends and uncertainty in the underlying
assumptions is reflected by applying margins (as opposed to a cost
of capital methodology) including valuing the cost of policyholder
options and guarantees using stochastic techniques.
Financial reporting Committees of each key insurance entity meet
on a quarterly basis to review and approve PVIF assumptions. All
changes to non-economic assumptions, economic assumptions that are
not observable and model methodology must be approved by the
Financial Reporting Committee.
Movements in PVIF
-------------------------- ----------------------------
2022 2021
GBPm GBPm
-------------------------------------------------------- -------------------------- ----------------------------
PVIF at 1 Jan 811 647
-------------------------------------------------------- -------------------------- ----------------------------
Change in PVIF of long-term insurance business 226 200
-------------------------------------------------------- -------------------------- ----------------------------
- value of new business written during the year 79 67
--------------------------------------------------------
- expected return(1) (53) (70)
--------------------------------------------------------
- assumption changes and experience variances(2,3) (see
below) 200 202
--------------------------------------------------------
- other adjustments - 1
Exchange differences 39 (36)
-------------------------------------------------------- -------------------------- ----------------------------
PVIF at 31 Dec 1,076 811
-------------------------------------------------------- -------------------------- ----------------------------
1 'Expected return' represents the unwinding of the discount
rate and reversal of expected cash flows for the period.
2 Represents the effect of changes in assumptions on expected
future profits and the difference between assumptions used in the
previous PVIF calculation and actual experience observed during the
year to the extent that this affects future profits. The gain of
GBP200m in the year (2021: gain of GBP202m) was primarily driven by
a reduction in the cost of financial guarantees in France as a
result of rising interest rates during 2022.
3 2022 includes GBP52m impact recognised on the classification
of France retail as discontinued operations.
Key assumptions used in the computation of PVIF for main life
insurance operations
Economic assumptions are set in a way that is consistent with
observable market values. The valuation of PVIF is sensitive to
observed market movements and the impact of such changes is
included in the sensitivities presented below.
2022 2021
-------------------------------- ----------------------------
UK France(1) UK France(1)
% % % %
------------------------------------ --------------- --------------- ------------- -------------
Weighted average risk-free rate 3.71 2.80 0.95 0.69
------------------------------------ --------------- --------------- ------------- -------------
Weighted average risk discount rate 3.71 4.44 0.95 1.55
------------------------------------ --------------- --------------- ------------- -------------
Expense inflation 3.70 4.26 3.80 1.80
------------------------------------ --------------- --------------- ------------- -------------
1 For 2022, the calculation of France's PVIF assumes a risk
discount rate of 4.44% (2021: 1.55%) plus a risk margin of GBP83m
(2021: GBP156m).
Sensitivity to changes in economic assumptions
The group sets the risk discount rate applied to the PVIF
calculation by starting from a risk-free rate curve and adding
explicit allowances for risks not reflected in the best estimate
cash flow modelling. Where the insurance operations provide options
and guarantees to policyholders, the cost of these options and
guarantees is accounted for as a deduction from the present value
of in-force 'PVIF' asset, unless the cost of such guarantees is
already allowed for as an explicit addition to liabilities under
insurance contracts. See page 92 for further details of these
guarantees and the impact of changes in economic assumptions on our
insurance manufacturing subsidiaries.
Sensitivity to changes in non-economic assumptions
Policyholder liabilities and PVIF are determined by reference to
non-economic assumptions including mortality and/or morbidity,
lapse rates and expense rates. See page 93 for further details on
the impact of changes in non-economic assumptions on our insurance
manufacturing operations.
21 Prepayments, accrued income and other assets
--------------------------------------------
The group The bank
----------------------------------------------------- ------------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
------------- ------------------------- -------------------------- --------------------------- -------------------------
Cash
collateral
and margin
receivables 44,932 29,947 32,255 22,961
------------- ------------------------- -------------------------- --------------------------- -------------------------
Settlement
accounts 6,926 4,960 5,441 4,604
------------- ------------------------- -------------------------- --------------------------- -------------------------
Bullion 3,464 2,253 3,464 2,253
------------- ------------------------- -------------------------- --------------------------- -------------------------
Prepayments
and accrued
income 1,769 1,365 994 531
------------- ------------------------- -------------------------- --------------------------- -------------------------
Property,
plant and
equipment 761 846 9 10
------------- ------------------------- -------------------------- --------------------------- -------------------------
Right-of-use
assets 166 251 32 37
------------- ------------------------- -------------------------- --------------------------- -------------------------
Reinsurers'
share of
liabilities
under
insurance
contracts
(Note 4) 140 146 - -
------------- ------------------------- -------------------------- --------------------------- -------------------------
Employee
benefit
assets (Note
5) 73 54 12 43
------------- ------------------------- -------------------------- --------------------------- -------------------------
Endorsements
and
acceptances 243 196 218 172
------------- ------------------------- -------------------------- --------------------------- -------------------------
Other
accounts 2,905 3,100 1,482 879
------------- ------------------------- -------------------------- --------------------------- -------------------------
At 31 Dec 61,379 43,118 43,907 31,490
------------- ------------------------- -------------------------- --------------------------- -------------------------
Prepayments, accrued income and other assets include GBP55,801m
(2021: GBP39,064m) of financial assets, the majority of which are
measured at amortised cost.
22 Trading liabilities
-------------------
The group The bank
------------------------------------------------- -----------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
------------ ------------------------ ----------------------- ------------------------- --------------------------
Deposits by
banks(1) 4,337 3,122 4,350 3,141
------------ ------------------------ ----------------------- ------------------------- --------------------------
Customer
accounts(1) 5,812 6,386 5,692 6,216
------------ ------------------------ ----------------------- ------------------------- --------------------------
Other debt
securities
in issue 812 1,324 61 30
------------ ------------------------ ----------------------- ------------------------- --------------------------
Other
liabilities
- net short
positions
in
securities 30,304 35,601 15,662 21,774
------------ ------------------------ ----------------------- ------------------------- --------------------------
At 31 Dec 41,265 46,433 25,765 31,161
------------ ------------------------ ----------------------- ------------------------- --------------------------
1 'Deposits by banks' and 'Customer accounts' include repos, stock lending and other amounts.
23 Financial liabilities designated at fair value
----------------------------------------------
The group The bank
------------------------------------------------- ------------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
------------- ------------------------ ----------------------- -------------------------- --------------------------
Deposits by
banks and
customer
accounts 4,864 4,302 4,864 4,245
-------------- ------------------------ ----------------------- -------------------------- --------------------------
Liabilities to
customers
under
investment
contracts 948 1,032 - -
-------------- ------------------------ ----------------------- -------------------------- --------------------------
Debt
securities in
issue 20,666 26,049 13,742 14,399
-------------- ------------------------ ----------------------- -------------------------- --------------------------
Subordinated
liabilities
(Note 26) 809 2,225 809 2,225
At 31 Dec 27,287 33,608 19,415 20,869
-------------- ------------------------ ----------------------- -------------------------- --------------------------
The group
The carrying amount of financial liabilities designated at fair
value was GBP(3,431)m lower than the contractual amount at
maturity
(2021: GBP(1,568)m lower). The cumulative amount of change in
fair value attributable to changes in credit risk was a loss of
GBP(292)m (2021: loss of GBP165m).
The bank
The carrying amount of financial liabilities designated at fair
value was GBP(2,230)m lower than the contractual amount at maturity
(2021: GBP(2,146)m lower). The cumulative amount of change in fair
value attributable to changes in credit risk was a loss of
GBP(139)m (2021: loss of GBP72m).
24 Accruals, deferred income and other liabilities
-----------------------------------------------
The group The bank
---------------------------------------------------- ------------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
------------- ------------------------- ------------------------- -------------------------- --------------------------
Cash
collateral
and margin
payables 55,470 32,309 40,356 24,204
-------------- ------------------------- ------------------------- -------------------------- --------------------------
Settlement
accounts 4,915 4,767 4,485 3,996
-------------- ------------------------- ------------------------- -------------------------- --------------------------
Accruals and
deferred
income 1,903 1,507 1,241 859
-------------- ------------------------- ------------------------- -------------------------- --------------------------
Amount due to
investors in
funds
consolidated
by the group 991 1,315 - -
-------------- ------------------------- ------------------------- -------------------------- --------------------------
Lease
liabilities 269 386 45 55
-------------- ------------------------- ------------------------- -------------------------- --------------------------
Employee
benefit
liabilities
(Note 5) 121 196 56 74
-------------- ------------------------- ------------------------- -------------------------- --------------------------
Share-based
payment
liability to
HSBC
Holdings 98 129 72 102
-------------- ------------------------- ------------------------- -------------------------- --------------------------
Endorsements
and
acceptances 231 189 218 172
-------------- ------------------------- ------------------------- -------------------------- --------------------------
Other
liabilities 2,947 2,658 1,509 708
-------------- ------------------------- ------------------------- -------------------------- --------------------------
At 31 Dec 66,945 43,456 47,982 30,170
-------------- ------------------------- ------------------------- -------------------------- --------------------------
For the group, accruals, deferred income and other liabilities
include GBP66,356m (2021: GBP42,887m), and for the bank GBP47,683m
(2021: GBP29,913m) of financial liabilities, the majority of which
are measured at amortised cost.
25 Provisions
----------
Legal
proceedings
Restructuring and regulatory Customer Other
costs matters remediation provisions Total
The group GBPm GBPm GBPm GBPm GBPm
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Provisions (excluding
contractual
commitments)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 1 Jan 2022 164 175 21 99 459
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Additions 117 61 4 63 245
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Amounts utilised (124) (152) (6) (34) (316)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Unused amounts reversed (35) (4) (6) (23) (68)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Exchange and other
movements 4 (3) - (2) (1)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 31 Dec 2022 126 77 13 103 319
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Contractual
commitments(1)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 1 Jan 2022 103
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Net change in expected
credit loss
provision and other
movements 2
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 31 Dec 2022 105
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Total Provisions
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 31 Dec 2021 562
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 31 Dec 2022 424
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Provisions (excluding
contractual
commitments)
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
At 1 Jan 2021 309 237 25 103 674
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
Additions 91 32 11 86 220
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
Amounts utilised (170) (63) (10) (32) (275)
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
Unused amounts reversed (63) (25) (6) (58) (152)
Exchange and other
movements (3) (6) 1 - (8)
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
At 31 Dec 2021 164 175 21 99 459
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
Contractual
commitments(1)
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
At 1 Jan 2021 187
Net change in expected
credit loss
provision and other
movements (84)
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
At 31 Dec 2021 103
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
Total Provisions
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
At 31 Dec 2020 861
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
At 31 Dec 2021 562
----------------------- ------------------------------ ------------------------------ ------------------------------ ---------------------------- ------------------------------
1 The contractual commitments include provision for off-balance
sheet loan commitments and guarantees, for which expected credit
losses are provided under IFRS 9. Further analysis of the movement
in the expected credit loss is disclosed within the 'Reconciliation
of changes in gross carrying/nominal amount and allowances for
loans and advances to banks and customers including loan
commitments and financial guarantees' table on page 53.
Legal
proceedings
Restructuring and regulatory Customer Other
costs matters remediation provisions Total
The bank GBPm GBPm GBPm GBPm GBPm
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
Provisions (excluding
contractual
commitments)
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
At 1 Jan 2022 12 155 13 27 207
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
Additions 36 51 1 32 120
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
Amounts utilised (14) (146) (3) (11) (174)
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
Unused amounts reversed (17) (3) (3) (13) (36)
Exchange and other - - - - -
movements
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
At 31 Dec 2022 17 57 8 35 117
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
Contractual
commitments(1)
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
At 1 Jan 2022 43
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
Net change in expected
credit loss
provision and other
movements 7
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
At 31 Dec 2022 50
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
Total Provisions
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
At 31 Dec 2021 250
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
At 31 Dec 2022 167
----------------------- ---------------------------- ----------------------------- ----------------------------- ---------------------------- -----------------------------
Legal
proceedings
Restructuring and regulatory Customer Other
costs matters remediation provisions Total
The bank GBPm GBPm GBPm GBPm GBPm
Provisions (excluding
contractual
commitments)
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
At 1 Jan 2021 39 198 17 52 306
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
Additions 54 23 7 30 114
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
Amounts utilised (54) (32) (8) (15) (109)
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
Unused amounts reversed (26) (24) (4) (40) (94)
Exchange and other
movements (1) (10) 1 - (10)
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
At 31 Dec 2021 12 155 13 27 207
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
Contractual
commitments(1)
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
At 1 Jan 2021 107
Net change in expected
credit loss
provision and other
movements (64)
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
At 31 Dec 2021 43
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
Total Provisions
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
At 31 Dec 2020 413
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
At 31 Dec 2021 250
----------------------- ------------------------------ ---------------------------- ------------------------------ ---------------------------- ----------------------------
1 The contractual commitments provision includes off-balance
sheet loan commitments and guarantees, for which expected credit
losses are provided under IFRS 9. Further analysis of the movement
in the expected credit loss is disclosed within the 'Reconciliation
of changes in gross carrying/nominal amount and allowances for
loans and advances to banks and customers including loan
commitments and financial guarantees' table on page 53.
Restructuring costs
These provisions comprise the estimated cost of restructuring,
including redundancy costs where an obligation exists. Additions
made during the year relate to formal restructuring plans made
within the group.
Legal proceedings and regulatory matters
Further details of legal proceedings and regulatory matters are
set out in Note 32. Legal proceedings include civil court,
arbitration or tribunal proceedings brought against HSBC companies
(whether by way of claim or counterclaim), or civil disputes that
may, if not settled, result in court, arbitration or tribunal
proceedings. Regulatory matters refer to investigations, reviews
and other actions carried out by, or in response to the actions of,
regulatory or law enforcement agencies in connection with alleged
wrongdoing.
26 Subordinated liabilities
------------------------
Subordinated liabilities
The group The bank
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
------------- -------------------------- --------------------------- ---------------------------- ----------------------------
At amortised
cost 14,528 12,488 14,252 12,218
------------- -------------------------- --------------------------- ---------------------------- ----------------------------
-
subordinated
liabilities 13,828 11,788 14,252 12,218
-------------
- preferred
securities 700 700 - -
------------- -------------------------- --------------------------- ----------------------------
Designated at
fair value
(Note 23) 809 2,225 809 2,225
------------- -------------------------- --------------------------- ---------------------------- ----------------------------
-
subordinated
liabilities 809 2,225 809 2,225
At 31 Dec 15,337 14,713 15,061 14,443
------------- -------------------------- --------------------------- ---------------------------- ----------------------------
Subordinated liabilities rank behind senior obligations and
consist of capital instruments and other instruments. Capital
securities may be called and redeemed by HSBC subject to prior
notification to the PRA and, where relevant, the consent of the
local banking regulator. If not redeemed at the first call date,
coupons payable may reset or become floating rate based on relevant
market rates. On subordinated liabilities other than floating rate
notes, interest is payable at fixed rates of up to 7.65%.
The balance sheet amounts disclosed below are presented on an
IFRS basis and do not reflect the amount that the instruments
contribute to regulatory capital due to the inclusion of issuance
costs, regulatory amortisation and regulatory eligibility
limits.
Subordinated liabilities of the group
Carrying amount
2022 2021
GBPm GBPm
Additional tier 1 instruments guaranteed by the bank
5.844% Non-cumulative Step-up Perpetual Preferred
GBP700m Securities(1,5,6) 569 700
--------- --------------------------------------------------- -------------------------- --------------------------
Tier 2 instruments
$750m 3.43% Subordinated Loan 2022 - 558
GBP300m 6.5% Subordinated Notes 2023 (3) 134 300
--------- --------------------------------------------------- -------------------------- --------------------------
GBP1,500m Floating Rate Subordinated Loan 2023 - 1,260
--------- --------------------------------------------------- -------------------------- --------------------------
EUR1,500m Floating Rate Subordinated Loan 2032 1,326 -
EUR1,500m Floating Rate Subordinated Loan 2024 1,329 1,260
$300m 7.65% Subordinated Notes 2025 (2) 141 222
--------- --------------------------------------------------- -------------------------- --------------------------
$750m HSBC Bank plc 4.19% Subordinated Loan 2027 593 604
EUR300m Floating Rate Subordinated Loan 2027 - 252
--------- --------------------------------------------------- -------------------------- --------------------------
GBP200m Floating Rate Subordinated Loan 2028 200 200
--------- --------------------------------------------------- -------------------------- --------------------------
EUR300m Floating Rate Subordinated Loan 2028 266 252
--------- --------------------------------------------------- -------------------------- --------------------------
EUR260m Floating Rate Subordinated Loan 2029 230 218
--------- --------------------------------------------------- -------------------------- --------------------------
5.375% Callable Subordinated Step-up Notes 2030
GBP350m (3,4,6) 60 398
--------- --------------------------------------------------- -------------------------- --------------------------
$2,000m HSBC Bank plc 1.625% Subordinated Loan 2031 1,497 1,457
--------- --------------------------------------------------- -------------------------- --------------------------
EUR2,000m HSBC Bank plc 0.375% Subordinated Loan 2031 1,583 1,658
--------- --------------------------------------------------- -------------------------- --------------------------
EUR2,000m HSBC Bank plc 0.375% Subordinated Loan 2031 1,583 1,658
--------- --------------------------------------------------- -------------------------- --------------------------
EUR1,250m HSBC Bank plc 0.25% Subordinated Loan 2031 990 1,036
--------- --------------------------------------------------- -------------------------- --------------------------
GBP500m 5.375% Subordinated Notes 2033 (3) 152 665
--------- --------------------------------------------------- -------------------------- --------------------------
GBP225m 6.25% Subordinated Notes 2041 (3) 47 224
--------- --------------------------------------------------- -------------------------- --------------------------
GBP600m 4.75% Subordinated Notes 2046 (3) 191 595
--------- --------------------------------------------------- -------------------------- --------------------------
$750m Undated Floating Rate Primary Capital Notes 624 554
--------- --------------------------------------------------- -------------------------- --------------------------
$500m Undated Floating Rate Primary Capital Notes 415 369
--------- --------------------------------------------------- -------------------------- --------------------------
$300m Undated Floating Rate Primary Capital Notes (Series 249 222
3)
--------- --------------------------------------------------- -------------------------- --------------------------
$1,250m HSBC Bank plc floating Subordinated Loan 2028 1,035 -
--------- --------------------------------------------------- -------------------------- --------------------------
$1,100m HSBC Bank plc floating Subordinated Loan 2033 910 -
--------- --------------------------------------------------- -------------------------- --------------------------
EUR400m HSBC Bank plc floating Subordinated Loan 2028 362 -
--------- --------------------------------------------------- -------------------------- --------------------------
EUR400m HSBC Bank plc floating Subordinated Loan 2027 361 -
--------- --------------------------------------------------- -------------------------- --------------------------
EUR500m HSBC Bank plc floating Subordinated Loan 2028 443 -
--------- --------------------------------------------------- -------------------------- --------------------------
Other Tier 2 instruments each less than GBP100m 47 51
-------------------------- --------------------------
At 31 Dec 15,337 14,713
-------------------------- --------------------------
1 The value of the security partially decreased as a result of a
fair value hedge gain. The instrument was held at amortised cost in
2021. Also, the interest rate payable after November 2031 is the
sum of the compounded daily Sonia rate plus 2.0366%.
2 The bank tendered for this security in November 2022. The
principal balance is $180m. The original notional value of the
security is $300m.
3 The bank tendered for these securities in November 2022. The
principal balance is GBP135m, GBP61m, GBP157m, GBP70m and GBP237m
respectively. The original notional values of these securities are
GBP300m, GBP350m, GBP500m, GBP225m and GBP600m respectively.
4 The interest rate payable after November 2025 is the sum of
the compounded daily Sonia rate plus 1.6193%.
5 See paragraph below, 'Guaranteed by HSBC Bank plc'.
6 These securities are ineligible for inclusion in the capital base of the group.
Guaranteed by HSBC Bank plc
A capital security guaranteed by the bank was issued by a Jersey
limited partnership. The proceeds of this was lent to the bank by
the limited partnership in the form of a subordinated note. It
qualified as additional tier 1 capital for the group (on a solo and
consolidated basis) under CRR II until 31 December 2021 by virtue
of the application of grandfathering provisions. Since 31 December
2021, this security has no longer qualified as regulatory capital
for the group.
This preferred security, together with the guarantee, is
intended to provide investors with rights to income, capital
distributions and distributions upon liquidation of the company
that are equivalent to the rights that they would have had if they
had purchased non-cumulative perpetual preference shares of the
company. There are limitations on the payment of distributions if
such payments are prohibited under UK banking regulations or other
requirements, if a payment would cause a breach of HSBC's capital
adequacy requirements, or if the bank has insufficient
distributable reserves (as defined).
The bank has individually covenanted that, if prevented under
certain circumstances from paying distributions on the preferred
security in full, it will not pay dividends or other distributions
in respect of its ordinary shares, or repurchase or redeem its
ordinary shares, until the distribution on the preferred security
has been paid in full.
If the preferred security guaranteed by the bank is outstanding
in November 2048, or if the total capital ratio of the group (on a
solo or consolidated basis) falls below the regulatory minimum
required, or if the Directors expect it to do so in the near term,
provided that proceedings have not been commenced for the
liquidation, dissolution or winding up of the bank, the holders'
interests in the preferred security guaranteed by the bank will be
exchanged for interests in preference shares issued by the bank
that have economic terms which are in all material respects
equivalent to the preferred security and its guarantee.
Tier 2 securities
Tier 2 capital securities are either perpetual or dated
subordinated securities on which there is an obligation to pay
coupons. These capital securities are included within the group's
regulatory capital base as tier 2 capital under CRR II, either as
fully eligible capital or by virtue of the application of
grandfathering provisions. In accordance with CRR II, the capital
contribution of all tier 2 securities is amortised for regulatory
purposes in their final five years before maturity.
27 Maturity analysis of assets, liabilities and off-balance sheet
commitments
--------------------------------------------------------------
Contractual maturity of financial liabilities
The balances in the table below do not agree directly with those
in our consolidated balance sheet as the table incorporates, on an
undiscounted basis, all cash flows relating to principal and future
coupon payments (except for trading liabilities and derivatives not
treated as hedging derivatives).
Undiscounted cash flows payable in relation to hedging
derivative liabilities are classified according to their
contractual maturities. Trading liabilities and derivatives not
treated as hedging derivatives are included in the 'Due not more
than 1 month' time bucket and not by contractual maturity.
In addition, loans and other credit-related commitments, and
financial guarantees are generally not recognised on our balance
sheet. The undiscounted cash flows potentially payable under loan
and other credit-related commitments and financial guarantees are
classified on the basis of the earliest date they can be
called.
Cash flows payable under financial liabilities by remaining contractual
maturities
Due over
1 month
Due not but not Due between Due between
more than more than 3 and 1 and Due after
1 month 3 months 12 months 5 years 5 years Total
The group GBPm GBPm GBPm GBPm GBPm GBPm
---------- ---------- ----------- ----------- --------- -------
Deposits by banks 16,178 36 2,479 1,994 256 20,943
---------- ---------- ----------- ----------- --------- -------
Customer accounts 197,400 11,821 6,441 127 285 216,074
---------- ---------- ----------- ----------- --------- -------
Repurchase agreements
- non-trading 30,572 1,793 203 427 - 32,995
---------- ---------- ----------- ----------- --------- -------
Trading liabilities 41,265 - - - - 41,265
---------- ---------- ----------- ----------- --------- -------
Financial liabilities
designated at fair
value 9,558 1,950 4,887 7,200 6,857 30,452
---------- ---------- ----------- ----------- --------- -------
Derivatives 218,015 88 391 1,382 437 220,313
---------- ---------- ----------- ----------- --------- -------
Debt securities in
issue 832 3,047 2,352 812 851 7,894
---------- ---------- ----------- ----------- --------- -------
Subordinated liabilities 9 137 427 3,300 14,713 18,586
---------- ---------- ----------- ----------- --------- -------
Other financial liabilities(1) 65,305 272 824 180 1,080 67,661
---------- ---------- ----------- ----------- --------- -------
579,134 19,144 18,004 15,422 24,479 656,183
---------- ---------- ----------- ----------- --------- -------
Loan and other credit-related
commitments 127,913 - - - - 127,913
---------- ---------- ----------- ----------- --------- -------
Financial guarantees(2) 5,327 - - - - 5,327
---------- ---------- ----------- ----------- --------- -------
At 31 Dec 2022 712,374 19,144 18,004 15,422 24,479 789,423
Deposits by banks 16,783 1,555 1,106 12,277 401 32,122
Customer accounts 196,609 5,599 2,770 199 101 205,278
Repurchase agreements
- non-trading 24,273 1,924 1,061 7 - 27,265
Trading liabilities 46,433 - - - - 46,433
Financial liabilities
designated at fair
value 9,358 2,790 4,310 8,269 11,873 36,600
Derivatives 139,040 46 104 406 581 140,177
Debt securities in
issue 2,755 2,952 2,145 1,328 335 9,515
Subordinated liabilities 14 62 123 3,969 10,734 14,902
Other financial liabilities(1) 40,292 423 442 234 1,417 42,808
475,557 15,351 12,061 26,689 25,442 555,100
Loan and other credit-related
commitments 119,476 - - - - 119,476
Financial guarantees(2) 11,054 - - - - 11,054
At 31 Dec 2021 606,087 15,351 12,061 26,689 25,442 685,630
Cash flows payable under financial liabilities by remaining contractual
maturities (continued)
Due over
1 month
Due not but not Due between Due between
more than more than 3 and 1 and Due after
1 month 3 months 12 months 5 years 5 years Total
The bank GBPm GBPm GBPm GBPm GBPm GBPm
---------- ---------------------------- ----------- ----------- --------- -------
Deposits by banks 13,327 6 214 53 - 13,600
---------- ---------------------------- ----------- ----------- --------- -------
Customer accounts 129,308 8,578 3,867 3 - 141,756
---------- ---------------------------- ----------- ----------- --------- -------
Repurchase agreements
- non-trading 27,436 1,663 203 427 - 29,729
---------- ---------------------------- ----------- ----------- --------- -------
Trading liabilities 25,765 - - - - 25,765
---------- ---------------------------- ----------- ----------- --------- -------
Financial liabilities
designated at fair
value 9,446 646 4,303 3,820 3,967 22,182
---------- ---------------------------- ----------- ----------- --------- -------
Derivatives 192,521 88 365 1,372 434 194,780
---------- ---------------------------- ----------- ----------- --------- -------
Debt securities in
issue - 2,878 1,525 83 314 4,800
---------- ---------------------------- ----------- ----------- --------- -------
Subordinated liabilities 9 137 417 3,283 14,874 18,720
---------- ---------------------------- ----------- ----------- --------- -------
Other financial liabilities 48,283 180 297 18 18 48,796
---------- ---------------------------- ----------- ----------- --------- -------
446,095 14,176 11,191 9,059 19,607 500,128
---------- ---------------------------- ----------- ----------- --------- -------
Loan and other credit-related
commitments 36,474 - - - - 36,474
---------- ---------------------------- ----------- ----------- --------- -------
Financial guarantees(2) 1,363 - - - - 1,363
---------- ---------------------------- ----------- ----------- --------- -------
At 31 Dec 2022 483,932 14,176 11,191 9,059 19,607 537,965
Deposits by banks 18,053 4,781 1,516 1,453 - 25,803
Customer accounts 119,749 3,504 1,453 2 - 124,708
Repurchase agreements
- non-trading 19,707 1,575 1,061 7 - 22,350
Trading liabilities 31,161 - - - - 31,161
----------------------------
Financial liabilities
designated at fair
value 9,241 1,597 3,723 2,360 7,055 23,976
Derivatives 127,352 46 104 379 574 128,455
Debt securities in
issue 1,480 1,915 845 1,118 327 5,685
Subordinated liabilities 14 62 111 3,700 11,202 15,089
Other financial liabilities 29,248 320 148 28 22 29,766
356,005 13,800 8,961 9,047 19,180 406,993
Loan and other credit-related
commitments 32,471 - - - - 32,471
Financial guarantees(2) 1,270 - - - - 1,270
At 31 Dec 2021 389,746 13,800 8,961 9,047 19,180 440,734
1 Excludes financial liabilities of disposal groups.
2 Excludes performance guarantee contracts to which the
impairment requirements in IFRS 9 are not applied.
Maturity analysis of financial assets and financial
liabilities
The following table provides an analysis of financial assets and
liabilities by residual contractual maturity at the balance sheet
date. These balances are included in the maturity analysis as
follows:
-- Financial assets and liabilities with no contractual maturity
(such as equity securities) are included in the 'Due after more
than 1 year' time bucket. Undated or perpetual instruments are
classified based on the contractual notice period, which the
counterparty of the instrument is entitled to give. Where there is
no contractual notice period, undated or perpetual contracts are
included in the 'Due after more than 1 year' time bucket.
-- Financial instruments included within assets and liabilities
of disposal groups held for sale are classified on the basis of the
contractual maturity of the underlying instruments and not on the
basis of the disposal transaction.
-- Liabilities under investment contracts are classified in
accordance with their contractual maturity. Undated investment
contracts are included in the 'Due after more than 1 year' time
bucket, however, such contracts are subject to surrender and
transfer options by the policyholders.
Maturity analysis of financial assets and financial
liabilities
2022 2021
Due after Due after
Due within more than Due within more than
1 year 1 year Total 1 year 1 year Total
The group GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Assets
---------------------------------- ---------------------------------- ----------------------------------
Financial
assets
designated
or otherwise
mandatorily
measured at
fair value 1,391 14,490 15,881 3,225 15,424 18,649
Loans and
advances
to banks 15,867 1,242 17,109 8,841 1,943 10,784
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Loans and
advances
to customers 38,405 34,209 72,614 40,837 50,340 91,177
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Reverse
repurchase
agreement -
non-trading 52,324 1,625 53,949 53,079 1,369 54,448
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Financial
investments 7,201 25,403 32,604 6,748 34,552 41,300
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Other
financial
assets 55,369 428 55,797 38,851 203 39,054
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Assets held
for sale 4,174 17,040 21,214 9 - 9
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
At 31 Dec 174,731 94,437 269,168 151,590 103,831 255,421
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Liabilities
Deposits by
banks 18,674 2,162 20,836 19,439 12,749 32,188
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Customer
accounts 215,562 386 215,948 204,973 268 205,241
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Repurchase
agreements
-
non-trading 32,486 415 32,901 27,252 7 27,259
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Financial
liabilities
designated
at fair
value 16,281 11,006 27,287 16,329 17,279 33,608
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Debt
securities
in
issue 6,149 1,119 7,268 7,840 1,588 9,428
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Other
financial
liabilities 65,108 1,248 66,356 41,131 1,754 42,885
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Subordinated
liabilities 142 14,386 14,528 8 12,480 12,488
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Liabilities
of disposal
groups held
for sale 21,621 3,090 24,711 - - -
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
At 31 Dec 376,023 33,812 409,835 316,972 46,125 363,097
------------------------------ ------------------------------ ---------------------------- ---------------------------------- ---------------------------------- ----------------------------------
The bank
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Assets
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Financial
assets
designated
or otherwise
mandatorily
measured at
fair value 1,287 331 1,618 2,796 419 3,215
Loans and
advances
to banks 13,338 1,148 14,486 5,267 1,511 6,778
Loans and
advances
to customers 25,814 11,178 36,992 23,609 10,327 33,936
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Reverse
repurchase
agreement -
non-trading 41,430 1,625 43,055 38,759 949 39,708
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Financial
investments 3,415 15,224 18,639 4,580 21,962 26,542
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Other
financial
assets 39,605 2 39,607 28,812 - 28,812
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
At 31 Dec 124,889 29,508 154,397 103,823 35,168 138,991
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Liabilities
Deposits by
banks 13,543 51 13,594 14,655 - 14,655
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Customer
accounts 141,712 2 141,714 124,704 2 124,706
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Repurchase
agreements
-
non-trading 29,223 415 29,638 22,337 7 22,344
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Financial
liabilities
designated
at fair
value 14,290 5,125 19,415 14,425 6,444 20,869
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Debt
securities
in
issue 4,341 315 4,656 4,240 1,418 5,658
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Other
financial
liabilities 47,651 32 47,683 29,868 44 29,912
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
Subordinated
liabilities 133 14,119 14,252 - 12,218 12,218
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
At 31 Dec 250,893 20,059 270,952 210,229 20,133 230,362
------------------------------ ---------------------------------- ---------------------------- -------------------------------- ---------------------------------- -----------------------------
28 Offsetting of financial assets and financial liabilities
--------------------------------------------------------
Financial assets and financial liabilities are offset and the
net amount is reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis, or realise the asset and settle
the liability simultaneously ('the offset criteria').
In the following table, the 'Amounts not set off in the balance
sheet' include transactions where:
-- the counterparty has an offsetting exposure with the group
and a master netting or similar arrangement is in place with a
right of set off only in the event of default, insolvency or
bankruptcy, or the offset criteria are not otherwise satisfied;
and
-- in the case of derivatives and reverse repurchase/repurchase,
stock borrowing/lending and similar agreements, cash and non-cash
collateral (debt securities and equities) has been received/pledged
to cover net exposure in the event of a default or other
predetermined events.
The effect of over-collateralisation is excluded.
'Amounts not subject to enforceable master netting agreements'
include contracts executed in jurisdictions where the rights of set
off may not be upheld under the local bankruptcy laws, and
transactions where a legal opinion evidencing enforceability of the
right of offset may not have been sought, or may have been unable
to obtain.
For risk management purposes, the net amounts of loans and
advances to customers are subject to limits, which are monitored
and the relevant customer agreements are subject to review and
updated, as necessary, to ensure that the legal right of offset
remains appropriate.
Amounts subject to enforceable
netting arrangements
Amounts not
set off in the
balance sheet
Amounts
not
Financial subject
Net amounts instruments, to
in the including enforceable
Gross Amounts balance non-cash Cash Net netting
amounts offset sheet collateral(6) collateral amount arrangements(5) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Financial
assets
---------------------
Derivatives
(Note 14)(1) 303,911 (79,799) 224,112 (193,720) (29,998) 394 1,126 225,238
--------------------- ------------------------------
Reverse
repos, stock
borrowing and
similar
agreements
classified
as(2) :
- trading
assets 14,490 (196) 14,294 (14,293) - 1 63 14,357
--------------------- ------------------------------
- non-trading
assets 103,839 (52,268) 51,571 (51,310) (260) 1 2,378 53,949
--------------------- ------------------------------
Loans and
advances to
customers(3) 17,979 (8,105) 9,874 (8,143) - 1,731 1 9,875
--------------------- ------------------------------
At 31 Dec
2022 440,219 (140,368) 299,851 (267,466) (30,258) 2,127 3,568 303,419
--------------------- ------------------------------
Derivatives
(Note 14)(1) 160,801 (20,689) 140,112 (114,985) (24,277) 850 1,109 141,221
------------- --------------------- --------------------------- ------------------------------
Reverse
repos, stock
borrowing and
similar
agreements
classified
as(2) :
- trading
assets 11,960 (156) 11,804 (11,804) - - 40 11,844
--------------------- ------------------------------
- non-trading
assets 125,935 (72,788) 53,147 (53,044) (103) - 1,301 54,448
--------------------- ------------------------------
Loans and
advances to
customers(3) 14,741 (6,091) 8,650 (7,053) - 1,597 5 8,655
--------------------- ------------------------------
At 31 Dec
2021 313,437 (99,724) 213,713 (186,886) (24,380) 2,447 2,455 216,168
--------------------- ------------------------------
Financial
liabilities
Derivatives
(Note 14)(1) 297,341 (79,799) 217,542 (197,201) (19,662) 679 1,325 218,867
--------------------- ------------------------------
Repos, stock
lending
and similar
agreements
classified
as(2) :
- trading
liabilities 10,180 (196) 9,984 (9,983) - 1 2 9,986
--------------------- ------------------------------
- non-trading
liabilities 85,168 (52,268) 32,900 (32,719) (182) (1) 1 32,901
--------------------- ------------------------------
Customer
accounts(4) 24,082 (8,105) 15,977 (8,143) - 7,834 10 15,987
--------------------- ------------------------------
At 31 Dec
2022 416,771 (140,368) 276,403 (248,046) (19,844) 8,513 1,338 277,741
--------------------- ------------------------------
Derivatives
(Note 14)(1) 159,169 (20,689) 138,480 (124,745) (13,273) 462 888 139,368
------------- --------------------- --------------------------- ------------------------------
Repos, stock
lending
and similar
agreements
classified
as(2) :
- trading
liabilities 9,444 (156) 9,288 (9,288) - - 13 9,301
--------------------- ------------------------------
- non-trading
liabilities 100,031 (72,788) 27,243 (27,090) (153) - 16 27,259
--------------------- ------------------------------
Customer
accounts(4) 21,846 (6,091) 15,755 (7,053) - 8,702 11 15,766
--------------------- ------------------------------
At 31 Dec
2021 290,490 (99,724) 190,766 (168,176) (13,426) 9,164 928 191,694
--------------------- ------------------------------
1 At 31 Dec 2022, the amount of cash margin received that had
been offset against the gross derivatives assets was GBP2,373m
(2021: GBP2,590m). The amount of cash margin paid that had been
offset against the gross derivatives liabilities was GBP7,279m
(2021: GBP6,180m).
2 For the amount of repos, reverse repos, stock lending, stock
borrowing and similar agreements recognised on the balance sheet
within 'Trading assets' and 'Trading liabilities', see the 'Funding
sources and uses' table on page 83.
3 At 31 Dec 2022, the total amount of 'Loans and advances to
customers' recognised on the balance sheet was GBP72,614m (2021:
GBP91,177m) of which GBP9,874m (2021: GBP8,650m) was subject to
offsetting.
4 At 31 Dec 2022, the total amount of 'Customer accounts'
recognised on the balance sheet was GBP215,948m (2021: GBP205,241m)
of which GBP15,977m (2021: GBP15,755m) was subject to
offsetting.
5 These exposures continue to be secured by financial
collateral, but we may not have sought or been able to obtain a
legal opinion evidencing enforceability of the right of offset.
6 The disclosure has been enhanced this year to support
consistency across Group entities. All financial instruments
(whether recognised on our balance sheet or as non-cash collateral
received or pledged) are presented within 'financial instruments,
including non-cash collateral' as balance sheet classification has
no effect on the rights of set-off associated with financial
instruments. Comparative data have been represented
accordingly.
29 Called up share capital and other equity instruments
----------------------------------------------------
Issued and fully paid
HSBC Bank plc GBP1.00 ordinary shares
2022 2021
Number GBPm Number GBPm
------------ ------------------------ --------------- -------------------------
At 1 Jan 796,969,111 797 796,969,111 797
At 31 Dec 796,969,112 797 796,969,111 797
------------ ------------------------ --------------- -------------------------
HSBC Bank plc share premium
2022 2021
GBPm GBPm
At 31 Dec 420 -
------------------------ --------------------------
Total called up share capital and share premium
2022 2021
GBPm GBPm
At 31 Dec 1,217 797
--------------------- -------------------------
HSBC Bank plc $0.01 non-cumulative third dollar preference shares
2022 2021
Number GBP000 Number GBP000
-------------------- -------------- ------------------------ ----------------- -------------------------
At 1 Jan and 31 Dec 35,000,000 172 35,000,000 172
-------------------- -------------- ------------------------ ----------------- -------------------------
The bank has no obligation to redeem the preference shares but
may redeem them in part or in whole at any time, subject to prior
notification to the Prudential Regulation Authority ('PRA').
Dividends on the preference shares in issue are paid annually at
the sole and absolute discretion of the Board of Directors. The
Board of Directors will not declare a dividend on the preference
shares in issue if (i) payment of the dividend would cause a breach
of the capital adequacy requirements of the bank (or its subsidiary
undertakings) under applicable laws or regulations or (ii) the
distributable profits of the bank are insufficient to enable the
payment in full or in part (as applicable) of the dividends on the
preference shares in issue. If either the solo or consolidated
Common Equity Tier 1 Capital Ratio of the bank as of any date falls
below 7.00% (a so-called 'right conversion event'), the rights
attaching to the preference shares shall be altered irrevocably and
permanently such that they have the same rights attaching to them
as ordinary shares. Holders of the preference shares in issue will
be able to attend any general meetings of shareholders of the bank
and to vote on any resolution proposed to vary or abrogate any of
the rights attaching to the preference shares or any resolution
proposed to reduce the paid up capital of the preference shares. If
the dividend payable on the preference shares in issue has not been
paid in full for the most recent dividend period, if a rights
conversion event has occured or if any resolution is proposed for
the winding-up of the bank or the sale of its entire business then,
in such circumstances, holders of preference shares will be
entitled to vote on all matters put to general meetings. In the
case of unpaid dividends, the holders of preference shares in issue
will be entitled to attend and vote at any general meetings until
such time as dividends on the preference shares for the most recent
dividend period have been paid in full, or a sum set aside for such
payment in full, in respect of one dividend period. All shares in
issue are fully paid.
Other equity instruments
HSBC Bank plc additional tier 1 instruments
2022 2021
GBPm GBPm
Undated Subordinated Resettable Additional Tier
1 instrument issued 2015 (Callable December 2020
EUR1,900m onwards) 1,388 1,388
------------------------ --------------------------
EUR235m Undated Subordinated Resettable Additional Tier 197 197
1 instrument issued 2016 (Callable January 2022
onwards)
------------------------ --------------------------
EUR300m Undated Subordinated Resettable Additional Tier 263 263
1 instrument 2018 (Callable March 2023 onwards)
------------------------ --------------------------
Undated Subordinated Resettable Additional Tier
GBP555m 1 instrument 2018 (Callable March 2023 onwards) 555 555
------------------------ --------------------------
Undated Subordinated Resettable Additional Tier
GBP500m 1 instrument 2019 (Callable November 2024 onwards) 500 500
------------------------ --------------------------
EUR250m Undated Subordinated Resettable Additional Tier 213 213
1 instrument 2019 (Callable November 2024 onwards)
------------------------ --------------------------
Undated Subordinated Resettable Additional Tier
GBP431m 1 instrument 2019 (Callable December 2024 onwards) 431 431
------------------------ --------------------------
EUR200m Undated Subordinated Resettable Additional Tier 175 175
1 instrument 2019 (Callable January 2025 onwards)
------------------------ --------------------------
EUR250m Undated Subordinated Resettable Additional Tier 208 -
1 instruments issued 2022 (Callable March 2027
onwards)
------------------------ --------------------------
At
31 Dec 3,930 3,722
------------------------ --------------------------
These instruments are held by HSBC Holdings plc. The bank has
issued capital instruments that are included in the group's capital
base as fully CRR II compliant additional tier 1 capital.
Interest on these instruments will be due and payable only at
the sole discretion of the bank, and the bank has sole and absolute
discretion at all times and for any reason to cancel (in whole or
in part) any interest payment that would otherwise be payable on
any date. There are limitations on the payment of principal,
interest or other amounts if such payments are prohibited under UK
banking regulations, or other requirements, if the bank has
insufficient distributable items reserves or if the bank fails to
satisfy the solvency condition as defined in the instruments
terms.
The instruments are undated and are repayable, at the option of
the bank, in whole at the initial call date, or on any Interest
Payment Date after the initial call date. In addition, the
instruments are repayable at the option of the bank in whole for
certain regulatory or tax reasons. Any repayments require the prior
consent of the Prudential Regulation Authority. These instruments
rank pari passu with the bank's most senior class or classes of
issued preference shares and therefore ahead of ordinary shares.
These instruments will be written down in whole, together with any
accrued but unpaid interest if either the group's solo or
consolidated Common Equity Tier 1 Capital Ratio falls below
7.00%.
30 Contingent liabilities, contractual commitments, guarantees and
contingent assets
---------------------------------------------------------------
The group The bank
--------------------------------------------------- ---------------------------------------------------
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
---------------- ------------------------ ------------------------- ------------------------ -------------------------
Guarantees and
other contingent
liabilities:
---------------- ------------------------ ------------------------- ------------------------ -------------------------
- financial
guarantees 5,327 11,054 1,363 1,270
---------------- ------------------------ ------------------------- ------------------------ -------------------------
- performance
and other
guarantees 17,136 15,833 6,886 7,334
---------------- ------------------------ ------------------------- ------------------------ -------------------------
- other
contingent
liabilities 353 367 342 364
---------------- ------------------------ ------------------------- ------------------------ -------------------------
At 31 Dec 22,816 27,254 8,591 8,968
---------------- ------------------------ ------------------------- ------------------------ -------------------------
Commitments:(1)
---------------- ------------------------ ------------------------- ------------------------ -------------------------
- documentary
credits and
short-term
trade-related
transactions 2,317 1,928 820 778
---------------- ------------------------ ------------------------- ------------------------ -------------------------
- forward asset
purchases and
forward
deposits
placed 33,684 30,005 3,317 1,138
---------------- ------------------------ ------------------------- ------------------------ -------------------------
- standby
facilities,
credit lines
and other
commitments to
lend 91,912 87,543 32,337 30,555
---------------- ------------------------ ------------------------- ------------------------ -------------------------
At 31 Dec 127,913 119,476 36,474 32,471
---------------- ------------------------ ------------------------- ------------------------ -------------------------
1 Includes GBP126,457m of commitments (2021: GBP115,695m), to
which the impairment requirements in IFRS 9 are applied where the
group has become party to an irrevocable commitment.
The above table discloses the nominal principal amounts, which
represent the maximum amounts at risk should the contracts be fully
drawn upon and clients default. As a significant portion of
guarantees and commitments is expected to expire without being
drawn upon, the total of the nominal principal amounts is not
indicative of future liquidity requirements.
UK branches of HSBC overseas entities
In December 2017, HM Revenue & Customs ('HMRC') challenged
the VAT status of certain UK branches of HSBC overseas entities.
HMRC has also issued notices of assessment covering the period from
1 October 2013 to 31 December 2017 totalling GBP262m, with interest
to be determined. No provision has been recognised in respect of
these notices. In Q1 2019, HMRC reaffirmed its assessment that the
UK branches are ineligible to be members of the UK VAT group and,
consequently, HSBC paid HMRC the sum of GBP262m and filed appeals.
In February 2022, the Upper Tribunal issued a judgement addressing
several preliminary legal issues, which was partially in favour of
HMRC and partially in favour of HSBC. The case will now return to
the First-tier Tax tribunal for full trial and we await
confirmation of the trial window. Since January 2018, HSBC's
returns have been prepared on the basis that the UK branches are
not in the UK VAT group. In the event that HSBC's appeals are
successful, HSBC will seek a refund of this VAT, of which GBP174m
is estimated to be attributable to HSBC Bank plc.
Contingent liabilities arising from legal proceedings,
regulatory and other matters against group companies are disclosed
in Note 32.
Financial Services Compensation Scheme
The Financial Services Compensation Scheme ('FSCS') provides
compensation, up to certain limits, to eligible customers of
financial services firms that are unable, or likely to be unable,
to pay claims against them. The FSCS may impose a further levy on
the group to the extent the industry levies imposed to date are not
sufficient to cover the compensation due to customers in any future
possible collapse. The ultimate FSCS levy to the industry as a
result of collapse cannot be estimated reliably. It is dependent on
various uncertain factors including the potential recovery of
assets by the FSCS, changes in the level of protected products
(including deposits and investments) and the population of FSCS
members at the time. In December 2022, the FCA announced that it
expects to review various elements of the scheme to ensure
consumers are appropriately and proportionately protected, with
costs distributed across industry levy payers in a fair and
sustainable way, with a view to deliver the majority of changes by
the end of the 2023/24 financial year.
Guarantees
The group The bank
2022 2021 2022 2021
By the By the By the By the
group group bank in bank in
in favour in favour favour favour
In favour of other In favour of other In favour of other In favour of other
of third HSBC Group of third HSBC Group of third HSBC Group of third HSBC Group
parties entities parties entities parties entities parties entities
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------------------------ ---------------- ------------------------- ---------------------- -------------------------- ------------------------ ---------------------------
Financial
guarantees(1) 4,158 1,169 10,635 419 1,105 258 824 446
------------------------ ------------------------ ---------------- ------------------------- ---------------------- -------------------------- ------------------------ ---------------------------
Performance
and
other
guarantees 15,475 1,661 14,433 1,400 5,516 1,370 6,119 1,215
------------------------ ------------------------ ---------------- ---------------------- -------------------------- ------------------------ ---------------------------
Total 19,633 2,830 25,068 1,819 6,621 1,628 6,943 1,661
------------------------ ------------------------ ---------------- ------------------------- ---------------------- -------------------------- ------------------------ ---------------------------
1 Financial guarantees contracts are contracts that require the
issuer to make specified payments to reimburse the holder for a
loss incurred because a specified debtor fails to make payment when
due, in accordance with the original or modified terms of a debt
instrument. The amounts in the above table are nominal principal
amounts. 'Financial guarantees' to which the impairment
requirements in IFRS 9 are applied have been presented separately
from other guarantees to align with credit risk disclosures.
The group provides guarantees and similar undertakings on behalf
of both third-party customers and other entities within HSBC Group.
These guarantees are generally provided in the normal course of the
group's banking businesses. Guarantees with terms of more than one
year are subject to the group's annual credit review process.
31 Finance lease receivables
-------------------------
The group leases a variety of assets to third parties under
finance leases, including transport assets (such as aircraft),
property and general plant and machinery. At the end of lease
terms, assets may be sold to third parties or leased for further
terms. Rentals are calculated to recover the cost of assets less
their residual value, and earn finance income.
2022 2021
Total Total
future Unearned future Unearned
minimum finance Present minimum finance Present
payments income value payments income Value
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------------------------- --------------------------
Lease
receivables:
---------------------------
No later than
one year 211 (24) 187 409 (20) 389
------------------------- -------------------------- --------------------------- --------------------------
One to two
years 214 (26) 188 251 (19) 232
------------------------- -------------------------- --------------------------- --------------------------
Two to three
years 207 (21) 186 187 (17) 170
------------------------- -------------------------- --------------------------- --------------------------
Three to four
years 117 (16) 101 177 (13) 164
------------------------- -------------------------- --------------------------- --------------------------
Four to five
years 100 (13) 87 90 (9) 81
------------------------- -------------------------- --------------------------- --------------------------
Later than
one year and
no
later than
five years 638 (76) 562 705 (58) 647
------------------------- -------------------------- --------------------------- --------------------------
Later than
five years 457 (50) 407 556 (33) 523
------------------------- -------------------------- --------------------------- --------------------------
At 31 Dec 1,306 (150) 1,156 1,670 (111) 1,559
------------------------- -------------------------- --------------------------- --------------------------
32 Legal proceedings and regulatory matters
----------------------------------------
The group is party to legal proceedings and regulatory matters
in a number of jurisdictions arising out of its normal business
operations. Apart from the matters described below, the group
considers that none of these matters are material. The recognition
of provisions is determined in accordance with the accounting
policies set out in Note 1. While the outcomes of legal proceedings
and regulatory matters are inherently uncertain, management
believes that, based on the information available to it,
appropriate provisions have been made in respect of these matters
as at 31 December 2022 (see Note 25). Where an individual provision
is material, the fact that a provision has been made is stated and
quantified, except to the extent that doing so would be seriously
prejudicial. Any provision recognised does not constitute an
admission of wrongdoing or legal liability. It is not practicable
to provide an aggregate estimate of potential liability for our
legal proceedings and regulatory matters as a class of contingent
liabilities.
Bernard L. Madoff Investment Securities LLC
Various non-US HSBC companies provided custodial, administration
and similar services to a number of funds incorporated outside the
US whose assets were invested with Bernard L. Madoff Investment
Securities LLC ('Madoff Securities'). Based on information provided
by Madoff Securities as at 30 November 2008, the purported
aggregate value of these funds was $8.4bn, including fictitious
profits reported by Madoff. Based on information available to HSBC,
the funds' actual transfers to Madoff Securities minus their actual
withdrawals from Madoff Securities during the time HSBC serviced
the funds are estimated to have totalled approximately $4bn.
Various HSBC companies have been named as defendants in lawsuits
arising out of Madoff Securities' fraud.
US litigation: The Madoff Securities Trustee has brought
lawsuits against various HSBC companies and others, seeking
recovery of transfers from Madoff Securities to HSBC in an amount
not specified, and these lawsuits remain pending in the US
Bankruptcy Court for the Southern District of New York (the 'US
Bankruptcy Court').
Certain Fairfield entities (together, 'Fairfield') (in
liquidation since July 2009) have brought a lawsuit in the US
against fund shareholders, including HSBC companies that acted as
nominees for clients, seeking restitution of redemption payments.
In August 2022, the US District Court for the Southern District of
New York (the 'New York District Court') affirmed earlier decisions
by the US Bankruptcy Court that dismissed the majority of the
liquidators' claims (against most of the HSBC companies). In
September 2022, the remaining defendants before the US Bankruptcy
Court sought leave to appeal and the liquidators filed appeals to
the US Court of Appeals for the Second Circuit, which are currently
pending. Meanwhile, proceedings before the US Bankruptcy Court with
respect to the remaining claims are ongoing.
UK litigation: The Madoff Securities Trustee has filed a claim
against various HSBC companies in the High Court of England and
Wales, seeking recovery of transfers from Madoff Securities to
HSBC. The claim has not yet been served and the amount claimed has
not been specified.
Cayman Islands litigation: In February 2013, Primeo Fund
('Primeo') (in liquidation since April 2009) brought an action
against HSBC Securities Services Luxembourg ('HSSL') and Bank of
Bermuda (Cayman) Limited (now known as HSBC Cayman Limited),
alleging breach of contract and breach of fiduciary duty and
claiming monetary damages. Following dismissal of Primeo's action
by the lower and appellate courts in the Cayman Islands, in 2019,
Primeo appealed to the UK Privy Council. During 2021, the UK Privy
Council held two separate hearings in connection with Primeo's
appeal. Judgment was given against HSBC in respect of the first
hearing and judgment is pending in respect of the second
hearing.
Luxembourg litigation: In April 2009, Herald Fund SPC ('Herald')
(in liquidation since July 2013) brought an action against HSSL
before the Luxembourg District Court, seeking restitution of cash
and securities that Herald purportedly lost because of Madoff
Securities' fraud, or money damages. The Luxembourg District Court
dismissed Herald's securities restitution claim, but reserved
Herald's cash restitution and money damages claims. Herald has
appealed this judgment to the Luxembourg Court of Appeal, where the
matter is pending.
In late 2018, Herald brought additional claims against HSSL and
HSBC Bank plc before the Luxembourg District Court, seeking further
restitution and damages.
In October 2009, Alpha Prime Fund Limited ('Alpha Prime')
brought an action against HSSL before the Luxembourg District
Court, seeking the restitution of securities, or the cash
equivalent, or money damages. In December 2018, Alpha Prime brought
additional claims seeking damages against various HSBC companies.
These matters are currently pending before the Luxembourg District
Court.
In December 2014, Senator Fund SPC ('Senator') brought an action
against HSSL before the Luxembourg District Court, seeking
restitution of securities, or the cash equivalent, or money
damages. In April 2015, Senator commenced a separate action against
the Luxembourg branch of HSBC Bank plc asserting identical
claims.
In December 2018, Senator brought additional claims against HSSL
and HSBC Bank plc Luxembourg branch, seeking restitution of
Senator's securities or money damages. These matters are currently
pending before the Luxembourg District Court.
There are many factors that may affect the range of possible
outcomes, and any resulting financial impact, of the various
Madoff-related proceedings described above, including but not
limited to the multiple jurisdictions in which the proceedings have
been brought. Based upon the information currently available,
management's estimate of the possible aggregate damages that might
arise as a result of all claims in the various Madoff-related
proceedings is around $600m, excluding costs and interest. Due to
uncertainties and limitations of this estimate, any possible
damages that might ultimately arise could differ significantly from
this amount.
Anti-money laundering and sanctions-related matters
In December 2012, HSBC Holdings plc ('HSBC Holdings') entered
into a number of agreements, including an undertaking with the UK
Financial Services Authority (replaced with a Direction issued by
the UK Financial Conduct Authority ('FCA') in 2013 and again in
2020) as well as a cease-and-desist order with the US Federal
Reserve Board ('FRB'), both of which contained certain
forward-looking anti-money laundering ('AML') and sanctions-related
obligations. For several years thereafter, HSBC retained a Skilled
Person under section 166 of the Financial Services and Markets Act
and an Independent Consultant under the FRB cease-and-desist order
to produce periodic assessments of the Group's AML and sanctions
compliance programme. The Skilled Person completed its engagement
in the second quarter of 2021, and the FCA determined that no
further Skilled Person work is required. Separately, the
Independent Consultant's engagement is now complete and, in August
2022, the FRB terminated its cease-and-desist order.
Since November 2014, a number of lawsuits have been filed in
federal courts in the US against various HSBC companies and others
on behalf of plaintiffs who are, or are related to, victims of
terrorist attacks in the Middle East. In each case, it is alleged
that the defendants aided and abetted the unlawful conduct of
various sanctioned parties in violation of the US Anti-Terrorism
Act. Nine actions against HSBC Bank plc remain pending in federal
courts and HSBC Bank plc's motions to dismiss have been granted in
five of these cases. In September 2022 and January 2023,
respectively, the appellate courts affirmed the dismissals of two
of the cases, and the plaintiffs' requests for review of these
decisions by the full appellate courts have been denied. The
dismissals in the other cases are subject to appeal. The four
remaining actions are at an early stage.
Based on the facts currently known, it is not practicable at
this time for HSBC to predict the resolution of the pending
matters, including the timing or any possible impact on HSBC, which
could be significant.
London interbank offered rates, European interbank offered rates
and other benchmark interest rate investigations and litigation
Euro interest rate derivatives: In December 2016, the European
Commission ('EC') issued a decision finding that HSBC, among other
banks, engaged in anti-competitive practices in connection with the
pricing of euro interest rate derivatives, and the EC imposed a
fine on HSBC based on a one-month infringement in 2007. The fine
was annulled in 2019 and a lower fine was imposed in 2021. In
January 2023, the European Court of Justice dismissed an appeal by
HSBC and upheld the EC's findings on HSBC's liability. A separate
appeal by HSBC concerning the amount of the fine remains pending
before the General Court of the European Union.
US dollar Libor: Beginning in 2011, HSBC and other panel banks
have been named as defendants in a number of private lawsuits filed
in the US with respect to the setting of US dollar Libor. The
complaints assert claims under various US federal and state laws,
including antitrust and racketeering laws and the Commodity
Exchange Act ('US CEA'). The lawsuits include individual and
putative class actions, most of which have been transferred and/or
consolidated for pre-trial purposes before the New York District
Court. HSBC has reached class settlements with five groups of
plaintiffs, and the court has approved these settlements. HSBC has
also resolved several of the individual actions, although a number
of other US dollar Libor-related actions remain pending.
Based on the facts currently known, it is not practicable at
this time for HSBC to predict the resolution of the pending
matters, including the timing or any possible impact on HSBC, which
could be significant.
Foreign exchange-related investigations and litigation
In June 2020, the Competition Commission of South Africa, having
initially referred a complaint for proceedings before the South
African Competition Tribunal in February 2017, filed a revised
complaint against 28 financial institutions, including HSBC Bank
plc, for alleged anti-competitive behaviour in the South African
foreign exchange market. In December 2021, a hearing on HSBC Bank
plc's application to dismiss the revised complaint took place
before the South African Competition Tribunal, where a decision
remains pending.
Beginning in 2013, various HSBC companies and other banks have
been named as defendants in a number of putative class actions
filed in, or transferred to, the New York District Court arising
from allegations that the defendants conspired to manipulate
foreign exchange rates. HSBC has reached class settlements with two
groups of plaintiffs, including direct and indirect purchasers of
foreign exchange products, and the court has granted final approval
of these settlements.
In 2018, complaints alleging foreign exchange-related misconduct
were filed in the New York District Court and the High Court of
England and Wales against HSBC and other defendants by certain
plaintiffs that opted out of the direct purchaser class action
settlement in the US. In December 2022, HSBC reached a
settlement-in-principle with the plaintiffs to resolve these
matters. The settlement remains subject to the negotiation of
definitive documentation. Additionally, in January 2023, HSBC
reached a settlement-in-principle with plaintiffs in Israel to
resolve a class action lawsuit filed in the local courts alleging
foreign exchange-related misconduct. The settlement remains subject
to the negotiation of definitive documentation and court approval.
Lawsuits alleging foreign exchange-related misconduct remain
pending against HSBC and other banks in courts in Brazil. It is
possible that additional civil actions will be initiated against
HSBC in relation to its historical foreign exchange activities.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
Precious metals fix-related litigation
Gold: Beginning in December 2015, numerous putative class
actions were filed in the Ontario and Quebec Superior Courts of
Justice against various HSBC companies and other financial
institutions. The plaintiffs allege that, among other things, from
January 2004 to March 2014, the defendants conspired to manipulate
the price of gold and gold derivatives in violation of the Canadian
Competition Act and common law. These actions are ongoing.
Silver: Beginning in July 2014, numerous putative class actions
were filed in federal district courts in New York, naming HSBC and
other members of The London Silver Market Fixing Limited as
defendants. The complaints, which were consolidated in the New York
District Court, allege that, from January 2007 to December 2013,
the defendants conspired to manipulate the price of silver and
silver derivatives for their collective benefit in violation of US
antitrust laws, the US CEA and New York state law. In February
2022, following the
conclusion of pre-class certification discovery, the defendants
filed a motion seeking to dismiss the plaintiffs' antitrust claims,
which remains pending.
In April 2016, two putative class actions were filed in the
Ontario and Quebec Superior Courts of Justice against various HSBC
companies and other financial institutions. The plaintiffs in both
actions allege that, from January 1999 to August 2014, the
defendants conspired to manipulate the price of silver and silver
derivatives in violation of the Canadian Competition Act and common
law. These actions are ongoing.
Platinum and palladium: Between late 2014 and early 2015,
numerous putative class actions were filed in the New York District
Court, naming HSBC and other members of The London Platinum and
Palladium Fixing Company Limited as defendants. The complaints
allege that, from January 2008 to November 2014, the defendants
conspired to manipulate the price of platinum group metals and
related financial products for their collective benefit in
violation of US antitrust laws and the US CEA. In March 2020, the
court granted the defendants' motion to dismiss the plaintiffs'
third amended complaint but granted the plaintiffs leave to
re-plead certain claims. The plaintiffs have filed an appeal.
Based on the facts currently known, it is not practicable at
this time for HSBC to predict the resolution of these matters,
including the timing or any possible impact on HSBC, which could be
significant.
Other regulatory investigations, reviews and litigation
HSBC Bank plc and/or certain of its affiliates are subject to a
number of other investigations and reviews by various regulators
and competition and law enforcement authorities, as well as
litigation, in connection with various matters relating to the
firm's businesses and operations, including:
-- an investigation by the US Commodity Futures Trading
Commission ('CFTC') concerning compliance with records preservation
requirements relating to the use of unapproved electronic messaging
platforms for business communications. HSBC Bank plc has reached a
settlement-in-principle with the CFTC's Division of Enforcement to
resolve this investigation. The settlement is subject to the
negotiation of definitive documentation and final approval by the
CFTC;
-- an investigation by the PRA in connection with depositor protection arrangements in the UK;
-- an investigation by the FCA in connection with collections
and recoveries operations in the UK;
-- an investigation by the UK Competition and Markets Authority
into potentially anti-competitive arrangements involving historical
trading activities relating to certain UK-based fixed income
products and related financial instruments; and
-- two group actions pending in the US courts and a claim issued
in the High Court of England and Wales in connection with HSBC Bank
plc's role as a correspondent bank to Stanford International Bank
Ltd from 2003 to 2009.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
33 Related party transactions
--------------------------
The immediate and ultimate parent company of the group is HSBC
Holdings plc, which is incorporated in England and Wales.
Copies of the Group financial statements may be obtained from
the below address.
HSBC Holdings plc
8 Canada Square
London E14 5HQ
IAS 24 'Related party disclosures' defines related parties as
including the parent, fellow subsidiaries, associates, joint
ventures, post-employment benefit plans for HSBC employees, Key
Management Personnel ('KMP') of the group and its ultimate parent
company, close family members of the KMP and entities which are
controlled, jointly controlled or significantly influenced by the
KMP or their close family members.
Particulars of transactions between the group and the related
parties are tabulated below. The disclosure of the year-end balance
and the highest amounts outstanding during the year are considered
to be the most meaningful information to represent the amount of
the transactions and outstanding balances during the year.
Key Management Personnel
The KMP of the bank are defined as those persons having
authority and responsibility for planning, directing and
controlling the activities of the bank. They include the Directors
and certain senior executives of the bank, directors and certain
members of the Group Executive Committee of HSBC Holdings plc, to
the extent they have a role in directing the affairs of the
bank.
The emoluments of those KMP who are not Directors or senior
executives of the bank are paid by other Group companies who make
no recharge to the bank. Accordingly, no emoluments in respect of
these KMP are included in the following disclosure.
The tables below represent the compensation for KMP (directors
and certain senior executives) of the bank in exchange for services
rendered to the bank for the period they served during the
year.
Compensation of Key Management Personnel
2022 2021 2020
GBP000 GBP000 GBP000
-------------------------------- --------------------------------- ---------------------------------
Short-term
employee
benefits(1,2) 13,487 13,678 3,865
-------------------------------- --------------------------------- ---------------------------------
Post-employment
benefits 69 46 19
-------------------------------- --------------------------------- ---------------------------------
Other long-term
employee
benefits 1,152 1,378 429
-------------------------------- --------------------------------- ---------------------------------
Share-based
payments 4,234 4,331 586
-------------------------------- --------------------------------- ---------------------------------
Year ended 31
Dec 18,942 19,433 4,899
-------------------------------- --------------------------------- ---------------------------------
1 Includes fees paid to non-executive Directors.
2 2022 includes payment of GBP600,000 (2021: GBP2,091,617)
relating to compensation for loss of employment.
Advances and credits, guarantees and deposit balances during the year
with Key Management Personnel
2022 2021
------------------------------------------------------------------ --------------------------------------------------------------------
Highest Highest
amounts amounts
Balance outstanding Balance outstanding
at during at during
31 Dec year(2) 31 Dec year
GBPm GBPm GBPm GBPm
------------- -------------------------------- -------------------------------- --------------------------------- ---------------------------------
Key
Management
Personnel(1)
------------- -------------------------------- -------------------------------- --------------------------------- ---------------------------------
Advances and
credits - - 0.03 0.08
Deposits 21 32 11 18
1 Includes close family members and entities which are
controlled or jointly controlled by KMP of the bank or their close
family members.
2 Exchange rate applied for non-GBP amounts is the average for the year.
The above transactions were made in the ordinary course of
business and on substantially the same terms, including interest
rates and security, as for comparable transactions with persons of
a similar standing or, where applicable, with other employees. The
transactions did not involve more than the normal risk of repayment
or present other unfavourable features.
In addition to the requirements of IAS 24, particulars of
advances (loans and quasi-loans), credits and guarantees entered
into by the group with Directors of HSBC Bank plc are required to
be disclosed pursuant to section 413 of the Companies Act 2006.
Under the Companies Act, there is no requirement to disclose
transactions with other KMP. During the course of 2022, there were
no advances, credits and guarantees entered into by the group with
Directors of HSBC Bank plc.
Other related parties
Transactions and balances during the year with KMP of the bank's
ultimate parent company
During the course of 2022, there were no transactions and
balances between KMP of the bank's ultimate parent company, who
were not considered KMP of the bank, in respect of advances and
credits, guarantees and deposits.
Transactions and balances during the year with associates and
joint ventures
During the course of 2022, there were no transactions and
balances with associates and joint ventures, in respect of loans,
deposits, guarantees and commitments.
The group's transactions and balances during the year with HSBC Holdings
plc and subsidiaries of HSBC Holdings plc
2022 2021
Due to/from Due to/from
Due to/from subsidiaries Due to/from subsidiaries
HSBC Holdings of HSBC Holdings HSBC Holdings of HSBC Holdings
plc plc plc plc
Highest Highest Highest Highest
balance Balance balance Balance balance Balance balance Balance
during at 31 during at 31 during at 31 during at 31
the year Dec the year Dec the year Dec the year Dec
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------
Assets
---------------------- ---------------------
Trading
assets 62 17 7,074 848 108 19 4,702 1,360
------------------------ ---------------------- ---------------------
Derivatives 7,196 5,714 39,341 27,473 2,002 787 25,566 21,862
------------------------ ---------------------- ---------------------
Financial
assets
designated
and
otherwise
mandatorily
measured at
fair value
through
profit or
loss 6 5 28 25 7 6 29 27
Loans and
advances
to banks - - 6,237 5,585 - - 4,890 3,173
------------------------ ---------------------- ---------------------
Loans and
advances
to customers 183 - 496 424 - - 490 329
------------------------ ---------------------- ---------------------
Financial
investments 154 136 - - 172 154 - -
------------------------ ---------------------- ---------------------
Reverse
repurchase
agreements -
non-trading - - 6,150 4,341 - - 2,332 1,690
------------------------ ---------------------- ---------------------
Prepayments,
accrued
income and
other assets 1,263 21 11,591 8,389 1,540 1,262 9,853 4,784
------------------------ ---------------------- ---------------------
Total related
party
assets at 31
Dec 8,864 5,893 70,917 47,085 3,829 2,228 47,862 33,225
------------------------ ---------------------- ---------------------
Liabilities
---------------------- ---------------------
Trading
liabilities 45 21 522 91 158 23 116 82
------------------------ ---------------------- ---------------------
Financial
liabilities
designated
at fair
value 1,162 593 - - 1,181 1,162 1,201 -
------------------------ ---------------------- ---------------------
Deposits by
banks - - 6,034 3,310 - - 6,659 2,261
------------------------ ---------------------- ---------------------
Customer
accounts 6,202 4,315 3,149 1,551 2,364 1,875 3,428 3,149
------------------------ ---------------------- ---------------------
Derivatives 4,345 2,680 43,384 30,997 3,443 2,074 26,152 22,133
------------------------ ---------------------- ---------------------
Subordinated
liabilities 12,115 12,115 - - 9,485 9,251 10,421 -
------------------------ ---------------------- ---------------------
Repurchase
agreements
-
non-trading - - 5,811 5,738 - - 6,162 1,841
------------------------ ---------------------- ---------------------
Provisions,
accruals,
deferred
income and
other
liabilities 3,357 3,161 10,816 4,864 189 179 8,057 3,826
------------------------ ---------------------- ---------------------
Total related
party
liabilities
at 31 Dec 27,226 22,885 69,716 46,551 16,820 14,564 62,196 33,292
------------------------ ---------------------- ---------------------
Guarantees
and
commitments - - 4,762 3,383 - - 2,622 2,061
------------------------ ---------------------- ---------------------
The group's transactions and balances during the year with HSBC Holdings
plc and subsidiaries of HSBC Holdings plc (continued)
Due to/from subsidiaries
Due to/from of
HSBC Holdings plc HSBC Holdings plc
2022 2021 2020 2022 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------
Income
statement
---------------------- ----------------------
Interest income 3 4 5 178 32 55
---------------------- ----------------------
Interest
expense(1) 307 50 (55) 162 58 256
---------------------- ----------------------
Fee income 9 8 13 74 61 55
Fee expense - - - 382 357 389
---------------------- ----------------------
Trading income - - - 53 2 2
---------------------- ----------------------
Trading expense - - - 2 - 2
---------------------- ----------------------
Other operating
income 1 7 30 149 236 365
---------------------- ----------------------
General and
administrative
expenses 65 143 126 2,387 2,110 2,077
---------------------- ----------------------
1 2020 negative balance relates to net impact of
fixed-for-floating-interest-rate swaps which the group has entered
into to manage the movements in market interest rates on certain
fixed rate financial liabilities.
The above outstanding balances arose in the ordinary course of
business and on substantially the same terms, including interest
rates and security, as for comparable transactions with third-party
counterparties.
The bank's transactions and balances during the year with HSBC Bank
plc subsidiaries, HSBC Holdings plc and subsidiaries of HSBC Holdings
plc
2022 2021
Due to/from Due to/from Due to/from Due to/from
subsidiaries subsidiaries subsidiaries subsidiaries
of HSBC Due to/from of HSBC of HSBC Due to/from of HSBC
Bank plc HSBC Holdings Holdings Bank plc HSBC Holdings Holdings
subsidiaries plc plc subsidiaries plc plc
Highest Highest Highest Highest Highest Highest
balance balance balance balance balance balance
during Balance during Balance during Balance during Balance during Balance during Balance
the at 31 the at 31 the at 31 the at 31 the at 31 the at 31
year Dec year Dec year Dec year Dec year Dec year Dec
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Assets
Trading
assets 264 172 62 17 7,074 845 603 264 108 19 4,695 1,360
Derivatives 17,187 11,332 7,196 5,714 37,475 26,170 15,309 9,025 2,002 787 22,953 19,755
Loans and
advances
to banks 3,484 2,940 - - 5,197 3,892 3,172 2,259 - - 3,561 2,100
Loans and
advances
to customers 4,517 4,515 183 - 285 247 6,446 3,850 - - 416 242
Financial
investments 4,521 4,183 - - - - 3,337 3,337 - - - -
Reverse
repurchase
agreements -
non-trading 4,683 2,332 - - 5,920 3,947 2,313 2,313 - - 2,058 1,428
Prepayments,
accrued
income
and other
assets 4,868 2,905 1,262 21 10,096 6,818 5,921 1,685 1,537 1,261 9,327 4,557
Investments
in
subsidiary
undertakings 10,646 10,646 - - - - 6,479 6,479 - - - -
Total related
party assets
at 31 Dec 50,170 39,025 8,703 5,752 66,047 41,919 43,580 29,212 3,647 2,067 43,010 29,442
Liabilities
Trading
liabilities 113 32 44 21 508 91 112 49 158 21 116 82
Financial
liabilities
designated
at
fair value - - 1,162 593 - - - - 1,181 1,162 1,201 -
Deposits by
banks 3,385 960 - - 3,601 1,979 1,808 1,229 - - 3,245 965
Customer
accounts 1,095 514 6,202 4,315 3,048 1,426 1,287 696 2,364 1,875 3,321 3,013
Derivatives 13,479 13,361 4,345 2,680 40,460 29,001 17,378 10,190 3,443 2,074 23,787 20,182
Subordinated
liabilities 700 700 11,884 11,884 - - 700 700 9,262 9,033 10,187 -
Repurchase
agreements
-
non-trading 1,279 429 - - 5,328 5,030 988 431 - - 5,670 1,645
Provisions,
accruals,
deferred
income and
other
liabilities 7,596 1,015 3,349 3,167 9,511 4,437 6,166 1,127 174 166 6,423 3,302
Total related
party
liabilities
at 31 Dec 27,647 17,011 26,986 22,660 62,456 41,964 28,439 14,422 16,582 14,331 53,950 29,189
Guarantees
and
commitments 4,469 2,655 - - 2,690 1,380 5,338 2,676 - - 1,686 1,130
The above outstanding balances arose in the ordinary course of
business and on substantially the same terms, including interest
rates and security, as for comparable transactions with third-party
counterparties.
Post-employment benefit plans
The HSBC Bank (UK) Pension Scheme (the 'Scheme') entered into
swap transactions with the bank to manage the inflation and
interest rate sensitivity of the liabilities. At 31 December 2022,
the gross notional value of the swaps was GBP5,449m (2021:
GBP5,490m), the swaps had a positive fair value of GBP424m to the
bank (2021: positive fair value of GBP766m) and the bank had
delivered collateral of GBP425m (2021: GBP775m) to the Scheme in
respect of these swaps. All swaps were executed at prevailing
market rates and within standard market bid/offer spreads.
34 Assets held for sale and liabilities of disposal groups held for
sale
----------------------------------------------------------------
Held for sale at 31 December
2022 2021
GBPm GBPm
--------------------------------- -------------------------------- --------------------------------
Disposal groups 23,179 3
--------------------------------- -------------------------------- --------------------------------
Unallocated impairment losses(1) (1,978) -
--------------------------------- --------------------------------
Non-current assets held for sale 13 6
--------------------------------- -------------------------------- --------------------------------
Total assets 21,214 9
--------------------------------- -------------------------------- --------------------------------
Liabilities of disposal groups 24,711 0
--------------------------------- -------------------------------- --------------------------------
1 This represents impairment losses in excess of the carrying
value on the non-current assets, excluded from the measurement
scope of IFRS 5.
Disposal groups
Planned sale of our retail banking operations in France
On 25 November 2021, HSBC Continental Europe signed a framework
agreement with Promontoria MMB SAS ('My Money Group') and its
subsidiary Banque des Caraïbes SA, regarding the planned sale of
HSBC Continental Europe's retail banking operations in France. The
sale, which is subject to regulatory approvals and the satisfaction
of other relevant conditions, includes: HSBC Continental Europe's
French retail banking operations; the Crédit Commercial de France
('CCF') brand; and HSBC Continental Europe's 100% ownership
interest in HSBC SFH (France) and its 3% ownership interest in
Crédit Logement.
The framework agreement has a long-stop date of 31 May 2024, if
the sale has not closed by that point the agreement will terminate,
although that date can be extended by either party to 30 November
2024 in certain circumstances or with the agreement of both
parties. We have agreed a detailed plan with My Money Group with
the aim of completing the sale in the second half of 2023, subject
to regulatory approvals, agreement and implementation of necessary
financing structures and the completion of the operational
transfer, including customer and data migrations. In this regard
the framework agreement imposes certain obligations on the parties
in planning for completion.
Given the scale and complexity of the business being sold, there
is risk of delay in the implementation of this plan. The disposal
group was classified as held for sale for the purposes of IFRS 5 as
at 30 September 2022, reflecting the prevailing judgements
concerning likelihood of the framework agreement's timetable being
achieved. The assets and liabilities classified as held for sale
were determined in accordance with the framework agreement, and are
subject to change as the detailed transition plan is executed. This
classification and consequential remeasurement resulted in an
impairment loss of GBP1.7bn, which included related transaction
costs. At 31 December 2022, we reassessed the likelihood of
completion taking account of the most recent correspondence with My
Money Group concerning the implementation of the plan and related
developments. As a result of this reassessment, the likelihood of
completion in 2023 is judged to be highly probable. As such, and in
accordance with IFRS 5, the disposal group continues to be
classified as held for sale.
The disposal group will be remeasured at the lower of the
carrying amount and fair value less costs to sell at each reporting
period. Any remaining gains or losses not previously recognised,
including from the recycling of foreign currency translation
reserves and the reversal of any remaining deferred tax assets and
liabilities, will be recognised on completion.
Planned sale of our branch operations in Greece
On 24 May 2022, HSBC Continental Europe signed a sale and
purchase agreement for the sale of its branch operations in Greece
to Pancreta Bank SA. Completion of the transaction is subject to
regulatory approval, and is currently expected to occur in the
first half of 2023. At 31 December 2022, the disposal group
included GBP0.3bn of loans and advances to customers and GBP1.9bn
of customer accounts, which met the criteria to be classified as
held for sale. In the second quarter of 2022, we recognised a loss
of GBP0.1bn upon reclassification as held for sale in accordance
with IFRS 5. On completion accumulated foreign currency translation
reserves will be recycled to the income statement.
Planned sale of our business in Russia
On 30 June 2022, following a strategic review of our business in
Russia, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc)
entered into an agreement for the planned sell of its wholly-owned
subsidiary HSBC Bank (RR) (Limited Liability Company). Completion
of the transaction is subject to regulatory and governmental
approval, and is currently expected to occur in the first half of
2023. In 2022, a GBP0.2bn loss on the planned sale was recognised,
upon reclassification as held for sale in accordance with IFRS5. On
completion accumulated foreign currency translation reserves will
be recycled to the income statement.
At 31 December 2022, the major classes of assets and associated
liabilities of disposal groups held for sale, including allocated
impairment losses, were as follows:
France Branch
retail operations Business
business in Greece in Russia Total
GBPm GBPm GBPm GBPm
------------- -------------------------------- ---------------------------------- -------------------------------- --------------------------------
Assets of
disposal
groups held
for
sale
------------- --------------------------------
Cash and
balances at
central
banks 60 1,502 - 1,562
------------- -------------------------------- ---------------------------------- -------------------------------- --------------------------------
Financial
assets
designated
and
otherwise
mandatorily
measured at
fair value
through
profit and
loss 39 - - 39
Loans and
advances to
banks - 25 102 127
------------- -------------------------------- ---------------------------------- -------------------------------- --------------------------------
Loans and
advances to
customers 20,776 291 - 21,067
------------- -------------------------------- ---------------------------------- -------------------------------- --------------------------------
Reverse
repurchase
agreements - - 208 208
------------- -------------------------------- ---------------------------------- -------------------------------- --------------------------------
Financial
investments - 66 22 88
Prepayments,
accrued
income and
other
assets 63 4 21 88
Total Assets
at 31 Dec
2022 20,938 1,888 353 23,179
------------- -------------------------------- ---------------------------------- -------------------------------- --------------------------------
Liabilities
of disposal
groups held
for sale
------------- --------------------------------
Customer
accounts 18,551 1,900 27 20,478
------------- -------------------------------- ---------------------------------- -------------------------------- --------------------------------
Financial
liabilities
designated
at
fair value 2,925 - - 2,925
------------- -------------------------------- ---------------------------------- -------------------------------- --------------------------------
Debt
securities
in issue 1,100 - - 1,100
Accruals,
deferred
income and
other
liabilities 138 52 18 208
Total
Liabilities
at 31 Dec
2022 22,714 1,952 45 24,711
Expected date Second First First
of Half of Half of Half of
completion 2023 2023 2023
Operating All global
segment WPB businesses CMB, GBM
France retail
banking operations
GBPm
Net assets/(liabilities) classified as held for sale(1) (1,712)
Expected cash contribution (2) 3,398
Disposal group post-cash contribution (3) 1,686
1 Excludes impairment loss allocated against the non-current
assets that are in scope of IFRS 5 measurement of GBP64m.
2 The contributions are reported within 'Cash and balances at
central banks' on the group's consolidated balance sheet.
3 'Disposal group post-cash contribution' includes the net asset
value of the transferring business of EUR1.6bn (GBP1.5bn) and
GBP0.2bn of additional items to which a nil value is ascribed per
the framework agreement.
Under the financial terms of the planned transaction, HSBC
Continental Europe will transfer the business with a net asset
value of EUR1.6bn (GBP1.5bn), subject to adjustment (upwards or
downwards) in certain circumstances, for a consideration of EUR1.
Any required increase to the net asset value of the business to
achieve the net asset value of EUR1.6bn (GBP1.5bn) will be
satisfied by the inclusion of additional cash. The value of cash
contribution will be determined by the net asset or liability
position of the disposal group at the point of completion. Based
upon the net liabilities of the disposal group at 31 December 2022,
HSBC would be expected to include a cash contribution of GBP3.4bn
as part of the planned transaction.
35 Events after the balance sheet date
-----------------------------------
In its assessment of events after the balance sheet date, the
group has considered and concluded that there are no events
requiring adjustment or disclosures in the financial
statements.
36 HSBC Bank plc's subsidiaries, joint ventures and associates
-----------------------------------------------------------
In accordance with section 409 of the Companies Act 2006 a list
of HSBC Bank plc subsidiaries, joint ventures and associates, their
registered office address and the effective percentage of equity
owned at 31 December 2022 is disclosed below.
Unless otherwise stated, the share capital comprises ordinary or
common shares which are held by HSBC Bank plc or its subsidiaries.
The ownership percentage is provided for each undertaking. The
undertakings below are consolidated by HSBC Bank plc unless
otherwise indicated.
HSBC Bank plc's registered office address is:
HSBC Bank plc
8 Canada Square
London E14 5HQ
Subsidiaries
The undertakings below are consolidated by the group.
% of share
class held
by immediate
parent company
(or by HSBC
Bank
plc where
Subsidiaries this varies) Footnotes
Assetfinance December 100.00
(H) Limited 9
Assetfinance December
(P) Limited 100.00 2,9
Assetfinance December 100.00
(R) Limited 9
Assetfinance June (A) 100.00
Limited 9
Assetfinance Limited 100.00 9
Assetfinance March
(B) Limited 100.00 10
Assetfinance March 100.00
(F) Limited 9
Assetfinance September 100.00
(F) Limited 9
Banco Nominees (Guernsey)
Limited 100.00 11
Banco Nominees 2 (Guernsey)
Limited 100.00 11
Beau Soleil Limited
Partnership n/a 0,12
BentallGreenOak China
Real Estate Investments,
L.P. n/a 0,1,13
Canada Crescent Nominees
(UK) Limited 100.00 2,9
CCF & Partners Asset
Management Limited 100.00 (99.99) 9
CCF Holding (LIBAN)
S.A.L. (In Liquidation) 74.99 16
Charterhouse Administrators
(D.T.) Limited 100.00 (99.99) 9
Charterhouse Management
Services Limited 100.00 (99.99) 9
Charterhouse Pensions
Limited 100.00 2,9
COIF Nominees Limited n/a 0,2,9
Corsair IV Financial
Services Capital Partners
- B L.P n/a 0,1,18
Dem 9 100.00 (99.99) 3,19
Dempar 1 100.00 (99.99) 3,19
Eton Corporate Services
Limited 100.00 11
Flandres Contentieux
S.A. 100.00 (99.99) 19
Foncière Elysées 100.00 (99.99) 19
Griffin International 100.00
Limited 9
HLF 100.00 (99.99) 19
HSBC (BGF) Investments
Limited 100.00 2,9
HSBC Asset Finance
(UK) Limited 100.00 2,9
HSBC Asset Finance
M.O.G. Holdings (UK)
Limited 100.00 2,9
HSBC Assurances Vie
(France) 100.00 (99.99) 24
HSBC Bank (General
Partner) Limited 100.00 2,25
HSBC Bank (RR) (Limited
Liability Company) n/a 0,6,26
HSBC Bank Armenia cjsc 100.00 27
HSBC Bank Capital Funding
(Sterling 1) LP n/a 0,25
HSBC Bank Capital Funding
(Sterling 2) LP n/a 0,25
HSBC Bank Malta p.l.c. 70.03 28
HSBC City Funding Holdings 100.00 9
HSBC Client Holdings
Nominee (UK) Limited 100.00 2,9
HSBC Client Nominee
(Jersey) Limited 100.00 2,29
HSBC Continental Europe 99.99 19
HSBC Corporate Trustee
Company (UK) Limited 100.00 2,9
HSBC Custody Services
(Guernsey) Limited 100.00 11
HSBC Epargne Entreprise
(France) 100.00 (99.99) 24
HSBC Equity (UK) Limited 100.00 2,9
HSBC Europe B.V. 100.00 9
HSBC Factoring (France) 100.00 (99.99) 19
HSBC Global Asset Management
(Deutschland) GmbH 100.00 30
HSBC Global Asset Management
(France) 100.00 (99.99) 24
HSBC Global Asset Management
(Malta) Limited 100.00 (70.03) 31
HSBC Global Asset Management
(Switzerland) AG 100.00 (99.99) 3,32
HSBC Global Custody
Nominee (UK) Limited 100.00 2,9
HSBC Global Custody
Proprietary Nominee
(UK) Limited 100.00 1,2,9
HSBC Global Shared
Services (India) Private
Limited (In Liquidation) 99.99 1,33
HSBC Infrastructure 100.00
Limited 9
HSBC Insurance Services
Holdings Limited 100.00 2,9
% of share
class held
by immediate
parent company
(or by HSBC
Bank
plc where
Subsidiaries this varies) Footnotes
HSBC Investment Bank
Holdings Limited 100.00 2,9
HSBC Issuer Services
Common Depositary
Nominee (UK) Limited 100.00 2,9
HSBC Issuer Services
Depositary Nominee
(UK) Limited 100.00 2,9
HSBC Life (UK) Limited 100.00 2,9
HSBC Life Assurance
(Malta) Limited 100.00 (70.03) 31
HSBC LU Nominees Limited 100.00 2,9
HSBC Marking Name
Nominee (UK) Limited 100.00 2,9
HSBC Middle East Leasing
Partnership n/a 0,34
HSBC Operational Services
GmbH 100.00 (99.99) 30
HSBC Overseas Nominee
(UK) Limited 100.00 2,9
HSBC PB Corporate
Services 1 Limited 100.00 35
HSBC Pension Trust
(Ireland) DAC 100.00 2,36
HSBC PI Holdings (Mauritius)
Limited 100.00 37
HSBC Preferential
LP (UK) 100.00 2,9
HSBC Private Banking
Nominee 3 (Jersey)
Limited 100.00 35
HSBC Private Equity 100.00 9
Investments (UK) Limited
HSBC Private Markets
Management SARL n/a 0,38
HSBC Property Funds 100.00 9
(Holding) Limited
HSBC Real Estate Leasing
(France) 100.00 (99.99) 19
HSBC REIM (France) 100.00 (99.99) 24
HSBC Securities (South
Africa) (Pty) Limited 100.00 2,39
HSBC Securities Services
(Guernsey) Limited 100.00 11
HSBC Securities Services
(Ireland) DAC 100.00 36
HSBC Securities Services
(Luxembourg) S.A. 100.00 2,40
HSBC Securities Services
Holdings (Ireland) 100.00 36
HSBC Service Company
Germany GmbH 100.00 (99.99) 1,30
HSBC Services (France) 100.00 (99.99) 19
HSBC SFH (France) 100.00 (99.99) 3,24
HSBC SFT (C.I.) Limited 100.00 2,11
HSBC Specialist Investments 100.00 9
Limited
HSBC Titan GmbH &
Co. KG 100.00 (99.99) 1,41
HSBC Transaction Services
GmbH 100.00 (99.99) 5,30
HSBC Trinkaus & Burkhardt
(International) S.A. 100.00 (99.99) 42
HSBC Trinkaus & Burkhardt
Gesellschaft fur Bankbeteiligungen
mbH 100.00 (99.99) 30
HSBC Trinkaus & Burkhardt
GmbH 100.00 (99.99) 5,30
HSBC Trinkaus Europa
Immobilien-Fonds Nr.
5 GmbH 100.00 (99.99) 30
HSBC Trinkaus Family
Office GmbH 100.00 (99.99) 5,30
HSBC Trinkaus Real
Estate GmbH 100.00 (99.99) 5,30
HSBC Trustee (C.I.)
Limited 100.00 2,35
HSBC Trustee (Guernsey)
Limited 100.00 2,11
HSIL Investments Limited 100.00 9
INKA Internationale
Kapitalanlagegesellschaft
mbH 100.00 (99.99) 30
James Capel (Nominees)
Limited 100.00 2,9
James Capel (Taiwan)
Nominees Limited 100.00 2,9
Keyser Ullmann Limited 100.00 (99.99) 9
Midcorp Limited 100.00 2,9
Prudential Client
HSBC GIS Nominee (UK)
Limited 100.00 2,9
Republic Nominees
Limited 100.00 2,11
RLUKREF Nominees (UK)
One Limited 100.00 1,2,9
RLUKREF Nominees (UK)
Two Limited 100.00 1,2,9
S.A.P.C. - Ufipro
Recouvrement 99.99 19
Saf Baiyun 100.00 (99.99) 3,19
Saf Guangzhou 100.00 (99.99) 3,19
SCI HSBC Assurances
Immo 100.00 (99.99) 24
SFM 100.00 (99.99) 19
SFSS Nominees (Pty)
Limited 100.00 39
SNC Les Oliviers D'Antibes 60.00 (59.99) 4,24
SNCB/M6 - 2008 A 100.00 (99.99) 19
SNCB/M6-2007 A 100.00 (99.99) 3,19
SNCB/M6-2007 B 100.00 (99.99) 3,19
Société
Française et
Suisse 100.00 (99.99) 19
Somers Dublin DAC 100.00 (99.99) 36
Sopingest 100.00 (99.99) 19
South Yorkshire Light 100.00
Rail Limited 9
Swan National Limited 100.00 9
The Venture Catalysts
Limited 100.00 2,9
Trinkaus Australien
Immobilien Fonds Nr.
1 Brisbane GmbH &
Co. KG 100.00 (99.99) 30
Trinkaus Australien
Immobilien-Fonds Nr.
1 Treuhand-GmbH 100.00 (99.99) 5,30
Trinkaus Europa Immobilien-Fonds
Nr.3 Objekt Utrecht
Verwaltungs-GmbH 100.00 (99.99) 30
Trinkaus Immobilien-Fonds
Geschaeftsfuehrungs-GmbH 100.00 (99.99) 5,30
Trinkaus Immobilien-Fonds
Verwaltungs-GmbH 100.00 (99.99) 5,30
Trinkaus Private Equity
Management GmbH 100.00 (99.99) 30
Trinkaus Private Equity
Verwaltungs GmbH 100.00 (99.99) 5,30
Valeurs Mobilières
Elysées 100.00 (99.99) 19
Joint ventures
The undertakings below are joint ventures and equity
accounted.
% of share
class held
by immediate
parent company
(or by
HSBC Bank
plc where
Joint Ventures this varies) Footnotes
HCM Holdings Limited
(In Liquidation) 50.99 23
The London Silver Market
Fixing Limited n/a 0,1,2,48
Associates
The undertakings below are associates and equity accounted.
% of share
class held
by immediate
parent company
(or by
HSBC Bank
plc where
Associates this varies) Footnotes
BGF Group plc 24.62 14
Bud Financial Limited 5.36 1,15
Contour Pte Ltd 12.65 1,17
Divido Financial Services
Limited 5.56 1,20
Episode Six Limited 7.02 1,21
Euro Secured Notes
Issuer 16.67 22
LiquidityMatch LLC n/a 0,1,43
London Precious Metals
Clearing Limited 30.00 1,2,44
Monese Ltd 5.39 1,45
Quantexa Ltd 10.10 46
Services Epargne Enterprise 14.18 47
Threadneedle Software
Holdings Limited 6.56 1,49
Trade Information Network
Limited 16.67 1,50
Trinkaus Europa Immobilien-Fonds
Nr. 7 Frankfurt Mertonviertel
KG n/a 0,30
Vizolution Limited 17.95 1,7
We Trade Innovation
Designated Activity
Company (In Liquidation) 9.88 1,8
Footnotes
Where an entity is governed by
0 voting rights, HSBC consolidates
when it holds - directly or indirectly
- the necessary voting rights
to pass resolutions by the governing
body. In all other cases, the
assessment of control is more
complex and requires judgement
of other factors, including having
exposure to variability of returns,
power to direct relevant activities,
and whether power is held as an
agent or principal. HSBC's consolidation
policy is described in Note 1.2(a).
Management has determined that
1 these undertakings are excluded
from consolidation in the Group
accounts as these entities do
not meet the definition of subsidiaries
in accordance with IFRSs. HSBC's
consolidation policy is described
in Note 1.2(a).
Directly held by HSBC Bank plc
2
Description of shares
Actions
3
Parts
4
GmbH Anteil
5
Russian Limited Liability Company
6 Shares
Registered offices
Office Block A, Bay Studios Business
7 Park, Fabian Way, Swansea, Wales,
United Kingdom, SA1 8QB
10 Earlsfort Terrace, Dublin,
8 Ireland, D02 T380
8 Canada Square, London, United
9 Kingdom, E14 5HQ
5 Donegal Square South, Northern
10 Ireland, Belfast, United Kingdom,
BT1 5JP
Arnold House, St Julians Avenue,
11 St Peter Port, Guernsey, GY1 3NF
HSBC Main Building, 1 Queen's
12 Road Central, Hong Kong
Oak House Hirzel Street, St Peter
13 Port, Guernsey, GY1 2NP
13-15 York Buildings, London,
14 United Kingdom, WC2N 6JU
Linen Court Floor 3, 10 East
15 Road, London, United Kingdom,
N1 6AD
Solidere - Rue Saad Zaghloul
16 Immeuble - 170 Marfaa, P.O. Box
17 5476 Mar Michael, Beyrouth,
Lebanon, 11042040
50 Raffles Place, #32-01 Singapore
17 Land Tower, Singapore, 048623
c/o Walkers Corporate Services
18 Limited Walker House, 87 Mary
Street, George Town, Grand Cayman,
Cayman Islands, KY1-9005
38 avenue Kléber, Paris,
19 France, 75116
Office 7, 35-37 Ludgate Hill,
20 London, United Kingdom, EC4M 7JN
9/F Amtel Bldg, 148 des Voeux
21 Rd Central, Central, Hong Kong
3 avenue de l'Opera, Paris, France,
22 75001
c/o Teneo Financial Advisory
23 Limited, 156 Great Charles Street,
Queensway, Birmingham, West Midlands,
United Kingdom, B3 3HN
Immeuble Cœur Défense,
24 110 esplanade du Général
de Gaulle, Courbevoie, France,
92400
HSBC House Esplanade, St. Helier,
25 Jersey, JE4 8UB
2 Paveletskaya Square Building
26 2, Moscow, Russian Federation,
115054
66 Teryan Street, Yerevan, Armenia,
27 0009
116 Archbishop Street, Valletta,
28 Malta
HSBC House Esplanade, St. Helier,
29 Jersey, JE1 1HS
Hansaallee 3, Düsseldorf,
30 Germany, 40549
80 Mill Street, Qormi, Malta,
31 QRM 3101
26 Gartenstrasse, Zurich, Switzerland,
32 8002
52/60, M G Road Fort, Mumbai,
33 India, 400 001
Unit 401 Level 4, Gate District
34 Precinct Building 2, Dubai International
Financial Centre, Dubai, United
Arab Emirates, 506553
HSBC House Esplanade, St. Helier,
35 Jersey, JE1 1GT
Registered offices (continued)
1 Grand Canal Square, Grand Canal
36 Harbour, Dublin 2, Ireland, D02
P820
6th Floor HSBC Centre 18, Cybercity,
37 Ebene, Mauritius, 72201
5 rue Heienhaff, Senningerberg,
38 Luxembourg, 1736
1 Mutual Place, 107 Rivonia Road,
39 Sandton, Gauteng, South Africa,
2196
18 Boulevard de Kockelscheuer,
40 Luxembourg, Luxembourg, L-1821
3 Hansaallee, Düsseldorf,
41 Nordrhein-Westfalen, Germany,
40549
16 Boulevard d'Avranches, Luxembourg,
42 Luxembourg, L-1160
100 Town Square Place, Suite
43 201 | Jersey City, NJ, United
States Of America, 07310
7th Floor 62 Threadneedle Street,
44 London, United Kingdom, EC2R 8HP
Eagle House, 163 City Road, London,
45 United Kingdom, EC1V 1NR
Hill House, 1 Little New Street,
46 London, United Kingdom, EC4A 3TR
32 rue du Champ de Tir, Nantes,
47 France, 44300
c/o Hackwood Secretaries Limited,
48 One Silk Street, London, United
Kingdom, EC2Y 8HQ
2nd Floor Regis House, 45 King
49 William Street, London, United
Kingdom, EC4R 9AN
3 More London Riverside, London,
50 United Kingdom, SE1 2AQ
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ACSFFLFLXLLLBBF
(END) Dow Jones Newswires
February 21, 2023 07:03 ET (12:03 GMT)
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