Additional Financial Information

Aug 01 2019 08:00 BSTSource: RNS

RNS Number : 5165H

Standard Chartered PLC

01 August 2019

Standard Chartered PLC - Additional Financial information

Highlights

Standard Chartered PLC (the Group) today releases its results for the year ended 30 June 2019. The following pages provide additional information related to the announcement.

Table of contents

Group Strategy
Our strategy	2
Risk review and Capital review
Risk review	7
Capital review	44
Financial statements and notes
Statement of directors' responsibilities	50
Independent review report	51
Condensed consolidated interim income statement	52
Condensed consolidated interim statement of comprehensive income	53
Condensed consolidated interim balance sheet	54
Condensed consolidated interim statement of changes in equity	55
Condensed consolidated interim cash flow statement	56
Notes to the financial statements	57
Other supplementary information	99
Glossary	104
Shareholder information	114

Standard Chartered PLC - Our strategy

Taking Standard Chartered to the next level

The strategic objectives we committed to in 2015 have stabilised the Group. We have learned a lot about where we are differentiated, what our clients want from us, and what we need to do to become a simpler, faster and better bank with sustainable growth and returns.

While we have made significant progress against the objectives we set out in 2015, we know that we are capable of much more. We remain focused on delivering our strategy by improving our service, delivering a differentiated proposition to our clients and stakeholders, and becoming a future-ready bank. Building on our purpose of driving commerce and prosperity through our unique diversity, we will have a particular focus on the following areas for the next three years to improve our growth and financial returns.

OUR STRATEGIC PRIORITIES

"Our refreshed strategic priorities build on our purpose and earlier areas of focus, but mark a sharp change in the way we operate as we go from turnaround to transformation."

Bill Winters Group Chief Executive

Our strategic priorities

Purpose and People

Understand our responsibilities

We will increasingly collaborate with clients and suppliers to improve social and environmental standards. We continue to partner with regulators and other stakeholders to fight financial crime, and aim to make our risk and control approach a competitive advantage for us.

Lead sustainable financing across emerging markets

We are maintaining our focus on supporting sustainable economic growth, expanding renewables financing and investing in sustainable infrastructure where it matters most. We will continue to facilitate the movement of capital to drive positive social and economic impact in our markets.

Support the communities where we live and work

We promote economic inclusion in our markets through community programmes aimed at tackling inequality. We provide disadvantaged young people with opportunities to learn new skills, get job-ready and start their own business. We will continue to support the visually impaired through our community programmes.

Maximise return from investment in our people

We want to deliver a client-centric environment with an inclusive culture that capitalises on the experience and unique diversity of our people. We are building a future-ready workforce, embedding digital, agile and people leadership skills. We aim to amplify the impact of our people by deploying them in markets that
fit their capabilities and career aspirations.

Progress in H1 2019

Employee net promoter score1: 11.5 (+1.9 points YoY)

H1 2018: 9.6

1 Employee net promoter score measures the number of promoters who would recommend the Group as a great place to work compared with detractors on a scale from -100 to +100

Deliver our network

Leverage our unique footprint

Our unique network is a long-term source of growth and sustainably higher returns. We will continue to deepen relationships with our clients to fully realise the revenue potential of our network. We will place a particular focus on multinational corporates operating extensively in Asia, Africa and the Middle East, as well as investors and financial institutions that are seeking emerging market solutions.

Build on our strength in China

We will continue connecting our clients both within and beyond China. We will increasingly capture growth opportunities arising from capital market opening, renminbi (RMB) internationalisation, Belt & Road corporate clients, offshore mainland Chinese wealth and the Greater Bay Area.

Grow with Africa

We will continue to grow with our clients in Africa, focusing on capturing inbound flows of financial institutions, multinational corporations, and Belt & Road clients. Meanwhile, we aim to accelerate our Retail Banking client growth in Africa with our cost-efficient digital bank capabilities.

Progress in H1 2019

Corporate & Institutional Banking network income2:$2.4bn (+9% YoY)

H1 2018: $2.2bn

2 Corporate & Institutional Banking income generated outside of a client group's headquarter country

Grow our affluent business

Meet the wealth needs of the affluent and emerging affluent

By continuously enhancing our offering for affluent and emerging affluent clients in markets where we have a Retail Banking presence, we aspire to be increasingly relevant for our clients and drive growth in these segments. To that end, we are investing in digitally delivered wealth propositions that excite our clients.

Enhance client experience with data and technology

We will increase our investment in data and analytics capabilities to generate a unique understanding of our clients and their needs, and in turn improve our offerings, deliver a personalised experience and increase client engagement.

Scale the non-affluent segment in a targeted manner

The rise of the middle class is an important growth opportunity for our Retail Banking business across our footprint. To profitably capture this opportunity, we will implement new business models, harness technology and work with non-bank partners to acquire and serve non-affluent clients with our target profile in a cost-efficient manner.

Progress in H1 2019

Affluent client income3: $1.8bn (+5% YoY)

H1 2018: $1.7bn

3 Income from Retail Banking Priority, Retail Banking Premium and Private Banking clients

Optimise low-returning markets

Improve returns in markets where we are an international bank with trusted local capabilities

In markets where we can utilise our local and international capabilities, we will aim to improve returns through our sharpened participation in Corporate & Institutional Banking and selectively in Commercial Banking and/or Retail Banking. In particular, we will focus on optimising the performance of four high-potential markets, namely India, Indonesia, Korea and the UAE.

Accelerate growth in our largest and most profitable markets

In markets where we are a top local universal bank and have attractive returns, we will participate in all of our business segments and invest to grow our market share.

Focus on Corporate & Institutional Banking in other markets

In markets where our capabilities are geared towards international business, we will reinforce our primary focus on originating and facilitating cross-border business with our Corporate & Institutional Banking presence.

Progress in H1 2019

Profit before taxation of India, Indonesia, Korea and the UAE4: $380m (+14% YoY)

H1 2018: $333m

4 Aggregate underlying profit before taxation of the four markets; excluding Permata

Improve productivity

Continue investing in productivity

Our investment in digitisation will continue to support productivity improvements and enhance client experience. For example, we refreshed our client digital platform with unified trade and FX capabilities in Corporate & Institutional Banking. In Retail Banking we launched real-time client onboarding on digital channels and refreshed wealth and FX platforms with full mobile access.

Organise around client journeys

We are shaping our organisation around the journeys of our clients, to better align our processes and way of working with the needs of our clients and partners. This will enable us to drive operational improvements to scale revenue growth through improved client acquisition, conversion and retention while also delivering enhanced efficiency. This will be guided by our principles of positioning ourselves as a digital solutions partner, focusing on end-to-end digital client experience, transparent and real-time service delivery, and effective and efficient decision-making.

Unlock capital and liquidity efficiency

We are establishing a Hong Kong hub entity structure to further enhance capital and liquidity utilisation across the Group.

Progress in H1 2019

Income per FTE5: $177,000 (+4% YoY)

H1 2018: $170,000

5 Underlying operating income over the past 12 months divided by the 12-month rolling average full-time equivalent (FTE) employees

Transform and disrupt with digital

Transform our Retail Banking business with digital

We have continued our strong momentum in digitising our Retail Banking business. For example, we have rolled out a full-service, cost-efficient digital bank in a number of markets in Africa, and we have obtained a virtual bank licence in Hong Kong. Going forward, we aim to adapt and replicate these capabilities as appropriate across our footprint to enhance client experience, improve efficiency, gain market share, disrupt and build a future-proof retail bank.

Consolidate strong position with corporate clients

We have been leading disruptive innovations in corporate banking. In 2018 we launched cross-border remittance services with Ant Financial, and started the first blockchain-based smart guarantees service in the trade finance industry. We will continue to invest in cutting-edge digital tools and new corporate banking models, with a particular focus on blockchain and distributed ledger technology, platforms and ecosystems, as well as artificial intelligence and machine learning.

Progress in H1 2019

Retail Banking digital adoption6: 52% (+423 bps YoY)

H1 2018: 47%

Corporate & Institutional Banking digital volumes⁷: +11% YoY

Commercial Banking digital adoption8: 67% (+277 bps YoY)

H1 2018: 64%

6 Mobile and online adoption by active clients

7 Financial Markets sales income originated via E-platforms

8 Percentage of Commercial Banking clients active on the Straight2Bank application

Standard Chartered PLC - Risk review and Capital review

Risk	Credit Risk
	Basis of preparation
	Credit risk overview
	IFRS 9 methodology
	Maximum exposure to credit risk
	Analysis of financial instrument by stage
	Credit quality analysis
	• Credit quality by client segment
	• Credit quality by geographic region
	• Credit quality by industry
	Movement in gross exposures and credit impairment for loans and advances, debt securities, undrawn commitments and financial guarantees
	Movement of debt securities, alternative tier one and other eligible bills
	Credit impairment charge
	Problem credit management and provisioning
	• Forborne and other modified loans by client segment
	• Forborne and other modified loans by region
	• Credit-impaired (stage 3) loans and advances by client segment
	• Credit-impaired (stage 3) loans and advances by geographic region
	• Movement of credit-impaired (stage 3) loans and advances provisions by client segment
	Credit risk mitigation
	• Collateral
	• Collateral - Corporate & Institutional Banking and Commercial Banking
	• Collateral - Retail Banking and Private Banking
	• Mortgage loan-to-value ratios by geography
	• Industry and Retail products analysis of loans and advances by geographic region
	IFRS 9 methodology
	Country risk
	Traded risk
	Market risk changes
	Counterparty Credit Risk
	Derivative financial instruments Credit Risk mitigation
	Liquidity and funding risk
	Liquidity & Funding risk metrics
	Encumbrance
	Liquidity analysis of the Group's balance sheet
	Interest Rate Risk in the Banking Book
	Operational risk
	Operational risk profile
	Other principal risks
Capital	Capital summary
	• Capital ratio
	• CRD IV Capital base
	• Movement in total capital
	Risk-weighted assets
	UK Leverage ratio

The following parts of the Risk review and Capital review form part of the financial statements and are reviewed by the external auditors:

• From the start of the 'Credit risk review' section to the end of 'Other principal risks' in the same section, excluding:

Risk section

Credit Quality by geographic region

Credit Quality by industry

Forborne and other modified loans by region

Credit-impaired (stage 3) loans and advances by geographic region

Industry and Retail Products analysis by geographic region

Country risk

Risks not in VaR

Backtesting

Liquidity coverage ratio (LCR)

Stressed coverage

Net stable funding ratio (NSFR)

Liquidity pool

Encumbrance

Interest Rate Risk in the Banking Book

Operational risk

Other principal risks

• From the start of 'CRD IV capital base' to the end of 'Movement in total capital' excluding capital ratios and risk-weighted assets (RWA)

Standard Chartered PLC - Risk review

Credit Risk

Basis of preparation

Unless otherwise stated, the balance sheet and income statement information presented within this section is based on the Group's management view. This is principally the location from which a client relationship is managed, which may differ from where it is financially booked and may be shared between businesses and/or regions. This view reflects how the client segments and regions are managed internally.

Loans and advances to customers and banks held at amortised cost in this Risk profile section include reverse repurchase agreement balances held at amortised cost, per the notes to the financial statements in the Half Year Report Reverse repurchase and repurchase agreements including other similar secured lending and borrowing.

Credit Risk overview

Credit Risk is the potential for loss due to the failure of a counterparty to meet its obligations to pay the Group. Credit exposures arise from both the banking and trading books.

IFRS 9 methodology

Impairment model

IFRS 9 requires an impairment model that requires the recognition of expected credit losses (ECL) on all financial debt instruments held at amortised cost, fair value through other comprehensive income (FVOCI), undrawn loan commitments and financial guarantees.

Staging of financial instruments

Financial instruments that are not already credit-impaired are originated into stage 1 and a 12-month expected credit loss provision is recognised.

Instruments will remain in stage 1 until they are repaid, unless they experience significant credit deterioration (stage 2) or they become credit-impaired (stage 3).

Instruments will transfer to stage 2 and a lifetime expected credit loss provision recognised when there has been a significant increase in the credit risk compared to what was expected at origination.

The framework used to determine a significant change in credit risk is set out below.

Stage 1

• 12-month ECL

• Performing

Stage 2

• Lifetime ECL

• Performing but has exhibited significant increase in credit risk (SICR)

Stage 3

• Credit-impaired

• Non-performing

IFRS 9 methodology

The main methodology principles and approach adopted by the Group are set out in the following table.

Title	Description
Approach to determining expected credit losses	For material loan portfolios, the Group has adopted a statistical modelling approach for determining expected credit losses that makes extensive use of credit modelling. Where available, the Group has leveraged existing advanced internal ratings based (IRB) regulatory models that have been used to determine regulatory expected loss. For portfolios that follow a standardised regulatory approach, the Group has developed new models where these are material.
Incorporation of forward-looking information	The determination of expected credit loss includes various assumptions and judgements in respect of forward-looking macroeconomic information. Refer to the Half Year Report for incorporation of forward-looking information, forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact on non-linearity and sensitivity of expected credit loss calculation to macroeconomic variables.
Significant increase in credit risk	Expected credit loss for financial assets will transfer from a 12-month basis to a lifetime basis when there is a significant increase in credit risk (SICR) relative to that which was expected at the time of origination, or when the asset becomes credit-impaired. On transfer to a lifetime basis, the expected credit loss for those assets will reflect the impact of a default event expected to occur over the remaining lifetime of the instrument rather than just over the 12 months from the reporting date. SICR is assessed by comparing the risk of default of an exposure at the reporting date with the risk of default at origination (after considering the passage of time). 'Significant' does not mean statistically significant nor is it reflective of the extent of the impact on the Group's financial statements. Whether a change in the risk of default is significant or not is assessed using quantitative and qualitative criteria, the weight of which will depend on the type of product and counterparty.
Assessment of credit-impaired financial assets	Credit-impaired financial assets comprise those assets that have experienced an observed credit event and are in default. Default represents those assets that are at least 90 days past due in respect of principal and interest payments and/or where the assets are otherwise considered unlikely to pay. This definition is consistent with internal Credit Risk management and the regulatory definition of default. Unlikely to pay factors include objective conditions such as bankruptcy, debt restructuring, fraud or death. It also includes credit-related modifications of contractual cashflows due to significant financial difficulty (forbearance) where the Group has granted concessions that it would not ordinarily consider.
Modified financial assets	Where the contractual terms of a financial instrument have been modified, and this does not result in the instrument being derecognised, a modification gain or loss is recognised in the income statement representing the difference between the original cashflows and the modified cashflows, discounted at the effective interest rate. The modification gain/loss is directly applied to the gross carrying amount of the instrument. If the modification is credit-related, such as forbearance or where the Group has granted concessions that it would not ordinarily consider, then it will be considered credit-impaired. Modifications that are not credit related will be subject to an assessment of whether the asset's credit risk has increased significantly since origination by comparing the remaining lifetime probability of default (PD) based on the modified terms to the remaining lifetime PD based on the original contractual terms.
Transfers between stages	Assets will transfer from stage 3 to stage 2 when they are no longer considered to be credit-impaired. Assets will not be considered credit-impaired only if the customer makes payments such that they are paid to current in line with the original contractual terms. In addition: • Loans that were subject to forbearance measures must remain current for 12 months before they can be transferred to stage 2 • Retail loans that were not subject to forbearance measures must remain current for 180 days before they can be transferred to stage 2 or stage 1 Assets may transfer to stage 1 if they are no longer considered to have experienced a significant increase in credit risk. This will be immediate when the original PD-based transfer criteria are no longer met (and as long as none of the other transfer criteria apply). Where assets were transferred using other measures, the assets will only transfer back to stage 1 when the condition that caused the significant increase in credit risk no longer applies (and as long as none of the other transfer criteria apply).
Governance and application of expert credit judgement in respect of expected credit losses	The determination of expected credit losses requires a significant degree of management judgement which had an impact on governance processes, with the output of the expected credit models assessed by the IFRS 9 Impairment Committee.

Maximum exposure to credit risk

The table below presents the Group's maximum exposure to credit risk for its on-balance sheet and off-balance sheet financial instruments as at 30 June 2019, before and after taking into account any collateral held or other credit risk mitigation.

The Group's on-balance sheet maximum exposure to credit risk increased by $22 billion to $689 billion (31 December 2018: $667 billion). This was driven by an $8 billion increase in investment securities (including those held at fair value through profit or loss), as the Group further increased its portfolio of high-quality liquid assets and increased exposures to financial institutions.

Other assets increased by $3.6 billion mainly driven by unsettled trades due to settlement timing differences.

Off-balance sheet credit risk exposures increased by $1.0 billion compared to 31 December 2018, as a decrease in contingent liabilities was offset by increases in documentary credits and short-term trade-related transactions.

Maximum exposure to credit risk

	30.06.19				31.12.18
	Maximum exposure $million	Credit risk management		Net exposure $million	Maximum exposure $million	Credit risk management		Net exposure $million
	Maximum exposure $million	Collateral $million	Master netting agreements $million	Net exposure $million	Maximum exposure $million	Collateral $million	Master netting agreements $million	Net exposure $million
On-balance sheet
Cash and balances at central banks	58,822			58,822	57,511			57,511
Loans and advances to banks1,8	59,210	1,145		58,065	61,414	3,815		57,599
Of which - reverse repurchase agreements and other similar secured lending7	1,145	1,145		-	3,815	3,815		-
Loans and advances to customers1,8	263,595	117,114		146,481	256,557	109,326		147,231
Of which - reverse repurchase agreements and other similar secured lending7	2,704	2,704		-	3,151	3,151		-
Investment securities - Debt securities, alternative Tier 1 and other eligible bills2	127,753			127,753	125,638			125,638
Fair value through profit or loss3,7	91,843	54,065	-	37,778	85,441	54,769		30,672
Loans and advances to banks	3,653			3,653	3,768			3,768
Loans and advances to customers	6,190			6,190	4,928			4,928
Reverse repurchase agreements and other similar lending7	54,065	54,065		-	54,769	54,769		-
Investment securities - Debt securities, alternative Tier 1 and other eligible bills2	27,935			27,935	21,976			21,976
Derivative financial instruments4,7	49,237	8,105	29,546	11,586	45,621	9,259	32,283	4,079
Accrued income	2,355			2,355	2,228			2,228
Assets held for sale	146			146	23			23
Other assets5	36,234			36,234	32,678			32,678
Total balance sheet	689,195	180,429	29,546	479,220	667,111	177,169	32,283	457,659
Off-balance sheet
Contingent liabilities6	41,267	-	-	41,267	41,952	-	-	41,952
Undrawn irrevocable standby facilities, credit lines and other commitments to lend6	148,291	-	-	148,291	147,728	-	-	147,728
Documentary credits and short-term trade-related transactions6	5,073	-	-	5,073	3,982	-	-	3,982
Total off-balance sheet	194,631	-	-	194,631	193,662	-	-	193,662
Total	883,826	180,429	29,546	673,851	860,773	177,169	32,283	651,321

1 An analysis of credit quality is set out in the credit quality analysis section. Further details of collateral held by client segment and stage are set out in the collateral analysis section

2 Excludes equity and other investments of $283 million (31 December 2018: $263 million). Further details are set out in the notes to the financial statements in the Half Year Report

3 Excludes equity and other investments of $1,559 million (31 December 2018: $1,691 million). Further details are set out in the notes to the financial statements in the Half Year Report

4 The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the positive and negative mark-to-market values of applicable derivative transactions

5 Other assets include Hong Kong certificates of indebtedness, cash collateral, and acceptances, in addition to unsettled trades and other financial assets

6 Excludes ECL allowances which are reported under Provisions for liabilities and charges

7 Collateral capped at maximum exposure (over-collateralised)

8 Adjusted for over-collateralisation, which has been determined with reference to the drawn and undrawn component as this best reflects the effect on the amount arising from expected credit losses

Analysis of financial instrument by stage

This table shows financial instruments and off-balance sheet commitments by stage, along with total credit impairment loss provision against each class of financial instrument.

The proportion of financial instruments held within stage 1 remained broadly stable compared to 31 December 2018 at 94 per cent. Within loans and advances to customers, Corporate & Institutional Banking stage 1 loans rated as strong increased to 64 per cent from 62 per cent, reflecting the continued focus on investment grade lending.

Stage 2 financial instruments were broadly stable at 5 per cent (31 December 2018: 6 per cent). Within this, the proportion of stage 2 debt securities declined to 4 per cent compared to 5 per cent at 31 December 2018 reflecting changes in the approach for stage allocations.

Stage 3 financial instruments were also stable at 1 per cent of the Group total. Stage 3 loans and advances to customers fell $706 million due to a combination of write-offs and repayments. The stage 3 cover ratio (excluding collateral) was slightly higher at 60 per cent.

	30.06.19
	Stage 1			Stage 2			Stage 3			Total
	Gross balance¹ $million	Total credit impairment $million	Net carrying value $million	Gross balance¹ $million	Total credit impairment $million	Net carrying value $million	Gross balance¹ $million	Total credit impairment $million	Net carrying value $million	Gross balance¹ $million	Total credit impairment $million	Net carrying value $million
Loans and advances to banks (amortised cost)	58,664	(5)	58,659	552	(1)	551	-	-	-	59,216	(6)	59,210
Loans and advances to customers (amortised cost)	245,747	(407)	245,340	16,090	(350)	15,740	6,218	(3,703)	2,515	268,055	(4,460)	263,595
Debt securities, alternative Tier 1 and other eligible bills	122,271	(32)		5,470	(23)		234	(207)		127,975	(262)
Amortised cost	11,420	(7)	11,413	718	(8)	710	234	(207)	27	12,372	(222)	12,150
FVOCI²	110,851	(25)		4,752	(15)		-	-		115,603	(40)
Cash and balances at central banks	58,822	-		-	-		-	-		58,822	-
Accrued income (amortised cost)	2,355	-		-	-		-	-		2,355	-
Assets held for sale	146	-		-	-		-	-		146	-
Other assets	36,234	-		-	-		155	(155)		36,389	(155)	36,234
Undrawn commitments³	139,647	(54)		13,646	(46)		71	-		153,364	(100)
Financial guarantees³	37,268	(5)		3,540	(6)		459	(161)		41,267	(172)
Total	701,154	(503)		39,298	(426)		7,137	(4,226)		747,589	(5,155)

1 Gross carrying amount for off-balance sheet refers to notional values

2 These instruments are held at fair value on the balance sheet. The ECL provision in respect of debt securities measured at FVOCI is held within reserves

3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financial liability and therefore there is no "net carrying amount". ECL allowances on off-balance sheet instruments are held as liability provisions to the extent that the drawn and undrawn components of loan exposures can be separately identified. Otherwise they will be reported against the drawn component

	31.12.18
	Stage 1			Stage 2			Stage 3			Total
	Gross balance1 $million	Total credit impairment $million	Net carrying value $million	Gross balance1 $million	Total credit impairment $million	Net carrying value $million	Gross balance1 $million	Total credit impairment $million	Net carrying value $million	Gross balance1 $million	Total credit impairment $million	Net carrying value $million
Loans and advances to banks (amortised cost)	60,350	(5)	60,345	1,070	(1)	1,069	-	-	-	61,420	(6)	61,414
Loans and advances to customers (amortised cost)	237,103	(426)	236,677	17,428	(416)	17,012	6,924	(4,056)	2,868	261,455	(4,898)	256,557
Debt securities, alternative Tier 1 and other eligible bills	118,713	(27)		6,909	(31)		232	(206)		125,854	(264)
Amortised cost	8,225	(7)	8,218	1,062	(3)	1,059	232	(206)	26	9,519	(216)	9,303
FVOCI2	110,488	(20)		5,847	(28)		-	-		116,335	(48)
Cash and balances at central banks	57,511	-		-	-		-	-		57,511	-
Accrued income (amortised cost)	2,228	-		-	-		-	-		2,228	-
Assets held for sale	23	-		-	-		-	-		23	-
Other assets	32,678	-	32,678	-	-	-	155	(155)	-	32,833	(155)	32,678
Undrawn commitments3	137,783	(69)		13,864	(39)		63	-		151,710	(108)
Financial guarantees3	38,532	(4)		3,053	(13)		367	(156)		41,952	(173)
Total	684,921	(531)		42,324	(500)		7,741	(4,573)		734,986	(5,604)

1 Gross carrying amount for off-balance sheet refers to notional values

2 These instruments are held at fair value on the balance sheet. The ECL provision in respect of debt securities measured at FVOCI is held within reserves

Credit quality analysis

Credit quality by client segment

For the Corporate & Institutional Banking and Commercial Banking portfolios, exposures are analysed by credit grade (CG), which plays a central role in the quality assessment and monitoring of risk. All loans are assigned a CG, which is reviewed periodically and amended in light of changes in the borrower's circumstances or behaviour. CGs 1 to 12 are assigned to stage 1 and stage 2 (performing) clients or accounts, while CGs 13 and 14 are assigned to stage 3 (non-performing or defaulted) clients. The mapping of credit quality is as follows.

Mapping of credit quality

The Group uses the following internal risk mapping to determine the credit quality for loans.

Credit quality description	Corporate & Institutional Banking and Commercial Banking			Private Banking1	Retail Banking
Credit quality description	Default Grade mapping	S&P external ratings equivalent	Regulatory PD range (%)	Internal ratings	Number of days past due
Strong	Grades 1-5	AAA/AA+ to BBB-/BB+	0.000-0.425	Class I and Class IV	Current loans (no past dues nor impaired)
Satisfactory	Grades 6-8	BB+/BB to B+	0.426-2.350	Class II and Class III	Loans past due till 29 days
Satisfactory	Grades 9-11	B+/B to B-/CCC/C	2.351-15.750
Higher risk	Grade 12	CCC/C	15.751-99.999	GSAM-managed	Past due loans 30 days and over till 90 days

1 For Private Banking, classes of risk represent the type of collateral held. Class I represents facilities with liquid collateral, such as cash and marketable securities. Class II represents unsecured/partially secured facilities and those with illiquid collateral, such as equity in private enterprises. Class III represents facilities with residential or commercial real estate collateral. Class IV covers margin trading facilities

The table overleaf sets out the gross loans and advances held at amortised cost, expected credit loss provisions and expected credit loss coverage by business segment and stage. Expected credit loss coverage represents the expected credit loss reported for each segment and stage as a proportion of the gross loan balance.

Stage 1

Stage 1 loans and advances to customers increased by $8.6 billion, or 4 per cent compared to 31 December 2018 and now represent 92 per cent of loans and advances to customers (31 December 2018: 91 per cent). The stage 1 coverage ratio remained at 0.2 per cent and was stable across all segments compared to year end. Most of the growth was concentrated in the Greater China & North Asia and ASEAN & South Asia regions, up $4.6 billion and $3.3 billion respectively.

87 per cent (31 December 2018: 85 per cent) of loans in Corporate & Institutional Banking and Commercial Banking are held in stage 1, with those rated as strong increasing to 57 per cent from 55 per cent as the Group continues to focus on the origination of investment grade lending. Within Corporate & Institutional Banking and Commercial Banking, overall stage 1 loans grew by $8.2 billion, primarily in the transport, telecom and utilities and mining and quarrying sectors, reflecting the overall increase in the portfolio since 31 December 2018.

Retail Banking stage 1 loans remained stable at 96 per cent with the proportion rated as strong maintained at 98 per cent. Stage 1 secured wealth products increased by $2.3 billion, primarily in Greater China & North Asia and ASEAN & South Asia.

Stage 2

Loans and advances to customer balances decreased by $1.3 billion compared to 31 December 2018, reducing the proportion of loans in stage 2 from 7 per cent to 6 per cent. The decrease was primarily due to lower levels of early alert exposures, outflows to stage 3 and slightly lower 'Higher risk' exposures. Stage 2 coverage dropped slightly to 2.2 per cent from 2.4 per cent at 31 December 2018.

In Corporate & Institutional Banking, stage 2 balances decreased by $241 million, with 74 per cent of loans rated as 'Satisfactory' compared to 73 per cent at 31 December 2018. Provisions also fell by $69 million, leading to a drop in coverage from 2.1 per cent to 1.3 per cent. This was largely due to lower levels of provisions held against 'Higher risk' accounts as a small number of loans with relatively high levels of provisions transferred into stage 3 during the first half of 2019.

Commercial Banking stage 2 loans decreased by $1 billion primarily due to repayments during the period with the majority of loans continuing to be rated as 'Satisfactory'. Provisions rose by $7 million, which together with the decrease in balances, drove coverage higher to 2.9 per cent compared to 2.1 per cent at 31 December 2018.

Across Corporate & Institutional Banking and Commercial Banking, an increase in manufacturing gross exposures was more than offset by reductions in the transport, telecoms and utilities and energy sectors.

Retail Banking stage 2 loans reduced slightly compared to 31 December 2018 with the proportion rated as 'Strong' increasing from 69 per cent to 73 per cent. Coverage dropped slightly to 4.5 per cent mainly due to the increased proportion of mortgages within stage 2.

Stage 3

Stage 3 loans and advances to customers fell by $0.7 billion, or 10 per cent, compared with 31 December 2018, with overall stage 3 provisions declining by $0.4 billion to $3.7 billion. The stage 3 cover ratio (excluding collateral) increased slightly to 60 per cent, largely driven by the impact of write-offs and repayments in the period.

In Corporate & Institutional Banking and Commercial Banking, gross stage 3 loans fell by $0.7 billion compared with 31 December 2018 due to write-offs, upgrades and repayments. Provisions against Corporate & Institutional Banking and Commercial Banking loans also fell by $0.3 billion from $3.6 billion to $3.3 billion.

Inflows into stage 3 for Corporate & Institutional Banking and Commercial Banking in the first half of 2019 were 28 per cent lower compared to the second half of 2018, driven by the Africa & Middle East region reflecting continued improvement in the portfolio.

The majority of new stage 3 provisions in Corporate & Institutional Banking and Commercial Banking are on counterparties that were already impaired, and as such the loan book does not indicate any new areas of stress.

Retail stage 3 loans were broadly stable at $0.8 billion.

Private Banking stage 3 loans are broadly stable, although there was a release in provisions on a stage 3 client in the first half of 2019.

Loans and advances by client segment

Amortised cost	30.06.19
	Banks $million	Customers						Undrawn commitments $million	Financial guarantees $million
	Banks $million	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Customer Total $million	Undrawn commitments $million	Financial guarantees $million
Stage 1	58,664	100,309	98,123	23,632	14,551	9,132	245,747	139,647	37,268
- Strong	46,225	63,941	95,917	6,818	10,907	8,976	186,559	113,762	25,591
- Satisfactory	12,439	36,368	2,206	16,814	3,644	156	59,188	25,885	11,677
Stage 2	552	9,116	2,818	3,440	715	1	16,090	13,646	3,540
- Strong	534	1,411	2,057	245	644	-	4,357	7,099	1,040
- Satisfactory	17	6,706	385	2,778	4	1	9,874	5,280	2,234
- Higher risk	1	999	376	417	67	-	1,859	1,267	266
Of which (stage 2):
- Less than 30 days past due	54	145	385	63	5	-	598
- More than 30 days past due	-	64	376	75	47	-	562
Stage 3, credit-impaired financial assets	-	3,541	827	1,624	226	-	6,218	71	459
Gross balance¹	59,216	112,966	101,768	28,696	15,492	9,133	268,055	153,364	41,267
Stage 1	(5)	(81)	(283)	(35)	(8)	-	(407)	(54)	(5)
- Strong	(3)	(33)	(159)	(3)	(7)	-	(202)	(23)	(2)
- Satisfactory	(2)	(48)	(124)	(32)	(1)	-	(205)	(31)	(3)
Stage 2	(1)	(123)	(127)	(99)	(1)	-	(350)	(46)	(6)
- Strong	(1)	(4)	(41)	-	(1)	-	(46)	(3)	-
- Satisfactory	-	(50)	(52)	(55)	-	-	(157)	(16)	(4)
- Higher risk	-	(69)	(34)	(44)	-	-	(147)	(27)	(2)
Of which (stage 2):
- Less than 30 days past due	-	(27)	(52)	(8)	-	-	(87)
- More than 30 days past due	-	-	(34)	(7)	-	-	(41)
Stage 3, credit-impaired financial assets	-	(2,123)	(392)	(1,138)	(50)	-	(3,703)	-	(161)

Total credit impairment	(6)	(2,327)	(802)	(1,272)	(59)	-	(4,460)	(100)	(172)
Net carrying value	59,210	110,639	100,966	27,424	15,433	9,133	263,595
Stage 1	0.0%	0.1%	0.3%	0.1%	0.1%	0.0%	0.2%	0.0%	0.0%
- Strong	0.0%	0.1%	0.2%	0.0%	0.1%	0.0%	0.1%	0.0%	0.0%
- Satisfactory	0.0%	0.1%	5.6%	0.2%	0.0%	0.0%	0.3%	0.1%	0.0%
Stage 2	0.2%	1.3%	4.5%	2.9%	0.1%	0.0%	2.2%	0.3%	0.2%
- Strong	0.2%	0.3%	2.0%	0.0%	0.2%	-	1.1%	0.0%	0.0%
- Satisfactory	0.0%	0.7%	13.5%	2.0%	-	0.0%	1.6%	0.3%	0.2%
- Higher risk	0.0%	6.9%	9.0%	10.6%	0.0%	-	7.9%	2.1%	0.8%
Of which (stage 2):
- Less than 30 days past due	0.0%	18.6%	13.5%	12.7%	-	-	14.5%
- More than 30 days past due	-	0.0%	9.0%	9.3%	0.0%	-	7.3%
Stage 3, credit-impaired financial assets (S3)	-	60.0%	47.4%	70.1%	22.1%	0.0%	59.6%	0.0%	35.1%
Cover ratio	0.0%	2.1%	0.8%	4.4%	0.4%	0.0%	1.7%	0.1%	0.4%

Fair value through profit or loss
Performing	20,861	41,859	303	812	-	3	42,977	-	-
- Strong	18,603	20,398	303	344	-	1	21,046	-	-
- Satisfactory	2,258	21,452	-	468	-	2	21,922	-	-
- Higher risk	-	9	-	-	-	-	9	-	-
Impaired³	-	41	-	29	-	-	70	-	-
Gross balance²	20,861	41,900	303	841	-	3	43,047	-	-

Net carrying value (incl FVTPL)	80,071	152,539	101,269	28,265	15,433	9,136	306,642	153,264	41,095

1 Loans and advances includes reverse repurchase agreements and other similar secured lending of $2,704 million under Customers and of $1,145 million under Banks, held at amortised cost

2 Loans and advances includes reverse repurchase agreements and other similar secured lending of $36,857 million under Customers and of $17,208 million under Banks, held at fair value through profit and loss

3 Refers to credit grade 13 and 14

Amortised cost	31.12.18
	Banks $million	Customers
	Banks $million	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Customer Total $million	Undrawn commitments $million	Financial guarantees $million
Stage 1	60,350	93,848	98,393	21,913	12,705	10,244	237,103	137,783	38,532
- Strong	47,860	58,167	96,506	5,527	9,447	10,193	179,840	114,402	30,211
- Satisfactory	12,490	35,681	1,887	16,386	3,258	51	57,263	23,381	8,321
Stage 2	1,070	9,357	2,837	4,423	785	26	17,428	13,864	3,053
- Strong	403	1,430	1,956	270	713	-	4,369	6,996	682
- Satisfactory	665	6,827	500	3,732	-	26	11,085	5,485	1,948
- Higher risk	2	1,100	381	421	72	-	1,974	1,383	423
Of which (stage 2):
- Less than 30 days past due	27	232	500	198	-	-	930
- More than 30 days past due	-	190	381	99	3	-	673
Stage 3, credit-impaired financial assets	-	4,084	832	1,773	235	-	6,924	63	367
Gross balance1	61,420	107,289	102,062	28,109	13,725	10,270	261,455	151,710	41,952
Stage 1	(5)	(94)	(299)	(24)	(9)	-	(426)	(69)	(4)
- Strong	(2)	(32)	(149)	(1)	(9)	-	(191)	(35)	(2)
- Satisfactory	(3)	(62)	(150)	(23)	-	-	(235)	(34)	(2)
Stage 2	(1)	(192)	(132)	(92)	-	-	(416)	(39)	(13)
- Strong	-	(11)	(42)	(5)	-	-	(58)	3	-
- Satisfactory	(1)	(66)	(50)	(45)	-	-	(161)	(19)	(3)
- Higher risk	-	(115)	(40)	(42)	-	-	(197)	(23)	(10)
Of which (stage 2):
- Less than 30 days past due	-	(34)	(50)	(9)	-	-	(93)
- More than 30 days past due	-	(2)	(40)	(4)	-	-	(46)
Stage 3, credit-impaired financial assets	-	(2,326)	(396)	(1,234)	(100)	-	(4,056)	-	(156)
Total credit impairment	(6)	(2,612)	(827)	(1,350)	(109)	-	(4,898)	(108)	(173)
Net carrying value	61,414	104,677	101,235	26,759	13,616	10,270	256,557
Stage 1	0.0%	0.1%	0.3%	0.1%	0.1%	0.0%	0.2%	0.1%	0.0%
- Strong	0.0%	0.1%	0.2%	0.0%	0.1%	0.0%	0.1%	0.0%	0.0%
- Satisfactory	0.0%	0.2%	7.9%	0.1%	0.0%	0.0%	0.4%	0.1%	0.0%
Stage 2	0.1%	2.1%	4.7%	2.1%	0.0%	0.0%	2.4%	0.3%	0.4%
- Strong	0.0%	0.8%	2.1%	1.9%	0.0%	-	1.3%	0.0%	0.0%
- Satisfactory	0.2%	1.0%	10.0%	1.2%	-	0.0%	1.5%	0.3%	0.2%
- Higher risk	0.0%	10.5%	10.5%	10.0%	0.0%	-	10.0%	1.7%	2.4%
Of which (stage 2):
- Less than 30 days past due	0.0%	14.7%	10.0%	4.5%	-	-	10.0%
- More than 30 days past due	-	1.1%	10.5%	4.0%	0.0%	-	6.8%
Stage 3, credit-impaired financial assets (S3)	-	57.0%	47.6%	69.6%	42.6%	0.0%	58.6%	-	42.5%
Cover ratio	0.0%	2.4%	0.8%	4.8%	0.8%	0.0%	1.9%	0.1%	0.4%

Fair value through profit or loss
Performing	20,651	41,886	400	479	-	4	42,769	-	-
- Strong	19,515	33,178	395	247	-	3	33,823	-	-
- Satisfactory	1,136	8,700	4	232	-	1	8,937	-	-
- Higher-risk	-	8	1	-	-	-	9	-	-
Impaired3	-	12	-	33	-	-	45	-	-
Gross balance2	20,651	41,898	400	512	-	4	42,814	-	-
Net carrying value (incl FVTPL)	82,065	146,575	101,635	27,271	13,616	10,274	299,371	151,602	41,779

1 Loans and advances includes reverse repurchase agreements and other similar secured lending of $3,151 million under Customers and of $3,815 million under Banks, held at amortised cost

2 Loans and advances includes reverse repurchase agreements and other similar secured lending of $37,886 million under Customers and of $16,883 million under Banks, held at fair value through profit and loss

3 Refers to credit grade 13 and 14

Credit quality by geographic region

The following table sets out the credit quality for gross loans and advances to customers and banks, held at amortised cost, by geographic region and stage.

Loans and advances to customers

Amortised cost	30.06.19
Amortised cost	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Stage 1	123,018	74,427	24,899	23,403	245,747
Stage 2	4,490	5,663	3,994	1,943	16,090
Gross stage 1 and stage 2 balance	127,508	80,090	28,893	25,346	261,837
Stage 3, credit-impaired financial assets2	719	2,489	2,022	988	6,218
Gross loans1	128,227	82,579	30,915	26,334	268,055

1 Amounts gross of expected credit losses. Includes reverse repurchase agreements and other similar secured lending

2 Amounts do not include those purchased or originated credit-impaired financial assets

Amortised cost	31.12.18
Amortised cost	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Stage 1	118,422	71,169	23,598	23,914	237,103
Stage 2	4,139	7,628	5,112	549	17,428
Gross stage 1 and stage 2 balance	122,561	78,797	28,710	24,463	254,531
Stage 3, credit-impaired financial assets2	777	2,730	2,573	844	6,924
Gross loans1	123,338	81,527	31,283	25,307	261,455

1 Amounts gross of expected credit losses. Includes reverse repurchase agreements and other similar secured lending

2 Amounts do not include those purchased or originated credit-impaired financial assets

Loans and advances to banks

	30.06.19
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Stage 1	24,580	14,311	6,195	13,578	58,664
Stage 2	-	384	8	160	552
Gross stage 1 and stage 2 balance	24,580	14,695	6,203	13,738	59,216
Stage 3, credit-impaired financial assets2	-	-	-	-	-
Gross loans1	24,580	14,695	6,203	13,738	59,216

1 Amounts gross of expected credit losses. Includes reverse repurchase agreements and other similar secured lending

2 Amounts do not include those purchased or originated credit-impaired financial assets

	31.12.18
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Stage 1	27,801	11,095	5,374	16,080	60,350
Stage 2	59	582	199	230	1,070
Gross stage 1 and stage 2 balance	27,860	11,677	5,573	16,310	61,420
Stage 3, credit-impaired financial assets2	-	-	-	-	-
Gross loans1	27,860	11,677	5,573	16,310	61,420

1 Amounts gross of expected credit losses. Includes reverse repurchase agreements and other similar secured lending

2 Amounts do not include those purchased or originated credit-impaired financial assets

Credit quality by industry

Loans and advances

This section provides an analysis of the Group's amortised cost portfolio by industry on a gross, total credit impairment and net basis.

From an industry perspective, loans and advances increased by $5.1 billion, largely driven by four sectors namely mining and quarrying, commercial real estate, manufacturing, and financing insurance and non-banking, with each sector contributing an increase of $1 billion or more. Retail Products increased by $1.5 billion primarily within secured wealth products in ASEAN & South Asia and Greater China & North Asia offset by lower mortgages in ASEAN & South Asia and Greater China & North Asia. Stage 1 loans increased by $8.6 billion compared to 31 December 2018, representing 92 per cent of loans and advances.

Amortised cost	30.06.19
	Stage 1			Stage 2			Stage 3			Total
	Gross balance $million	Total credit impairment $million	Net carrying amount $million	Gross balance $million	Total credit impairment $million	Net carrying amount $million	Gross balance $million	Total credit impairment $million	Net carrying amount $million	Gross balance $million	Total credit impairment $million	Net carrying amount $million
Industry:
Energy	15,718	(21)	15,697	1,588	(37)	1,551	783	(570)	213	18,089	(628)	17,461
Manufacturing	22,111	(22)	22,089	2,508	(57)	2,451	733	(490)	243	25,352	(569)	24,783
Financing, insurance and non-banking	20,921	(7)	20,914	912	(11)	901	243	(139)	104	22,076	(157)	21,919
Transport, telecom and utilities	14,286	(16)	14,270	1,423	(21)	1,402	634	(428)	206	16,343	(465)	15,878
Food and household products	8,612	(5)	8,607	1,451	(14)	1,437	647	(342)	305	10,710	(361)	10,349
Commercial real estate	14,501	(15)	14,486	1,541	(34)	1,507	191	(41)	150	16,233	(90)	16,143
Mining and quarrying	6,648	(7)	6,641	606	(17)	589	448	(324)	124	7,702	(348)	7,354
Consumer durables	7,157	(7)	7,150	789	(11)	778	534	(321)	213	8,480	(339)	8,141
Construction	3,058	(5)	3,053	320	(7)	313	547	(337)	210	3,925	(349)	3,576
Trading companies & distributors	1,340	(1)	1,339	719	(2)	717	226	(113)	113	2,285	(116)	2,169
Government	14,099	(3)	14,096	164	(1)	163	-	-	-	14,263	(4)	14,259
Other	4,623	(7)	4,616	539	(10)	529	175	(156)	19	5,337	(173)	5,164
Retail Products:
Mortgage	72,292	(9)	72,283	2,128	(8)	2,120	334	(111)	223	74,754	(128)	74,626
CCPL and other unsecured lending	16,639	(259)	16,380	571	(114)	457	408	(249)	159	17,618	(622)	16,996
Auto	624	(1)	623	2	-	2	1	-	1	627	(1)	626
Secured wealth products	19,382	(19)	19,363	719	(6)	713	260	(62)	198	20,361	(87)	20,274
Other	3,736	(3)	3,733	110	-	110	54	(20)	34	3,900	(23)	3,877
Net carrying value (customers)¹	245,747	(407)	245,340	16,090	(350)	15,740	6,218	(3,703)	2,515	268,055	(4,460)	263,595

1 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $2,704 million

Amortised cost	31.12.18
	Stage 1			Stage 2			Stage 3			Total
	Gross balance $million	Total credit impairment $million	Net carrying amount $million	Gross balance $million	Total credit impairment $million	Net carrying amount $million	Gross balance $million	Total credit impairment $million	Net carrying amount $million	Gross balance $million	Total credit impairment $million	Net carrying amount $million
Industry:
Energy	14,530	(18)	14,512	2,198	(46)	2,152	890	(554)	336	17,618	(618)	17,000
Manufacturing	21,627	(23)	21,604	1,932	(86)	1,846	719	(530)	189	24,278	(639)	23,639
Financing, insurance and non-banking	20,419	(7)	20,412	379	(10)	369	225	(119)	106	21,023	(136)	20,887
Transport, telecom and utilities	12,977	(21)	12,956	2,495	(25)	2,470	818	(474)	344	16,290	(520)	15,770
Food and household products	7,558	(7)	7,551	1,851	(15)	1,836	718	(376)	342	10,127	(398)	9,729
Commercial real estate	13,516	(16)	13,500	1,299	(27)	1,272	342	(79)	263	15,157	(122)	15,035
Mining and quarrying	4,845	(7)	4,838	1,047	(29)	1,018	439	(309)	130	6,331	(345)	5,986
Consumer durables	7,328	(5)	7,323	906	(13)	893	534	(348)	186	8,768	(366)	8,402
Construction	2,565	(4)	2,561	512	(22)	490	636	(385)	251	3,713	(411)	3,302
Trading companies & distributors	2,512	(2)	2,510	385	(2)	383	353	(239)	114	3,250	(243)	3,007
Government	13,488	(1)	13,487	250	-	250	-	-	-	13,738	(1)	13,737
Other	4,639	(7)	4,632	552	(8)	544	183	(147)	36	5,374	(162)	5,212
Retail Products:
Mortgage	73,437	(9)	73,428	1,936	(9)	1,927	343	(98)	245	75,716	(116)	75,600
CCPL and other unsecured lending	16,622	(277)	16,345	560	(117)	443	437	(263)	174	17,619	(657)	16,962
Auto	670	(2)	668	4	-	4	1	-	1	675	(2)	673
Secured wealth products	17,074	(18)	17,056	825	(5)	820	236	(112)	124	18,135	(135)	18,000
Other	3,296	(2)	3,294	297	(2)	295	50	(23)	27	3,643	(27)	3,616
Net carrying value (customers)¹	237,103	(426)	236,677	17,428	(416)	17,012	6,924	(4,056)	2,868	261,455	(4,898)	256,557

1 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $3,151 million

Movement in gross exposures and credit impairment for loans and advances, debt securities, undrawn commitments and financial guarantees

The tables overleaf set out the movement in gross exposures and credit impairment by stage in respect of amortised cost loans to banks and customers, undrawn committed facilities, undrawn cancellable facilities, debt securities classified at amortised cost and FVOCI and financial guarantees. The tables are presented for the Group, and the Corporate & Institutional Banking, Commercial Banking and Retail Banking segments.

Methodology

The movement lines within the tables are an aggregation of monthly movements over the year and will therefore reflect the accumulation of multiple trades during the year. The credit impairment charge in the income statement comprises the amounts within the boxes in the table below less recoveries of amounts previously written off.

The approach for determining the key line items in the tables is set out below.

• Transfers - transfers between stages are deemed to occur at the beginning of a month based on prior month closing balances

• Net remeasurement from stage changes - the remeasurement of credit impairment provisions arising from a change in stage is reported within the stage that the assets are transferred to. For example, assets transferred into stage 2 are remeasured from a 12 month to a lifetime expected credit loss, with the effect of remeasurement reported in stage 2. For stage 3, this represents the initial remeasurement from specific provisions recognised on individual assets transferred into stage 3 in the year

• Net changes in exposures - new business written less repayments in the year. Within stage 1, new business written will attract up to 12 months of expected credit loss charges. Repayments of non-amortising loans (primarily within Corporate & Institutional Banking and Commercial Banking) will have low amounts of expected credit loss provisions attributed to them, due to the release of provisions over the term to maturity. In stages 2 and 3, the amounts principally reflect repayments although stage 2 may include new business written where clients are on non-purely precautionary early alert, credit grade 12, or when non-investment grade debt securities are acquired

• Changes in risk parameters - for stages 1 and 2, this reflects changes in the probability of default (PD), loss given default (LGD) and exposure at default (EAD) of assets during the year, which includes the impact of releasing provisions over the term to maturity. It also includes the effect of changes in forecasts of macroeconomic variables during the year. In stage 3, this line represents additional specific provisions recognised on exposures held within stage 3

Movements during the year

Stage 1 gross exposures increased by $11.1 billion, or 2 per cent, from 1 January 2019, largely reflecting the impact of new business booked offset by a net transfer out to stage 2. The increase was largely driven by Corporate & Institutional Banking and Commercial Banking, up $7.6 billion, together with an increase of $2.5 billion of debt securities within the 'Central & other items' segment, primarily related to debt securities. Stage 1 provisions decreased by $28 million, or 5 per cent, as the impact of provisions transferred in from stage 2, primarily in Retail Banking was more than offset by the benefit from improvements in portfolio quality, and the unwind of provisions.

Stage 2 gross exposures declined by $3.0 billion, or 7 per cent, largely due to repayments which more than offset the net impact of stage transfers. Within Commercial Banking, stage 2 exposures fell by $1.3 billion, with the amount of loans on non-purely precautionary early alert decreasing over the period. Stage 2 provisions overall fell by $74 million, or 15 per cent, largely due to outflows to stage 3 in Corporate & Institutional Banking and transfers to stage 1 in Retail Banking, which were partly offset by increases from 'Changes in risk parameters' primarily driven by normal Retail Banking lifecycle flows.

Across both stage 1 and 2 for all segments, the impact of changes to macroeconomic forecasts during the period increased stage 1 and 2 provisions by $6 million.

Across all segments, approximately 50 per cent of the stage 2 provisions at 30 June 2019 arose on exposures that primarily meet the PD significant increase in credit risk thresholds, approximately 20 per cent are as a result of having 'Higher risk' credit quality or being on non-purely precautionary early alert and approximately 7 per cent for being more than 30 days past due. The remainder largely relates to debt security exposures allocated to stage 2 on initial transition to IFRS 9.

Stage 3 exposures fell from $7.6 billion at 1 January 2019 to $7.0 billion at 30 June 2019, primarily due to repayments and write-offs within Corporate & Institutional Banking and Commercial Banking. This was also reflected in lower stage 3 provisions, which fell from $4.4 billion at 1 January 2019 to $4.1 billion at 30 June 2019.

All segments

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
Amortised cost and FVOCI	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million
As at 1 January 2018	565,815	(576)	565,239	52,387	(742)	51,645	9,198	(5,576)	3,622	627,400	(6,894)	620,506
Transfers to stage 1	59,776	(627)	59,149	(59,776)	627	(59,149)	-	-	-	-	-	-
Transfers to stage 2	(73,589)	136	(73,453)	73,809	(136)	73,673	(220)	-	(220)	-	-	-
Transfers to stage 3	(293)	7	(286)	(2,338)	264	(2,074)	2,631	(271)	2,360	-	-	-
Net change in exposures	50,249	(282)	49,967	(20,341)	94	(20,247)	(1,836)	527	(1,309)	28,072	339	28,411
Net remeasurement from stage changes	-	139	139	-	(136)	(136)	-	(529)	(529)	-	(526)	(526)
Changes in risk parameters	-	468	468	-	(275)	(275)	-	(971)	(971)	-	(778)	(778)
Write-offs	-	-	-	-	-	-	(2,075)	2,075	-	(2,075)	2,075	-
Exchange translation differences and other movements¹	(9,477)	204	(9,273)	(1,417)	(196)	(1,613)	(112)	327	215	(11,006)	335	(10,671)
As at 31 December 2018³	592,481	(531)	591,950	42,324	(500)	41,824	7,586	(4,418)	3,168	642,391	(5,449)	636,942

Income statement ECL (charge)/release²		325			(317)			(973)			(965)
Recoveries of amounts previously written off								312			312
Total credit impairment (charge)/release		325			(317)			(661)			(653)
of which: for the six month ended 30 June 2018		130			(113)			(231)			(214)
of which: for the six month ended 31 December 2018		195			(204)			(430)			(439)

As at 1 January 2019	592,481	(531)	591,950	42,324	(500)	41,824	7,586	(4,418)	3,168	642,391	(5,449)	636,942
Transfers to stage 1	14,610	(298)	14,312	(14,610)	298	(14,312)	-	-	-	-	-	-
Transfers to stage 2	(34,063)	70	(33,993)	34,128	(75)	34,053	(65)	5	(60)	-	-	-
Transfers to stage 3	(55)	4	(51)	(820)	145	(675)	875	(149)	726	-	-	-
Net change in exposures	32,756	(88)	32,668	(21,201)	(48)	(21,249)	(689)	87	(602)	10,866	(49)	10,817
Net remeasurement from stage changes	-	77	77	-	(94)	(94)	-	(63)	(63)	-	(80)	(80)
Changes in risk parameters	-	208	208	-	(135)	(135)	-	(333)	(333)	-	(260)	(260)
Write-offs	-	-	-	-	-	-	(815)	815	-	(815)	815	-
Exchange translation differences and other movements¹	(2,132)	55	(2,077)	(523)	(17)	(540)	90	(15)	75	(2,565)	23	(2,542)
As at 30 June 2019³	603,597	(503)	603,094	39,298	(426)	38,872	6,982	(4,071)	2,911	649,877	(5,000)	644,877

Income statement ECL (charge)/release		197			(277)			(309)			(389)
Recoveries of amounts previously written off								135			135
Total credit impairment (charge)/release		197			(277)			(174)			(254)

1 Includes fair value adjustments and amortisation on debt securities

2 Total credit impairment for 12 months ended 31 December 2018

3 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets

Corporate & Institutional

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
Amortised cost and FVOCI	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million
As at 1 January 2018	263,079	(114)	262,965	29,576	(409)	29,167	5,951	(3,504)	2,447	298,606	(4,027)	294,579
Transfers to stage 1	40,196	(156)	40,040	(40,196)	156	(40,040)	-	-	-	-	-	-
Transfers to stage 2	(39,490)	30	(39,460)	39,692	(30)	39,662	(202)	-	(202)	-	-	-
Transfers to stage 3	-	-	-	(1,129)	85	(1,044)	1,129	(85)	1,044	-	-	-
Net change in exposures	12,869	(183)	12,686	(8,639)	10	(8,629)	(1,064)	377	(687)	3,166	204	3,370
Net remeasurement from stage changes	-	46	46	-	(30)	(30)	-	(277)	(277)	-	(261)	(261)
Changes in risk parameters	-	101	101	-	140	140	-	(394)	(394)	-	(153)	(153)
Write-offs	-	-	-	-	-	-	(1,208)	1,208	-	(1,208)	1,208	-
Exchange translation differences and other movements	(3,418)	131	(3,287)	(252)	(157)	(409)	(133)	209	76	(3,803)	183	(3,620)
As at 31 December 2018	273,236	(145)	273,091	19,052	(235)	18,817	4,473	(2,466)	2,007	296,761	(2,846)	293,915

Income statement ECL (charge)/release¹		(36)			120			(294)			(210)
Recoveries of amounts previously written off								77			77
Total credit impairment (charge)/release		(36)			120			(217)			(133)

As at 1 January 2019	273,235	(145)	273,090	19,052	(235)	18,817	4,473	(2,466)	2,007	296,760	(2,846)	293,914
Transfers to stage 1	7,667	(69)	7,598	(7,667)	69	(7,598)	-	-	-	-	-	-
Transfers to stage 2	(19,977)	13	(19,964)	20,034	(16)	20,018	(57)	3	(54)	-	-	-
Transfers to stage 3	-	-	-	(370)	53	(317)	370	(53)	317	-	-	-
Net change in exposures	17,064	(52)	17,012	(12,813)	(11)	(12,824)	(430)	48	(382)	3,821	(15)	3,806
Net remeasurement from stage changes	-	23	23	-	(57)	(57)	-	6	6	-	(28)	(28)
Changes in risk parameters	-	91	91	-	14	14	-	(173)	(173)	-	(68)	(68)
Write-offs	-	-	-	-	-	-	(361)	361	-	(361)	361	-
Exchange translation differences and other movements	(1,832)	24	(1,808)	225	15	240	14	8	22	(1,593)	47	(1,546)
As at 30 June 2019	276,157	(115)	276,042	18,461	(168)	18,293	4,009	(2,266)	1,743	298,627	(2,549)	296,078

Income statement ECL (charge)/release		62			(54)			(119)			(111)
Recoveries of amounts previously written off								1			1
Total credit impairment (charge)/release		62			(54)			(118)			(110)

1 Total credit impairment for 12 months ended 31 December 2018

Commercial

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
Amortised cost and FVOCI	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million
As at 1 January 2018	28,792	(40)	28,752	5,382	(95)	5,287	2,000	(1,379)	621	36,174	(1,514)	34,660
Transfers to stage 1	12,675	(64)	12,611	(12,675)	64	(12,611)	-	-	-	-	-	-
Transfers to stage 2	(11,152)	26	(11,126)	11,171	(26)	11,145	(19)	-	(19)	-	-	-
Transfers to stage 3	(11)	-	(11)	(606)	14	(592)	617	(14)	603	-	-	-
Net change in exposures	2,163	(65)	2,098	3,660	9	3,669	(337)	138	(199)	5,486	82	5,568
Net remeasurement from stage changes	-	12	12	-	(13)	(13)	-	(217)	(217)	-	(218)	(218)
Changes in risk parameters	-	67	67	-	(33)	(33)	-	(162)	(162)	-	(128)	(128)
Write-offs	-	-	-	-	-	-	(293)	293	-	(293)	293	-
Exchange translation differences and other movements	(1,047)	29	(1,018)	(223)	(20)	(243)	(155)	93	(62)	(1,425)	102	(1,323)
As at 31 December 2018	31,420	(35)	31,385	6,709	(100)	6,609	1,813	(1,248)	565	39,942	(1,383)	38,559

Income statement ECL (charge)/release¹		14			(37)			(241)			(264)
Recoveries of amounts previously written off								21			21
Total credit impairment (charge)/release		14			(37)			(220)			(243)

As at 1 January 2019	31,420	(35)	31,385	6,709	(100)	6,609	1,813	(1,248)	565	39,942	(1,383)	38,559
Transfers to stage 1	1,694	(18)	1,676	(1,694)	18	(1,676)	-	-	-	-	-	-
Transfers to stage 2	(6,269)	12	(6,257)	6,277	(14)	6,263	(8)	2	(6)	-	-	-
Transfers to stage 3	-	-	-	(132)	11	(121)	132	(11)	121	-	-	-
Net change in exposures	8,578	(47)	8,531	(5,529)	(22)	(5,551)	(129)	39	(90)	2,920	(30)	2,890
Net remeasurement from stage changes	-	3	3	-	(6)	(6)	-	(30)	(30)	-	(33)	(33)
Changes in risk parameters	-	19	19	-	53	53	-	(45)	(45)	-	27	27
Write-offs	-	-	-	-	-	-	(161)	161	-	(161)	161	-
Exchange translation differences and other movements	654	20	674	(216)	(43)	(259)	37	(21)	16	475	(44)	431
As at 30 June 2019	36,077	(46)	36,031	5,415	(103)	5,312	1,684	(1,153)	531	43,176	(1,302)	41,874

Income statement ECL (charge)/release		(25)			25			(36)			(36)
Recoveries of amounts previously written off								1			1
Total credit impairment (charge)/release		(25)			25			(35)			(35)

1 Total credit impairment for 12 months ended 31 December 2018

Retail Banking

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
Amortised cost and FVOCI	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million	Gross balance $million	Total credit impairment $million	Net $million
As at 1 January 2018	131,280	(381)	130,899	7,964	(178)	7,786	818	(389)	429	140,062	(948)	139,114
Transfers to stage 1	5,570	(388)	5,182	(5,570)	388	(5,182)	-	-	-	-	-	-
Transfers to stage 2	(9,954)	74	(9,880)	9,954	(74)	9,880	-	-	-	-	-	-
Transfers to stage 3	(281)	8	(273)	(511)	164	(347)	792	(172)	620	-	-	-
Net change in exposures	9,858	(17)	9,841	(2,628)	78	(2,550)	(398)	-	(398)	6,832	61	6,893
Net remeasurement from stage changes	-	72	72	-	(90)	(90)	-	(12)	(12)	-	(30)	(30)
Changes in risk parameters	-	264	264	-	(373)	(373)	-	(402)	(402)	-	(511)	(511)
Write-offs	-	-	-	-	-	-	(575)	575	-	(575)	575	-
Exchange translation differences and other movements	(2,989)	55	(2,934)	(322)	(47)	(369)	195	6	201	(3,116)	14	(3,102)
As at 31 December 2018	133,484	(313)	133,171	8,887	(132)	8,755	832	(394)	438	143,203	(839)	142,364

Income statement ECL (charge)/release¹		319			(385)			(414)			(480)
Recoveries of amounts previously written off								214			214
Total credit impairment (charge)/release		319			(385)			(200)			(266)

As at 1 January 2019	133,484	(313)	133,171	8,887	(132)	8,755	832	(394)	438	143,203	(839)	142,364
Transfers to stage 1	3,059	(184)	2,875	(3,059)	184	(2,875)	-	-	-	-	-	-
Transfers to stage 2	(5,048)	38	(5,010)	5,048	(38)	5,010	-	-	-	-	-	-
Transfers to stage 3	(55)	4	(51)	(295)	81	(214)	350	(85)	265	-	-	-
Net change in exposures	1,978	18	1,996	(1,438)	11	(1,427)	(102)	-	(102)	438	29	467
Net remeasurement from stage changes	-	52	52	-	(31)	(31)	-	(39)	(39)	-	(18)	(18)
Changes in risk parameters	-	62	62	-	(197)	(197)	-	(163)	(163)	-	(298)	(298)
Write-offs	-	-	-	-	-	-	(293)	293	-	(293)	293	-
Exchange translation differences and other movements	(729)	23	(706)	94	(4)	90	43	(3)	40	(592)	16	(576)
As at 30 June 2019	132,689	(300)	132,389	9,237	(126)	9,111	830	(391)	439	142,756	(817)	141,939

Income statement ECL (charge)/release		132			(217)			(202)			(287)
Recoveries of amounts previously written off								133			133
Total credit impairment (charge)/release		132			(217)			(69)			(154)

1 Total credit impairment for 12 months ended 31 December 2018

Movement of debt securities, alternative tier one and other eligible bills

Amortised cost and FVOCI	30.06.19 Net $million	31.12.182 Net $million
Opening balance	125,638	115,597
Exchange translation differences and other movements	(2,043)	(2,790)
Additions	135,493	276,394
Maturities and disposals	(132,404)	(264,014)
Transfers to assets held for sale	-	-
Impairment, net of recoveries on disposal	(6)	(8)
Changes in fair value (including the effect of fair value hedging)	747	84
Amortisation of discounts and premiums	328	375
Closing balance1	127,753	125,638

1 The FVOCI amount is not net of impairment

2 2018 comparative has been adjusted to exclude impairment on FVOCI

Credit impairment charge

The total credit impairment charge for the first half of 2019 is $254 million (H1 2018: $293 million), down 13 per cent primarily due to lower stage 3 impairments offset by an increase in stage 1 and 2 impairments.

The Corporate & Institutional Banking credit impairment charge of $110 million is $29 million higher than the equivalent period in 2018. This was due to lower gross stage 3 recoveries and stage 1 and 2 releases. H1 2018 benefitted from upgrades in high risk accounts and releases from the quarterly update of macroeconomic variables. Stage 3 impairments in 2019 were driven by Europe & Americas.

Retail Banking credit impairment charge increased 29 per cent to $154 million (H1 2018: $119 million) due to non-recurring items in the first half of 2018: releases in higher-risk unsecured segments in Indonesia, United Arab Emirates and Malaysia as well as restructured portfolio releases in Korea. Excluding these, the underlying impairment remains comparable.

Commercial Banking total credit impairment charge decreased 67 per cent (H1 2018: $106 million) to $35 million driven by lower gross Stage 3 provisions and recoveries in the period. Africa & Middle East is the largest contributor to stage 3 impairments.

Private Banking had a net provision release of $47 million driven primarily by a Stage 3 client in ASEAN & South Asia.

	6 months ended 30.06.191 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Ongoing business portfolio
Corporate & Institutional Banking	110	161	81
Retail Banking	154	148	119
Commercial Banking	35	138	106
Central & other items	2	1	(14)
Private Banking	(47)	(1)	1
Credit impairment charge	254	447	293

Restructuring business portfolio
Liquidation portfolio	-	(9)	(70)
Others	-	1	(9)
Credit impairment charge	-	(8)	(79)

Total credit impairment charge	254	439	214

1 In 2019 the Liquidation Portfolio has been included in ongoing business. Prior periods have not been restated

Problem credit management and provisioning

Forborne and other modified loans by client segment

A forborne loan arises when a concession has been made to the contractual terms of a loan in response to a customer's financial difficulties.

The table below presents loans with forbearance measures by segment.

Amortised cost	30.06.19
Amortised cost	Loans to banks $million	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
All loans with forbearance measures	-	1,405	355	700	-	-	2,460
Credit impairment (stage 3)	-	(582)	(173)	(445)	-	-	(1,200)
Net carrying value	-	823	182	255	-	-	1,260
Amortised cost	31.12.18
Amortised cost	Loans to banks $million	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
All loans with forbearance measures	-	1,445	376	709	-	-	2,530
Credit impairment (stage 3)	-	(517)	(174)	(427)	-	-	(1,118)
Net carrying value	-	928	202	282	-	-	1,412

Forborne and other modified loans by region

Amortised cost	30.06.19
Amortised cost	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Not impaired	98	105	124	23	350
Impaired	229	293	178	210	910
Total forborne loans	327	398	302	233	1,260

Amortised cost	31.12.18
Amortised cost	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Not impaired	114	109	113	44	380
Impaired	233	344	179	276	1,032
Total forborne loans	347	453	292	320	1,412

Credit-impaired (stage 3) loans and advances by client segment

With effect from 1 January 2019, the liquidation portfolio has been included within the ongoing portfolio. Gross credit-impaired (stage 3) loans for the Group are down 10 per cent in the period to $6.2 billion (31 December 2018: $6.9 billion), driven by repayments, write-offs and transfers to stage 2 in Corporate & Institutional Banking.

The inflows of stage 3 loans in Corporate & Institutional Banking continued to be low at $0.2 billion (H2 2018: $0.3 billion). The low inflows of stage 3 loans reflect the continued improvement in the credit portfolio. Stage 3 inflows in Commercial Banking reduced from $0.2 billion in H2 2018 to $0.1 billion. Stage 3 loans in Retail Banking were broadly stable at $0.8 billion.

Stage 3 cover ratio

The stage 3 cover ratio measures the proportion of stage 3 impairment provisions to gross stage 3 loans, and is a metric commonly used in considering impairment trends. This metric does not allow for variations in the composition of stage 3 loans and should be used in conjunction with other credit risk information provided, including the level of collateral cover.

The balance of stage 3 loans not covered by stage 3 impairment provisions represents the adjusted value of collateral held and the net outcome of any workout or recovery strategies.

Collateral provides risk mitigation to some degree in all client segments and supports the credit quality and cover ratio assessments post impairment provisions. Further information on collateral is provided in the credit risk mitigation section.

The cover ratio before collateral for Corporate & Institutional Banking increased to 60 per cent from 57 per cent (31 December 2018) due to repayments and upgrades to performing loans. The cover ratio for Retail was broadly stable at 47 per cent although the cover ratio including collateral improved to 90 per cent (31 December 2018: 87 per cent).

The Private Banking cover ratio before collateral decreased to 22 per cent (31 December 2018: 43 per cent) following a provision release during the first half of the year. The Private Banking segment remains fully covered taking into account the collateral held.

Amortised cost	30.06.191
Amortised cost	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Gross credit-impaired	3,541	827	1,624	226	-	6,218
Credit-impaired provisions	(2,123)	(392)	(1,138)	(50)	-	(3,703)
Net credit-impaired	1,418	435	486	176	-	2,515
Cover ratio	60%	47%	70%	22%	-	60%
Collateral ($million)	568	354	265	175	-	1,362
Cover ratio (after collateral)	76%	90%	86%	100%	-	81%

1 The remaining portfolio of loans and advances to customers previously separately identified in the liquidation portfolio are now included in the ongoing business

Amortised cost	31.12.18
Amortised cost	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Gross credit-impaired	4,084	832	1,773	235	-	6,924
Credit-impaired provisions	(2,326)	(396)	(1,234)	(100)	-	(4,056)
Net credit-impaired	1,758	436	539	135	-	2,868
Cover ratio	57%	48%	70%	43%	-	59%
Collateral ($million)	802	324	302	135	-	1,563
Cover ratio (after collateral)	77%	87%	87%	100%	-	81%

Of the above, included in the liquidation portfolio:
Gross credit impaired	1,029	-	89	157	-	1,275
Credit impaired provisions	(780)	-	(89)	(93)	-	(962)
Net credit impaired	249	-	-	64	-	313
Cover ratio	76%	-	100%	59%	-	75%
Collateral ($million)	159	-	-	64	-	223
Cover ratio (after collateral)	91%	-	100%	100%	-	93%

Credit-impaired (stage 3) loans and advances by geographic region

Stage 3 loans decreased by $0.7 billion or 10 per cent compared with 31 December 2018. The largest decrease was in the Africa & Middle East region, primarily due to settlements and write-offs.

Amortised cost	30.06.19
Amortised cost	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Gross credit-impaired	719	2,489	2,022	988	6,218
Credit-impairment provisions	(197)	(1,541)	(1,428)	(537)	(3,703)
Net credit-impaired	522	948	594	451	2,515
Cover ratio	27%	62%	71%	54%	60%

Amortised cost	31.12.18
Amortised cost	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Gross credit-impaired	777	2,730	2,573	844	6,924
Credit-impairment provisions	(282)	(1,705)	(1,726)	(343)	(4,056)
Net credit-impaired	495	1,025	847	501	2,868
Cover ratio	36%	62%	67%	41%	59%

Movement of credit-impaired (stage 3) loans and advances provisions by client segment

Credit impairment provisions as at 30 June 2019 were $3,703 million, compared with $4,056 million at 31 December 2018. The decrease was largely due to write-offs in Corporate & Institutional Banking. Private Banking provisions fell by $50m primarily due to a provision release during the period.

The following table shows the movement of credit-impaired (stage 3) provisions for each client segment.

Amortised cost	30.06.19
Amortised cost	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & others $million	Total2 $million
Gross credit-impaired loans at 30 June	3,541	827	1,624	226	-	6,218
Credit impairment allowances at 1 January	2,326	396	1,234	100	-	4,056
Exchange translation difference	5	13	33	-	-	51
Amounts written off	(361)	(293)	(161)	-	-	(815)
Discount unwind	(17)	(11)	(7)	(2)	-	(37)
New provisions charge/(release)1	(4)	39	24	-	-	59
Recoveries/derecognition (repayment)1	(42)	-	(39)	-	-	(81)
Net transfers into and out of stage 3	50	85	9	-	-	144
Changes due to risk parameters1	166	163	45	(48)	-	326
Credit impairment allowances at 30 June	2,123	392	1,138	50	-	3,703
Net credit impairment	1,418	435	486	176	-	2,515

Income statement charge/(release)	119	203	31	(48)	-	305
Recoveries of amounts previously written off	(1)	(133)	(1)	-	-	(135)
Total income statement charge	118	70	30	(48)	-	170

Amortised cost	31.12.18
Amortised cost	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & others $million	Total2 $million
Gross credit-impaired loans at 31 December	4,084	832	1,773	235	-	6,924
Credit impairment allowances at 1 January	3,437	389	1,369	91	-	5,286
Exchange translation difference	(188)	16	(86)	3	-	(255)
Amounts written off	(1,179)	(575)	(291)	-	-	(2,045)
Discount unwind	(39)	(20)	(16)	(5)	-	(80)
New provisions charge/(release)1	189	12	218	3	-	422
Recoveries/derecognition (repayment)1	(379)	-	(136)	(5)	-	(520)
Net transfers into and out of stage 3	85	172	14	-	-	271
Changes due to risk parameters1	400	402	162	13	-	977
Credit impairment allowances at 31 December	2,326	396	1,234	100	-	4,056
Net credit impairment	1,758	436	539	135	-	2,868

Income statement charge/(release)	210	414	244	11	-	879
Recoveries of amounts previously written off	(77)	(214)	(21)	-	-	(312)
Total income statement charge	133	200	223	11	-	567

1 Components of the income statement charge/(release)

2 Excludes credit impairment relating to loan commitments and financial guarantees

Credit Risk mitigation

Potential credit losses from any given account, customer or portfolio are mitigated using a range of tools such as collateral, netting arrangements, credit insurance and credit derivatives, taking into account expected volatility and guarantees.

The reliance that can be placed on these mitigants is carefully assessed in light of issues such as legal certainty and enforceability, market valuation correlation and counterparty risk of the guarantor.

Collateral

The requirement for collateral is not a substitute for the ability to repay, which is the primary consideration for any lending decisions.

The unadjusted market value of collateral across all asset types, in respect of Corporate & Institutional Banking and Commercial Banking, without adjusting for over-collateralisation, was $254 billion (2018: $265 billion).

The collateral values in the table below are adjusted where appropriate in accordance with our risk mitigation policy and for the effect of over-collateralisation. The extent of over-collateralisation has been determined with reference to both the drawn and undrawn components of exposure as this best reflects the effect of collateral and other credit enhancements on the amounts arising from expected credit losses.

We have remained prudent in the way we assess the value of collateral, which is calibrated for a severe downturn and backtested against our prior experience. On average, across all types of non-cash collateral, the value ascribed is approximately half of its current market value.

In the Retail Banking and Private Banking segments, a secured loan is one where the borrower pledges an asset as collateral of which the Group is able to take possession in the event that the borrower defaults. The collateral level for Retail Banking is stable at $74.5 billion. Private Banking collateral is $1.1 billion higher compared to 2018 in line with the overall movement of the secured portfolio.

For loans and advances to customers and banks (excluding those held at fair value through profit or loss), the table below sets out the fair value of collateral held by the Group, adjusted where appropriate in accordance with the risk mitigation policy and for the effect of over-collateralisation.

Collateral held on loans and advances

The table below details collateral held against exposures, separately disclosing stage 3 exposure and corresponding collateral.

Amortised cost	30.06.19
	Amount outstanding			Collateral			Net exposure
	Total $million	Stage 2 financial assets $million	Credit impaired financial assets (Stage 3) $million	Total3 $million	Stage 2 financial assets $million	Credit impaired financial assets (Stage 3) $million	Total $million	Stage 2 financial assets $million	Credit impaired financial assets (Stage 3) $million
Corporate & Institutional Banking1	169,849	9,544	1,418	21,900	2,159	568	147,949	7,385	850
Retail Banking	100,966	2,691	435	74,539	2,042	354	26,427	649	81
Commercial Banking	27,424	3,341	486	7,098	1,252	265	20,326	2,089	221
Private Banking	15,433	714	176	10,873	622	175	4,560	92	1
Central and other items	9,133	1	-	3,849	-	-	5,284	1	-
Total2	322,805	16,291	2,515	118,259	6,075	1,362	204,546	10,216	1,153

Amortised cost	31.12.18
	Maximum exposure			Collateral			Net exposure
	Total $million	Past due but not individually impaired loans $million	Individually impaired loans $million	Total3 $million	Past due but not individually impaired loans $million	Individually impaired loans $million	Total $million	Past due but not individually impaired loans $million	Individually impaired loans $million
Corporate & Institutional Banking1	166,091	10,234	1,758	15,882	1,314	802	150,209	8,920	956
Retail Banking	101,235	2,705	436	74,485	2,092	324	26,750	613	112
Commercial Banking	26,759	4,331	539	6,767	3,966	302	19,992	365	237
Private Banking	13,616	785	135	9,729	783	135	3,887	2	-
Central and other items	10,270	26	-	6,278	-	-	3,992	26	-
Total2	317,971	18,081	2,868	113,141	8,155	1,563	204,830	9,926	1,305

1 Includes loans and advances to banks

2 Excludes FVTPL

3 Excludes collateral held against FVTPL exposures, and is adjusted for over-collateralisation based on the drawn and undrawn components of exposures

Collateral - Corporate & Institutional Banking and Commercial Banking

Collateral held against Corporate & Institutional Banking and Commercial Banking exposures amounted to $29 billion.

Collateral taken for longer-term and sub-investment grade corporate loans continues to be high at 47 per cent.

Our underwriting standards encourage taking specific charges on assets and we consistently seek high-quality, investment grade collateral. 76 per cent of tangible collateral held comprises physical assets or is property based, with the remainder largely in cash and investment securities.

Non-tangible collateral such as guarantees and standby letters of credit is also held against corporate exposures, although the financial effect of this type of collateral is less significant in terms of recoveries. However, this is considered when determining probability of default and other credit-related factors. Collateral is also held against off-balance sheet exposures, including undrawn commitments and trade-related instruments.

The following table provides an analysis of the types of collateral held against Corporate & Institutional Banking and Commercial Banking loan exposures.

Corporate & Institutional Banking

Amortised cost	30.06.19 $million	31.12.18 $million
Maximum exposure	169,849	166,091
Property	6,239	5,557
Plant, machinery and other stock	859	1,067
Cash	3,733	2,019
Reverse repos	712	528
AAA	-	-
A- to AA+	437	321
BBB- to BBB+	36	207
Lower than BBB-	89	-
Unrated	150	-
Financial guarantees and insurance	7,165	3,697
Commodities	121	90
Ships and aircraft	3,071	2,924
Total value of collateral	21,900	15,882
Net exposure1	147,949	150,209

1 Excludes collateral held against FVTPL exposures, and is adjusted for over-collateralisation based on the drawn and undrawn components of exposures

Commercial Banking

Amortised cost	30.06.19 $million	31.12.18 $million
Maximum exposure	27,424	26,759
Property	4,762	4,557
Plant, machinery and other stock	880	992
Cash	713	486
Reverse repos	64	72
A- to AA+	17	1
BBB- to BBB+	47	71
Financial guarantees and insurance	469	502
Commodities	32	11
Ships and aircraft	178	147
Total value of collateral	7,098	6,767
Net exposure1	20,326	19,992

1 Excludes collateral held against FVTPL exposures, and is adjusted for over-collateralisation based on the drawn and undrawn components of exposures

Collateral - Retail Banking and Private Banking

In Retail Banking and Private Banking, 85 per cent of the portfolio is fully secured. The proportion of unsecured loans remains broadly stable at 14 per cent and the remaining 1 per cent is partially secured.

The following table presents an analysis of loans to individuals by product; split between fully secured, partially secured and unsecured:

Amortised cost	30.06.19				31.12.18
Amortised cost	Fully secured $million	Partially secured $million	Unsecured $million	Total $million	Fully secured $million	Partially secured $million	Unsecured $million	Total $million
Maximum exposure	98,891	631	16,877	116,399	96,534	1,383	16,934	114,851
Loans to individuals
Mortgages	74,510	116	-	74,626	75,386	191	23	75,600
CCPL	154	56	16,786	16,996	168	102	16,692	16,962
Auto	620	-	6	626	671	-	2	673
Secured wealth products	20,165	109	-	20,274	17,721	107	172	18,000
Other	3,442	350	85	3,877	2,588	983	45	3,616
Total collateral1				85,412				84,214
Net exposure2				30,987				30,637
Percentage of total loans	85%	1%	14%		84%	1%	15%

1 Collateral values are adjusted where appropriate in accordance with our risk mitigation policy and for the effect of over-collateralisation

2 Amounts net of ECL/individual impairment provisions and excludes FVTPL

Mortgage loan-to-value ratios by geography

Loan-to-value (LTV) ratios measure the ratio of the current mortgage outstanding to the current fair value of the properties on which they are secured.

In mortgages, the value of property held as security significantly exceeds the value of mortgage loans. The average LTV of the overall mortgage portfolio is low at 44 per cent. Hong Kong, which represents 33 per cent of the Retail Banking mortgage portfolio has an average LTV of 36.5 per cent. All of our other key markets continue to have low portfolio LTVs, (Korea, Singapore and Taiwan at 44.0 per cent, 54.9 per cent and 51.9 per cent respectively).

An analysis of LTV ratios by geography for the mortgage portfolio is presented in the mortgage LTV ratios by geography table below.

Amortised cost	30.06.19
Amortised cost	Greater China & North Asia %	ASEAN & South Asia %	Africa & Middle East %	Europe & Americas %	Total %
Less than 50 per cent	70.1	40.8	19.9	16.9	59.9
50 per cent to 59 per cent	13.9	18.6	13.9	10.8	15.0
60 per cent to 69 per cent	9.0	22.4	18.6	35.6	13.4
70 per cent to 79 per cent	5.8	15.9	21.0	32.0	9.5
80 per cent to 89 per cent	1.0	1.8	14.3	4.2	1.7
90 per cent to 99 per cent	0.1	0.2	7.0	-	0.3
100 per cent and greater	0.1	0.2	5.4	0.5	0.3
Average portfolio loan-to-value	41.0	51.9	67.5	54.9	44.3
Loans to individuals - mortgages ($million)	51,614	18,904	2,059	2,049	74,626

Amortised cost	31.12.18
Amortised cost	Greater China & North Asia %	ASEAN & South Asia %	Africa & Middle East %	Europe & Americas %	Total %
Less than 50 per cent	67.7	41.5	20.9	19.6	58.5
50 per cent to 59 per cent	14.9	18.8	15.3	21.0	16.0
60 per cent to 69 per cent	10.7	22.0	21.8	30.2	14.4
70 per cent to 79 per cent	5.0	16.0	21.6	26.8	8.8
80 per cent to 89 per cent	1.3	1.5	12.0	2.4	1.7
90 per cent to 99 per cent	0.3	0.1	4.7	-	0.3
100 per cent and greater	0.1	0.1	3.8	-	0.2
Average portfolio loan-to-value	42.0	51.5	65.2	54.2	44.8
Loans to individuals - mortgages ($million)	52,434	19,156	2,126	1,884	75,600

Industry and Retail Products analysis of loans and advances by geographic region

This section provides an analysis of the Group's amortised cost loan portfolio, net of provisions, by industry and region.

In the Corporate & Institutional Banking and Commercial Banking segments our largest industry exposure remains manufacturing, which constitutes 17 per cent of Corporate & Institutional Banking and Commercial Banking loans and advances to customers (31 December 2018: 17 per cent). The manufacturing sector group is spread across a diverse range of industries, including automobiles and components, capital goods, pharmaceuticals, biotech and life sciences, technology hardware and equipment, chemicals, paper products and packaging, with lending spread over 4,602 clients.

The financing, insurance and non-banking industry group constitutes 15 per cent of Corporate & Institutional Banking and Commercial Banking loans and advances to customers. Clients are mostly investment grade institutions and this lending forms part of the liquidity management of the Group.

Loans and advances to the energy sector remained at 12 per cent of total loans and advances to Corporate & Institutional Banking and Commercial Banking. The energy sector lending is spread across five subsectors and over 396 clients.

The Group provides loans to commercial real estate counterparties of $16 billion, which represents 6 per cent of total customer loans and advances. In total, $7.1 billion of this lending is to counterparties where the source of repayment is substantially derived from rental or sale of real estate and is secured by real estate collateral. The remaining commercial real estate loans comprise working capital loans to real estate corporates, loans with non-property collateral, unsecured loans and loans to real estate entities of diversified conglomerates. The average LTV ratio of the commercial real estate portfolio has increased to 46 per cent, compared with 43 per cent in 2018. The proportion of loans with an LTV greater than 80 per cent has remained at less than 1 per cent during the same period.

The Mortgage portfolio continues to be the largest portion of the Retail Products portfolio, at 64 per cent. Credit cards and personal loans (CCPL) and other unsecured lending remains at 15 per cent of total Retail Products loans and advances.

Industry and Retail Products analysis by geographic region

Amortised cost	30.06.19
Amortised cost	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Industry:
Energy	3,560	5,042	3,209	5,650	17,461
Manufacturing	11,803	6,242	3,100	3,638	24,783
Financing, insurance and non-banking	8,748	4,914	1,312	6,945	21,919
Transport, telecom and utilities	6,028	4,077	4,480	1,293	15,878
Food and household products	2,203	4,375	2,588	1,183	10,349
Commercial real estate	9,145	4,945	1,762	291	16,143
Mining and quarrying	2,467	2,624	1,222	1,041	7,354
Consumer durables	4,771	2,153	638	579	8,141
Construction	1,077	1,211	1,153	135	3,576
Trading companies and distributors	1,279	493	246	151	2,169
Government	2,096	8,753	3,410	-	14,259
Other	1,675	1,830	677	982	5,164
Retail Products:
Mortgages	51,614	18,904	2,059	2,049	74,626
CCPL and other unsecured lending	10,326	4,266	2,291	113	16,996
Auto	-	511	114	1	626
Secured wealth products	8,087	10,116	358	1,713	20,274
Other	2,890	313	670	4	3,877
Net loans and advances to customers	127,769	80,769	29,289	25,768	263,595
Net loans and advances to banks	24,580	14,693	6,202	13,735	59,210

Amortised cost	31.12.18
Amortised cost	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Industry:
Energy	2,778	5,279	2,793	6,150	17,000
Manufacturing	10,531	6,298	3,209	3,601	23,639
Financing, insurance and non-banking	8,657	4,653	915	6,662	20,887
Transport, telecom and utilities	5,712	4,177	4,703	1,178	15,770
Food and household products	1,945	4,011	2,798	975	9,729
Commercial real estate	8,148	4,865	1,854	168	15,035
Mining and quarrying	1,683	2,283	1,088	932	5,986
Consumer durables	4,892	2,255	731	524	8,402
Construction	831	1,094	1,225	152	3,302
Trading companies and distributors	1,976	624	391	16	3,007
Government	1,726	8,815	3,113	83	13,737
Other	1,686	1,899	803	824	5,212
Retail Products:
Mortgages	52,434	19,156	2,126	1,884	75,600
CCPL and other unsecured lending	10,269	4,234	2,459	-	16,962
Auto	-	522	150	1	673
Secured wealth products	6,912	9,055	310	1,723	18,000
Other	2,616	320	679	1	3,616
Net loans and advances to customers	122,796	79,540	29,347	24,874	256,557
Net loans and advances to banks	27,858	11,676	5,573	16,307	61,414

IFRS 9 methodology

Key assumptions and judgements in determining expected credit loss

Incorporation of forward-looking information

The evolving economic environment is a key determinant of the ability of a bank's clients to meet their obligations as they fall due. It is a fundamental principle of IFRS 9 that the provisions banks hold against potential future credit risk losses should depend not just on the health of the economy today, but should also take into account potential changes to the economic environment. For example, if a bank were to anticipate a sharp slowdown in the world economy over the coming year, it should hold more provisions today to absorb the credit losses likely to occur in the near future.

To capture the effect of changes to the economic environment, the PDs and LGDs used to calculate expected credit loss incorporate forward-looking information in the form of forecasts of the values of economic variables and asset prices that are likely to have an effect on the repayment ability of the Group's clients.

The 'Base Forecast' of the economic variables and asset prices is based on management's view, supported by projections from the Group's in-house research team and outputs from models that project specific economic variables and asset prices.

Forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact on non-linearity

The Base Forecast - management's view of the most likely outcome - is that the global economic expansion is expected to decelerate following a synchronised upswing in the last few years. In particular, the pace of US economic expansion is expected to ease below trend in the next few years.

While this Base Forecast is the premise for the Group's strategic plan, one of the key requirements of IFRS 9 is that the assessment of provisions should be based on a range of potential outcomes for the future economic environment. For example, the global economy may grow more quickly or more slowly than the Base Forecast, and these variations would have different implications for the provisions that the Group should hold today. As the negative impact of an economic downturn on credit losses tends to be greater than the positive impact of an economic upturn, if the Group sets provisions only on the expected credit loss under the Base Forecast, it might not end up with a level of provisions that appropriately considers the range of potential outcomes. To address this skewness (or non-linearity) in expected credit loss, IFRS 9 requires the ECL to be the probability-weighted amount calculated for a range of possible outcomes.

To take account of the potential non-linearity in expected credit loss, the Group simulates a set of 50 scenarios around the Base Forecast and calculates the expected credit loss under each of them. These scenarios are generated by a Monte Carlo simulation, which considers the degree of uncertainty (or volatility) around economic outcomes and how these outcomes have tended to move in relation to one another (or correlation). The use of Monte Carlo simulation is motivated by the number and spread of countries in which the Group operates. This implies that the number of countries' macroeconomic variables to forecast is large, but more importantly the observation that a downturn in one part of the world is never perfectly synchronised with downturns everywhere else means that the Group may be challenged to capture a full range of scenarios with a handful of manually tuned scenarios.

While the 50 scenarios do not each have a specific narrative, they reflect a range of plausible hypothetical alternative outcomes for the global economy. Some imply an unwinding of the current shocks and uncertainty leading to higher global economic activity and higher asset prices, while others represent an intensification of current shocks or introduction of new shocks that raise uncertainty, leading to lower global economic activity and lower asset prices.

The table overleaf provides a summary of the Group's Base Forecast, representing the average over five years, alongside the corresponding range seen across the multiple scenarios.

Over the medium term - five years ahead - there has been relatively little change in the forecast level of activity compared to the end of last year, however, with the global industrial cycle slowing there have been some marginal downward revisions to GDP growth over the medium term. China's economy, for example, is expected to grow by an average of around 5.9 per cent over the next five years, compared to 6 per cent previously. Fiscal support by the government in the form of both higher government spending and tax cuts will help offset the effects from any weakness in external demand. Similarly, marginal downward adjustments to economic activity have also been made to trade dependent economies such as Hong Kong and Korea.

With the US economic expansion expected to weaken in the near term, the US Federal Reserve has ended its monetary tightening cycle and the prospects for interest rate cuts in the near term have increased. This has led to downward revisions to interest rate forecasts in countries where central bank policy is tied to US monetary policy. This includes Singapore and Hong Kong where the average for the inter-bank rates over five years have been revised down by at least 40 basis points relative to the forecast level at the end of last year.

The monetary easing stance by the US Federal Reserve and anchored inflation also provide the scope (by limiting capital outflows) for other countries, such as Korea and India, to cut interest rates to support growth. Lower interest rates will provide support to the housing market in Hong Kong, where the market has recently proven to be resilient despite economic pressure from US-China trade tensions. This is reflected in the upward revision to house prices in Hong Kong from previous price expectations. However, country specific factors have weighed on property markets in other countries. Recent government measures to curb prices have led to downward revisions to house price forecasts for both Korea and Singapore.

With the global economic expansion decelerating there has been a marginal downward revision to the price of oil to a five year average $84 from $85 previously.

30.06.19	China			Hong Kong			Korea			Singapore			India
30.06.19	Base forecast	Low2	High3	Base forecast	Low2	High3	Base forecast	Low2	High3	Base forecast	Low2	High3	Base forecast	Low2	High3
GDP growth (YoY%)	5.9	4.5	7.4	2.9	0.3	5.2	2.8	0.8	5.0	2.6	(1.1)	6.3	7.6	5.5	9.6
Unemployment (%)	3.8	3.7	3.9	3.4	2.6	4.1	3.3	2.8	3.8	3.0	2.3	3.7	N/A¹	N/A¹	N/A¹
3-month interest rates (%)	2.9	2.1	3.9	2.1	0.8	3.8	2.1	1.3	3.0	2.0	1.2	2.9	6.0	5.1	7.1
House prices (YoY%)	5.5	2.6	8.2	3.1	(6.8)	12.7	2.4	0.1	4.8	2.6	(4.3)	10.0	8.4	2.5	13.7

31.12.18	China			Hong Kong			Korea			Singapore			India
31.12.18	Base forecast	Low2	High3	Base forecast	Low2	High3	Base forecast	Low2	High3	Base forecast	Low2	High3	Base forecast	Low2	High3
GDP growth (YoY%)	6.0	4.3	7.7	3.0	0.6	5.6	2.9	0.4	5.3	2.4	(1.7)	6.4	7.7	5.6	10.1
Unemployment (%)	4.0	3.8	4.2	3.4	2.4	4.6	3.2	2.4	4.0	3.0	2.3	3.7	N/A¹	N/A¹	N/A¹
3-month interest rates (%)	3.1	2.0	4.3	3.0	1.8	4.2	2.6	1.4	4.0	2.4	1.3	3.8	6.9	5.1	8.9
House prices (YoY%)	5.8	3.4	8.5	2.3	(8.1)	12.1	3.5	1.3	6.1	4.4	(1.5)	10.6	8.4	1.4	15.1

30.06.19	Base forecast	Low2	High3
Crude price Brent, $ pb	84	46	124

31.12.18	Base forecast	Low2	High3
Crude price Brent, $ pb	85	40	118

1 Not available

2 Represents the 10th percentile in the range used to determine non-linearity

3 Represents the 90th percentile in the range used to determine non-linearity

The final expected credit loss reported by the Group is a simple average of the expected credit loss for each of the 50 scenarios. The impact of non-linearity on expected credit loss is set out in the table below:

	Including non-linearity $m	Excluding non-linearity $m	Difference %
Total expected credit loss at 30 June 20191	1,042	1,026	1.6
Total expected credit loss at 31 December 20181	1,163	1,139	2.1

1 Total modelled expected credit loss comprises stage 1 and stage 2 balances of $907 million (31 December 2018: $1,031 million) and $135 million (31 December 2018: $132 million) of modelled expected credit loss on stage 3 loans

The average expected credit loss under multiple scenarios is 1.6 per cent higher than the expected credit loss calculated using only the most likely scenario (the Base Forecast). Portfolios that are more sensitive to non-linearity include those with greater leverage and/or a longer tenor, such as Project and Shipping Finance and credit card portfolios. Other portfolios display minimal non-linearity owing to their limited responsiveness to macroeconomic impacts for structural reasons such as significant collateralisation, as with the Retail Banking mortgage portfolios.

Credit-impaired assets managed by Group Special Assets Management (GSAM) incorporate forward-looking economic assumptions in respect of the recovery outcomes identified and are assigned individual probability weightings. These assumptions are not based on a Monte Carlo simulation but are informed by the Base Forecast.

Sensitivity of expected credit loss calculation to macroeconomic variables

The expected credit loss calculation relies on multiple variables and is inherently non-linear and portfolio-dependent, which implies that no single analysis can fully demonstrate the sensitivity of the expected credit loss to changes in the macroeconomic variables. The Group has conducted a series of analyses with the aim of identifying the macroeconomic variables which might have the greatest impact on overall expected credit loss. These encompassed single variable and multi-variable exercises, using simple up/down variation and extracts from actual calculation data, as well as bespoke scenario design and assessment.

The primary conclusion of these exercises is that no individual macroeconomic variable is materially influential - that is, likely to result in an impact of at least 1 per cent of the Group's expected credit loss. The Group believes this is plausible, because the number of variables used in the expected credit loss calculation is large. This does not mean that macroeconomic variables are uninfluential; rather, that the Group believes that consideration of macroeconomics should involve whole scenarios, as this aligns with the multi-variable nature of the calculation.

As the Group has two principal uncertainties related to the macroeconomic outlook, a sensitivity analysis of ECL was undertaken to explore the combined effect of these: extended trade tensions that could lead to a China slowdown with spillovers to emerging markets. In this scenario, current trade policy tensions between the US and China increase dramatically. The US targets trading partners with which it has a material trade deficit and pushes through highly protectionist measures, initiating trade tensions with Asia focused on China. Indirectly, economies reliant on global trade flows are vulnerable to the trade shock. The escalating trade tensions create uncertainty which reduces risk appetite, leading to a decline in asset prices and lower consumption and investment across developed and emerging markets. This leads to a global slowdown and a sharp fall in commodity prices. As an indication, China annual real GDP growth troughs at circa. 4 per cent, representing a marked divergence from the base forecast growth of around 6 per cent, while China exports growth dips negative for the first time since 2009. US GDP slows from a trend rate of about 2 per cent down to 1 per cent. Crude oil prices fall, and residential property indices in China and Hong Kong dip negative. To contextualise this scenario relative to the Monte Carlo generated scenarios, the China and US GDP dips approach the lowest growth boundary of the 50 scenarios in 2019, crude oil remains closer to the middle than to the bottom edge, but the China property price index falls well below the simulated lower bound over a period of years.

Applying this scenario, modelled stage 1 and 2 expected credit loss provisions would be approximately $338 million higher than the reported base case expected credit loss provision (excluding the impact of non-linearity). This includes the impact of exposures transferring to stage 2 from stage 1 but does not consider an increase in stage 3 defaults. The proportion of exposures in stage 2 would increase from 6 per cent to 9 per cent. As expected, this has an impact on our corporate exposures in China, Hong Kong and Singapore. Within Retail Banking, the Group's credit card portfolios in Hong Kong and Singapore were impacted. There was no impact on modelled stage 3 provisions as these primarily relate to unsecured Retail Banking exposures for which the LGD is not sensitive to changes in macroeconomic variables. Note that the actual outcome of any scenario may be materially different due to, amongst other factors, the effect of management actions to mitigate potential increases in risk and changes in the underlying portfolio.

Country Risk

Country cross-border risk is the risk that the Group will be unable to obtain payment from counterparties on their contractual obligations as a result of certain actions taken by foreign governments, chiefly relating to convertibility and transferability of foreign currency.

The profile of the Group's country cross-border exposures as at 30 June 2019 remained consistent with its strategic focus on core franchise countries. Changes in the pace of economic activity and portfolio management activity had an impact on the growth of cross-border exposure for certain markets.

Country cross-border exposure to China remains predominantly short term with 82 per cent of exposure having a tenor of less than one year. During the first half of 2019, the Group's cross-border exposure to China increased, primarily driven by the medium-term treasury market portfolio.

The increase in cross-border exposure to Hong Kong during the first half of 2019 was primarily driven by short-term trade finance facilities; reflecting a more cautious approach given the subdued global trade environment and domestic economic headwinds.

Singapore's cross-border exposure rose during the first half of 2019 due to an increase in trade finance and lending activities. This was partly offset by reductions in sovereign exposures and amounts outstanding from financial institutions.

India's cross-border exposure increased significantly, primarily driven by a sizeable increase in the corporate loan book, specifically to Indian conglomerates, and a rise in Issuer Risk, trade activity and marketable securities.

The significant increase in cross-border exposure to South Korea reflects a rise in trade finance related exposures and marketable securities held.

The decrease in United Arab Emirates cross-border exposure reflects a reduction in the medium-term loan book. This was partly offset by an increase in trade finance activities and marketable securities held.

Cross-border exposure to developed countries in which the Group does not have a major presence predominantly relates to treasury and liquidity management activities, which can change significantly from period to period. Exposure to such markets also represents global corporate business for customers with interests in our footprint. The movement in exposures to the United States, Germany, Australia and France are all largely attributed to Group liquidity management operations during the year.

The table below, which is based on the Group's internal country cross-border risk reporting requirements, shows cross-border exposures that exceed 1 per cent of total assets.

	30.06.19			31.12.18
	Less than one year $million	More than one year $million	Total $million	Less than one year $million	More than one year $million	Total $million
China	38,533	8,383	46,916	37,039	6,458	43,497
United States	8,900	12,878	21,778	15,369	8,986	24,355
Hong Kong	13,271	8,235	21,506	11,451	8,819	20,270
Singapore	13,431	6,361	19,792	12,799	5,921	18,720
India	12,663	7,101	19,764	10,536	5,674	16,210
South Korea	16,303	3,409	19,712	12,210	4,550	16,760
United Arab Emirates	8,243	8,806	17,049	8,531	9,139	17,670
Germany	3,642	7,983	11,625	3,236	7,080	10,316
Australia	2,573	5,848	8,421	2,495	5,335	7,830
France	2,673	5,530	8,203	1,870	4,378	6,248

Traded Risk

Traded Risk is the potential for loss resulting from activities undertaken by the bank in financial markets. Under the Enterprise Risk Management Framework, the introduction of the Traded Risk Framework in 2018 sought to bring together all risk types exhibiting risk features common to Traded Risk.

These risk types include Market Risk, Counterparty Credit Risk, Issuer Risk, XVA, Algorithmic Trading and Pension Risk. Traded Risk Management (TRM) is the core risk management function supporting market-facing businesses, specifically Financial Markets and Treasury Markets.

Market Risk

Market Risk is the potential for loss of economic value due to adverse changes in financial market rates or prices. The Group's exposure to Market Risk arises predominantly from the following sources:

• Trading book: the Group provides clients access to financial markets, facilitation of which entails the Group taking moderate Market Risk positions. All trading teams support client activity; there are no proprietary trading teams. Hence, income earned from Market Risk-related activities is primarily driven by the volume of client activity rather than risk-taking.

• Non-trading book:

- The Treasury Markets desk is required to hold a liquid assets buffer, much of which is held in high-quality marketable debt securities

- The Group has capital invested and related income streams denominated in currencies other than US dollars. To the extent that these are not hedged, the Group is subject to structural Foreign Exchange Risk which is reflected in reserves

A summary of our current policies and practices regarding Market Risk management is provided in the Principal Risks section of our 2018 Annual Report.

The primary categories of Market Risk for the Group are:

• Interest Rate Risk: arising from changes in yield curves, credit spreads and implied volatilities on interest rate options

• Foreign Exchange Rate Risk: arising from changes in currency exchange rates and implied volatilities on foreign exchange options

• Commodity Risk: arising from changes in commodity prices and implied volatilities on commodity options; covering energy, precious metals, base metals and agriculture

• Equity Risk: arising from changes in the prices of equities, equity indices, equity baskets and implied volatilities on related options

Market Risk changes

The average level of total trading and non-trading VaR in the first half of 2019 was $28.2 million, 36 per cent higher than the second half of 2018 ($20.8 million) and 38 per cent higher than the first half of 2018 ($20.4 million). The actual level of total trading and non-trading VaR as at the end of the first half of 2019 was $31.0 million, 21 per cent higher than in the second half of 2018 ($25.5 million) and 58 per cent higher than the first half of 2018 ($19.6 million). The increase in total average VaR was driven by the non-trading book, which has seen an increase in the bond inventory size in high-quality assets from Treasury Markets and reduced portfolio diversification since the fourth quarter of 2018.

For the trading book, the average level of VaR in the first half of 2019 was $11.1 million, 19 per cent higher than in the second half of 2018 ($9.3 million), and 7 per cent higher than in the first half of 2018 ($10.4 million). Trading activities have remained relatively unchanged and client-driven.

Daily value at risk (VaR at 97.5 per cent, one day)

Trading and non-trading	6 months ended 30.06.19				6 months ended 31.12.18				6 months ended 30.06.18
Trading and non-trading	Average $million	High1 $million	Low1 $million	Actual2 $million	Average $million	High1 $million	Low1 $million	Actual2 $million	Average $million	High1 $million	Low1 $million	Actual2 $million
Interest Rate Risk3	26.8	29.5	24.1	26.7	19.4	25.9	16.6	25.9	19.1	22.8	16.9	17.7
Foreign Exchange Risk	4.6	8.5	2.7	3.7	3.8	7.7	2.5	7.7	4.9	8.6	3.1	3.9
Commodity Risk	1.2	2.2	0.8	1.2	1.4	2.1	0.8	1.2	1.2	1.8	0.9	1.8
Equity Risk	3.3	4.6	2.5	4.5	3.4	5.5	2.6	2.7	6.2	6.8	4.1	4.7
Total4	28.2	31.4	24.1	31.0	20.8	26.1	16.4	25.5	20.4	24.4	17.5	19.6

Trading5	6 months ended 30.06.19				6 months ended 31.12.18				6 months ended 30.06.18
Trading5	Average $million	High1 $million	Low1 $million	Actual2 $million	Average $million	High1 $million	Low1 $million	Actual2 $million	Average $million	High1 $million	Low1 $million	Actual2 $million
Interest Rate Risk3	8.6	11.8	6.3	7.3	7.4	9.1	6.0	7.9	8.6	11.7	6.4	6.8
Foreign Exchange Risk	4.6	8.5	2.7	3.7	3.8	7.7	2.5	7.7	4.9	8.6	3.1	3.9
Commodity Risk	1.2	2.2	0.8	1.2	1.4	2.1	0.8	1.2	1.2	1.8	0.9	1.8
Equity Risk	-	0.1	-	-	0.1	0.1	-	-	0.1	0.1	-	0.1
Total4	11.1	14.0	9.2	11.0	9.3	13.6	7.5	13.6	10.4	13.8	7.5	8.1

Non-trading	6 months ended 30.06.19				6 months ended 31.12.18				6 months ended 30.06.18
Non-trading	Average $million	High1 $million	Low1 $million	Actual2 $million	Average $million	High1 $million	Low1 $million	Actual2 $million	Average $million	High1 $million	Low1 $million	Actual2 $million
Interest rate risk3	23.6	25.0	21.2	23.3	17.8	20.7	15.1	20.7	15.8	17.7	14.1	15.1
Equity risk6	3.3	4.6	2.5	4.5	3.3	5.4	2.6	2.7	6.2	6.8	4.1	4.6
Total4	23.7	27.4	20.6	26.5	17.7	21.3	9.2	21.3	16.6	18.8	15.3	16.0

1 Highest and lowest VaR for each risk factor are independent and usually occur on different days

2 Actual one-day VaR at year end date

3 Interest rate risk VaR includes Credit Spread Risk arising from securities accounted for as fair value through profit or loss (FVTPL) or fair value other comprehensive income (FVOCI)

4 The total VaR shown in the tables above is not equal to the sum of the component risks due to offsets between them

5 Trading book for Market Risk is defined in accordance with the EU Capital Requirements Regulation (CRD IV/CRR) Part 3 Title I Chapter 3, which restricts the positions permitted in the trading book

6 Non-trading Equity Risk VaR includes only listed equities

Risks not in VaR

In the first half of 2019, the main Market Risk not reflected in VaR was currency risk where the exchange rate is currently pegged or managed. The historical one-year VaR observation period does not reflect the future possibility of a change in the currency regime such as sudden depegging. The other material Market Risk not reflected in VaR was associated with basis risks where historical market price data for VaR is sometimes more limited and therefore proxied, generating a potential basis risk. Additional capital is set aside to cover such 'risks not in VaR'. For further details on Market Risk capital see the section on Market Risk in the Standard Chartered PLC Pillar 3 Disclosures for 30 June 2019.

Backtesting

In the first half of 2019, there were three regulatory backtesting exceptions at Group level (in the second half of 2018, there were two regulatory backtesting exceptions at Group level).

A Group exception occurred on 1 April 2019 when markets rallied following the release of strong Chinese manufacturing data. There was also an exception on 30 May 2019 driven by a reduction in USD yields and implied volatility which reversed an increase of the previous day. Additionally, a Group exception occurred on 10 June 2019 when US Treasury yields rallied following reports that proposed tariffs on goods from Mexico to the USA would not be implemented.

In total there have been five Group exceptions in the previous 250 business days which is within the 'amber zone' applied internationally to internal models by bank supervisors (Basel Committee on Banking Supervision, Supervisory framework for the use of backtesting in conjunction with the internal models approach to market risk capital requirements, January 1996).

Average daily income earned from market risk related activities¹	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Trading
Interest Rate Risk	3.5	1.9	4.3
Foreign Exchange Risk	4.9	4.0	3.8
Commodity Risk	0.7	0.8	0.8
Equity Risk	-	-	-
Total	9.1	6.7	8.9

Non-trading
Interest Rate Risk	1.6	1.9	2.9
Equity Risk	(0.2)	1.0	(0.3)
Total	1.4	3.0	2.6

1 Reflects total product income which is the sum of client income and own account income. Includes elements of trading income, interest income and other income which are generated from Market Risk-related activities. XVA income is included under Interest Rate Risk

Counterparty Credit Risk

Counterparty Credit Risk is the potential for loss in the event of the default of a derivative counterparty, after taking into account the value of eligible collaterals and risk mitigation techniques. The Group's counterparty credit exposures are included in the Credit Risk section.

Derivative financial instruments Credit Risk mitigation

The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the positive and negative mark-to-market values of applicable derivative transactions.

In addition, the Group enters into credit support annexes (CSAs) with counterparties where collateral is deemed a necessary or desirable mitigant to the exposure. Cash collateral includes collateral called under a variation margin process from counterparties if total uncollateralised mark-to-market exposure exceeds the threshold and minimum transfer amount specified in the CSA. With certain counterparties, the CSA is reciprocal and requires us to post collateral if the overall mark-to-market values of positions are in the counterparty's favour and exceed an agreed threshold.

Liquidity and Funding Risk

Liquidity and Funding Risk is the risk that we may not have sufficient stable or diverse sources of funding to meet our obligations as they fall due.

The Group's Liquidity and Funding Risk framework requires each country to ensure that it operates within predefined liquidity limits and remains in compliance with Group liquidity policies and practices, as well as local regulatory requirements.

The Group achieves this through a combination of setting risk appetite and associated limits, policy formation, risk measurement and monitoring, prudential and internal stress testing, governance and review.

Since the beginning of the year there were no significant changes in treasury policies as disclosed in the 2018 Annual Report and Accounts.

In April 2019, the Group resolved the previously disclosed investigations by the US Authorities and the Financial Conduct Authority related to historical sanctions compliance and financial crime controls. These legacy investigation issues were the main regulatory uncertainties facing the Group. We will continue to maintain a strong liquidity position and would continue to optimise this where possible subject to a number of factors including market conditions and current and future regulatory requirements.

The Group has relatively low levels of sterling and euro funding and exposures within the context of the overall Group balance sheet. The result of the UK referendum to leave the EU has therefore not had a material first order liquidity impact to date. A new subsidiary has been established in Germany (Standard Chartered Bank AG) to grow our continental Europe franchise.

Liquidity and Funding Risk metrics

We monitor key liquidity metrics regularly, both on a country basis and in aggregate across the Group.

The following liquidity and funding Board Risk Appetite metrics define the maximum amount and type of risk that the Group is willing to assume in pursuit of its strategy: liquidity coverage ratio (LCR), liquidity stress survival horizons, external wholesale borrowing, and advances-to-deposits ratio.

Liquidity coverage ratio (LCR)

The LCR is a regulatory requirement set to ensure that the Group has sufficient unencumbered high-quality liquid assets to meet its liquidity needs in a 30-calendar-day liquidity stress scenario.

The Group monitors and reports its liquidity position under European Commission Delegated Regulation 2015/61 and has maintained its liquidity position above the prudential requirement.

At the reporting date, the Group LCR was 139 per cent (2018: 154 per cent) with a prudent surplus to both Board-approved risk appetite and regulatory requirements. The ratio decreased 15 per cent year-to-date due to period end cashflows and a shift in liability mix at the end of the period which led to higher outflows and a smaller increase in our liquidity buffer. We also held adequate liquidity across our footprint to meet all local prudential LCR requirements where applicable.

	30.06.19 $million	31.12.18 $million
Liquidity buffer	154,897	149,602
Total net cash outflows	111,336	97,443
Liquidity coverage ratio	139%	154%

Stressed coverage

The Group intends to maintain a prudent and sustainable funding and liquidity position, in all countries and currencies, such that it can withstand a severe but plausible liquidity stress.

Our approach to managing liquidity and funding is reflected in the following Board-level Risk Appetite Statement:

"The Group should hold an adequate buffer of high-quality liquid assets to survive extreme but plausible liquidity stress scenarios for at least 60 days without recourse to extraordinary central bank support."

The Group's internal liquidity stress testing framework covers the following stress scenarios:

Standard Chartered-specific - This scenario captures the liquidity impact from an idiosyncratic event affecting Standard Chartered only i.e. the rest of the market is assumed to operate normally.

Market wide - This scenario captures the liquidity impact from a market wide crisis affecting all participants in a country, region or globally.

Combined - This scenario assumes both Standard Chartered-specific and Market-wide events affecting the Group simultaneously and hence is the most severe scenario.

All scenarios include, but are not limited to, modelled outflows for retail and wholesale funding, off-balance sheet funding risk, cross currency funding risk, intraday risk, franchise risk and risks associated with a deterioration of a firm's credit rating.

Stress testing results show that a positive surplus was maintained under all scenarios at 30 June 2019, i.e. respective countries are able to survive for a period of time as defined under each scenario. The combined scenario at 30 June 2019 showed the Group maintained liquidity resources to survive greater than 60 days, as per our Board Risk Appetite. The results take into account currency convertibility and portability constraints across all major presence countries.

Standard Chartered Bank's credit ratings as at 30 June 2019 were A+ with stable outlook (Fitch), A with stable outlook (S&P) and A1 with stable outlook (Moody's). A downgrade in the Group's long-term credit ratings would increase derivative collateral requirements and outflows due to rating-linked liabilities. At 30 June 2019, the estimated contractual outflow of a two-notch long-term ratings downgrade is $1.1 billion.

External wholesale borrowing

The Board sets a risk limit to prevent excessive reliance on wholesale borrowing. Limits are applied to all branches and operating subsidiaries in the Group and as at the reporting date the Group remained within Board Risk Appetite.

Advances-to-deposits ratio

This is defined as the ratio of total loans and advances to customers relative to total customer accounts. An advances-to-deposits ratio of below 100 per cent demonstrates that customer deposits exceed customer loans as a result of the emphasis placed on generating a high level of funding from customers.

The advances-to-deposits ratio remained broadly unchanged at 63.7 per cent over the first half of 2019 (2018: 63.1 per cent).

	30.06.19 $million	31.12.18 $million
Total loans and advances to customers1,2	260,246	250,922
Total customer accounts3	408,487	397,764
Advances-to-deposits ratio	63.7%	63.1%

1 Excludes reverse repurchase agreement and other similar secured lending of $2,704 million and includes loans and advances to customers held at fair value through profit and loss of $6,190 million

2 Loans and advances to customers for the purpose of the advances-to-deposits ratio excludes $6,835 million of approved balances held with central banks, confirmed as repayable at the point of stress. The loans and advances to customers balance at 31 December 2018 used in the advances-to-deposits ratio at 31 Decmber 2018 has decreased by $7,412 million from $258,334 million to $250,922 million to exclude approved balances held with central banks. The advances-to-deposits ratio has been restated from 64.9 per cent to 63.1 per cent as a result

3 Includes customer accounts held at fair value through profit or loss of $6,889 million

Net stable funding ratio (NSFR)

On 23 November 2016, the European Commission, as part of a package of risk-reducing measures, proposed a binding requirement for stable funding (net stable funding ratio (NSFR)) at European Union level. The proposal aims to implement the European Banking Authority's interpretation of the Basel standard on NSFR (BCBS295). The NSFR is due to become a binding regulatory requirement in June 2021 with a minimum of 100 per cent. Pending implementation of the final rules, the Group continues to monitor NSFR in line with the BCBS' final recommendation (BCBS295).

The NSFR is a balance sheet metric which requires institutions to maintain a stable funding profile in relation to the characteristics of their assets and off-balance sheet activities over a one-year horizon. It is the ratio between the amount of available stable funding (ASF) and the amount of required stable funding (RSF). ASF factors are applied to balance sheet liabilities and capital, based on their perceived stability and the amount of stable funding they provide. Likewise, RSF factors are applied to assets and off-balance sheet exposures according to the amount of stable funding they require. At the last reporting date, the Group NSFR remained above 100 per cent.

Liquidity pool

The liquidity value of the Group's LCR eligible liquidity pool at the reporting date was $155 billion. The figures in the below table account for haircuts, currency convertibility and portability constraints, and therefore are not directly comparable with the consolidated balance sheet. The pool is held to offset stress outflows as defined in European Commission Delegated Regulation 2015/61. Cash and balances at central banks at 30 June 2019 in the table below has increased compared to year end as a result of the inclusion of approved term amounts confirmed as repayable at the point of stress.

	30.06.19
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Level 1 securities
Cash and balances at central banks	19,065	9,300	1,072	28,401	57,838
Central banks, governments/public sector entities	24,368	10,661	1,561	33,366	69,956
Multilateral development banks and international organisations	2,171	1,280	165	7,123	10,739
Other	-	-	-	1,172	1,172
Total Level 1 securities	45,604	21,241	2,798	70,062	139,705
Level 2A securities	7,776	1,940	61	2,768	12,545
Level 2B securities	-	516	-	2,131	2,647
Total LCR eligible assets	53,380	23,697	2,859	74,961	154,897

	31.12.18
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Level 1 securities
Cash and balances at central banks	16,267	2,645	1,416	28,232	48,560
Central banks, governments/public sector entities	33,462	9,900	1,540	30,166	75,068
Multilateral development banks and international organisations	1,543	1,451	195	8,487	11,676
Other	-	-	-	1,125	1,125
Total Level 1 securities	51,272	13,996	3,151	68,010	136,429
Level 2A securities	3,943	1,083	60	5,296	10,382
Level 2B securities	-	1,264	-	1,527	2,791
Total LCR eligible assets	55,215	16,343	3,211	74,833	149,602

Encumbrance

Encumbered assets

Encumbered assets represent on-balance sheet assets pledged or subject to any form of arrangement to secure, collateralise or credit enhance a transaction from which it cannot be freely withdrawn. Cash collateral pledged against derivatives and Hong Kong government certificates of indebtedness, which secure the equivalent amount of Hong Kong currency notes in circulation, are included within Other assets.

Unencumbered - readily available for encumbrance

Unencumbered assets that are considered by the Group to be readily available in the normal course of business to secure funding, meet collateral needs, or be sold to reduce potential future funding requirements and are not subject to any restrictions on their use for these purposes.

Unencumbered - other assets capable of being encumbered

Unencumbered assets that, in their current form, are not considered by the Group to be readily realisable in the normal course of business to secure funding, meet collateral needs, or be sold to reduce potential future funding requirements and are not subject to any restrictions on their use for these purposes. Included within this category are loans and advances which would be suitable for use in secured funding structures such as securitisations.

Unencumbered - cannot be encumbered

Unencumbered assets that have not been pledged and cannot be used to secure funding, meet collateral needs, or be sold to reduce potential future funding requirements, as assessed by the Group.

Derivatives, reverse repurchase assets and stock lending

These assets are shown separately as these on-balance sheet amounts cannot be pledged. However, these assets can give rise to off-balance sheet collateral which can be used to raise secured funding or meet additional funding requirements.

The following table provides a reconciliation of the Group's encumbered assets to total assets.

	Assets $million	30.06.19
		Assets encumbered as a result of transactions with counterparties other than central banks			Other assets (comprising assets encumbered at the central bank and unencumbered assets)
		As a result of securitisations $million	Other $million	Total $million	Assets positioned at the central bank (ie pre-positioned plus encumbered) $million	Assets not positioned at the central bank				Total $million
		As a result of securitisations $million	Other $million	Total $million		Readily available for encumbrance $million	Other assets that are capable of being encumbered $million	Derivatives and reverse repo/stock lending $million	Cannot be encumbered $million	Total $million
Cash and balances at central banks	58,822	-	-	-	9,305	49,517	-	-	-	58,822
Derivative financial instruments	49,237	-	-	-	-	-	-	49,237	-	49,237
Loans and advances to banks	80,071	344	148	492	-	46,085	14,175	18,353	966	79,579
Loans and advances to customers	306,642	407	1,299	1,706	-	-	242,332	39,561	23,043	304,936
Investment securities	157,530	-	11,369	11,369	3,064	98,097	39,178	-	5,822	146,161
Other assets	39,338	-	15,324	15,324	-	-	14,857	-	9,157	24,014
Current tax assets	507	-	-	-	-	-	-	-	507	507
Prepayments and accrued income	2,797	-	-	-	-	-	1,481	-	1,316	2,797
Interests in associates and joint ventures	2,512	-	-	-	-	-	-	-	2,512	2,512
Goodwill and intangible assets	5,111	-	-	-	-	-	-	-	5,111	5,111
Property, plant and equipment	7,750	-	-	-	-	-	516	-	7,234	7,750
Deferred tax assets	924	-	-	-	-	-	-	-	924	924
Assets classified as held for sale	1,263	-	-	-	-	-	-	-	1,263	1,263
Total	712,504	751	28,140	28,891	12,369	193,699	312,539	107,151	57,855	683,613

	Assets $million	31.12.18
		Assets encumbered as a result of transactions with counterparties other than central banks			Other assets (comprising assets encumbered at the central bank and unencumbered assets)
		As a result of securitisations $million	Other $million	Total $million	Assets positioned at the central bank (ie pre- positioned plus encumbered) $million	Assets not positioned at the central bank				Total $million
		As a result of securitisations $million	Other $million	Total $million		Readily available for encumbrance $million	Other assets that are capable of being encumbered $million	Derivatives and reverse repo/stock lending $million	Cannot be encumbered $million	Total $million
Cash and balances at central banks	57,511	-	-	-	8,152	49,359	-	-	-	57,511
Derivative financial instruments	45,621	-	-	-	-	-	-	45,621	-	45,621
Loans and advances to banks	82,065	447	-	447	-	45,623	13,918	20,698	1,379	81,618
Loans and advances to customers	299,371	497	7	504	-	-	243,802	41,037	14,028	298,867
Investment securities	149,568	-	7,521	7,521	-	95,523	40,591	-	5,933	142,047
Other assets	35,401	-	16,287	16,287	-	-	11,440	-	7,674	19,114
Current tax assets	492	-	-	-	-	-	-	-	492	492
Prepayments and accrued income	2,505	-	-	-	-	-	1,356	-	1,149	2,505
Interests in associates and joint ventures	2,307	-	-	-	-	-	-	-	2,307	2,307
Goodwill and intangible assets	5,056	-	-	-	-	-	-	-	5,056	5,056
Property, plant and equipment	6,490	-	-	-	-	-	400	-	6,090	6,490
Deferred tax assets	1,047	-	-	-	-	-	-	-	1,047	1,047
Assets classified as held for sale	1,328	-	-	-	-	-	-	-	1,328	1,328
Total	688,762	944	23,815	24,759	8,152	190,505	311,507	107,356	46,483	664,003

The Group received $77,246 million (31 December 2018: $82,534 million) as collateral under reverse repurchase agreements that was eligible for repledging; of this the Group sold or repledged $36,169 million (31 December 2018: $40,552 million) under repurchase agreements.

Liquidity analysis of the Group's balance sheet

Contractual maturity of assets and liabilities

The following table presents assets and liabilities by maturity groupings based on the remaining period to the contractual maturity date as at the balance sheet date on a discounted basis. Contractual maturities do not necessarily reflect actual repayments or cashflow.

Within the tables below, cash and balances with central banks, interbank placements and investment securities that are fair value through other comprehensive income are used by the Group principally for liquidity management purposes.

As at the reporting date, assets remain predominantly short-dated, with 57 per cent maturing in under one year. Our less than three-month cumulative net funding gap increased from the previous year, largely due to an increase in customer accounts as the Group focused on improving the quality of its deposit base. In practice, these deposits are recognised as stable and have behavioural profiles that extend beyond their contractual maturities.

	30.06.19
	One month or less $million	Between one month and three months $million	Between three months and six months $million	Between six months and nine months $million	Between nine months and one year $million	Between one year and two years $million	Between two years and five years $million	More than five years and undated $million	Total $million
Assets
Cash and balances at central banks	49,517	-	-	-	-	-	-	9,305	58,822
Derivative financial instruments	5,853	5,771	4,787	3,781	2,091	4,241	9,508	13,205	49,237
Loans and advances to banks^1,2	34,904	19,484	12,073	4,366	4,559	2,206	1,987	492	80,071
Loans and advances to customers^1,2	86,104	37,351	20,710	9,850	9,398	18,524	40,864	83,841	306,642
Of which classified as:
Investment securities	12,574	15,072	10,276	9,804	15,176	28,839	41,797	23,992	157,530
Other assets	16,107	15,904	1,876	133	114	188	184	25,696	60,202
Total assets	205,059	93,582	49,722	27,934	31,338	53,998	94,340	156,531	712,504

Liabilities
Deposits by banks^1,3	35,032	2,679	1,643	625	221	112	506	51	40,869
Customer accounts^1,4	332,905	52,154	28,361	12,393	12,031	2,902	1,397	2,768	444,911
Derivative financial instruments	5,670	6,227	4,663	4,079	2,583	5,154	10,647	11,330	50,353
Senior debt	291	3,890	605	867	2,891	2,942	6,259	12,713	30,458
Other debt securities in issue¹	4,500	9,229	7,220	1,452	1,114	460	123	1,388	25,486
Other liabilities	16,378	18,197	3,777	1,107	946	1,027	993	12,318	54,743
Subordinated liabilities and other borrowed funds	-	17	-	-	758	-	4,961	9,509	15,245
Total liabilities	394,776	92,393	46,269	20,523	20,544	12,597	24,886	50,077	662,065
Net liquidity gap	(189,717)	1,189	3,453	7,411	10,794	41,401	69,454	106,454	50,439

1 Loans and advances, investment securities, deposits by banks, customer accounts and debt securities in issue include financial instruments held at fair value through profit or loss, see the notes to the financial statements in the Half Year Report

2 Loans and advances include reverse repurchase agreements and other similar secured lending of $57.9 billion

3 Deposits by banks include repurchase agreements and other similar secured borrowing of $9.3 billion

4 Customer accounts include repurchase agreements and other similar secured borrowing of $36.4 billion

	31.12.18
	One month or less $million	Between one month and three months $million	Between three months and six months $million	Between six months and nine months $million	Between nine months and one year $million	Between one year and two years $million	Between two years and five years $million	More than five years and undated $million	Total $million
Assets
Cash and balances at central banks	49,359	-	-	-	-	-	-	8,152	57,511
Derivative financial instruments	6,902	5,861	5,827	3,509	2,333	4,458	8,079	8,652	45,621
Loans and advances to banks1,2	38,331	20,549	11,209	5,214	2,835	2,584	1,064	279	82,065
Loans and advances to customers1,2	84,846	33,756	18,133	11,641	10,321	17,519	39,306	83,849	299,371
Of which classified as
Investment securities	15,297	13,589	14,131	14,300	17,402	25,695	31,303	17,851	149,568
Other assets	21,155	8,909	2,385	224	135	96	155	21,567	54,626
Total assets	215,890	82,664	51,685	34,888	33,026	50,352	79,907	140,350	688,762

Liabilities
Deposits by banks1,3	30,368	2,593	572	553	397	244	230	60	35,017
Customer accounts1,4	331,633	51,553	23,643	10,966	11,634	3,631	1,154	2,967	437,181
Derivative financial instruments	7,467	6,072	6,136	3,544	2,140	5,257	8,886	7,707	47,209
Senior debt	1,259	959	509	5,087	667	2,878	6,327	10,093	27,779
Other debt securities in issue1	4,893	9,792	8,062	177	715	1,030	16	1,395	26,080
Other liabilities	22,835	8,698	4,130	852	536	868	401	11,823	50,143
Subordinated liabilities and other borrowed funds	23	17	-	-	-	2,522	4,421	8,018	15,001
Total liabilities	398,478	79,684	43,052	21,179	16,089	16,430	21,435	42,063	638,410
Net liquidity gap	(182,588)	2,980	8,633	13,709	16,937	33,922	58,472	98,287	50,352

2 Loans and advances include reverse repurchase agreements and other similar secured lending of $61.7 billion

3 Deposits by banks include repurchase agreements and other similar secured borrowing of $5.0 billion

4 Customer accounts include repurchase agreements and other similar secured borrowing of $39.4 billion

Behavioural maturity of financial assets and liabilities

The cashflows presented in the previous section reflect the cashflows that will be contractually payable over the residual maturity of the instruments. However, contractual maturities do not necessarily reflect the timing of actual repayments or cashflow. In practice, certain assets and liabilities behave differently from their contractual terms, especially for short-term customer accounts, credit card balances and overdrafts, which extend to a longer period than their contractual maturity. On the other hand, mortgage balances tend to have a shorter repayment period than their contractual maturity date. Expected customer behaviour is assessed and managed on a country basis using qualitative and quantitative techniques, including analysis of observed customer behaviour over time.

Maturity of financial liabilities on an undiscounted basis

The following table analyses the contractual cashflows payable for the Group's financial liabilities by remaining contractual maturities on an undiscounted basis. The financial liability balances in the table below will not agree to the balances reported in the consolidated balance sheet as the table incorporates all contractual cashflows, on an undiscounted basis, relating to both principal and interest payments. Derivatives not treated as hedging derivatives are included in the 'On demand' time bucket and not by contractual maturity.

Within the 'More than five years and undated' maturity band are undated financial liabilities, all of which relate to subordinated debt, on which interest payments are not included as this information would not be meaningful, given the instruments are undated. Interest payments on these instruments are included within the relevant maturities up to five years.

	30.06.19
	One month or less $million	Between one month and three months $million	Between three months and six months $million	Between six months and nine months $million	Between nine months and one year $million	Between one year and two years $million	Between two years and five years $million	More than five years and undated $million	Total $million
Deposits by banks	35,157	2,705	1,660	631	241	126	525	51	41,096
Customer accounts	333,549	52,683	29,319	12,561	12,196	3,301	1,478	3,298	448,385
Derivative financial instruments1	48,522	6	7	71	-	722	738	287	50,353
Debt securities in issue	4,809	13,612	8,023	2,333	3,576	3,810	7,495	16,256	59,914
Subordinated liabilities and other borrowed funds	-	-	255	-	1,153	606	6,569	15,233	23,816
Other liabilities	15,047	18,432	3,951	1,241	948	1,027	995	13,369	55,010
Total liabilities	437,084	87,438	43,215	16,837	18,114	9,592	17,800	48,494	678,574

	31.12.18
	One month or less $million	Between one month and three months $million	Between three months and six months $million	Between six months and nine months $million	Between nine months and one year $million	Between one year and two years $million	Between two years and five years $million	More than five years and undated $million	Total $million
Deposits by banks	30,467	2,609	593	569	409	267	250	62	35,226
Customer accounts	332,115	51,845	24,686	11,094	11,780	3,700	1,226	3,552	439,998
Derivative financial instruments1	45,665	137	141	9	91	31	679	456	47,209
Debt securities in issue	6,169	11,345	8,786	5,310	1,628	3,685	7,104	13,000	57,027
Subordinated liabilities and other borrowed funds	23	-	255	-	414	3,169	6,154	13,865	23,880
Other liabilities	19,746	8,757	4,129	892	520	885	407	12,302	47,638
Total liabilities	434,185	74,693	38,590	17,874	14,842	11,737	15,820	43,237	650,978

1 Derivatives are on a discounted basis

Interest Rate Risk in the Banking Book

The following table provides the estimated impact on the Group's earnings of a 50 basis point parallel shock (up and down) across all yield curves. The sensitivities shown represent the estimated change in base case projected net interest income (NII), plus the change in interest rate implied income and expense from FX swaps used to manage banking book currency positions, under the two interest rate shock scenarios.

The interest rate sensitivities are indicative and based on simplified scenarios, estimating the aggregate impact of an instantaneous 50 basis point parallel shock across all yield curves over a one-year horizon, including the time taken to implement changes to pricing before becoming effective. The assessment assumes that non-interest rate sensitive aspects of the size and mix of the balance sheet remain constant and that there are no specific management actions in response to the change in rates. No assumptions are made in relation to the impact on credit spreads in a changing rate environment.

Significant modelling and behavioural assumptions are made regarding scenario simplification, market competition, pass-through rates, asset and liability re-pricing tenors, and price flooring. In particular, the assumption that interest rates of all currencies and maturities shift by the same amount concurrently, and that no actions are taken to mitigate the impacts arising from this are considered unlikely. Reported sensitivities will vary over time due to a number of factors including changes in balance sheet composition, market conditions, customer behaviour and risk management strategy and should therefore not be considered an income or profit forecast.

Estimated one-year impact to earnings from a parallel shift in yield curves at the beginning of the period of:	30.06.19
	USD bloc $million	HKD, SGD & KRW bloc $million	Other currency bloc $million	Total $million
+ 50 basis points	20	90	100	210
- 50 basis points	(10)	(70)	(100)	(180)

Estimated one-year impact to earnings from a parallel shift in yield curves at the beginning of the period of:	31.12.18
	USD bloc $million	HKD, SGD & KRW bloc $million	Other currency bloc $million	Total $million
+ 50 basis points	10	110	90	210
- 50 basis points	(20)	(70)	(90)	(180)

As at 30 June 2019, the Group estimates the one-year impact of an instantaneous, parallel increase across all yield curves of 50 basis points to be an earnings benefit of $210 million. The corresponding impact from a parallel decrease of 50 basis points would result in an earnings reduction of $180 million.

The benefit from rising interest rates is primarily from reinvesting at higher yields and from assets re-pricing faster and to a greater extent than deposits. NII sensitivity under both the up and down shock remained broadly unchanged since December 2018.

The US dollar sensitivity is impacted by the dampening effect due to the asymmetry of funding trading book assets with banking book liabilities. The sensitivities include the cost of banking book liabilities used to fund the trading book, however the revenue associated with the trading book positions is recognised in trading book income. This asymmetry in both the up and down scenarios should be broadly offset within total operating income.

Operational Risk

Operational Risks arise from the processes executed within the Group. Risks associated with these processes are mapped into a Group Process Universe where the standardised Control Assessment Standards are applied. The Standards are benchmarked against regulatory requirements.

Operational risk profile

The Operational Risk profile is the Group's overall exposure to non-financial risk, at a given point in time, covering all Principal Risk Types. The Operational Risk profile comprises both Operational Risk events (including losses) and the current exposures to non-financial risks.

Other principal risks

Losses arising from operational failures for other principal risks (for example: Compliance, Conduct, Reputational, Information and Cyber Security, and Financial Crime Risk are reported as operational losses). Operational losses do not include Operational Risk-related credit impairments.

Standard Chartered PLC - Capital review

The Capital review provides an analysis of the Group's capital and leverage position and requirements.

Capital summary

The Group's capital and leverage position is managed within the Board-approved risk appetite. The Group is well capitalised with low leverage and high levels of loss-absorbing capacity.

Capital, leverage and RWA	30.06.19	31.12.18
CET1 capital	13.5%	14.2%
Tier 1 capital	15.9%	16.8%
Total capital	20.3%	21.6%
UK leverage	5.3%	5.6%
Risk-weighted assets (RWA) $million	270,739	258,297

The Group's Common Equity Tier 1 (CET1) capital and Tier 1 leverage position were well above current requirements. For further detail see the Capital section in the Standard Chartered PLC Pillar 3 Disclosures for H1 2019.

The Group's current Pillar 2A requirement is 2.9 per cent of RWA, of which at least 1.6 per cent must be held in CET1. This requirement can vary over time.

The Group's fully phased minimum requirement for own funds and eligible liabilities (MREL) is 21.8 per cent of RWA from 1 January 2022. The Group's combined buffer (the capital conservation, global systemically important institution (G-SII) and countercyclical buffers) is additive to the minimum requirement, resulting in a total MREL requirement of 25.7 per cent of RWA from 1 January 2022. The Group's MREL position was 26.2 per cent of RWA and 9.1 per cent of leverage exposure at 30 June 2019.

The Group has continued its programme of MREL issuance from its holding company in 2019, issuing around $2.8 billion of MREL eligible securities during the period including the Group's inaugural issuance of Australian dollar senior notes. The Group also priced an inaugural SGD750 million Additional Tier 1 (AT1) and its first emerging-markets focused sustainability bond of EUR500 million in the period. As both securities settled after 30 June 2019, they are not included in any regulatory metrics in the period.

In the period, the Group commenced a buy-back of $1 billion of its ordinary share capital with the purpose of reducing the Group's outstanding ordinary shares. The impact of the $1 billion buy-back on the Group's CET1 ratio is a reduction of around 39 basis points, which has been reflected in the capital base..

The Group is a G-SII, with a 1.0 per cent G-SII CET1 buffer. The Standard Chartered PLC 2018 G-SII disclosure is published at: sc.com/fullyearresults.

Capital ratios

	30.06.19	31.12.18
CET1	13.5%	14.2%
Tier 1 capital	15.9%	16.8%
Total capital	20.3%	21.6%

CRD IV capital base1

	30.06.19 $million	31.12.18 $million
CET1 instruments and reserves
Capital instruments and the related share premium accounts	5,615	5,617
Of which: share premium accounts	3,989	3,965
Retained earnings²	24,603	25,377
Accumulated other comprehensive income (and other reserves)	11,640	11,878
Non-controlling interests (amount allowed in consolidated CET1)	693	686
Independently reviewed interim and year-end profits	1,481	1,072
Foreseeable dividends net of scrip	(449)	(527)
CET1 capital before regulatory adjustments	43,583	44,103
CET1 regulatory adjustments
Additional value adjustments (prudential valuation adjustments)	(677)	(564)
Intangible assets (net of related tax liability)	(5,201)	(5,146)
Deferred tax assets that rely on future profitability (excludes those arising from temporary differences)	(92)	(115)
Fair value reserves related to net losses on cashflow hedges	68	10
Deduction of amounts resulting from the calculation of excess expected loss	(930)	(875)
Net gains on liabilities at fair value resulting from changes in own Credit Risk	(68)	(412)
Defined-benefit pension fund assets	(10)	(34)
Fair value gains arising from the institution's own Credit Risk related to derivative liabilities	(90)	(127)
Exposure amounts which could qualify for risk-weighting of 1250%	(72)	(123)
Total regulatory adjustments to CET1	(7,072)	(7,386)
CET1 capital	36,511	36,717
AT1 capital instruments	6,632	6,704
AT1 regulatory adjustments	(20)	(20)
Tier 1 capital	43,123	43,401

Tier 2 capital instruments	11,864	12,325
Tier 2 regulatory adjustments	(30)	(30)
Tier 2 capital	11,834	12,295
Total capital	54,957	55,696
Total risk-weighted assets	270,739	258,297

1 CRD IV capital is prepared on the regulatory scope of consolidation

2 Retained earnings have been reduced to reflect the full $1 billion pro forma impact of the share buy-back programme announced in April 2019

Movement in total capital

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million
CET1 at 1 January/1 July	36,717	38,512
Ordinary shares issued in the period and share premium	25	10
Share buy-back	(1,000)	-
Profit for the period	1,481	(485)
Foreseeable dividends net of scrip deducted from CET1	(449)	(527)
Difference between dividends paid and foreseeable dividends	(190)	43
Movement in goodwill and other intangible assets	(55)	(155)
Foreign currency translation differences	(82)	(380)
Non-controlling interests	7	(9)
Movement in eligible other comprehensive income	170	(75)
Deferred tax assets that rely on future profitability	23	14
Decrease/(increase) in excess expected loss	(55)	(192)
Additional value adjustments (prudential valuation adjustment)	(113)	(68)
IFRS 9 day one transitional impact on regulatory reserves	(43)	-
Exposure amounts which could qualify for risk-weighting	51	(1)
Other	24	30
CET1 at 30 June/31 December	36,511	36,717

AT1 at 1 January/1 July	6,684	6,692
Issuances net of redemptions	-	-
Foreign currency translation difference	(1)	(8)
Excess on AT1 grandfathered limit (ineligible)	(71)	-
AT1 at 30 June/31 December	6,612	6,684

Tier 2 capital at 1 January/1 July	12,295	12,815
Regulatory amortisation	(572)	(461)
Issuances net of redemptions	-	-
Foreign currency translation difference	(15)	(93)
Tier 2 ineligible minority interest	51	29
Recognition of ineligible AT1	71	-
Other	4	5
Tier 2 capital at 30 June/31 December	11,834	12,295
Total capital at 30 June/31 December	54,957	55,696

The main movements in capital in the period were:

• The CET1 ratio decreased from 14.2 per cent to 13.5 per cent predominantly because of the impact of the share buy-back, other distributions and higher RWA in the period partly offset by H1 profit

• CET1 capital decreased by $0.2 billion, due to the share buy-back of $1 billion, other distributions during the period of $0.6 billion, partly offset by profit after tax of $1.5 billion

• AT1 decreased slightly to $ 6.6 billion due to the amount above the AT1 grandfathered limit which is ineligible as AT1

• Tier 2 capital was $0.5 billion lower at $11.8 billion mainly due to the impact of regulatory amortisation, partly offset by the recognition of ineligible AT1 as Tier 2

Risk-weighted assets by business

	30.06.19
	Credit Risk $million	Operational Risk $million	Market Risk $million	Total risk $million
Corporate & Institutional Banking	101,744	13,261	22,981	137,986
Retail Banking	35,458	7,314	-	42,772
Commercial Banking	28,948	2,626	-	31,574
Private Banking	5,887	728	-	6,615
Central & other items	47,973	3,691	128	51,792
Total risk-weighted assets	220,010	27,620	23,109	270,739

	31.12.18
	Credit Risk $million	Operational Risk $million	Market Risk $million	Total risk $million
Corporate & Institutional Banking	96,954	13,029	19,008	128,991
Retail Banking	35,545	7,358	-	42,903
Commercial Banking	27,711	2,770	-	30,481
Private Banking	5,103	758	-	5,861
Central & other items	45,825	4,135	101	50,061
Total risk-weighted assets	211,138	28,050	19,109	258,297

Risk-weighted assets by geographic region

	30.06.19 $million	31.12.18 $million
Greater China & North Asia	84,881	81,023
ASEAN & South Asia	93,737	87,935
Africa & Middle East	51,705	53,072
Europe & Americas	42,809	40,789
Central & other items	(2,393)	(4,522)
Total risk-weighted assets	270,739	258,297

Movement in risk-weighted assets

	Credit Risk						Operational Risk $million	Market Risk $million	Total risk $million
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	PrivateBanking $million	Central &other items $million	Total $million	Operational Risk $million	Market Risk $million	Total risk $million
At 1 January 2018	109,368	36,345	29,712	5,134	45,671	226,230	30,478	23,040	279,748
Assets (decline)/growth	1,473	557	1,019	426	2,573	6,048	-	-	6,048
Net credit migration	(2,317)	(191)	321	-	244	(1,943)	-	-	(1,943)
Risk-weighted assets efficiencies	(325)	-	-	-	-	(325)	-	-	(325)
Model, methodology and policy changes	(1,769)	(591)	6	-	76	(2,278)	-	(1,138)	(3,416)
Disposals	-	-	-	-	(626)	(626)	-	-	(626)
Foreign currency translation	(1,240)	(759)	(567)	(50)	(1,292)	(3,908)	-	-	(3,908)
Other non-Credit Risk movements	-	-	-	-	-	-	(2,428)	(1,283)	(3,711)
At 30 June 2018	105,190	35,361	30,491	5,510	46,646	223,198	28,050	20,619	271,867
Assets (decline)/growth	(3,000)	909	(2,366)	(370)	323	(4,504)	-	-	(4,504)
Net credit migration	197	216	(84)	-	250	579	-	-	579
Risk-weighted assets efficiencies	(3,215)	(597)	-	-	(748)	(4,560)	-	-	(4,560)
Model, methodology and policy changes	(1,569)	(80)	60	-	1	(1,588)	-	(810)	(2,398)
Disposals	-	-	-	-	-	-	-	-	-
Foreign currency translation	(649)	(264)	(390)	(37)	(647)	(1,987)	-	-	(1,987)
Other non-Credit Risk movements	-	-	-	-	-	-	-	(700)	(700)
At 31 December 2018	96,954	35,545	27,711	5,103	45,825	211,138	28,050	19,109	258,297
Assets (decline)/growth	5,808	1,650	1,405	771	3,021	12,655	-	-	12,655
Net credit migration	(320)	(831)	(51)	10	45	(1,147)	-	-	(1,147)
Risk-weighted assets efficiencies	(672)	-	-	-	(2,056)	(2,728)	-	-	(2,728)
Model, methodology and policy changes	-	(698)	-	-	1,400	702	-	500	1,202
Disposals	-	-	-	-	-	-	-	-	-
Foreign currency translation	(26)	(208)	(117)	3	(262)	(610)	-	-	(610)
Other non-Credit Risk movements	-	-	-	-	-	-	(430)	3,500	3,070
At 30 June 2019	101,744	35,458	28,948	5,887	47,973	220,010	27,620	23,109	270,739

Movements in risk-weighted assets

RWA increased by $12.4 billion, or 4.8 per cent from 31 December 2018 to $270.7 billion. This was mainly due to increases in Credit Risk RWA of $8.9 billion, Market Risk RWA $4.0 billion partly offset by a decrease of $0.4 billion in Operational Risk RWA.

Corporate & Institutional Banking

Credit Risk RWA increased by $4.8 billion to $101.7 billion mainly due to:

• $5.8 billion increase due to asset balance growth in Financial Markets, Corporate Finance and Lending

• $0.7 billion decrease due to RWA efficiencies relating to credit risk mitigation

• $0.3 billion decrease due to net credit migration principally in Corporate Finance, Transaction Banking, and Lending

Retail Banking

Credit Risk RWA decreased by $0.1 billion to $35.5 billion mainly due to:

• $1.7 billion asset balance growth in ASEAN & South Asia and Africa & Middle East

• $0.7 billion RWA reduction following regulatory approval of changes to Korean Personal Loans models

• $0.8 billion decrease from net credit migration primarily in Greater China & North Asia

• $0.2 billion decrease from foreign currency translation mainly due to depreciation of currencies in Greater China & North Asia against the US dollar

Commercial Banking

Credit Risk RWA increased by $1.2 billion to $28.9 billion mainly due to:

• $1.4 billion RWA asset balance growth mainly due to Corporate Finance and Lending

• $0.1 billion decrease from net credit migration

• $0.1 billion decrease from foreign currency translation mainly due to depreciation of currencies in Pakistan and Korea against the US dollar

Private Banking

Credit Risk RWA increased by $0.8 billion to $5.9 billion principally due to asset balance growth in wealth management products.

Central & other items

Central and other items RWA mainly relates to the Treasury Markets liquidity portfolio, the Group's principal joint venture investment, PT Bank Permata Tbk, equity investments and deferred/current tax assets

Credit Risk RWA increased by $2.1 billion to $48.0 billion mainly due to:

• $3.0 billion increase in Credit Risk RWA is principally due to higher investment securities balance in Treasury

• $1.4 billion increase from the implementation of the IFRS 16 standard relating to leases on property

• $0.3 billion decrease from foreign currency translation mainly due to depreciation of currencies in Pakistan and Korea against the US dollar

• $2.1 billion of benefit from RWA efficiency initiatives on Treasury Markets' exposures

Market Risk

Total market risk RWA (MRWA) increased by $4.0 billion, or 21 per cent from 31 December 2018 to $23.1 billion. This change was due mainly to increased trading book debt security holdings and to internal models approach (IMA) RWA following an increase in regulatory backtesting exceptions.

Operational Risk

Operational Risk RWA reduced by $0.4 billion to $27.6 billion, comprising a decrease in the average income over a rolling three-year time horizon, as lower 2018 income replaced higher 2015 income, and a reduced average beta factor, due to a shift towards lower beta businesses. This represents a 1.5 per cent year-on-year reduction in Operational Risk RWA.

UK leverage ratio

The Group's UK leverage ratio, which excludes qualifying claims on central banks in accordance with a PRA waiver, was 5.3 per cent, which is above the current minimum requirement of 3.7 per cent. The lower UK leverage ratio in the period was due to the combined impact of an increased exposure measure and slightly lower Tier 1 capital (end point).

UK leverage ratio

	30.06.19 $million	31.12.18 $million
Tier 1 capital (transitional)	43,123	43,401
AT1 capital subject to phase out	(1,671)	(1,743)
Tier 1 capital (end point)	41,452	41,658
Derivative financial instruments	49,237	45,621
Derivative cash collateral	8,826	10,323
Securities financing transactions (SFTs)	57,914	61,735
Loans and advances and other assets	596,527	571,083
Total on-balance sheet assets	712,504	688,762
Regulatory consolidation adjustments¹	(37,066)	(45,521)
Derivatives adjustments
Derivatives netting	(35,463)	(34,300)
Adjustments to cash collateral	(11,038)	(14,827)
Net written credit protection	1,359	1,221
Potential future exposure on derivatives	31,298	28,498
Total derivatives adjustments	(13,844)	(19,408)
Counterparty Risk leverage exposure measure for SFTs	7,913	8,281
Off-balance sheet items	119,047	115,335
Regulatory deductions from Tier 1 capital	(6,914)	(6,847)
UK leverage exposure (end point)	781,640	740,602
UK leverage ratio (end point)	5.3%	5.6%
UK leverage exposure quarterly average	788,148	734,976
UK leverage ratio quarterly average	5.2%	5.8%
Countercyclical leverage ratio buffer	0.1%	0.1%
G-SII additional leverage ratio buffer	0.4%	0.3%

1 Includes adjustment for qualifying central bank claims

Standard Chartered PLC - Statement of directors' responsibilities

We confirm that to the best of our knowledge:

• The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU

• The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the six months ended 30 June 2019 and their impact on the condensed consolidated interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place during the six months ended 30 June 2019 that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could have materially affected the financial position or performance of the entity during that period

By order of the Board

Andy Halford

Group Chief Financial Officer

1 August 2019

Standard Chartered PLC - Independent review report

to Standard Chartered PLC

Conclusion

We have been engaged by Standard Chartered PLC (the Company) including its subsidiaries (together the Group) to review the condensed consolidated interim set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises the condensed consolidated interim balance sheet, the condensed consolidated interim income statement, the condensed consolidated interim statement of comprehensive income, the condensed consolidated interim statement of changes in equity, the condensed consolidated interim cashflow statement, and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules (the DTR) of the UK's Financial Conduct Authority (the UK FCA).

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in the notes to the financial statements in the Half Year Report, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the Group a conclusion on the condensed consolidated set of financial statements in the half-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Group in accordance with the terms of our engagement to assist the Group in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Group those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group for our review work, for this report, or for the conclusions we have reached.

Paul Furneaux
for and on behalf of KPMG LLP

Chartered Accountants
15 Canada Square
London E14 5GL

1 August 2019

Standard Chartered PLC - Condensed consolidated interim income statement

For the six months ended 30 June 2019

	Notes	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Interest income		9,843	9,037	8,227
Interest expense		(5,225)	(4,605)	(3,866)
Net interest income		4,618	4,432	4,361
Fees and commission income	3	2,120	1,915	2,114
Fees and commission expense	3	(282)	(292)	(245)
Net trading income	4	994	717	966
Other operating income	5	380	390	431
Operating income		7,830	7,162	7,627
Staff costs		(3,577)	(3,496)	(3,578)
Premises costs		(191)	(417)	(373)
General administrative expenses		(953)	(2,118)	(808)
Depreciation and amortisation		(577)	(431)	(426)
Operating expenses	6	(5,298)	(6,462)	(5,185)
Operating profit before impairment losses and taxation		2,532	700	2,442
Credit impairment	7	(254)	(439)	(214)
Other impairment	8	(44)	(132)	(50)
Profit from associates and joint ventures		180	73	168
Profit before taxation		2,414	202	2,346
Taxation	9	(918)	(686)	(753)
Profit/(loss) for the period		1,496	(484)	1,593

Profit/(loss) attributable to:
Non-controlling interests		19	22	33
Parent company shareholders		1,477	(506)	1,560
Profit/(loss) for the period		1,496	(484)	1,593

		cents	cents	cents
Earnings per share:
Basic earnings/(loss) per ordinary share	11	38.0	(21.9)	40.7
Diluted earnings/(loss) per ordinary share	11	37.5	(21.7)	40.2

The notes form an integral part of these financial statements.

Standard Chartered PLC - Condensed consolidated interim statement of comprehensive income

For the six months ended 30 June 2019

	Notes	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Profit/(loss) for the period		1,496	(484)	1,593
Other comprehensive income/(loss)
Items that will not be reclassified to income statement:		(384)	129	253
Own credit (losses)/gains on financial liabilities designated at fair value through profit or loss		(392)	258	136
Equity instruments at fair value through other comprehensive income		13	17	19
Actuarial (losses)/gains on retirement benefit obligations	23	(49)	(124)	105
Taxation relating to components of other comprehensive income		44	(22)	(7)

Items that may be reclassified subsequently to income statement:		65	(363)	(826)
Exchange differences on translation of foreign operations:
Net losses taken to equity		(159)	(454)	(1,008)
Net gains on net investment hedges		73	66	216
Share of other comprehensive income from associates and joint ventures		3	17	16
Debt instruments at fair value through other comprehensive income:
Net valuation gains/(losses) taken to equity		291	(9)	(119)
Reclassified to income statement		(58)	18	13
Net impact of expected credit losses		3	8	(8)
Cashflow hedges:
Net (losses)/gains taken to equity		(79)	(15)	49
Reclassified to income statement		7	2	5
Taxation relating to components of other comprehensive income		(16)	4	10
Other comprehensive loss for the period, net of taxation		(319)	(234)	(573)
Total comprehensive income/(loss) for the period		1,177	(718)	1,020

Total comprehensive income/(loss) attributable to:
Non-controlling interests		11	9	25
Parent company shareholders		1,166	(727)	995
Total comprehensive income/(loss) for the period		1,177	(718)	1,020

Standard Chartered PLC - Condensed consolidated interim balance sheet

As at 30 June 2019

	Notes	30.06.19 $million	31.12.18 $million
Assets
Cash and balances at central banks		58,822	57,511
Financial assets held at fair value through profit or loss	12	93,402	87,132
Derivative financial instruments	12,13	49,237	45,621
Loans and advances to banks1	12	59,210	61,414
Loans and advances to customers2	12	263,595	256,557
Investment securities	12	128,036	125,901
Other assets	16	39,338	35,401
Current tax assets		507	492
Prepayments and accrued income		2,797	2,505
Interests in associates and joint ventures		2,512	2,307
Goodwill and intangible assets	15	5,111	5,056
Property, plant and equipment		7,750	6,490
Deferred tax assets		924	1,047
Assets classified as held for sale	17	1,263	1,328
Total assets		712,504	688,762

Liabilities
Deposits by banks	12	30,783	29,715
Customer accounts	12	401,597	391,013
Repurchase agreements and other similar secured borrowing	12,14	5,920	1,401
Financial liabilities held at fair value through profit or loss	12	61,781	60,700
Derivative financial instruments	12,13	50,353	47,209
Debt securities in issue	12	46,672	46,454
Other liabilities	18	42,752	38,309
Current tax liabilities		550	676
Accruals and deferred income		4,893	5,393
Subordinated liabilities and other borrowed funds	12,21	15,245	15,001
Deferred tax liabilities		549	563
Provisions for liabilities and charges		393	1,330
Retirement benefit obligations	23	473	399
Liabilities included in disposal groups held for sale	17	104	247
Total liabilities		662,065	638,410

Equity
Share capital and share premium account	22	7,109	7,111
Other reserves		11,640	11,878
Retained earnings		26,318	26,129
Total parent company shareholders' equity		45,067	45,118
Other equity instruments	22	4,961	4,961
Total equity excluding non-controlling interests		50,028	50,079
Non-controlling interests		411	273
Total equity		50,439	50,352
Total equity and liabilities		712,504	688,762

1 Reverse repurchase agreements and other similar secured lending balances held at amortised cost of $1,145 million (31 December 2018: $3,815 million) have been included with loans and advances to banks

2 Reverse repurchase agreements and other similar secured lending balances held at amortised cost of $2,704 million (31 December 2018: $3,151 million) have been included with loans and advances to customers

The notes form an integral part of these financial statements.

Standard Chartered PLC - Condensed consolidated interim statement of changes in equity

For the six months ended 30 June 2019

	Share capital and share premium account $million	Capital and merger reserves $million	Own credit adjustment reserve $million	Fair value through other comprehensive income reserve - debt $million	Fair value through other comprehensive income reserve - equity $million	Cash flow hedge reserve $million	Translation reserve $million	Retained earnings $million	Parent company shareholders' equity $million	Other equity instruments $million	Non-controlling interests $million	Total $million
As at 1 January 2018	7,097	17,1291	54	(77)	53	(45)	(4,454)	25,895	45,652	4,961	333	50,946
Profit for the period	-	-	-	-	-	-	-	1,560	1,560	-	33	1,593
Other comprehensive income/(loss)	-	-	132	(103)	37	46	(783)	1062	(565)	-	(8)	(573)
Distributions	-	-	-	-	-	-	-	-	-	-	(27)	(27)
Shares issued, net of expenses3	4	-	-	-	-	-	-	-	4	-	-	4
Net own shares adjustment4	-	-	-	-	-	-	-	7	7	-	-	7
Share option expense, net of taxation	-	-	-	-	-	-	-	97	97	-	-	97
Dividends5	-	-	-	-	-	-	-	(564)	(564)	-	-	(564)
Other movements	-	-	-	-	-	-	-	5	5	-	-	5
As at 30 June 2018	7,101	17,129	186	(180)	90	1	(5,237)	27,106	46,196	4,961	331	51,488
(Loss)/profit for the period	-	-	-	-	-	-	-	(506)	(506)	-	22	(484)
Other comprehensive income/(loss)	-	-	226	19	30	(11)	(375)	(110)2	(221)	-	(13)	(234)
Distributions	-	-	-	-	-	-	-	-	-	-	(70)	(70)
Shares issued, net of expenses3	10	-	-	-	-	-	-	-	10	-	-	10
Net own shares adjustment4	-	-	-	-	-	-	-	(6)	(6)	-	-	(6)
Share option expense, net of taxation	-	-	-	-	-	-	-	61	61	-	-	61
Dividends5	-	-	-	-	-	-	-	(411)	(411)	-	-	(411)
Other movements	-	-	-	-	-	-	-	(5)	(5)	-	36	(2)
As at 31 December 2018	7,111	17,129	412	(161)	120	(10)	(5,612)	26,129	45,118	4,961	273	50,352
Profit for the period	-	-	-	-	-	-	-	1,477	1,477	-	19	1,496
Other comprehensive (loss)/income	-	-	(344)	212	3	(58)	(78)	(46)2	(311)	-	(8)	(319)
Distributions	-	-	-	-	-	-	-	-	-	-	(26)	(26)
Shares issued, net of expenses3	25	-	-	-	-	-	-	-	25	-	-	25
Net own shares adjustment4	-	-	-	-	-	-	-	(132)	(132)	-	-	(132)
Share option expense, net of taxation	-	-	-	-	-	-	-	97	97	-	-	97
Dividends5	-	-	-	-	-	-	-	(716)	(716)	-	-	(716)
Cancellation of shares including share buy-back7	(27)	27	-	-	-	-	-	(486)	(486)	-	-	(486)
Other movements	-	-	-	-	-	-	-	(5)8	(5)	-	1536	148
As at 30 June 2019	7,109	17,156	68	51	123	(68)	(5,690)	26,318	45,067	4,961	411	50,439

1 Includes capital reserve of $5 million, capital redemption reserve of $13 million and merger reserve of $17,111 million

2 Comprises actuarial (loss)/gain, net of taxation and share from associates and joint ventures $(46) million ($(110) million for the six months ended 31 December 2018 and $106 million for the six months ended 30 June 2018)

3 Comprises share capital of shares issued to fulfil discretionary awards $1 million ($2 million for the six months ended 31 December 2018 and $3 million for the six months ended 30 June 2018), share capital of shares issued to fulfil employee share save options exercised $1 million (nil for the six months ended 31 December 2018 and nil for the six months ended 30 June 2018) and share premium of shares issued to fulfil employee share save options exercised $23 million ($8 million for the six months ended 31 December 2018 and $1 million for the six months ended 30 June 2018)

4 Comprises treasury shares purchased to fulfil discretionary award plans $136 million ( $8 million for the six months ended 31 December 2018 and nil for the six months ended 30 June 2018) offset by treasury shares issued to fulfil discretionary award plans $4 million ($2 million for the six months ended 31 December 2018 and $7 million for the six months ended 30 June 2018)

5 Comprises dividends paid net of scrip $495 million ($192 million for the six months ended 31 December 2018 and $347 million for the six months ended 30 June 2018) and dividends on preference shares classified as equity and Additional Tier 1 securities $221 million ($219 million for the six months ended 31 December 2018 and $217 million for the six months ended 30 June 2018). (refer to the notes to the financial statements in the Half Year Report)

6 Other movements $81 million relates to the Principal Finance business and $72 million relates to the non-controlling interests of our partners in SC Digital Solutions. For the six months ended 31 December 2018, the movement is mainly due to additional share capital issued by Angola subscribed by its non-controlling interests without change in shareholding percentage

7 On 1 May 2019, the Group commenced a share buy-back of its ordinary shares of $0.50 each up to a maximum consideration of $1 billion. At 30 June 2019, the total number of shares purchased was 54,885,156, representing 1.66% of the ordinary shares in issue. The nominal value of ordinary shares purchased at 30 June 2019 was $27 million and the aggregate consideration paid by the Group was $486 million. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account (refer to the notes to the financial statements in the Half Year Report)

8 Withholding tax on capitalisation of revenue reserves $4 million

Notes to the financial statements in the Half Year Report includes a description of each reserve.

The notes form an integral part of these financial statements.

Standard Chartered PLC - Condensed consolidated interim cashflow statement

For the six months ended 30 June 2019

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Cashflows from operating activities:
Profit before taxation	2,414	202	2,346
Adjustments for non-cash items and other adjustments included within income statement	1,092	1,452	1,183
Change in operating assets	(22,546)	16,006	(28,843)
Change in operating liabilities	23,187	(6,135)	39,994
Contributions to defined benefit schemes	(27)	(105)	(38)
UK and overseas taxes paid	(929)	(440)	(330)
Net cash from operating activities	3,191	10,980	14,312
Cashflows from investing activities:
Purchase of property, plant and equipment	(135)	(107)	(64)
Disposal of property, plant and equipment	21	82	3
Dividends received from subsidiaries, associates and joint ventures	1	64	3
Disposal of subsidiaries	3	7	-
Purchase of investment securities	(135,488)	(132,485)	(143,903)
Disposal and maturity of investment securities	132,444	129,136	134,847
Net cash used in investing activities	(3,154)	(3,303)	(9,114)
Cashflows from financing activities:
Issue of ordinary and preference share capital, net of expenses	25	10	4
Treasury share issuance	4	2	7
Treasury share purchase	(136)	(8)	-
Cancellation of shares including share buy-back	(486)	-	-
Gross proceeds from issue of subordinated liabilities	-	-	500
Interest paid on subordinated liabilities	(265)	(360)	(242)
Repayment of subordinated liabilities	(23)	145	(2,242)
Proceeds from issue of senior debts	3,589	7,845	1,921
Repayment of senior debts	(2,289)	(4,566)	(2,464)
Interest paid on senior debts	(271)	(285)	(222)
Investment from non-controlling interests	153	-	-
Dividends paid to non-controlling interests and preference shareholders	(247)	(290)	(243)
Dividends paid to ordinary shareholders	(495)	(191)	(348)
Net cash (used in)/from financing activities	(441)	2,302	(3,329)
Net (decrease)/increase in cash and cash equivalents	(404)	9,979	1,869
Cash and cash equivalents at beginning of the period	97,500	88,315	87,231
Effect of exchange rate movements on cash and cash equivalents	(140)	(794)	(785)
Cash and cash equivalents at end of the period	96,956	97,500	88,315

Contents - Notes to the financial statements

Section	Note	Note title
Basis of preparation	1	Accounting policies
Performance/return	2	Segmental information
	3	Net fees and commission
	4	Net trading income
	5	Other operating income
	6	Operating expenses
	7	Credit impairment
	8	Other impairment
	9	Taxation
	10	Dividends
	11	Earnings per ordinary share
Assets and liabilities held at fair value	12	Financial instruments
Assets and liabilities held at fair value	13	Derivative financial instruments
Financial instruments held at amortised cost	14	Reverse repurchase and repurchase agreements including other similar lending and borrowing
Other assets and investments	15	Goodwill and intangible assets
	16	Other assets
	17	Assets held for sale and associated liabilities
Funding, accruals, provisions, contingent liabilities and legal proceedings	18	Other liabilities
	19	Contingent liabilities and commitments
	20	Legal and regulatory matters
Capital instruments, equity and reserves	21	Subordinated liabilities and other borrowed funds
Capital instruments, equity and reserves	22	Share capital, other equity instruments and reserves
Employee benefits	23	Retirement benefit obligations
Other disclosure matters	24	Related party transactions
	25	Post balance sheet events
	26	Corporate governance
	27	Statutory accounts
	28	Transition to IFRS 16 Leases
	29	Dealings in Standard Chartered PLC listed securities

Standard Chartered PLC - Notes to the financial statements

1. Accounting policies

Statement of compliance

The Group's condensed consolidated interim financial statements consolidate those of Standard Chartered PLC (the Company) and its subsidiaries (together referred to as the Group) and equity account the Group's interest in associates and jointly controlled entities. These interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU).

They should be read in conjunction with the annual consolidated financial statements of the Group for the year ended 31 December 2018, which were prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as issued by the IASB and endorsed by the EU. At 30 June 2019, there was no difference between IFRS endorsed by the EU and the IFRS issued by the IASB in terms of their application to the Group.

The following form part of these interim financial statements:

a) From the start of Risk profile section to the end of other principal risks in the same section excluding:

• Credit quality by geographic region

• Credit quality by industry

• Forborne and other modified loans by region

• Credit-impaired (stage 3) loans and advances by geographic region

• Industry and retail products analysis of loans and advances by geographic region

• Country Risk

• Risks not in VaR

• Backtesting

• Liquidity coverage ratio (LCR)

• Stressed coverage

• Net stable funding ratio (NSFR)

• Liquidity pool

• Encumbrance

• Interest Rate Risk in the banking book

• Operational Risk

• Other principal risks

b) Capital review: from the start of 'Capital Requirements Directive (CRD) IV capital base' to the end of 'Movement in total capital' excluding capital ratios and risk-weighted assets (RWA)

Accounting policies

The accounting policies applied by the Group in the Interim Financial Information are the same as those applied by the Group in the 2018 annual consolidated financial statements, except for the recognition and measurement of applicable leases under IFRS 16 Leases, effective from 1 January 2019. The Interim Financial Information has been prepared in accordance with the "Recognition and measurement" requirements of IAS 34.

Basis of preparation

The consolidated and Company financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of cash-settled share-based payments, assets held for sale, fair value through other comprehensive income, and financial assets and liabilities (including derivatives) at fair value through profit or loss.

Significant accounting estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and key sources of uncertainty were the same as those applied to the consolidated financial statements as at, and for, the year ended 31 December 2018. Summaries of the Group's significant accounting policies are included throughout the 2018 Annual Report.

IFRS and Hong Kong accounting requirements

As required by the Hong Kong Listing Rules, an explanation of the differences in accounting practices between EU-endorsed IFRS and Hong Kong Financial Reporting Standards is required to be disclosed. There would be no significant differences had these accounts been prepared in accordance with Hong Kong Financial Reporting Standards.

New accounting standards adopted by the Group

IFRS 16 Leases

On 1 January 2019, the Group adopted IFRS 16 Leases, which has been endorsed by the EU. IFRS 16 replaces IAS17 Leases.

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

The significant judgements in the implementation were determining if a contract contained a lease, and the determination of whether the Group is reasonably certain that it will exercise extension options present in lease contracts. The significant estimates were the determination of incremental borrowing rates in the respective economic environments. The weighted average discount rate applied to lease liabilities on the transition date 1 January 2019 was 5.0 per cent.

The impact of IFRS 16 on the Group is primarily where the Group is a lessee in property lease contracts. The Group has elected to adopt the simplified approach of transition and has not restated comparative information. On 1 January 2019, the Group recognised a lease liability, being the remaining lease payments, including extensions options where renewal is reasonably certain, discounted using the Group's incremental borrowing rate at the date of initial application in the economic environment of the lease. The corresponding right-of-use asset recognised is the amount of the lease liability adjusted by prepaid or accrued lease payments related to those leases. The balance sheet increase as a result of recognition of the lease liability and right-of-use asset as of 1 January 2019 was approximately $1.4 billion, with no adjustment to retained earnings. The asset is presented in 'Property, plant and equipment' and the liability is presented in 'Other liabilities'. These balances are shown in the notes to the financial statements in the Half Year Report.

IFRIC 23 Uncertainty over Income Tax Treatments

IFRIC 23 was adopted by the Group on 1 January 2019 and has been endorsed by the EU. It clarifies the accounting for uncertainties in income taxes and did not result in a material impact to the Group's interim report.

Other amendments and clarifications made to existing standards that are not yet effective are not expected.

Going concern

These interim financial statements were approved by the Board of directors on 1 August 2019. The directors made an assessment of the Group's ability to continue as a going concern and confirm they are satisfied that the Group has adequate resources to continue in business for a period of at least 12 months from the date of approval of these interim financial statements. For this reason, the Group continues to adopt the going concern basis of accounting for preparing the financial statements.

2. Segmental information

Basis of preparation

The analysis reflects how the client segments and geographic regions are managed internally. This is described as the Management View and is principally the location from which a client relationship is managed, which may differ from where it is financially booked and may be shared between businesses and/or regions. In certain instances this approach is not appropriate and a Financial View is disclosed, that is, the location in which the transaction or balance was booked. Typically the Financial View is used in areas such as the Market and Liquidity risk reviews where actual booking location is more important for an assessment. Segmental information is therefore on a Management View unless otherwise stated.

Restructuring and other items excluded from underlying results

The Group's statutory performance is adjusted for profits or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are significant or material in the context of the Group's normal business earnings for the period and items which management and investors would ordinarily identify separately when assessing performance period-by period. These adjustments are set out below.

The Group made a provision for regulatory matters of $204 million mostly relating to the resolution of legacy conduct and control issues. Revaluations of Principal Finance exposures together with profits related to the Group's discontinued ship leasing business contributed the majority of the $14 million net restructuring charges in the first half of 2019.

As previously communicated the Group's joint venture investment in Indonesia is no longer considered core and the related profits of $23 million in 2019 are excluded from underlying and reported in other items.

	6 months ended 30.06.19
	Underlying $million	Provision for regulatory matters $million	Restructuring $million	Gains arising on repurchase of senior and subordinated liabilities $million	Share of profits of PT Bank Permata Tbk joint venture $million	Statutory $million
Operating income	7,696	-	134	-	-	7,830
Operating expenses	(4,969)	(204)	(125)	-	-	(5,298)
Operating profit/(loss) before impairment losses and taxation	2,727	(204)	9	-	-	2,532
Credit impairment	(254)	-	-	-	-	(254)
Other impairment	(21)	-	(23)	-	-	(44)
Profit from associates and joint ventures	157	-	-	-	23	180
Profit/(loss) before taxation	2,609	(204)	(14)	-	23	2,414

	6 months ended 31.12.18
	Underlying $million	Provision for regulatory matters $million	Restructuring $million	Gains arising on repurchase of senior and subordinated liabilities $million	Share of profits of PT Bank Permata Tbk joint venture $million	Statutory $million
Operating income	7,319	-	(157)	-	-	7,162
Operating expenses	(5,347)	(900)	(215)	-	-	(6,462)
Operating profit/(loss) before impairment losses and taxation	1,972	(900)	(372)	-	-	700
Credit impairment	(447)	-	8	-	-	(439)
Other impairment	(97)	-	(35)	-	-	(132)
Profit from associates and joint ventures	73	-	-	-	-	73
Profit/(loss) before taxation	1,501	(900)	(399)	-	-	202

	6 months ended 30.06.18
	Underlying $million	Provision for regulatory matters $million	Restructuring $million	Gains arising on repurchase of senior and subordinated liabilities $million	Share of profits of PT Bank Permata Tbk joint venture $million	Statutory $million
Operating income	7,649	-	(91)	69	-	7,627
Operating expenses	(5,117)	-	(68)	-	-	(5,185)
Operating profit/(loss) before impairment losses and taxation	2,532	-	(159)	69	-	2,442
Credit impairment	(293)	-	79	-	-	(214)
Other impairment	(51)	-	1	-	-	(50)
Profit from associates and joint ventures	168	-	-	-	-	168
Profit/(loss) before taxation	2,356	-	(79)	69	-	2,346

Underlying performance by client segment

	6 months ended 30.06.19
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Operating income	3,607	2,595	746	306	442	7,696
External	3,703	2,134	799	171	889	7,696
Inter-segment	(96)	461	(53)	135	(447)	-
Operating expenses	(2,124)	(1,823)	(425)	(253)	(344)	(4,969)
Operating profit before impairment losses and taxation	1,483	772	321	53	98	2,727
Credit impairment	(110)	(154)	(35)	47	(2)	(254)
Other impairment	(19)	-	-	-	(2)	(21)
Profit from associates and joint ventures	-	-	-	-	157	157
Underlying profit before taxation	1,354	618	286	100	251	2,609
Provision for regulatory matters	-	-	-	-	(204)	(204)
Restructuring	23	(1)	-	(1)	(35)	(14)
Share of profits of PT Bank Permata Tbk joint venture	-	-	-	-	23	23
Statutory profit before taxation	1,377	617	286	99	35	2,414
Total assets	332,599	103,320	32,821	15,654	228,110	712,504
Of which: loans and advances to customers including FVTPL	152,577	101,195	28,229	15,521	9,120	306,642
loans and advances to customers	110,677	100,892	27,388	15,521	9,117	263,595
loans held at fair value through profit or loss	41,900	303	841	-	3	43,047
Total liabilities	386,223	142,655	34,773	18,616	79,798	662,065
Of which: customer accounts	239,816	139,256	31,876	18,473	15,490	444,911

	6 months ended 31.12.18
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Operating income	3,409	2,421	685	245	559	7,319
External	3,495	2,080	771	115	858	7,319
Inter-segment	(86)	341	(86)	130	(299)	-
Operating expenses	(2,178)	(1,852)	(463)	(255)	(599)	(5,347)
Operating profit/(loss) before impairment losses and taxation	1,231	569	222	(10)	(40)	1,972
Credit impairment	(161)	(148)	(138)	1	(1)	(447)
Other impairment	(91)	(5)	-	-	(1)	(97)
Profit from associates and joint ventures	-	-	-	-	73	73
Underlying profit/(loss) before taxation	979	416	84	(9)	31	1,501
Provision for regulatory matters	(50)	-	-	-	(850)	(900)
Restructuring	(274)	(64)	(11)	(18)	(32)	(399)
Statutory profit/(loss) before taxation	655	352	73	(27)	(851)	202
Total assets	308,496	103,780	31,379	13,673	231,434	688,762
Of which: loans and advances to customers including FVTPL	146,575	101,635	27,271	13,616	10,274	299,371
loans and advances to customers	104,677	101,235	26,759	13,616	10,270	256,557
loans held at fair value through profit or loss	41,898	400	512	-	4	42,814
Total liabilities	369,316	140,328	37,260	19,733	71,773	638,410
Of which: customer accounts	243,019	136,691	34,860	19,622	2,989	437,181

	6 months ended 30.06.18
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Operating income	3,451	2,620	706	271	601	7,649
External	3,560	2,413	799	155	722	7,649
Inter-segment	(109)	207	(93)	116	(121)	-
Operating expenses	(2,218)	(1,884)	(460)	(275)	(280)	(5,117)
Operating profit/(loss) before impairment losses and taxation	1,233	736	246	(4)	321	2,532
Credit impairment	(81)	(119)	(106)	(1)	14	(293)
Other impairment	(59)	-	-	-	8	(51)
Profit from associates and joint ventures	-	-	-	-	168	168
Underlying profit/(loss) before taxation	1,093	617	140	(5)	511	2,356
Restructuring	(76)	(4)	(1)	(6)	8	(79)
Gains arising on repurchase of senior and subordinated liabilities	3	-	-	-	66	69
Statutory profit/(loss) before taxation	1,020	613	139	(11)	585	2,346
Total assets	310,487	103,581	32,347	13,616	234,843	694,874
Of which: loans and advances to customers including FVTPL	143,297	101,530	28,571	13,565	9,756	296,719
loans and advances to customers	106,780	101,017	28,213	13,565	9,756	259,331
loans held at fair value through profit or loss	36,517	513	358	-	-	37,388
Total liabilities	384,593	135,384	35,024	19,938	68,447	643,386
Of which: customer accounts	246,667	132,254	32,696	19,830	3,567	435,014

Underlying performance by region

	6 months ended 30.06.19
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Operating income	3,080	2,136	1,340	794	346	7,696
Operating expenses	(1,826)	(1,292)	(850)	(715)	(286)	(4,969)
Operating profit before impairment losses and taxation	1,254	844	490	79	60	2,727
Credit impairment	(70)	(84)	(49)	(66)	15	(254)
Other impairment	(8)	-	-	-	(13)	(21)
Profit from associates and joint ventures	153	-	-	-	4	157
Underlying profit before taxation	1,329	760	441	13	66	2,609
Provision for regulatory matters	-	-	-	-	(204)	(204)
Restructuring	(3)	(16)	(2)	(15)	22	(14)
Share of profits of PT Bank Permata Tbk joint venture	-	23	-	-	-	23
Statutory profit/(loss) before taxation	1,326	767	439	(2)	(116)	2,414
Net interest margin	1.48%	1.96%	3.10%	0.55%		1.59%
Total assets	275,414	151,714	59,189	214,126	12,061	712,504
Of which: loans and advances to customers including FVTPL	134,440	82,826	30,161	59,215	-	306,642
loans and advances to customers	127,769	80,769	29,289	25,768	-	263,595
loans held at fair value through profit or loss	6,671	2,057	872	33,447	-	43,047
Total liabilities	240,802	132,763	37,000	215,504	35,996	662,065
Of which: customer accounts	196,994	101,594	29,621	116,702	-	444,911

	6 months ended 31.12.18
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Operating income	3,060	1,898	1,228	800	333	7,319
Operating expenses	(1,909)	(1,351)	(891)	(717)	(479)	(5,347)
Operating profit/(loss) before impairment losses and taxation	1,151	547	337	83	(146)	1,972
Credit impairment	(54)	(184)	(192)	(15)	(2)	(447)
Other impairment	(66)	(1)	-	-	(30)	(97)
Profit from associates and joint ventures	49	19	-	-	5	73
Underlying profit/(loss) before taxation	1,080	381	145	68	(173)	1,501
Provision for regulatory matters	-	-	-	(50)	(850)	(900)
Restructuring	(80)	17	(59)	(3)	(274)	(399)
Statutory profit/(loss) before taxation	1,000	398	86	15	(1,297)	202
Net interest margin	1.42%	2.09%	2.94%	0.50%		1.56%
Total assets	269,765	147,049	57,800	201,912	12,236	688,762
Of which: loans and advances to customers including FVTPL	130,669	81,905	29,870	56,927	-	299,371
Total liabilities	238,249	127,478	36,733	198,853	37,097	638,410
Of which: customer accounts	196,870	96,896	29,916	113,499	-	437,181

	6 months ended 30.06.18
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Operating income	3,097	2,073	1,376	870	233	7,649
Operating expenses	(1,903)	(1,360)	(919)	(736)	(199)	(5,117)
Operating profit before impairment losses and taxation	1,194	713	457	134	34	2,532
Credit impairment	(17)	(138)	(70)	(68)	-	(293)
Other impairment	(44)	7	-	17	(31)	(51)
Profit from associates and joint ventures	156	7	-	3	2	168
Underlying profit before taxation	1,289	589	387	86	5	2,356
Restructuring	(26)	88	(41)	(5)	(95)	(79)
Gains arising on repurchase of senior and subordinated liabilities	-	-	-	3	66	69
Statutory profit/(loss) before taxation	1,263	677	346	84	(24)	2,346
Net interest margins	1.46%	2.03%	3.12%	0.44%		1.59%
Total assets	268,294	147,017	58,343	208,599	12,621	694,874
Of which: loans and advances to customers including FVTPL	132,679	82,078	30,967	50,995	-	296,719
Total liabilities	235,214	126,815	38,493	210,002	32,862	643,386
Of which: customer accounts	190,305	95,228	31,540	117,941	-	435,014

Additional segmental information (statutory)

	6 months ended 30.06.19
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Net interest income	2,093	1,638	464	159	264	4,618
Net fees and commission income	810	777	146	123	(18)	1,838
Other income	835	180	138	25	196	1,374
Operating income	3,738	2,595	748	307	442	7,830

	6 months ended 31.12.18
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Net interest income	1,779	1,587	436	150	480	4,432
Net fees and commission income	733	695	133	82	(20)	1,623
Other income	736	140	115	13	103	1,107
Operating income	3,248	2,422	684	245	563	7,162

	6 months ended 30.06.18
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Net interest income	1,691	1,577	427	147	519	4,361
Net fees and commission income	763	884	151	110	(39)	1,869
Other income	904	158	128	16	191	1,397
Operating income	3,358	2,619	706	273	671	7,627

	6 months ended 30.06.19
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Net interest income	1,736	1,257	760	455	410	4,618
Other income	1,391	878	580	339	24	3,212
Operating income	3,127	2,135	1,340	794	434	7,830

	6 months ended 31.12.18
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Net interest income	1,674	1,286	726	381	365	4,432
Other income	1,381	620	502	425	(198)	2,730
Operating income	3,055	1,906	1,228	806	167	7,162

	6 months ended 30.06.18
	Greater China & North Asia $million	ASEAN & South Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Net interest income	1,677	1,275	767	311	331	4,361
Other income	1,418	811	610	562	(135)	3,266
Operating income	3,095	2,086	1,377	873	196	7,627

	6 months ended 30.06.19
	Hong Kong $million	Korea $million	China $million	Singapore $million	India $million	UAE $million	UK $million	US $million
Net interest income	1,019	329	316	523	301	199	266	129
Other income	881	176	129	347	201	128	64	236
Operating income	1,900	505	445	870	502	327	330	365

	6 months ended 31.12.18
	Hong Kong $million	Korea $million	China $million	Singapore $million	India $million	UAE $million	UK $million	US $million
Net interest income	951	331	311	518	336	183	157	123
Other income	948	144	88	180	125	97	227	211
Operating income	1,899	475	399	698	461	280	384	334

	6 months ended 30.06.18
	Hong Kong $million	Korea $million	China $million	Singapore $million	India $million	UAE $million	UK $million	US $million
Net interest income	903	341	337	531	310	182	137	120
Other income	945	193	83	319	165	175	307	213
Operating income	1,848	534	420	850	475	357	444	333

3. Net fees and commission

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Fees and commissions income	2,120	1,915	2,114
Fees and commissions expense	(282)	(292)	(245)
Net fees and commission	1,838	1,623	1,869

Total fee income arising from financial instruments that are not fair valued through profit or loss is $777 million (31 December 2018: $779 million and 30 June 2018: $699 million) and arising from trust and other fiduciary activities is $79 million (31 December 2018: $66 million and 30 June 2018: $78 million).

Total fee expense arising from financial instruments that are not fair valued through profit or loss is $69 million (31 December 2018: $88 million and 30 June 2018: $55 million) and arising from trust and other fiduciary activities is $14 million (31 December 2018: $13 million and 30 June 2018: $14 million).

	6 months ended 30.06.19
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Transaction Banking	530	5	111	-	-	646
Trade	222	5	82	-	-	309
Cash Management	216	-	29	-	-	245
Securities Services	92	-	-	-	-	92
Financial Markets	133	-	12	-	-	145
Corporate Finance	104	-	13	2	-	119
Lending and Portfolio Management	39	-	9	-	-	48
Principal Finance	4	-	-	-	-	4
Wealth Management	-	591	1	119	-	711
Retail Products	-	181	-	2	-	183
Treasury	-	-	-	-	(11)	(11)
Others	-	-	-	-	(7)	(7)
Net fees and commission	810	777	146	123	(18)	1,838

	6 months ended 31.12.18
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Transaction Banking	511	6	105	-	-	622
Trade	212	6	77	-	-	295
Cash Management	213	-	28	-	-	241
Securities Services	86	-	-	-	-	86
Financial Markets	105	-	12	-	-	117
Corporate Finance	103	-	10	-	-	113
Lending and Portfolio Management	34	-	5	-	-	39
Principal Finance	(20)	-	-	-	-	(20)
Wealth Management	-	515	1	81	-	597
Retail Products	-	174	-	1	-	175
Treasury	-	-	-	-	(10)	(10)
Others	-	-	-	-	(10)	(10)
Net fees and commission	733	695	133	82	(20)	1,623

	6 months ended 30.06.18
	Corporate & Institutional Banking $million	Retail Banking $million	Commercial Banking $million	Private Banking $million	Central & other items $million	Total $million
Transaction Banking	555	6	118	-	-	679
Trade	236	6	86	-	-	328
Cash Management	216	-	32	-	-	248
Securities Services	103	-	-	-	-	103
Financial Markets	101	-	13	-	-	114
Corporate Finance	78	-	11	-	-	89
Lending and Portfolio Management	23	-	8	-	-	31
Principal Finance	6	-	-	-	-	6
Wealth Management	-	652	1	109	-	762
Retail Products	-	229	-	1	-	230
Treasury	-	-	-	-	(12)	(12)
Others	-	(3)	-	-	(27)	(30)
Net fees and commission	763	884	151	110	(39)	1,869

4. Net trading income

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Net trading income	994	717	966
Significant items within net trading income include:
Gains on instruments held for trading	1,111	812	944
Gains/(losses) on financial assets mandatorily at fair value through profit or loss	56	(27)	(77)
Gains/(losses) on financial assets designated at fair value through profit or loss	12	24	(13)
(Losses)/gains on financial liabilities designated at fair value through profit or loss	(297)	(135)	165

5. Other operating income

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Other operating income includes:
Rental income from operating lease assets	265	285	288
Net gains/(losses) on disposal of fair value through other comprehensive income investments	58	(18)	(13)
Losses on disposal of investment securities	(17)	-	-
Net gain on sale of businesses	-	9	-
Dividend income	6	16	9
Gains arising on repurchase of senior and subordinated liabilities	-	-	691
Other	68	98	78
	380	390	431

1 On 14 June 2018, Standard Chartered PLC repurchased in part, £245.7 million of its £750 million 4.375 per cent senior debt 2038 and £372.5 million of its £900 million 5.125 per cent subordinated debt 2034. On the same date, Standard Chartered Bank repurchased in part, £95.1 million of its £200 million 7.75 per cent subordinated notes (callable 2022). This activity resulted in an overall gain of £69 million for the Group

6. Operating expenses

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Staff costs:
Wages and salaries	2,729	2,694	2,745
Social security costs	98	75	96
Other pension costs (notes to the financial statements in the Half Year Report)	199	178	187
Share-based payment costs	107	62	104
Other staff costs	444	487	446
	3,577	3,496	3,578

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Premises and equipment expenses:
Rental of premises1	19	188	186
Other premises and equipment costs	164	218	177
Rental of computers and equipment	8	11	10
	191	417	373

General administrative expenses:
UK bank levy	-	324	-
Provision for regulatory matters	204	900	-
Other general administrative expenses	749	894	808
	953	2,118	808

Depreciation and amortisation:
Property, plant and equipment:
Premises1	179	42	44
Equipment	52	47	47
Operating lease assets	129	156	148
	360	245	239
Intangibles:
Software	213	181	182
Acquired on business combinations	4	5	5
	577	431	426
Total operating expenses	5,298	6,462	5,185

1 As a result of IFRS 16, rental expenses of premises has decreased and has been replaced by depreciation on premises (being the right-of-use asset) and interest expenses (on the lease liability)

7. Credit impairment

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Net credit impairment against profit on loans and advances to banks and customers	259	413	194
Net credit impairment against profit or loss during the period relating to debt securities	9	11	(4)
Net credit impairment relating to financial guarantees and loan commitments	(14)	15	24
Credit impairment1	254	439	214

1 No material purchased or originated credit-impaired (POCI) assets

8. Other impairment

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Impairment of fixed assets	36	103	47
Impairment of other intangible assets	6	25	21
Other	2	4	(18)
Other impairment	44	132	50

9. Taxation

The following table provides analysis of taxation charge in the period.

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
The charge for taxation based upon the profit for the period comprises:
Current tax:
United Kingdom corporation tax at 19 per cent (31 December 2018 and 30 June 2018: 19 per cent):
Current tax charge on income for the period	10	(2)	3
Adjustments in respect of prior periods (including double tax relief)	(1)	3	46
Foreign tax:
Current tax charge on income for the period	829	391	718
Adjustments in respect of prior periods	(54)	(17)	(88)
	784	375	679
Deferred tax:
Origination/reversal of temporary differences	139	274	(20)
Adjustments in respect of prior periods	(5)	37	94
	134	311	74
Tax on profits on ordinary activities	918	686	753
Effective tax rate	38.0%	nm1	32.1%

1 Not meaningful

The tax charge for the period of $918 million (31 December 2018: $686 million and 30 June 2018: $753 million) on a profit before tax of $2,414 million (31 December 2018: $202 million and 30 June 2018: $2,346 million) reflects the impact of capital gains tax arising on internal restructuring to establish the Hong Kong hub, non-deductible expenses and the impact of countries with tax rates higher or lower than the UK, the most significant of which is India.

Foreign tax includes current tax of $117 million (31 December 2018: $66 million and 30 June 2018: $103 million) on the profits assessable in Hong Kong.

Deferred tax includes origination or reversal of temporary differences of $(4) million (31 December 2018: $20 million and 30 June 2018: $(3) million) provided at a rate of 16.5 per cent (31 December 2018: 16.5 per cent) on the profits assessable in Hong Kong.

10. Dividends

The Board has decided to adopt a formulaic approach to setting the interim dividend for 2019, being one-third of the prior year full-year dividend per share.

Ordinary equity shares

	30.06.19		31.12.18¹		30.06.18¹
	Cents per share	$million	Cents per share	$million	Cents per share	$million
2018/2017 final dividend declared and paid during the period	15	495	-	-	11	363
2018 interim dividend declared and paid during the period	-	-	6	198	-	-

1 The amounts are gross of scrip adjustments

The 2018 final dividend of 15 cents per ordinary share ($495 million) was paid to eligible shareholders on 16 May 2019, and is recognised in these interim accounts.

Interim dividends on ordinary equity shares are recorded in the period in which they are declared and, in respect of the final dividend, have been approved by the shareholders.

Accordingly, the final ordinary equity share dividends as stated above relate to the prior year and the 2018 interim dividend of 6 cents per ordinary share ($198 million) was paid to eligible shareholders on 22 October 2018.

2019 recommended interim dividend

The 2019 interim dividend of 7 cents per ordinary share will be paid in pounds sterling, Hong Kong dollars or US dollars on 21 October 2019 to shareholders on the UK register of members at the close of business in the UK on 9 August 2019. The 2019 interim dividend will be paid in Indian rupees on 21 October 2019 to Indian Depository Receipt holders on the Indian register at the close of business in India on 9 August 2019.

Preference shares and Additional Tier 1 securities

Dividends on these preference shares and securities classified as equity are recorded in the period in which they are declared.

		30.06.19 $million	31.12.18 $million	30.06.18 $million
Non-cumulative redeemable preference shares:	7.014 per cent preference shares of $5 each	26	27	26
	6.409 per cent preference shares of $5 each	16	14	12
		42	41	38
Additional Tier 1 securities: $5 billion fixed rate resetting perpetual subordinated contingent convertible securities		179	178	179
		221	219	217
Dividends on these preference shares are treated as interest expense and accrued accordingly.
Non-cumulative irredeemable preference shares:	7 3/8 per cent preference shares of £1 each	5	4	5
	8 1/4 per cent preference shares of £1 each	5	5	5
		10	9	10

11. Earnings per ordinary share

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Profit/(loss) for the period attributable to equity holders	1,496	(484)	1,593
Non-controlling interests	(19)	(22)	(33)
Dividend payable on preference shares and AT1 classified as equity	(221)	(219)	(217)
Profit/(loss) for the period attributable to ordinary shareholders	1,256	(725)	1,343

Items normalised:
Provision for regulatory matters	204	900	-
Restructuring	14	399	79
Profit from associates and joint ventures	(23)	-	-
Gains arising on repurchase of subordinated liabilities	-	-	(69)
Tax on normalised items	172	(27)	131
Underlying profit	1,623	547	1,484

Basic - Weighted average number of shares (millions)	3,304	3,306	3,303
Diluted - Weighted average number of shares (millions)	3,348	3,340	3,337

Basic earnings/(loss) per ordinary share (cents)	38.0	(21.9)	40.7
Diluted earnings/(loss) per ordinary share (cents)	37.5	(21.7)	40.2
Underlying basic earnings per ordinary share (cents)	49.1	16.5	44.9
Underlying diluted earnings per ordinary share (cents)	48.5	16.4	44.5

12. Financial instruments

The Group's classification of its financial assets and liabilities is summarised in the following tables.

Assets	Notes	Assets at fair value						Assets held at amortised cost $million	Total $million
Assets	Notes	Trading $million	Derivatives held for hedging $million	Non-trading mandatorily at fair value through profit or loss $million	Designated at fair value through profit or loss $million	Fair value through other comprehensive income $million	Total financial assets at fair value $million	Assets held at amortised cost $million	Total $million
Cash and balances at central banks		-	-	-	-	-	-	58,822	58,822
Financial assets held at fair value through profit or loss
Loans and advances to banks1		152	-	3,501	-	-	3,653	-	3,653
Loans and advances to customers1		1,619	-	4,571	-	-	6,190	-	6,190
Reverse repurchase agreements and other similar secured lending	14	-	-	54,065	-	-	54,065	-	54,065
Debt securities, alternative Tier 1 and other eligible bills		26,889	-	739	307	-	27,935	-	27,935
Equity shares		1,094	-	357	108	-	1,559	-	1,559
		29,754	-	63,233	415	-	93,402	-	93,402
Derivative financial instruments	13	48,413	824	-	-	-	49,237	-	49,237
Loans and advances to banks1		-	-	-	-	-	-	59,210	59,210
Of which: reverse repurchase agreements and other similar secured lending	14	-	-	-	-	-	-	1,145	1,145
Loans and advances to customers1		-	-	-	-	-	-	263,595	263,595
Of which: reverse repurchase agreements and other similar secured lending	14	-	-	-	-	-	-	2,704	2,704
Investment securities
Debt securities, alternative Tier 1 and other eligible bills		-	-	-	-	115,603	115,603	12,150	127,753
Equity shares		-	-	-	-	283	283	-	283
		-	-	-	-	115,886	115,886	12,150	128,036
Other assets	16	-	-	-	-	-	-	36,234	36,234
Assets held for sale	17	72	-	293	526	-	891	141	1,032
Total at 30 June 2019		78,239	824	63,526	941	115,886	259,416	430,152	689,568

1 Further analysed in Risk review and Capital review

Assets	Notes	Assets at fair value						Assets held at amortised cost $million	Total $million
Assets	Notes	Trading $million	Derivatives held for hedging $million	Non-trading mandatorily at fair value through profit or loss $million	Designated at fair value through profit or loss $million	Fair value through other comprehensive income $million	Total financial assets at fair value $million	Assets held at amortised cost $million	Total $million
Cash and balances at central banks		-	-	-	-	-	-	57,511	57,511
Financial assets held at fair value through profit or loss
Loans and advances to banks1		146	-	3,622	-	-	3,768	-	3,768
Loans and advances to customers1		1,074	-	3,854	-	-	4,928	-	4,928
Reverse repurchase agreements and other similar secured lending	14	-	-	54,769	-	-	54,769	-	54,769
Debt securities, alternative Tier 1 and other eligible bills		21,246	-	393	337	-	21,976	-	21,976
Equity shares		1,347	-	233	111	-	1,691	-	1,691
		23,813	-	62,871	448	-	87,132	-	87,132
Derivative financial instruments	13	45,108	513	-	-	-	45,621	-	45,621
Loans and advances to banks1		-	-	-	-	-	-	61,414	61,414
Of which: reverse repurchase agreements and other similar secured lending	14	-	-	-	-	-	-	3,815	3,815
Loans and advances to customers1		-	-	-	-	-	-	256,557	256,557
Of which: reverse repurchase agreements and other similar secured lending	14	-	-	-	-	-	-	3,151	3,151
Investment securities
Debt securities, alternative Tier 1 and other eligible bills		-	-	-	-	116,335	116,335	9,303	125,638
Equity shares		-	-	-	-	263	263	-	263
		-	-	-	-	116,598	116,598	9,303	125,901
Other assets	16	-	-	-	-	-	-	32,678	32,678
Assets held for sale	17	78	-	358	451	-	887	135	1,022
Total at 31 December 2018		68,999	513	63,229	899	116,598	250,238	417,598	667,836

1 Further analysed in Risk review and Capital review

Liabilities	Notes	Liabilities at fair value				Amortised cost $million	Total $million
Liabilities	Notes	Trading $million	Derivatives held for hedging $million	Designated at fair value through profit or loss $million	Total financial liabilities at fair value $million	Amortised cost $million	Total $million
Financial liabilities held at fair value through profit or loss
Deposits by banks		-	-	757	757	-	757
Customer accounts		-	-	6,889	6,889	-	6,889
Repurchase agreements and other similar secured borrowing	14	-	-	39,834	39,834	-	39,834
Debt securities in issue		-	-	9,272	9,272	-	9,272
Short positions		5,029	-	-	5,029	-	5,029
		5,029	-	56,752	61,781	-	61,781
Derivative financial instruments	13	48,491	1,862	-	50,353	-	50,353
Deposits by banks		-	-	-	-	30,783	30,783
Customer accounts		-	-	-	-	401,597	401,597
Repurchase agreements and other similar secured borrowing	14	-	-	-	-	5,920	5,920
Debt securities in issue		-	-	-	-	46,672	46,672
Other liabilities	18	-	-	-	-	41,083	41,083
Subordinated liabilities and other borrowed funds	21	-	-	-	-	15,245	15,245
Liabilities included in disposal groups held for sale	17	40	-	-	40	-	40
Total at 30 June 2019		53,560	1,862	56,752	112,174	541,300	653,474

Liabilities	Notes	Liabilities at fair value				Amortised cost $million	Total $million
Liabilities	Notes	Trading $million	Derivatives held for hedging $million	Designated at fair value through profit or loss $million	Total financial liabilities at fair value $million	Amortised cost $million	Total $million
Financial liabilities held at fair value through profit or loss
Deposits by banks		-	-	318	318	-	318
Customer accounts		-	-	6,751	6,751	-	6,751
Repurchase agreements and other similar secured borrowing	14	-	-	43,000	43,000	-	43,000
Debt securities in issue		-	-	7,405	7,405	-	7,405
Short positions		3,226	-	-	3,226	-	3,226
		3,226	-	57,474	60,700	-	60,700
Derivative financial instruments	13	45,580	1,629	-	47,209	-	47,209
Deposits by banks		-	-	-	-	29,715	29,715
Customer accounts		-	-	-	-	391,013	391,013
Repurchase agreements and other similar secured borrowing	14	-	-	-	-	1,401	1,401
Debt securities in issue		-	-	-	-	46,454	46,454
Other liabilities	18	-	-	-	-	37,945	37,945
Subordinated liabilities and other borrowed funds	21	-	-	-	-	15,001	15,001
Liabilities included in disposal groups held for sale	17	198	-	-	198	-	198
Total at 31 December 2018		49,004	1,629	57,474	108,107	521,529	629,636

Financial liabilities designated at fair value through profit or loss

	30.06.19 $million	31.12.18 $million
Carrying balance aggregate fair value	56,752	57,474
Amount contractually obliged to repay at maturity	56,708	57,974
Difference between aggregate fair value and contractually obliged to repay at maturity	44	(500)
Cumulative change in fair value accredited to Credit risk difference	84	476

The net fair value loss on financial liabilities designated at fair value through profit or loss was $297 million for the period (31 December 2018: net gain of $30 million). Further details of the Group's own credit adjustment (OCA) valuation technique is described later in this note.

Valuation of financial instruments

Fair value is 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 in the principal market or, in the absence of this, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects the Group's non-performance risk. The fair value of financial instruments is generally measured on the basis of the individual financial instrument. However, when a group of financial assets and financial liabilities is managed on the basis of its net exposure to either Market Risks or Credit Risk, the fair value of the group of financial instruments is measured on a net basis.

The fair values of quoted financial assets and liabilities in active markets are based on current prices. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for identical instruments held by the Group. Where quoted market prices are not available, or are unreliable because of poor liquidity, fair values have been determined using valuation techniques which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Valuation techniques used include discounted cashflow analysis and pricing models and, where appropriate, comparison with instruments that have characteristics similar to those of the instruments held by the Group.

The Valuation Control function is responsible for independent price verification, oversight of fair value and appropriate value adjustments and escalation of valuation issues. Independent price verification is the process of determining that the valuations incorporated into the financial statements are validated independent of the business area responsible for the product. The Valuation Control function has oversight of the fair value adjustments to ensure the financial instruments are priced to exit. These are key controls in ensuring the material accuracy of the valuations incorporated in the financial statements. The market data used for price verification may include data sourced from recent trade data involving external counterparties or third parties such as Bloomberg, Reuters, brokers and consensus pricing providers. Valuation Control performs a semi-annual review of the suitability of the market data used for price testing. Price verification uses independently sourced data that is deemed most representative of the market the instruments trade in. To determine the quality of the market data inputs, factors such as independence, relevance, reliability, availability of multiple data sources and methodology employed by the pricing provider are taken into consideration.

The Valuation and Benchmarks Committee (VBC) is the valuation governance forum consisting of representatives from Group Market Risk, Product Control, Valuation Control and the business, which meets monthly to discuss and approve the independent valuations of the inventory. For Principal Finance, the Investment Committee meeting is held on a quarterly basis to review investments and valuations.

Significant accounting estimates and judgements

The Group evaluates the significance of financial instruments and material accuracy of the valuations incorporated in the financial statements as they involve a high degree of judgement and estimation uncertainty in determining the carrying values of financial assets and liabilities at the balance sheet date.

• Fair value of financial instruments is determined using valuation techniques and estimates (see below) which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Changes in the observability of significant valuation inputs can materially affect the fair values of financial instruments

• When establishing the exit price of a financial instrument using a valuation technique, the Group estimates valuation adjustments in determining the fair value

• In determining the valuation of financial instruments, the Group makes judgements on the amounts reserved to cater for model and valuation risks, which cover both Level 2 and Level 3 assets, and the significant valuation judgements in respect of Level 3 instruments

• Where the estimated measurement of fair value is more judgemental in respect of Level 3 assets, these are valued based on models that use a significant degree of non-market-based unobservable inputs

Valuation techniques

Refer to the fair value hierarchy explanation - Level 1, 2 and 3

• Financial instruments held at fair value

- Debt securities - asset-backed securities: Asset-backed securities are valued based on external prices obtained from consensus pricing providers, broker quotes, recent trades, arrangers' quotes, etc. Where an observable price is available for a given security, it is classified as Level 2. In instances where third-party prices are not available or reliable, the security is classified as Level 3. The fair value of Level 3 securities is estimated using market standard cash flow models with input parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable securities with similar vintage, collateral type, and credit ratings

- Debt securities in issue: These debt securities relate to structured notes issued by the Group. Where independent market data is available through pricing vendors and broker sources, these positions are classified as Level 2. Where such liquid external prices are not available, valuations of these debt securities are implied using input parameters such as bond spreads and credit spreads, and are classified as Level 3. These input parameters are determined with reference to the same issuer (if available) or proxies from comparable issuers or assets

- Derivatives: Derivative products are classified as Level 2 if the valuation of the product is based upon input parameters which are observable from independent and reliable market data sources. Derivative products are classified as Level 3 if there are significant valuation input parameters which are unobservable in the market, such as products where the performance is linked to more than one underlying variable. Examples are foreign exchange basket options, equity options based on the performance of two or more underlying indices and interest rate products with quanto payouts. In most cases, these unobservable correlation parameters cannot be implied from the market, and methods such as historical analysis and comparison with historical levels or other benchmark data must be employed

- Equity shares - private equity: The majority of private equity unlisted investments are valued based on earning multiples - Price-to-Earnings (P/E) or enterprise value to earnings before income tax, depreciation and amortisation (EV/EBITDA) ratios - of comparable listed companies. The two primary inputs for the valuation of these investments are the actual or forecast earnings of the investee companies and earning multiples for the comparable listed companies. To ensure comparability between these unquoted investments and the comparable listed companies, appropriate adjustments are also applied (for example, liquidity and size) in the valuation. In circumstances where an investment does not have direct comparables or where the multiples for the comparable companies cannot be sourced from reliable external sources, alternative valuation techniques (for example, discounted cashflow models), which use predominantly unobservable inputs or Level 3 inputs, may be applied. Even though earning multiples for the comparable listed companies can be sourced from third-party sources (for example, Bloomberg), and those inputs can be deemed Level 2 inputs, all unlisted investments (excluding those where observable inputs are available, for example, Over-the-counter (OTC) prices) are classified as Level 3 on the basis that the valuation methods involve judgements ranging from determining comparable companies to discount rates where the discounted cashflow method is applied

- Loans and advances: These primarily include loans in the global syndications business which were not syndicated as of the balance sheet date and other financing transactions within Financial Markets and loans and advances including reverse repurchase agreements that do not have SPPI cashflows or are managed on a fair value basis. These loans are generally bilateral in nature and, where available, their valuation is based on observable clean sales transactions prices or market observable credit spreads. If observable credit spreads are not available, proxy spreads based on comparable loans with similar credit grade, sector and region, are used. Where observable credit spreads and market standard proxy methods are available, these loans are classified as Level 2. Where there are no recent transactions or comparable loans, these loans are classified as Level 3

- Other debt securities: These debt securities include convertible bonds, corporate bonds, credit and structured notes. Where quoted prices are available through pricing vendors, brokers or observable trading activities from liquid markets, these are classified as Level 2 and valued using such quotes. Where there are significant valuation inputs which are unobservable in the market, due to illiquid trading or the complexity of the product, these are classified as Level 3. The valuations of these debt securities are implied using input parameters such as bond spreads and credit spreads. These input parameters are determined with reference to the same issuer (if available) or proxied from comparable issuers or assets

• Financial instruments held at amortised cost

The following sets out the Group's basis for establishing fair values of amortised cost financial instruments and their classification between Levels 1, 2 and 3. As certain categories of financial instruments are not actively traded, there is a significant level of management judgement involved in calculating the fair values:

- Cash and balances at central banks: The fair value of cash and balances at central banks is their carrying amounts

- Debt securities in issue, subordinated liabilities and other borrowed funds: The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cashflow model is used based on a current market related yield curve appropriate for the remaining term to maturity

- Deposits and borrowings: The estimated fair value of deposits with no stated maturity is the amount repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings without quoted market prices is based on discounted cashflows using the prevailing market rates for debts with a similar Credit Risk and remaining maturity

- Investment securities: For investment securities that do not have directly observable market values, the Group utilises a number of valuation techniques to determine fair value. Where available, securities are valued using input proxies from the same or closely related underlying (for example, bond spreads from the same or closely related issuer) or input proxies from a different underlying (for example, a similar bond but using spreads for a particular sector and rating). Certain instruments cannot be proxies as set out above, and in such cases the positions are valued using non-market observable inputs. This includes those instruments held at amortised cost and predominantly relates to asset-backed securities. The fair value for such instruments is usually proxies from internal assessments of the underlying cashflows

- Loans and advances to banks and customers: For loans and advances to banks, the fair value of floating rate placements and overnight deposits is their carrying amounts. The estimated fair value of fixed interest-bearing deposits is based on discounted cashflows using the prevailing money market rates for debts with a similar Credit Risk and remaining maturity. The Group's loans and advances to customers' portfolio is well diversified by geography and industry. Approximately a quarter of the portfolio reprices within one month, and approximately half reprices within 12 months. Loans and advances are presented net of provisions for impairment. The fair value of loans and advances to customers with a residual maturity of less than one year generally approximates the carrying value. The estimated fair value of loans and advances with a residual maturity of more than one year represents the discounted amount of future cashflows expected to be received, including assumptions relating to prepayment rates and Credit Risk. Expected cashflows are discounted at current market rates to determine fair value. The Group has a wide range of individual instruments within its loans and advances portfolio and as a result providing quantification of the key assumptions used to value such instruments is impractical

- Other assets: Other assets consist primarily of cash collateral and trades pending settlement. The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are either short term in nature or reprice to current market rates frequently

Fair value adjustments

When establishing the exit price of a financial instrument using a valuation technique, the Group considers adjustments to the modelled price which market participants would make when pricing that instrument. The main valuation adjustments (described further below) in determining fair value for financial assets and financial liabilities are as follows.

	01.01.19 $million	Movement during the period $million	30.06.19 $million	01.01.18 $million	Movement during the year $million	31.12.18 $million
Bid-offer valuation adjustment	67	10	77	82	(15)	67
CVA	196	(12)	184	229	(33)	196
DVA	(143)	42	(101)	(66)	(77)	(143)
Model valuation adjustment	6	-	6	6	-	6
FVA	60	(26)	34	79	(19)	60
Other fair value adjustments	59	1	60	65	(6)	59
Total	245	15	260	395	(150)	245

Income Deferrals
Day 1 and other deferrals	100	(4)	96	83	17	100
Total	100	(4)	96	83	17	100

Note: Bracket represents an asset and credit to the income statement

• Bid-offer valuation adjustment: Where market parameters are marked on a mid-market basis in the revaluation systems, a bid-offer valuation adjustment is required to quantify the expected cost of neutralising the business' positions through dealing away in the market, thereby bringing long positions to bid and short positions to offer. The methodology to calculate the bid-offer adjustment for a derivative portfolio involves netting between long and short positions and the grouping of risk by strike and tenor based on the hedging strategy where long positions are marked to bid and short positions marked to offer in the systems

• Credit valuation adjustment (CVA): The Group makes CVA adjustment against the fair value of derivative products. CVA is an adjustment to the fair value of the transactions to reflect the possibility that our counterparties may default and we may not receive the full market value of the outstanding transactions. It represents an estimate of the adjustment a market participant would include when deriving a purchase price to acquire our exposures. CVA is calculated for each subsidiary, and within each entity for each counterparty to which the entity has exposure and takes account of any collateral we may hold. The Group calculates the CVA by using estimates of future positive exposure, market-implied probability of default (PD) and recovery rates. Where market-implied data is not readily available, we use market-based proxies to estimate the PD. Wrong-way risk occurs when the exposure to a counterparty is adversely correlated with the credit quality of that counterparty, and the Group has implemented a model to capture this impact for certain key wrong-way exposures. The Group also captures the uncertainties associated with wrong-way risk in its Prudential Valuation Adjustments

• Debit valuation adjustment (DVA): The Group calculates DVA adjustments on its derivative liabilities to reflect changes in its own credit standing. The Group's DVA adjustments will increase if its credit standing worsens and conversely, decrease if its credit standing improves. For derivative liabilities, a DVA adjustment is determined by applying the Group's probability of default to the Group's negative expected exposure against the counterparty. The Group's probability of default and loss expected in the event of default is derived based on bond and CDS spreads associated with the Group's issuances and market standard recovery levels. The expected exposure is modelled based on the simulation of the underlying risk factors over the life of the deal booked against the particular counterparty. This simulation methodology incorporates the collateral posted by the Group and the effects of master netting agreements

• Model valuation adjustment: Valuation models may have pricing deficiencies or limitations that require a valuation adjustment. These pricing deficiencies or limitations arise due to the choice, implementation and calibration of the pricing model

• Funding valuation adjustment (FVA): The Group makes FVA adjustments against derivative products. FVA reflects an estimate of the adjustment to its fair value that a market participant would make to incorporate funding costs that could arise in relation to the exposure. FVA is calculated by determining the net expected exposure at a counterparty level and then applying a funding rate to those exposures that reflect the market cost of funding. The FVA for collateralised derivatives is based on discounting the expected future cashflows at the relevant overnight indexed swap (OIS) rate after taking into consideration the terms of the underlying collateral agreement with the counterparty. The FVA for uncollateralised (including partially collateralised) derivatives incorporates the estimated present value of the market funding cost or benefit associated with funding these transactions

• Other fair value adjustments: The Group calculates the fair value on the interest rate callable products by calibrating to a set of market prices with differing maturity, expiry and strike of the trades

• Day one and other deferrals: In certain circumstances, the initial fair value may be based on a valuation technique which may lead to the recognition of profits or losses at the time of initial recognition. However, these profits or losses can only be recognised when the valuation technique used is based primarily on observable market data. In those cases where the initially recognised fair value is based on a valuation model that uses inputs which are not observable in the market, the difference between the transaction price and the valuation model is not recognised immediately in the income statement. The difference is amortised to the income statement until the inputs become observable, or the transaction matures or is terminated. Other deferrals primarily represent adjustments taken to reflect the specific terms and conditions of certain derivative contracts which affect the termination value at the measurement date

In addition, the Group calculates OCA on its issued debt designated at fair value, including structured notes, in order to reflect changes in its own credit standing. The Group's OCA adjustments will increase if its credit standing worsens and conversely, decrease if its credit standing improves. The Group's OCA adjustments will reverse over time as its liabilities mature. For issued debt and structured notes designated at fair value, an OCA adjustment is determined by discounting the contractual cashflows using a yield curve adjusted for market observed secondary senior unsecured credit spreads. The OCA at 30 June 2019 is $84 million, other comprehensive income loss $392 million (31 December 2018: $476 million, other comprehensive income gain $394 million).

Fair value hierarchy - financial instruments held at fair value

Assets and liabilities carried at fair value or for which fair values are disclosed have been classified into three levels according to the observability of the significant inputs used to determine the fair values. Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy. The Group recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level of observability of the inputs to the valuation techniques as at the end of the reporting period.

• Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities

• Level 2: Fair value measurements are those 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: Fair value measurements are those where at least one input which could have a significant effect on the instrument's valuation is not based on observable market data

The following tables show the classification of financial instruments held at fair value into the valuation hierarchy:

Assets	Level 1 $million	Level 2 $million	Level 3 $million	Total $million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	-	3,653	-	3,653
Loans and advances to customers	-	5,720	470	6,190
Reverse repurchase agreements and other similar secured lending	-	54,065	-	54,065
Debt securities, alternative Tier 1 and other eligible bills	9,571	18,215	149	27,935
Of which:
Government bonds and treasury bills	7,850	8,217	-	16,067
Issued by corporates other than financial institutions²	64	5,538	149	5,751
Issued by financial institutions²	1,657	4,460	-	6,117

Equity shares	1,190	-	369	1,559

Derivative financial instruments	552	48,637	48	49,237
Of which:
Foreign exchange	58	27,488	39	27,585
Interest rate	17	20,274	9	20,300
Credit	-	555	-	555
Equity and stock index options	-	28	-	28
Commodity	477	292	-	769

Investment securities
Debt securities, alternative Tier 1 and other eligible bills	61,929	53,515	159	115,603
Of which:
Government bonds and treasury bills	43,889	19,360	109	63,358
Issued by corporates other than financial institutions²	6,353	12,170	50	18,573
Issued by financial institutions²	11,687	21,985	-	33,672

Equity shares	30	-	253	283
Total financial instruments at 30 June 20191	73,272	183,805	1,448	258,525

Liabilities
Financial instruments held at fair value through profit or loss
Deposits by banks	-	721	36	757
Customer accounts	-	6,889	-	6,889
Repurchase agreements and other similar secured borrowing	-	39,834	-	39,834
Debt securities in issue	-	8,810	462	9,272
Short positions	2,986	2,043	-	5,029

Derivative financial instruments	625	49,068	660	50,353
Of which:
Foreign exchange	51	28,284	15	28,350
Interest rate	49	19,318	391	19,758
Credit	-	1,268	29	1,297
Equity and stock index options	-	64	225	289
Commodity	525	134	-	659

Total financial instruments at 30 June 20191	3,611	107,365	1,158	112,134

1 The above table does not include held for sale assets of $891 million and liabilities of $40 million. These are reported in the notes to the financial statements in the Half Year Report together with their fair value hierarchy

2 Include covered bonds of $3,170 million, securities issued by Multilateral Development Banks/International Organisations of $11,238 million and State-owned agencies and development banks of $18,223 million

There were no significant changes to valuation or levelling approaches in 2019.

There were no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the year.

Assets	Level 1 $million	Level 2 $million	Level 3 $million	Total $million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	-	3,768	-	3,768
Loans and advances to customers	-	4,436	492	4,928
Reverse repurchase agreements and other similar secured lending	-	54,769	-	54,769
Debt securities, alternative Tier 1 and other eligible bills	8,097	13,562	317	21,976
Of which:
Government bonds and treasury bills	6,699	6,851	-	13,550
Issued by corporates other than financial institutions²	178	3,241	317	3,736
Issued by financial institutions²	1,220	3,470	-	4,690

Equity shares	1,364	-	327	1,691

Derivative financial instruments	907	44,702	12	45,621
Of which:
Foreign exchange	149	31,242	7	31,398
Interest rate	4	12,237	5	12,246
Credit	-	252	-	252
Equity and stock index options	-	89	-	89
Commodity	754	882	-	1,636

Investment securities
Debt securities, alternative Tier 1 and other eligible bills	67,624	48,299	412	116,335
Of which:
Government bonds and treasury bills	52,329	17,928	412	70,669
Issued by corporates other than financial institutions²	8,366	9,839	-	18,205
Issued by financial institutions²	6,929	20,532	-	27,461

Equity shares	29	4	230	263
Total financial instruments at 31 December 2018¹	78,021	169,540	1,790	249,351

Liabilities
Financial instruments held at fair value through profit or loss
Deposits by banks	-	314	4	318
Customer accounts	-	6,751	-	6,751
Repurchase agreements and other similar secured borrowing	-	43,000	-	43,000
Debt securities in issue	-	6,966	439	7,405
Short positions	1,999	1,227	-	3,226

Derivative financial instruments	809	45,995	405	47,209
Of which:
Foreign exchange	137	32,655	7	32,799
Interest rate	15	12,583	355	12,953
Credit	-	273	8	281
Equity and stock index options	-	32	35	67
Commodity	657	452	-	1,109

Total financial instruments at 31 December 2018¹	2,808	104,253	848	107,909

1 The above table does not include held for sale assets of $887 million and liabilities of $198 million. These are reported in the notes to the financial statements in the Half Year Report together with their fair value hierarchy

2 Include covered bonds of $5,466 million, securities issued by Multilateral Development Banks/International Organisations $7,432 million and State-owned agencies and development banks of $7,549 million

There were no significant changes to valuation or levelling approaches in 2018.

There were no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the period.

Fair value hierarchy - financial instruments measured at amortised cost

The following table shows the carrying amounts and incorporates the Group's estimate of fair values of those financial assets and liabilities not presented on the Group's balance sheet at fair value. These fair values may be different from the actual amount that will be received or paid on the settlement or maturity of the financial instrument. For certain instruments, the fair value may be determined using assumptions for which no observable prices are available.

	Carrying value $million	Fair value
	Carrying value $million	Level 1 $million	Level 2 $million	Level 3 $million	Total $million
Assets
Cash and balances at central banks1	58,822	-	58,822	-	58,822
Loans and advances to banks	59,210	-	59,121	-	59,121
Of which: reverse repurchase agreements and other similar secured lending	1,145	-	1,155	-	1,155
Loans and advances to customers	263,595	-	22,883	241,028	263,911
Of which: reverse repurchase agreements and other similar secured lending	2,704	-	1,673	1,033	2,706
Investment securities²	12,150	-	11,647	25	11,672
Other assets1	36,234	-	36,234	-	36,234
Assets held for sale	141	-	40	101	141
At 30 June 2019	430,152	-	188,747	241,154	429,901
Liabilities
Deposits by banks	30,783	-	30,776	-	30,776
Customer accounts	401,597	-	401,734	-	401,734
Repurchase agreements and other similar secured borrowing	5,920	-	5,920	-	5,920
Debt securities in issue	46,672	19,239	27,383	-	46,622
Subordinated liabilities and other borrowed funds	15,245	15,422	69	-	15,491
Other liabilities1	41,083	-	41,083	-	41,083
At 30 June 2019	541,300	34,661	506,965	-	541,626

	Carrying value $million	Fair value
	Carrying value $million	Level 1 $million	Level 2 $million	Level 3 $million	Total $million
Assets
Cash and balances at central banks1	57,511	-	57,511	-	57,511
Loans and advances to banks	61,414	-	61,357	-	61,357
Of which: reverse repurchase agreements and other similar secured lending	3,815	-	3,842	-	3,842
Loans and advances to customers	256,557	-	18,514	238,797	257,311
Of which: reverse repurchase agreements and other similar secured lending	3,151	-	2,409	744	3,153
Investment securities²	9,303	-	8,953	8	8,961
Other assets1	32,678	-	32,673	-	32,673
Assets held for sale	135	-	135	-	135
At 31 December 2018	417,598	-	179,143	238,805	417,948
Liabilities
Deposits by banks	29,715	-	29,715	-	29,715
Customer accounts	391,013	-	391,018	-	391,018
Repurchase agreements and other similar secured borrowing	1,401	-	1,401	-	1,401
Debt securities in issue	46,454	17,009	29,195	-	46,204
Subordinated liabilities and other borrowed funds	15,001	14,505	23	-	14,528
Other liabilities1	37,945	-	37,945	-	37,945
At 31 December 2018	521,529	31,514	489,297	-	520,811

1 The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are short term in nature or reprice to current market rates frequently

2 Includes Government bonds and Treasury bills of $5,488 million at H1 2019 and $4,716 million at FY 2018

Level 3 summary and significant unobservable inputs

The following table presents the Group's primary Level 3 financial instruments which are held at fair value. The table also presents the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, the range of values for those inputs and the weighted average of those inputs.

Instrument	Value at 30 June 2019		Principal valuation technique	Significant unobservable inputs	Range1	Weighted average2
Instrument	Assets $million	Liabilities $million	Principal valuation technique	Significant unobservable inputs	Range1	Weighted average2
Loans and advances to customers	470		Comparable pricing/yield	Price/yield	NA	NA
Loans and advances to customers			Discounted cashflows	Recovery rates	25.5% - 100%	95.2%
Debt securities, alternative Tier 1 and other eligible securities	51		Discounted cashflows	Recovery rates	44.2%	44.2%
Government bonds and treasury bills	109		Discounted cashflows	Price/yield	0.0% - 11.0%	6.7%
Asset-backed securities	148		Discounted cashflows	Price/yield	0.0% - 5.0%	4.0%
Equity shares (includes private equity investments)3	622		Comparable pricing/yield	EV/EBITDA multiples	3.3x - 9.2x	4.8x
				P/E multiples	16.5x	16.5x
				P/B multiples	0.6x - 1.0x	1.0x
				P/S multiples	N/A	N/A
				Liquidity discount	10.0% - 20.0%	16.5%
			Discounted cashflows	Discount rates	9.1% - 16.3%	9.9%
Derivative financial instruments Of which:
Foreign exchange	39	15	Option pricing model	Foreign exchange option implied volatility	1.2% - 7.4%	5.0%
Foreign exchange			Discounted cashflows	Foreign exchange curves	6.5% - 7.2%	6.9%
Interest rate	9	391	Discounted cashflows	Interest rate curves	2.4% - 16.6%	10.7%
Interest rate			Discounted cashflows	Credit spreads	1.0% - 3.6%	1.0%
Credit	-	29	Discounted cashflows	Credit spreads	0.6% - 1.5%	1.0%
Equity and stock index	-	225	Internal pricing model	Equity correlation	-70.0% - 85.0%	N/A
				Equity-FX correlation	-80.0% - 82.3%	N/A
Deposits by banks		36	Discounted cashflows	Credit spreads	1.0%	1.0%
Debt securities in issue		462	Discounted cashflows	Credit spreads	0.2% - 4.0%	1.2%
		-	Internal pricing model	Equity correlation	-70.0% - 85.0%	N/A
		-		Equity-FX correlation	-80.0% - 82.3%	N/A
Total	1,448	1,158

1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group's Level 3 financial instruments as at 30 June 2019. The ranges of values used are reflective of the underlying characteristics of these Level 3 financial instruments based on the market conditions at the balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group's Level 3 financial instruments

2 Weighted average for non-derivative financial instruments has been calculated by weighting inputs by the relative fair value. Weighted average for derivatives has been provided by weighting inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indicator

3 The Group has an equity investment in the Series B preferred shares of Ripple Labs, Inc., which owns a digital currency (XRP) and is being carried at a fair value based on the shares' initial offering price. The shares will continue to be valued at the initial offering price until such time as a reliable means of valuing the cashflows and underlying assets is possible or additional sales are observable

The following section describes the significant unobservable inputs identified in the valuation technique table:

• Comparable price/yield is a valuation methodology in which the price of a comparable instrument is used to estimate the fair value where there are no direct observable prices. Yield is the interest rate that is used to discount the future cashflows in a discounted cashflow model. Valuation using comparable instruments can be done by calculating an implied yield (or spread over a liquid benchmark) from the price of a comparable instrument, then adjusting that yield (or spread) to derive a value for the instrument. The adjustment should account for relevant differences in the financial instruments such as maturity and/or credit quality. Alternatively, a price-to-price basis can be assumed between the comparable instrument and the instrument being valued in order to establish the value of the instrument (for example, deriving a fair value for a junior unsecured bond from the price of a senior secured bond). An increase in price, in isolation, would result in a favourable movement in the fair value of the asset. An increase in yield, in isolation, would result in an unfavourable movement in the fair value of the asset

• Recovery rates are the expectation of the rate of return resulting from the liquidation of a particular loan. As the probability of default increases for a given instrument, the valuation of that instrument will increasingly reflect its expected recovery level assuming default. An increase in the recovery rate, in isolation, would result in a favourable movement in the fair value of the loan

• EV/EBITDA ratio multiples This is the ratio of Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA). EV is the aggregate market capitalisation and debt minus the cash and cash equivalents. An increase in EV/EBITDA multiples in isolation, will result in a favourable movement in the fair value of the unlisted firm

• Price-Earnings (P/E) multiples This is the ratio of the Market Capitalisation to the net income after tax. The multiples are determined from multiples of listed comparables, which are observable. An increase in P/E multiple will result in a favourable movement in the fair value of the unlisted firm

• Price-Book (P/B) multiple This is the ratio of the market value of equity to the book value of equity. An increase in P/B multiple will result in a favourable movement in the fair value of the unlisted firm

• Price-Sales (P/S) multiple This is the ratio of the market value of equity to sales. An increase in P/S multiple will result in a favourable movement in the fair value of the unlisted firm

• Liquidity discounts in the valuation of unlisted investments primarily applied to the valuation of unlisted firms' investments to reflect the fact that these stocks are not actively traded. An increase in liquidity discount will result in unfavourable movement in the fair value of the unlisted firm

• Discount rate refers to the rate of return used to convert expected cashflows into present value

• Volatility represents an estimate of how much a particular instrument, parameter or index will change in value over time. Generally, the higher the volatility, the more expensive the option will be

• Foreign exchange curves is the term structure for the forward rates and swap rates between currency pairs over a specified period

• Interest rate curves is the term structure of interest rates and measure of future interest rates at a particular point in time

• Credit spread represents the additional yield that a market participant would demand for taking exposure to the Credit Risk of an instrument

• Correlation is the measure of how movement in one variable influences the movement in another variable. An equity correlation is the correlation between two equity instruments while an interest rate correlation refers to the correlation between two swap rates

• Commodities correlation: This refers to the correlation between two commodity underlyings over a specified time

Level 3 movement tables - financial assets

The table below analyses movements in Level 3 financial assets carried at fair value.

Assets	Held at fair value through profit or loss			Derivative financial instruments $million	Investment securities
Assets	Loans and advances to customers $million	Debt securities, alternative Tier 1 and other eligible bills $million	Equity shares $million	Derivative financial instruments $million	Debt securities, alternative Tier 1 and other eligible bills $million	Equity shares $million	Total $million
At 1 January 2019	492	317	327	12	412	230	1,790
Total gains/(losses) recognised in income statement	(3)	(23)	(16)	1	3	-	(38)
Net trading income	(3)	(23)	(16)	1	-	-	(41)
Other operating income	-	-	-	-	3	-	3
Total (losses)/gains recognised in other comprehensive income (OCI)	-	-	-	-	(327)	4	(323)
Fair value through OCI reserve	-	-	-	-	-	12	12
Exchange difference	-	-	-	-	(327)	(8)	(335)
Purchases	29	46	69	58	202	16	420
Sales	(8)	(155)	(12)	(20)	-	-	(195)
Settlements	(121)	(3)	-	(2)	(58)	-	(184)
Transfers out1	-	(86)	(74)	(3)	(73)	-	(236)
Transfers in2	81	53	75	2	-	3	214
At 30 June 2019	470	149	369	48	159	253	1,448
Total unrealised gains recognised in the income statement, within net trading income, relating to change in fair value of assets held at 30 June 2019	1	-	-	3	-	-	4

1 Transfers out include debt securities, alternative Tier 1 and other eligible bills, equity shares and derivative financial instruments where the valuation parameters became observable during the period and were transferred to Level 1 and Level 2

2 Transfers in primarily relate to loans and advances, debt securities, alternative Tier 1 and other eligible bills, equity shares and derivative financial instruments where the valuation parameters become unobservable during the period

Level 3 movement tables - financial assets

The table below analyses movements in Level 3 financial assets carried at fair value.

Assets	Held at fair value through profit or loss					Derivative financial instruments $million	Investment securities
Assets	Loans and advances to banks $million	Loans and advances to customers $million	Reverse repurchase agreements and other similar secured lending	Debt securities, alternative Tier 1 and other eligible bills $million	Equity shares $million	Derivative financial instruments $million	Debt securities, alternative Tier 1 and other eligible bills $million	Equity shares $million	Total $million
At 1 January 2018	71	717	-	431	1,100	40	318	150	2,827
Total gains/(losses) recognised in income statement	2	13	-	(44)	(10)	(3)	22	-	(20)
Net trading income	2	13	-	(44)	(10)	(3)	-	-	(42)
Other operating income	-	-	-	-	-	-	22	-	22
Total (losses)/gains recognised in other comprehensive income	-	-	-	-	-	-	(2)	40	38
Fair value through OCI reserve	-	-	-	-	-	-	-	41	41
Exchange difference	-	-	-	-	-	-	(2)	(1)	(3)
Purchases	-	328	55	120	143	70	445	38	1,199
Sales	-	(254)	-	(215)	(176)	(40)	-	(5)	(690)
Settlements	(71)	(261)	-	(6)	-	(14)	(210)	-	(562)
Transfers out1	(101)	(112)	(55)	(8)	(743)	(43)	(161)	(1)	(1,224)
Transfers in2	99	61	-	39	13	2	-	8	222
At 31 December 2018	-	492	-	317	327	12	412	230	1,790
Total unrealised (losses)/gains recognised in the income statement, within net trading income, relating to change in fair value of assets held at 31 December 2018	-	(2)	-	-	22	(3)	-	-	17

1 Transfers out include loans and advances, reverse repurchase agreements, debt securities, alternative Tier 1 and other eligible bills, equity shares and derivative financial instruments where the valuation parameters became observable during the year, and were transferred to Level 1 and Level 2. Transfers out further relates to $743 million equity shares held for sale

Level 3 movement tables - financial liabilities

	30.06.19
	Deposits by banks $million	Debt securities in issue $million	Derivative financial instruments $million	Total $million
At 1 January 2019	4	439	405	848
Total losses recognised in income statement - net trading income	-	23	51	74
Net trading income	-	23	51	74
Issues	32	240	197	469
Settlements	-	(240)	(190)	(430)
Transfers out1	-	-	(9)	(9)
Transfers in2	-	-	206	206
At 30 June 2019	36	462	660	1,158
Total unrealised losses/(gains) recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 30 June 2019	-	14	(6)	8

	31.12.18
	Deposits by banks $million	Debt securities in issue $million	Derivative financial instruments $million	Total $million
At 1 January 2018	69	442	25	536
Total losses/(gains) recognised in income statement - net trading income	1	(22)	30	9
Issues	4	167	439	610
Settlements	(70)	(148)	(103)	(321)
Transfers out1	-	-	(2)	(2)
Transfers in2	-	-	16	16
At 31 December 2018	4	439	405	848
Total unrealised (gains)/losses recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 31 December 2018	-	(5)	8	3

1 Transfers out during the period/year primarily relate to derivative financial instruments where the valuation parameters became observable during the period/year and were transferred to Level 2 financial liabilities

2 Transfers in during the period/year primarily relate to derivative financial instruments where the valuation parameters become unobservable during the period/year

Sensitivities in respect of the fair values of Level 3 assets and liabilities

Sensitivity analysis is performed on products with significant unobservable inputs. The Group applies a 10 per cent increase or decrease on the values of these unobservable inputs, to generate a range of reasonably possible alternative valuations. The percentage shift is determined by statistical analyses performed on a set of reference prices based on the composition of our Level 3 assets. Favourable and unfavourable changes are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable parameters. This Level 3 sensitivity analysis assumes a one-way market move and does not consider offsets for hedges.

	Held at fair value through profit or loss			Fair value through other comprehensive income
	Net exposure $million	Favourable changes $million	Unfavourable changes $million	Net exposure $million	Favourable changes $million	Unfavourable changes $million
Financial instruments held at fair value
Loans and advances	470	477	452	-	-	-
Debt securities, alternative Tier 1 and other eligible bills	149	150	148	159	159	159
Equity shares	369	406	332	253	278	228
Derivative financial instruments	(612)	(579)	(645)	-	-	-
Deposits by banks	(36)	(35)	(37)	-	-	-
Debt securities in issue	(462)	(436)	(488)	-	-	-
At 30 June 2019	(122)	(17)	(238)	412	437	387

Financial instruments held at fair value
Loans and advances	492	498	481	-	-	-
Debt securities, alternative Tier 1 and other eligible bills	317	339	295	412	415	409
Equity shares	327	360	294	230	253	207
Derivative financial instruments	(393)	(376)	(410)	-	-	-
Deposits by banks	(4)	(4)	(4)	-	-	-
Debt securities in issue	(439)	(417)	(461)	-	-	-
At 31 December 2018	300	400	195	642	668	616

The reasonably possible alternatives could have increased or decreased the fair values of financial instruments held at fair value through profit or loss and those classified as fair value through other comprehensive income by the amounts disclosed below.

Financial instruments	Fair value changes	30.06.19 $million	31.12.18 $million
Held at fair value through profit or loss	Possible increase	105	100
Held at fair value through profit or loss	Possible decrease	(116)	(105)
Fair value through other comprehensive income	Possible increase	25	26
Fair value through other comprehensive income	Possible decrease	(25)	(26)

13. Derivative financial instruments

The tables below analyse the notional principal amounts and the positive and negative fair values of derivative financial instruments. Notional principal amounts are the amounts of principal underlying the contract at the reporting date.

Derivatives	30.06.19			31.12.18
Derivatives	Notional principal amounts $million	Assets $million	Liabilities $million	Notional principal amounts $million	Assets $million	Liabilities $million
Foreign exchange derivative contracts:
Forward foreign exchange contracts	996,234	11,399	11,474	2,080,513	16,457	17,264
Currency swaps and options	1,549,950	16,186	16,876	856,660	14,941	15,535
	2,546,184	27,585	28,350	2,937,173	31,398	32,799
Interest rate derivative contracts:
Swaps	4,089,329	34,184	33,427	3,693,897	20,378	20,909
Forward rate agreements and options	420,988	2,103	2,305	489,943	1,400	1,586
Exchange traded futures and options	843,532	156	169	775,518	121	111
	5,353,849	36,443	35,901	4,959,358	21,899	22,606
Credit derivative contracts	52,245	555	1,297	39,343	252	281
Equity and stock index options	2,469	28	289	2,960	89	67
Commodity derivative contracts	94,114	769	659	69,601	1,636	1,109
Gross total derivatives	8,048,861	65,380	66,496	8,008,435	55,274	56,862
Offset	-	(16,143)	(16,143)	-	(9,653)	(9,653)
Net total derivatives	8,048,861	49,237	50,353	8,008,435	45,621	47,209

The notional amounts of the contract are not offset and do not represent the Group's actual exposure to Credit Risk. This Credit Risk is limited to the current cost of replacing contracts with a positive mark to market to the Group should the counterparty default.

The Group limits exposure to credit losses in the event of default by entering into master netting agreements with certain market counterparties. As required by IAS 32, exposures are only presented net in these accounts where they are subject to legal right of offset and intended to be settled net in the ordinary course of business.

Derivatives held for hedging

Included in the table above are derivatives held for hedging purposes as follows:

	30.06.19			31.12.18
	Notional principal amounts $million	Assets $million	Liabilities $million	Notional principal amounts $million	Assets $million	Liabilities $million
Derivatives designated as fair value hedges:
Interest rate swaps	64,599	579	907	63,675	306	573
Currency swaps	9,337	35	781	8,963	30	942
	73,936	614	1,688	72,638	336	1,515
Derivatives designated as cashflow hedges:
Interest rate swaps	9,682	36	112	10,733	59	67
Forward foreign exchange contracts	187	-	23	184	-	18
Currency swaps	3,416	50	8	2,701	57	22
	13,285	86	143	13,618	116	107
Derivatives designated as net investment hedges:
Forward foreign exchange contracts	5,129	124	31	5,200	61	7
Total derivatives held for hedging	92,350	824	1,862	91,456	513	1,629

14. Reverse repurchase and repurchase agreements including other similar secured lending and borrowing

Reverse repurchase agreements and other similar secured lending

	30.06.19 $million	31.12.18 $million
Banks	18,353	20,698
Customers	39,561	41,037
	57,914	61,735
Of which:
Fair value through profit or loss	54,065	54,769
Banks	17,208	16,883
Customers	36,857	37,886

Held at amortised cost	3,849	6,966
Banks	1,145	3,815
Customers	2,704	3,151

Under reverse repurchase and securities borrowing arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms are:

	30.06.19 $million	31.12.18 $million
Securities and collateral received (at fair value)	78,961	84,557
Securities and collateral which can be repledged or sold (at fair value)	77,246	82,534
Amounts repledged/transferred to others for financing activities, to satisfy liabilities under sale and repurchase agreements (at fair value)	36,169	40,552

Repurchase agreements and other similar secured borrowing

	30.06.19 $million	31.12.18 $million
Banks	9,329	4,984
Customers	36,425	39,417
	45,754	44,401

Of which:
Fair value through profit or loss	39,834	43,000
Banks	7,931	4,777
Customers	31,903	38,223

Held at amortised cost	5,920	1,401
Banks	1,398	207
Customers	4,522	1,194

The tables below set out the financial assets provided as collateral for repurchase and other secured borrowing transactions.

Collateral pledged against repurchase agreements	30.06.19
Collateral pledged against repurchase agreements	Fair value through profit or loss $million	Fair value through other comprehensive income $million	Amortised cost $million	Off-balance sheet $million	Total $million
On-balance sheet
Debt securities, alternative Tier 1 and other eligible bills	3,282	6,409	324	-	10,015
Off-balance sheet
Repledged collateral received	-	-	-	36,169	36,169
At 30 June 2019	3,282	6,409	324	36,169	46,184

Collateral pledged against repurchase agreements	31.12.18
Collateral pledged against repurchase agreements	Fair value through profit or loss $million	Fair value through other comprehensive income $million	Amortised cost $million	Off-balance sheet $million	Total $million
On-balance sheet
Debt securities, alternative Tier 1 and other eligible bills	2,060	1,974	49	-	4,083
Off-balance sheet
Repledged collateral received	-	-	-	40,552	40,552
At 31 December 2018	2,060	1,974	49	40,552	44,635

15. Goodwill and intangible assets

	30.06.19				31.12.18
	Goodwill $million	Acquired intangibles $million	Computer software $million	Total $million	Goodwill $million	Acquired intangibles $million	Computer software $million	Total $million
Cost	3,089	483	3,000	6,572	3,116	510	2,835	6,461
Provision for amortisation	-	450	1,011	1,461	-	458	947	1,405
Net book value	3,089	33	1,989	5,111	3,116	52	1,888	5,056

	30.06.18
	Goodwill $million	Acquired intangibles $million	Computer software $million	Total $million
Cost	3,187	559	2,616	6,362
Provision for amortisation	-	461	927	1,388
Net book value	3,187	98	1,689	4,974

At 30 June 2019, accumulated goodwill impairment losses incurred from 1 January 2005 amounted to $2,801 million (31 December 2018: $2,801 million), of which nil was recognised in 2019 (31 December 2018: nil).

Outcome of impairment assessment

At 30 June 2019, the Group performed a review of the goodwill that has been assigned to the Group's cash-generating units for indicators of impairment, considering whether there were any reduced expectations for future cashflows and/or fluctuations in the discount rate or the assumptions. The results of this review indicated that there is no goodwill impairment to be recognised.

It continues to be possible that certain scenarios could be constructed where a combination of a material change in the discount rate coupled with a reduction in current business plan forecasts or the GDP growth rate would potentially result in the carrying amount of goodwill exceeding the recoverable amount in the future. Refer to the notes to the financial statements in the Half Year Report, Goodwill and intangible assets, in the 2018 Annual Report.

16. Other assets

	30.06.19 $million	31.12.18 $million
Financial assets held at amortised cost (notes to the financial statements in the Half Year Report):
Hong Kong SAR Government certificates of indebtedness (notes to the financial statements in the Half Year Report)1	6,498	5,964
Cash collateral	8,826	10,323
Acceptances and endorsements	5,291	4,923
Unsettled trades and other financial assets	15,619	11,468
	36,234	32,678
Non-financial assets:
Commodities2	2,773	2,488
Other assets	331	235
	39,338	35,401

1 The Hong Kong SAR Government certificates of indebtedness are subordinated to the claims of other parties in respect of bank notes issued

2 Commodities are carried at fair value and classified as Level 2

17. Assets held for sale and associated liabilities

Assets held for sale	30.06.19 $million	31.12.18 $million
Debt securities	5	14
Equity shares	886	873
Financial assets held at fair value through profit or loss1	891	887

Loans and advances to banks	-	112
Loans and advances to customers	141	23
Financial assets held at amortised cost	141	135

Goodwill and intangible assets	69	71
Property, plant and equipment2	117	170
Others	45	65
	1,263	1,328

1 Principal Finance assets of $891 million (31 December 2018: $887 million), classified as financial assets held at fair value through profit or loss comprising debt securities ($5 million) and equity shares ($886 million), is expected to be disposed of by the end of 2019

2 Aircraft classified as held for sale by Pembroke Air Leasing Finance for $111 million (31 December 2018: $162 million) is included within property, plant and equipment

Reported below are the associated financial liabilities held for sale of the Principal Finance business amounting to $40 million (31 December 2018: $198 million), all of which are classified under Level 3. The transactions are expected to complete in 2019.

Liabilities held for sale	30.06.19 $million	31.12.18 $million
Derivative financial instruments1	40	198
Financial liabilities held at fair value through profit or loss	40	198


Other liabilities	61	48
Accruals and deferred income	3	-
Provisions for liabilities and charges	-	1
	104	247

1 The derivative liability is a fixed price forward sale contract to sell the Principal Finance assets

18. Other liabilities

	30.06.19 $million	31.12.18 $million
Financial liabilities held at amortised cost (notes to the financial statements in the Half Year Report)
Notes in circulation1	6,498	5,964
Acceptances and endorsements	5,291	4,923
Cash collateral	8,105	9,259
Unsettled trades and other financial liabilities	21,189	17,799
	41,083	37,945
Non-financial liabilities
Cash-settled share-based payments	37	32
Property leases2	1,334	-
Equipment leases2	18	-
Other liabilities	280	332
	42,752	38,309

1 Hong Kong currency notes in circulation of $6,498 million (31 December 2018: $5,964 million) that are secured by the Government of Hong Kong SAR certificates of indebtedness of the same amount included in other assets (notes to the financial statements in the Half Year Report)

2 Other non-financial liabilities now includes the present value of lease liabilities, as required by IFRS 16 from 1 January 2019

19. Contingent liabilities and commitments

The table below shows the contract or underlying principal amounts and risk-weighted amounts of unmatured off-balance sheet transactions at the balance sheet date. The contract or underlying principal amounts indicate the volume of business outstanding and do not represent amounts at risk.

	30.06.19 $million	31.12.18 $million
Contingent liabilities
Guarantees and irrevocable letters of credit	35,922	36,511
Other contingent liabilities	5,345	5,441
	41,267	41,952
Commitments
Documentary credits and short-term trade-related transactions	5,073	3,982
Undrawn formal standby facilities, credit lines and other commitments to lend
One year and over	71,606	71,467
Less than one year	36,279	37,041
Unconditionally cancellable	40,406	39,220
	153,364	151,710
Capital commitments
Contracted capital expenditure approved by the directors but not provided for in these accounts1	37	450

1 Of which: the Group has commitments totalling $25 million to purchase aircraft for delivery in 2019 (31 December 2018: $439 million).

The Group's share of contingent liabilities and commitments relating to joint ventures is $nil billion (31 December 2018: $0.2 billion). As set out in the notes to the financial statements in the Half Year Report, the Group has contingent liabilities in respect of certain legal and regulatory matters for which it is not practicable to estimate the financial impact as there are many factors that may affect the range of possible outcomes.

20. Legal and regulatory matters

Claims and other proceedings

The Group receives legal claims against it in a number of jurisdictions and is subject to regulatory and enforcement investigations and proceedings from time to time.

Apart from the matters described below, the Group currently considers none of these claims, investigations or proceedings to be material. However, in light of the uncertainties involved in such matters there can be no assurance that the outcome of a particular matter or matters currently not considered to be material may not ultimately be material to the Group's results in a particular reporting period depending on, among other things, the amount of the loss resulting from the matter(s) and the results otherwise reported for such period.

Investigations into, and resolutions with respect to, historical sanctions and financial crime control issues

In April 2019, the Group announced that it had resolved the previously disclosed investigations by (i) the New York Department of Financial Services (NYDFS), the Board of Governors of the Federal Reserve System, the Department of Justice (DOJ), the New York County District Attorney's Office (DANY) and the Office of Foreign Assets Control (together, the US Authorities) concerning historical violations of US sanctions laws and regulations from 2007 through to 2014 and (ii) the Financial Conduct Authority (FCA) concerning the effectiveness and governance of historical financial crime controls in the Group's UK correspondent banking business and in its UAE branches (the 2019 Resolutions). Under the terms of the 2019 Resolutions, the Group agreed to pay a total of $947 million in monetary penalties to the US Authorities and £102 million to the FCA. The Group took a $900 million provision, which included these matters, in its 2018 financial statements and took a further and final charge of $186 million in the first quarter of 2019. As part of the 2019 Resolutions, the Group's Deferred Prosecution Agreements, which were originally entered into with the DOJ and DANY (and subsequently extended) as part of settlements in 2012 with the US Authorities relating to US sanctions compliance, were also further extended to 9 April 2021. The monitorship previously imposed by the DOJ expired on 31 March 2019.

Settlement relating to FX trading

In January 2019, the Group reached a settlement with the NYDFS regarding past control failures and improper conduct related to the Group's FX trading and sales business between 2007 and 2013. As part of this settlement, the Group agreed to pay a civil monetary penalty of $40 million to the NYDFS. A provision was made in the Group's 2018 financial statements relating to this settlement.

Other proceedings

Since November 2014, a number of lawsuits have been filed in the United States District Courts for the Southern and Eastern Districts of New York against a number of banks (including Standard Chartered Bank) on behalf of plaintiffs who are, or are relatives of, victims of various terrorist attacks in Iraq. Five of the lawsuits were filed in late December 2018. The plaintiffs allege that the defendant banks aided and abetted the unlawful conduct of US sanctioned parties in breach of the US Anti-Terrorism Act. Based on the facts currently known, it is not possible for the Group to predict the outcome of these lawsuits.

The Director of Public Prosecutions (DPP) and related agencies in Kenya are investigating Standard Chartered Kenya Limited (SCBK) and other banks in connection with the alleged theft of funds from Kenya's State Department of Public Service, Youth and Gender Affairs. This investigation follows fines being imposed on those banks, including SCBK, by the Central Bank of Kenya regarding adequacy of controls related to the processing of the allegedly stolen funds. The DPP has announced that it has received recommendations from the Kenyan Directorate of Criminal Investigations that charges should be brought against a number of banks, including SCBK, bank officials and other individuals. There may be penalties or other financial consequences for SCBK in connection with this investigation.

21. Subordinated liabilities and other borrowed funds

	30.06.19
	USD $million	GBP $million	EUR $million	Others $million	Total $million
Fixed rate subordinated debt	10,140	1,443	2,965	521	15,069
Floating rate subordinated debt	161	15	-	-	176
Total	10,301	1,458	2,965	521	15,245

	31.12.18
	USD $million	GBP $million	EUR $million	Others $million	Total $million
Fixed rate subordinated debt	9,905	1,414	2,966	528	14,813
Floating rate subordinated debt	161	15	-	12	188
Total	10,066	1,429	2,966	540	15,001

Redemptions and repurchases during the period

On 27 June 2019, Standard Chartered Bank Botswana Limited exercised its right to redeem BWP 127.26 million 8.2 per cent subordinated notes 2022 (callable 2017).

On 27 March 2019, Standard Chartered Bank Botswana Limited exercised its right to redeem BWP 50 million floating rate notes 2022 (callable 2017).

On 12 February 2019, Standard Chartered Bank Botswana Limited exercised its right to redeem BWP 70 million floating rate subordinated notes 2021 (callable 2016).

22. Share capital, other equity and reserves

Group and Company

	Number of ordinary shares millions	Ordinary share capital1 $million	Share premium2 $million	Total share capital & share premium $million	Other equity instruments $million
At 1 January 2018	3,296	1,648	5,449	7,097	4,961
Capitalised on scrip dividend	2	1	(1)	-	-
Shares issued	6	3	1	4	-
At 30 June 2018	3,304	1,652	5,449	7,101	4,961
Shares issued	4	2	8	10	-
At 31 December 2018	3,308	1,654	5,457	7,111	4,961
Capitalised on scrip dividend	-	-	-	-	-
Shares issued	4	2	23	25	-
Cancellation of shares including share buy-back	(54)	(27)	-	(27)	-
At 30 June 2019	3,258	1,629	5,480	7,109	4,961

1 Issued and fully paid ordinary shares of 50 cents each

2 Includes $1,494 million of share premium relating to preference capital

Share buy-back

On 1 May 2019, the Group commenced a share buy-back of its ordinary shares of $0.50 each up to a maximum consideration of $1 billion. The buy-back will reduce the number of outstanding ordinary shares and will be debited against the Group's retained earnings. Further the nominal value of the shares will be transferred from the share capital to the Capital Redemption Reserve account within equity. The nominal value of ordinary shares purchased at 30 June 2019 was $27 million and the aggregate consideration paid by the Group was $486 million. The table below outlines the details of the ordinary shares purchased from 1 May 2019 to 30 June 2019. At 30 June 2019, the total number of shares purchased was 54,885,156, representing 1.66 per cent of the ordinary shares in issue. All shares purchased were subsequently cancelled.

	Number of ordinary shares	Average price paid per share £	Aggregate price paid £	Aggregate price paid $
	54,885,156	6.9479	381,336,010	486,231,013

Ordinary share capital

In accordance with the Companies Act 2006 the Company does not have authorised share capital. The nominal value of each ordinary share is 50 cents.

During the period 3,368,576 shares were issued under employee share plans at prices between nil and 620 pence.

Preference share capital

At 30 June 2019, the Company has 15,000 $5 non-cumulative redeemable preference shares in issue, with a premium of $99,995 making a paid up amount per preference share of $100,000. The preference shares are redeemable at the option of the Company and are classified in equity.

The available profits of the Company are distributed to the holders of the issued preference shares in priority to payments made to holders of the ordinary shares and in priority to, or pari passu with, any payments to the holders of any other class of shares in issue. On a winding up, the assets of the Company are applied to the holders of the preference shares in priority to any payment to the ordinary shareholders and in priority to, or pari passu with, the holders of any other shares in issue, for an amount equal to any dividends accrued and/or payable and the nominal value of the shares together with any premium as determined by the Board. The redeemable preference shares are redeemable at the paid up amount (which includes premium) at the option of the Company in accordance with the terms of the shares. The holders of the preference shares are not entitled to attend or vote at any general meeting except where any relevant dividend due is not paid in full or where a resolution is proposed varying the rights of the preference shares.

Other equity instruments

On 2 April 2015, Standard Chartered PLC issued $2,000 million fixed rate resetting perpetual subordinated contingent convertible securities as Additional Tier 1 (AT1) securities, raising $1,987 million after issue costs. On 18 August 2016, Standard Chartered PLC issued a further $2,000 million fixed rate resetting perpetual subordinated contingent convertible securities as AT1 securities, raising $1,982 million after issue costs. On 18 January 2017, Standard Chartered PLC issued a further $1,000 million fixed rate resetting perpetual subordinated contingent convertible securities as AT1 securities, raising $992 million after issue costs. All the issuances were made for general business purposes and to increase the regulatory capital base of the Group.

The principal terms of the AT1 securities are described below:

• The securities are perpetual and redeemable, at the option of Standard Chartered PLC in whole but not in part, on the first interest reset date and each date falling five years after the first reset date

• The securities are also redeemable for certain regulatory or tax reasons on any date at 100 per cent of their principal amount together with any accrued but unpaid interest up to (but excluding) the date fixed for redemption. Any redemption is subject to Standard Chartered PLC giving notice to the relevant regulator and the regulator granting permission to redeem

• The interest rate in respect of the securities issued on 2 April 2015 for the period from (and including) the issue date to (but excluding) 2 April 2020 is a fixed rate of 6.50 per cent per annum. The first reset date for the interest rate is 2 April 2020 and each date falling five, or an integral multiple of five years after the first reset date

• The interest rate in respect of the securities issued on 18 August 2016 for the period from (and including) the issue date to (but excluding) 2 April 2022 is a fixed rate of 7.50 per cent per annum. The first reset date for the interest rate is 2 April 2022 and each date falling five years, or an integral multiple of five years, after the first reset date

• The interest rate in respect of the securities issued on 18 January 2017 for the period from (and including) the issue date to (but excluding) 2 April 2023 is a fixed rate of 7.75 per cent per annum. The first reset date for the interest rate is 2 April 2023 and each date falling five years, or an integral multiple of five years, after the first reset date

• The interest on each of the securities will be payable semi-annually in arrears on 2 April and 2 October in each year, accounted for as a dividend

• Interest on the securities is due and payable only at the sole and absolute discretion of Standard Chartered PLC, subject to certain additional restrictions set out in the terms and conditions. Accordingly, Standard Chartered PLC may at any time elect to cancel any interest payment (or part thereof) which would otherwise be payable on any interest payment date

• The securities convert into ordinary shares of Standard Chartered PLC, at a pre-determined price, should the fully loaded Common Equity Tier 1 (CET1) ratio of the Group fall below 7.0 per cent. Approximately 572 million ordinary shares would be required to satisfy the conversion of all the securities mentioned above

The securities rank behind the claims against Standard Chartered PLC of: (a) unsubordinated creditors; (b) which are expressed to be subordinated to the claims of unsubordinated creditors of Standard Chartered PLC but not further or otherwise; or (c) which are, or are expressed to be, junior to the claims of other creditors of Standard Chartered PLC, whether subordinated or unsubordinated, other than claims which rank, or are expressed to rank, pari passu with, or junior to, the claims of holders of the AT1 securities in a winding-up occurring prior to the conversion trigger.

Reserves

The constituents of the reserves are summarised as follows:

• The capital reserve represents the exchange difference on redenomination of share capital and share premium from sterling to US dollars in 2001. The capital redemption reserve represents the nominal value of preference shares redeemed

• Merger reserve represents the premium arising on shares issued using a cash box financing structure, which required the Company to create a merger reserve under section 612 of the Companies Act 2006. Shares were issued using this structure in 2005 and 2006 to assist in the funding of certain acquisitions, in 2008, 2010 and 2015 for the shares issued by way of a rights issue, and for the shares issued in 2009 in the placing. The funding raised by the 2008 and 2010 rights issues and 2009 share issue was fully retained within the Company

• Own credit adjustment (OCA) reserve represents the cumulative gains and losses on financial liabilities designated at fair value through profit or loss relating to own credit. Following the Group's decision to early apply this IFRS 9 requirement, the cumulative OCA component of financial liabilities designated at fair value through profit or loss has been transferred from opening retained earnings to the OCA reserve. Gains and losses on financial liabilities designated at fair value through profit or loss relating to own credit in the year have been taken through other comprehensive income (OCI) into this reserve. On derecognition of applicable instruments the balance of any OCA will not be recycled to the income statement, but will be transferred within equity to retained earnings

• Fair value through OCI debt reserve represents the unrealised fair value gains and losses in respect of financial assets classified as fair value through OCI, net of expected credit losses and taxation. Gains and losses are deferred in this reserve and are reclassified to the income statement when the underlying asset is sold, matures or becomes impaired. Fair value through OCI equity reserve represents unrealised fair value gains and losses in respect of financial assets classified as fair value through OCI, net of taxation. Gains and losses are recorded in this reserve and never recycled to the income statement

• Cashflow hedge reserve represents the effective portion of the gains and losses on derivatives that meet the criteria for these types of hedges. Gains and losses are deferred in this reserve and are reclassified to the income statement when the underlying hedged item affects profit and loss or when a forecast transaction is no longer expected to occur

• Translation reserve represents the cumulative foreign exchange gains and losses on translation of the net investment of the Group in foreign operations. Since 1 January 2004, gains and losses are deferred to this reserve and are reclassified to the income statement when the underlying foreign operation is disposed. Gains and losses arising from derivatives used as hedges of net investments are netted against the foreign exchange gains and losses on translation of the net investment of the foreign operations

• Retained earnings represents profits and other comprehensive income earned by the Group and Company in the current and prior periods, together with the after tax increase relating to equity-settled share options, less dividend distributions, own shares held (treasury shares) and share buy-backs

A substantial part of the Group's reserves are held in overseas subsidiary undertakings and branches, principally to support local operations or to comply with local regulations. The maintenance of local regulatory capital ratios could potentially restrict the amount of reserves which can be remitted. In addition, if these overseas reserves were to be remitted, further unprovided taxation liabilities might arise.

As at 30 June 2019, the distributable reserves of Standard Chartered PLC (the Company) were $14.6 billion (31 December 2018: $15.1 billion). These comprised retained earnings and $12.5 billion of the merger reserve account. Distribution of reserves is subject to maintaining minimum capital requirements.

23. Retirement benefit obligations

Retirement benefit obligations comprise:

	30.06.19 $million	31.12.18 $million	30.06.18 $million
Total market value of assets	2,464	2,410	2,506
Present value of the plans liabilities	(2,917)	(2,796)	(2,838)
Defined benefit plans obligation	(453)	(386)	(332)
Defined contribution plans obligation	(20)	(13)	(16)
Net obligation	(473)	(399)	(348)

Retirement benefit charge comprises:

	6 months ended 30.06.19 $million	6 months ended 31.12.18 $million	6 months ended 30.06.18 $million
Defined benefit plans	40	40	41
Defined contribution plans	159	138	146
Charge against profit (notes to the financial statements in the Half Year Report)	199	178	187

The pension cost for defined benefit plans was:
Current service cost	31	32	35
Past service cost and curtailments	3	2	-
Gain on settlements	-	1	-
Interest income on pension plan assets	(34)	(33)	(35)
Interest on pension plan liabilities	40	38	41
Total charge to profit before deduction of tax	40	40	41
(Returns)/losses on plan assets excluding interest income	(132)	82	31
Losses/(gains) on liabilities	181	42	(136)
Total losses/(gains) recognised directly in statement of comprehensive income before tax	49	124	(105)
Deferred taxation	(4)	(12)	6
Total losses/(gains) after tax	45	112	(99)

24. Related party transactions

Directors and officers

As at 30 June 2019, Standard Chartered Bank had in place a charge over $83 million (31 December 2018: $83 million, 30 June 2018: $73 million) of cash assets in favour of the independent trustee of its employer-financed retirement benefit scheme.

There were no changes in the related party transactions described in the Annual Report 2018 that have had a material effect on the financial position or performance of the Group in the period ended 30 June 2019. All related party transactions that have taken place in the period ended 30 June 2019 were similar in nature to those disclosed in the Annual Report 2018.

Associate and joint ventures

The following transactions with related parties are on an arm's-length basis.

	30.06.19				31.12.18
	China Bohai Bank $million	Clifford Capital $million	PT Bank Permata $million	Seychelles International Mercantile Banking Corporation Limited $million	China Bohai Bank $million	Clifford Capital $million	PT Bank Permata $million	Seychelles International Mercantile Banking Corporation Limited $million
Assets
Loans and advances	-	-	65	-	-	22	58	-
Derivative assets	1	-	-	-	2	-	-	-
Total assets	1	-	65	-	2	22	58	-

Liabilities
Deposits	345	-	27	11	266	-	35	11
Total liabilities	345	-	27	11	266	-	35	11
Loan commitments and other guarantees	-	50	-	-	-	-	-	-
Total net income	4	-	2	-	6	-	6	-

25. Post balance sheet events

An interim dividend for half year 2019 of 7 cents per ordinary share was declared by the directors on 1 August 2019.

26. Corporate governance

The directors confirm that, throughout the period, the Company has complied with the code provisions set out in the Corporate Governance Code contained in Appendix 14 of the Hong Kong Listing Rules. The directors also confirm that the announcement of these results has been reviewed by the Company's Audit Committee. The Company confirms that it has adopted a code of conduct regarding securities transactions by directors on terms no less exacting than the required standard set out in Appendix 10 of the Hong Kong Listing Rules and that having made specific enquiry of all directors, the directors of the Company have complied with the required standards of the adopted code of conduct throughout the period.

As previously announced, since 31 December 2018 the following changes to the composition of the Board have taken place. Carlson Tong was appointed to the Board as an independent non-executive director and as a member of the Audit Committee, the Board Risk Committee and the Board Financial Crime Risk Committee on 21 February 2019. Dr Han Seung-soo, an independent non-executive director, retired from the Board and as a member of the Brand, Values and Conduct Committee on 23 February 2019. Om Bhatt, an independent non-executive director, stepped down from the Board and as a member of the Board Risk Committee and Brand, Values and Conduct Committee on 23 February 2019. David Tang was appointed to the Board as an independent non-executive director and a member of the Brand, Values and Conduct Committee on 12 June 2019. Biographies for each of the directors and a list of the committees' membership can be found at sc.com. Members of the Audit and Board Risk Committees receive a fee of GBP 35,000 per committee, per year. Members of the Board Financial Crime Risk Committee and Brand, Values and Conduct Committee receive a fee of GBP 30,000 per committee, per year.

In compliance with Rule 13.51B (1) of the Hong Kong Listing Rules the Company confirms that on 10 May 2019 it was announced that Gay Huey Evans, independent non-executive director was elected as Chair of the Board of The London Metal Exchange, to take effect from December 2019.

27. Statutory accounts

The information in this half year report is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This document was approved by the Board on 1 August 2019. The statutory accounts for the year ended 31 December 2018 have been audited by the Company's auditors and delivered to the Registrar of Companies in England and Wales. The report of the auditors was: (i) unqualified; (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 of the Companies Act 2006.

28. Transition to IFRS 16 Leases

On 1 January 2019, the Group adopted IFRS 16 Leases, which has been endorsed by the EU. IFRS 16 replaces IAS 17 Leases. The key accounting policies, significant judgements and significant estimates are detailed in the notes to the financial statements in the Half Year Report.

As of 30 June 2019, the right-of-use assets in respect of property leases and equipment leases were $1,288 million and $19 million respectively. Right-of-use assets are presented in 'Property, plant equipment' on the Group's balance sheet.

The corresponding property lease liabilities and equipment lease liabilities were $1,334 million and $18 million respectively. Lease liabilities are presented in 'Other liabilities' on the Group's balance sheet.

The total charge to the income statement for the six months ended 30 June 2019 was $175 million. Of this, $34 million was recognised as 'Interest expense' on lease liabilities and $141 million was recognised as 'Depreciation and amortisation' on the right-of-use assets.

The difference between right-of-use assets and lease liabilities recognised on 1 January 2019 is due existing prepayments and accruals recognised under IAS 17 as of 31 December 2018 being included in the measurement of the right-of-use assets.

The difference between operating lease commitments as disclosed in the Group's 2018 Annual Report and the newly recognised lease liabilities is a result of dissimilar recognition basis between the old and new standards. IFRS 16 requires preparers to assess the lease term used to measure assets and liabilities to include "reasonably certain" renewal or termination options, whereas previously IAS 17 required disclosure of "non-cancellable" lease commitments. The consequences of this are:

• Under IFRS 16, for some leases the Group includes lease renewal options which it is reasonably certain will be exercised in the measurement of right-of-use assets and lease liabilities. These renewal options would not have been included in the previous operating lease commitment disclosure

• In certain jurisdictions, the Group has a unilateral right to cancel building leases with notice of 3 months or less and without incurring a significant financial penalty. In previous disclosures, the Group would exclude cashflows beyond the non-cancellable period as permitted under IAS 17, but under IFRS 16 the Group would only exclude these cashflows from lease measurement if it was reasonably certain the termination clause would be exercised

29. Dealings in Standard Chartered PLC listed securities

This is also disclosed as part of Note 22 Share capital, other equity and reserves.

Except as disclosed, neither the Company nor any of its subsidiaries has bought, sold or redeemed any securities of the Company listed on The Stock Exchange of Hong Kong Limited during the period. Details of the shares purchased and held by the trusts are set out below.

Number of shares	1995 Trust			2004 Trust			Total
Number of shares	30.06.19	31.12.18	30.06.18	30.06.19	31.12.18	30.06.18	30.06.19	31.12.18	30.06.18
Shares purchased during the period	646,283	1,017,941	-	15,703,928	-	-	16,350,211	1,017,941	-
Market price of shares purchased ($million)	5	8	-	131	-	-	136	8	-
Shares held at the end of the period	-	2,354,820	1,336,879	2,370,743	16,755	16,755	2,370,743	2,371,575	1,353,634
Maximum number of shares held during the period							14,424,640	2,371,575	3,787,015

Standard Chartered PLC - Other supplementary information

A. Our Fair Pay Charter

The Group's Fair Pay Charter sets out the principles we use to determine and deliver pay for all employees globally. In 2019 we published our first Fair Pay Report internally to all colleagues to explain how our performance and reward approach meets the principles of the Charter, and to provide an update on areas we are working on to enhance our approach. Our Fair Pay Charter is set out in the Group's 2018 Annual Report and Accounts together with a summary of how we apply the principles.

B. Group Share Plans

2011 Standard Chartered Share Plan (the 2011 Plan)

The 2011 Plan was approved by shareholders in May 2011 and is the Group's main share plan. Since approval, it has been used to deliver various types of share awards:

• Long Term Incentive Plan ('LTIP') awards: granted with vesting subject to performance measures. Performance measures attached to awards granted previously include: total shareholder return ('TSR'); return on equity ('RoE') with a common equity tier 1 ('CET1') underpin; strategic measures; earnings per share ('EPS') growth; and return on risk-weighted assets ('RoRWA'). Each measure is assessed independently over a three-year period. Awards granted from 2016 have an individual conduct gateway requirement that results in the award lapsing if not met

• Deferred awards are used to deliver the deferred portion of variable remuneration, in line with both market practice and regulatory requirements. These awards vest in instalments on anniversaries of the award date specified at the time of grant. Deferred awards are not subject to any plan limit. This enables the Group to meet regulatory requirements relating to deferral levels, and is in line with market practice

• Restricted share awards, made outside of the annual performance process as replacement buy-out awards to new joiners who forfeit awards on leaving their previous employers, vest in instalments on the anniversaries of the award date specified at the time of grant. This enables the Group to meet regulatory requirements relating to buy-outs, and is in line with market practice. In line with similar plans operated by our competitors, restricted share awards are not subject to an annual limit and do not have any performance measures

Under the 2011 Plan, no grant price is payable to receive an award. The remaining life of the 2011 Plan during which new awards can be made is two years.

2001 Performance Share Plan (2001 PSP) - closed

The Group's previous plan for delivering performance shares was the 2001 PSP. There are no outstanding vested awards under this plan. This plan is closed and no further awards will be granted under this plan.

2006 Restricted Share Scheme (2006 RSS)/2007 Supplementary Restricted Share Scheme (2007 SRSS) - closed

The Group's previous plans for delivering restricted shares were the 2006 RSS and 2007 SRSS both now replaced by the 2011 Plan. There are no outstanding vested awards under these plans. These plans are closed and no further awards will be granted under these plans.

All Employee Sharesave Plans

2013 Sharesave Plan

The 2013 Sharesave Plan was approved by shareholders in May 2013. Under the 2013 Sharesave Plan, employees may open a savings contract. Within a maturity period of six months after the third anniversary, employees may purchase ordinary shares in the Company at a discount of up to 20 per cent on the share price at the date of invitation (this is known as the 'option exercise price'). There are no performance measures attached to options granted under the 2013 Sharesave Plan and no grant price is payable to receive an option. In some countries in which the Group operates, it is not possible to deliver shares under the 2013 Sharesave Plan, typically due to securities law and regulatory restrictions. In these countries, where possible, the Group offers an equivalent cash-based plan to its employees. The remaining life of the 2013 Sharesave Plan is three years.

Valuation of share awards

The valuation models used in determining the fair values of share awards granted under the Group's share plans are detailed in the Group's 2018 Annual Report and Accounts.

Reconciliation of share award movements for the period to 30 June 2019

	2011 Plan1		PSP1	Sharesave	Weighted average Sharesave exercise price (£)
	LTIP	Deferred/ restricted shares	PSP1	Sharesave	Weighted average Sharesave exercise price (£)
Outstanding at 1 January 2019	27,003,333	26,612,980	4,270	13,724,361	5.48
Granted²	2,763,220	14,812,688	-	-	-
Lapsed	(2,989,541)	(1,032,940)	-	(1,217,746)	5.51
Exercised	(4,579,973)	(9,352,168)	(4,270)	(2,879,471)	5.58
Outstanding at 30 June 2019	22,197,039	31,040,560	-	9,627,144	5.45
Exercisable as at 30 June 2019	46,123	2,986,102	-	32,532	5.60
Range of exercise prices (£)	-	-	-	5.13-6.20
Intrinsic value of vested but not exercised options ($million)	0.42	27.11	-	0.06
Weighted average contractual remaining life (years)	7.31	8.6	-	2.09
Weighted average share price for awards exercised during the period (£)	6.22	6.19	6.95	6.56

1 Employees do not contribute towards the cost of these awards

2 114,346,920 (DRSA/RSA) granted on 11 March 2019, 186,955 (DRSA/RSA) granted as notional dividend on 08 March 2019, 2,530,325 (LTIP) granted on 11 March 2019, 232,895 (LTIP) granted as notional dividend on 08 March 2019, 278,813 (DRSA/RSA) granted on 24 June 2019

C. Group Chairman and independent non-executive directors' interests in ordinary shares as at 30 June 20191,2

	Shares beneficially held as at 30 June 2019	Shares beneficially held as at 31 December 2018
Chairman
J Viñals	18,500	18,500
Independent non-executive directors
N Kheraj	40,571	40,571
O P Bhatt³	-	2,000
Dr L Cheung	2,571	2,571
Mr D P Conner	10,000	10,000
Dr B E Grote	60,041	60,041
Dr Han Seung-soo, KBE⁴	-	3,474
C M Hodgson	2,571	2,571
G Huey Evans, OBE	2,615	2,615
Dr N Okonjo-Iweala	2,034	2,034
D Tang5	2,000	-
C Tong6	2,000	-
J M Whitbread	3,615	3,615

1 Independent non-executive directors are required to hold shares with a nominal value of $1,000. All the directors have met this requirement

2 The beneficial interests of the Chairman and independent non-executive directors and their related parties in the ordinary shares of the Company are set out above. The directors do not have any non-beneficial interests in the Company's shares. None of the directors used ordinary shares as collateral for any loans. No director had either i) an interest in the Company's preference shares or loan stocks of any subsidiary or associated undertaking of the Group or ii) any corporate interests in the Company's ordinary shares

3 Om Bhatt stepped down from the Board on 23 February 2019

4 Dr Han Seung-soo retired from the Board on 23 February 2019

5 David Tang was appointed to the Board on 12 June 2019

6 Carlson Tong was appointed to the Board on 21 February 2019

D. Executive directors' interests in ordinary shares as at 30 June 2019

Scheme interests awarded, exercised and lapsed during the period

The following table shows the changes in share interests. Employees, including executive directors, are not permitted to engage in any personal hedging strategies with regards to their Standard Chartered PLC shares, including hedging against the share price of Standard Chartered PLC shares.

	Changes in interests during the period 1 January to 30 June 2019
	As at 1 January	Awarded1	Dividends awarded2	Exercised3	Lapsed	As at 30 June	Performance period end	Vesting date
W T Winters4
Restricted shares (buy-out)	314,916	-	-	-	-	314,916	-	22 Sep 2019
LTIP 2016-18	496,390	-	4,710	138,735	362,365	-	11 Mar 2019	4 May 2019
	124,097	-	-	-	90,591	33,506	11 Mar 2019	4 May 2020
	124,097	-	-	-	90,591	33,506	11 Mar 2019	4 May 2021
	124,097	-	-	-	90,591	33,506	11 Mar 2019	4 May 2022
	124,100	-	-	-	90,593	33,507	11 Mar 2019	4 May 2023
LTIP 2017-19	118,550	-	-	-	-	118,550	13 Mar 2020	13 Mar 2020
	118,550	-	-	-	-	118,550	13 Mar 2020	13 Mar 2021
	118,550	-	-	-	-	118,550	13 Mar 2020	13 Mar 2022
	118,550	-	-	-	-	118,550	13 Mar 2020	13 Mar 2023
	118,551	-	-	-	-	118,551	13 Mar 2020	13 Mar 2024
LTIP 2018-20	108,378	-	-	-	-	108,378	9 Mar 2021	9 Mar 2021
	108,378	-	-	-	-	108,378	9 Mar 2021	9 Mar 2022
	108,378	-	-	-	-	108,378	9 Mar 2021	9 Mar 2023
	108,378	-	-	-	-	108,378	9 Mar 2021	9 Mar 2024
	108,379	-	-	-	-	108,379	9 Mar 2021	9 Mar 2025
LTIP 2019-21	-	133,065	-	-	-	133,065	11 Mar 2022	11 Mar 2022
	-	133,065	-	-	-	133,065	11 Mar 2022	11 Mar 2023
	-	133,065	-	-	-	133,065	11 Mar 2022	11 Mar 2024
	-	133,065	-	-	-	133,065	11 Mar 2022	11 Mar 2025
	-	133,067	-	-	-	133,067	11 Mar 2022	11 Mar 2026
A N Halford⁵
LTIP 2016-18	296,417	-	2,812	82,844	216,385	-	11 Mar 2019	4 May 2019
	74,104	-	-	-	54,096	20,008	11 Mar 2019	4 May 2020
	74,104	-	-	-	54,096	20,008	11 Mar 2019	4 May 2021
	74,104	-	-	-	54,096	20,008	11 Mar 2019	4 May 2022
	74,105	-	-	-	54,096	20,009	11 Mar 2019	4 May 2023
LTIP 2017-19	73,390	-	-	-	-	73,390	13 Mar 2020	13 Mar 2020
	73,390	-	-	-	-	73,390	13 Mar 2020	13 Mar 2021
	73,390	-	-	-	-	73,390	13 Mar 2020	13 Mar 2022
	73,390	-	-	-	-	73,390	13 Mar 2020	13 Mar 2023
	73,394	-	-	-	-	73,394	13 Mar 2020	13 Mar 2024
LTIP 2018-20	67,108	-	-	-	-	67,108	9 Mar 2021	9 Mar 2021
	67,108	-	-	-	-	67,108	9 Mar 2021	9 Mar 2022
	67,108	-	-	-	-	67,108	9 Mar 2021	9 Mar 2023
	67,108	-	-	-	-	67,108	9 Mar 2021	9 Mar 2024
	67,108	-	-	-	-	67,108	9 Mar 2021	9 Mar 2025
LTIP 2019-21	-	85,094	-	-	-	85,094	11 Mar 2022	11 Mar 2022
	-	85,094	-	-	-	85,094	11 Mar 2022	11 Mar 2023
	-	85,094	-	-	-	85,094	11 Mar 2022	11 Mar 2024
	-	85,094	-	-	-	85,094	11 Mar 2022	11 Mar 2025
	-	85,096	-	-	-	85,096	11 Mar 2022	11 Mar 2026
Sharesave	1,612	-	-	1,612	-	-	-	1 Dec 2018

1 For the LTIP 2019-21 awards granted to Bill Winters and Andy Halford on 11 March 2019, the values granted were: Bill Winters: £3.3 million; Andy Halford: £2.1 million. The number of shares awarded in respect of the LTIP took into account the lack of dividend equivalents (calculated by reference to market consensus dividend yield) such that the overall value of the award was maintained. Performance measures apply to 2019-21 LTIP awards. The share price at grant was the closing price on the day before the grant date

2 Dividend equivalent shares may be awarded on vesting for awards granted prior to 1 January 2018

3 On 7 May 2019, Bill Winters exercised the 2016-18 LTIP award over a total of 138,735 shares. The closing share price on the day before exercise was £6.91. On 7 May 2019, Andy Halford exercised the 2016-18 LTIP award over a total of 82,844 shares. The closing share price on the day before exercise was £6.91. On 1 March 2019, Andy Halford exercised a Sharesave option under the 2013 Sharesave Plan at an exercise price of £5.5776 per share

4 The unvested share awards held by Bill Winters are conditional rights under the 2011 Plan. Bill does not have to pay towards these awards

5 The unvested share awards held by Andy Halford are conditional rights under the 2011 Plan. Andy does not have to pay towards these awards

Further details relating to the above awards and individual shareholding requirements can be found in the 2018 Annual Report and Accounts.

Shareholdings and share interests

The following table summarises the executive directors' shareholdings and share interests¹.

	Shareholdings		Share awards
	Shares held beneficially2,3	Vested but unexercised share awards	Unvested share awards not subject to performance measures4	Unvested share awards subject to performance measures
W T Winters	1,388,163	-	448,941	1,799,969
A N Halford	600,006	-	80,033	1,127,966

1 All figures are as at 30 June 2019 unless stated otherwise. No director had either (i) an interest in Standard Chartered PLC's preference shares or loan stocks of any subsidiary or associated undertaking of the Group or (ii) any corporate interests in Standard Chartered PLC's ordinary shares

2 The beneficial interests of directors and connected persons in the ordinary shares of the Company are set out above. The executive directors do not have any non-beneficial interests in the Company's shares. None of the executive directors used ordinary shares as collateral for any loans

3 The shares held beneficially include shares awarded to deliver the executive directors' salary shares

4 27 per cent of the 2016-18 LTIP award is no longer subject to performance measures due to achievement against 2016-18 strategic measures

E. Share price information

The middle market price of an ordinary share at the close of business on 30 June 2019 was 714.2 pence. The share price range during the first half of 2019 was 575.7 pence to 714.2 pence (based on the closing middle market prices).

F. Substantial shareholders

The Company and its shareholders have been granted partial exemption from the disclosure requirements under Part XV of the Securities and Futures Ordinance (SFO).

As a result of this exemption, shareholders no longer have an obligation under Part XV of the SFO (other than Divisions 5,11 and 12 thereof) to notify the Company of substantial shareholding interests, and the Company is no longer required to maintain a register of interests of substantial shareholders under section 336 of the SFO. The Company is, however, required to file with The Stock Exchange of Hong Kong Limited any disclosure of interests made in the UK.

G. Code for Financial Reporting Disclosure

The UK Finance Code for Financial Reporting Disclosure sets out five disclosure principles together with supporting guidance. The principles are that UK banks will: provide high-quality, meaningful and decision useful disclosures; review and enhance their financial instrument disclosures for key areas of interest; assess the applicability and relevance of good practice recommendations to their disclosures, acknowledging the importance of such guidance; seek to enhance the comparability of financial statement disclosures across the UK banking sector; and clearly differentiate in their annual reports between information that is audited and information that is unaudited. The Group's interim financial statements for the six months ended 30 June 2019 have been prepared in accordance with the Code's principles.

Standard Chartered PLC - Alternative performance measures

An alternative performance measure is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. The following are key alternative performance measures used by the Group to assess financial performance and financial position.

Measure	Definition
Constant currency basis	A performance measure on a constant currency basis is presented such that comparative periods are adjusted for the current year's functional currency rate. The following balances are presented on a constant currency basis when described as such: • Operating income • Operating expenses • Profit before tax • RWAs or Risk-weighted assets
Underlying	A performance measure is described as underlying if the statutory result has been adjusted for restructuring and other items representing profits or losses of a capital nature; amounts consequent to investment transactions driven by strategic intent; and other infrequent and/or exceptional transactions that are significant or material in the context of the Group's normal business earnings for the period, and items which management and investors would ordinarily identify separately when assessing performance period-by-period. A reconciliation between underlying and statutory performance is contained in the notes to the financial statements in the Half Year Report. The following balances and measures are presented on an underlying basis when described as such: • Operating income • Operating expense • Profit before tax • Earnings per share • Cost to income ratio • Jaws • RoE or Return on equity • RoTE or Return on tangible equity
Advances-to-deposits/customer advances-to-deposits (ADR) ratio	The ratio of total loans and advances to customers relative to total customer accounts, excluding approved balances held with central banks, confirmed as repayable at the point of stress. A low advances-to-deposits ratio demonstrates that customer accounts exceed customer loans resulting from emphasis placed on generating a high level of stable funding from customers.
Cost to income ratio	The proportion of total operating expenses to total operating income.
Cover ratio	The ratio of impairment provisions for each stage to the gross loan exposure for each stage.
Cover ratio after collateral/cover ratio including collateral	The ratio of impairment provisions for Stage 3 loans and realisable value of collateral held against these non-performing loan exposures to the gross loan exposure of Stage 3 loans.
Jaws	The difference between the rates of change in revenue and operating expenses. Positive jaws occurs when the percentage change in revenue is higher than, or less negative than, the corresponding rate for operating expenses.
Loan loss rate	Total credit impairment for loans and advances to customers over average loans and advances to customers.
Net tangible asset value per share	Ratio of net tangible assets (total tangible assets less total liabilities) to the number of ordinary shares outstanding at the end of a reporting period.
NIM or Net interest margin	Net interest income divided by average interest-earning assets.
RAR per FTE or Risk adjusted revenue per full-time equivalent	Risk adjusted revenue (RAR) is defined as underlying operating income less underlying impairment over the past 12 months. RAR is then divided by the 12 month rolling average full-time equivalent (FTE) to determine RAR per FTE.
RoE or Return on equity	The ratio of the current year's profit available for distribution to ordinary shareholders to the weighted average ordinary shareholders' equity for the reporting period.
RoTE or Return on ordinary shareholders tangible equity	The ratio of the current year's profit available for distribution to ordinary shareholders, to the weighted average ordinary shareholders' equity less the average goodwill and intangible assets for the reporting period.
TSR or Total shareholder return	The total return of the Group's equity (share price growth and dividends) to investors.

Standard Chartered PLC - Glossary

AT1 or Additional Tier 1 capital

Additional Tier 1 capital consists of instruments other than Common Equity Tier 1 that meet the Capital Requirements Regulation (CRR) criteria for inclusion in Tier 1 capital.

Additional value adjustment

See Prudent valuation adjustment.

Advanced Internal Rating Based (AIRB) approach

The AIRB approach under the Basel framework is used to calculate credit risk capital based on the Group's own estimates of prudential parameters.

ASEAN

Association of South East Asian Nations (ASEAN) which includes the Group's operations in Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

AUM or Assets under management

Total market value of assets such as deposits, securities and funds held by the Group on behalf of the clients.

Basel II

The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in June 2006 in the form of the International Convergence of Capital Measurement and Capital Standards.

Basel III

The global regulatory standards on bank capital adequacy and liquidity, originally issued in December 2010 and updated in June 2011. In December 2017, the BCBS published a document setting out the finalisation of the Basel III framework. The latest requirements issued in December 2017 will be implemented from 2022.

BCBS or Basel Committee on Banking Supervision

A forum on banking supervisory matters which develops global supervisory standards for the banking industry. Its members are officials from 45 central banks or prudential supervisors from 28 countries and territories.

Basic underlying earnings per share (EPS)

Represents the underlying earnings divided by the basic weighted average number of shares.

Basis point (bps)

One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent.

CRD IV or Capital Requirements Directive IV

A capital adequacy legislative package adopted by EU member states. CRD IV comprises the recast Capital Requirements Directive and the Capital Requirements Regulation (CRR). The package implements the Basel III framework together with transitional arrangements for some of its requirements. CRD IV came into force on 1 January 2014.

Capital-lite income

Income derived from products with low RWA consumption or products which are non-funding in nature.

Capital resources

Sum of Tier 1 and Tier 2 capital after regulatory adjustments.

CGU or Cash-generating unit

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Cash shortfall

The difference between the cash flows that are due in accordance with the contractual terms of the instrument and the cash flows that the Group expects to receive over the contractual life of the instrument.

Clawback

An amount an individual is required to pay back to the Group, which has to be returned to the Group under certain circumstances.

CRE or Commercial real estate

Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multi-family housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets.

CET1 or Common Equity Tier 1 capital

Common Equity Tier 1 capital consists of the common shares issued by the Group and related share premium, retained earnings, accumulated other comprehensive income and other disclosed reserves, eligible non-controlling interests and regulatory adjustments required in the calculation of Common Equity Tier 1.

CET1 ratio

A measure of the Group's CET1 capital as a percentage of risk-weighted assets.

Contractual maturity

Contractual maturity refers to the final payment date of a loan or other financial instrument, at which point all the remaining outstanding principal and interest is due to be paid.

Countercyclical capital buffer

The countercyclical capital buffer (CCyB) is part of a set of macroprudential instruments, designed to help counter procyclicality in the financial system. CCyB as defined in the Basel III standard provides for an additional capital requirement of up to 2.5 per cent of risk-weighted assets in a given jurisdiction. The Bank of England's Financial Policy Committee has the power to set the CCyB rate for the United Kingdom. Each bank must calculate its 'institution-specific' CCyB rate, defined as the weighted average of the CCyB rates in effect across the jurisdictions in which it has credit exposures. The institution-specific CCyB rate is then applied to a bank's total risk-weighted assets.

Counterparty credit risk

The risk that a counterparty defaults before satisfying its obligations under a derivative, a securities financing transaction (SFT) or a similar contract.

CCF or Credit conversion factor

An estimate of the amount the Group expects a customer to have drawn further on a facility limit at the point of default. This is either prescribed by CRR or modelled by the bank.

CDS or Credit default swaps

A credit derivative is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.

Credit institutions

An institution whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account.

Credit risk mitigation

Credit risk mitigation is a process to mitigate potential credit losses from any given account, customer or portfolio by using a range of tools such as collateral, netting agreements, credit insurance, credit derivatives and guarantees.

CVA or Credit valuation adjustments

An adjustment to the fair value of derivative contracts that reflects the possibility that the counterparty may default such that the Group would not receive the full market value of the contracts.

Customer accounts

Money deposited by all individuals and companies which are not credit institutions including securities sold under repurchase agreement (see repo/reverse repo). Such funds are recorded as liabilities in the Group's balance sheet under customer accounts.

Days past due

One or more days that interest and/or principal payments are overdue based on the contractual terms.

DVA or Debit valuation adjustment

An adjustment to the fair value of derivative contracts that reflects the possibility that the Group may default and not pay the full market value of contracts.

Debt securities

Debt securities are assets on the Group's balance sheet and represent certificates of indebtedness of credit institutions, public bodies or other undertakings excluding those issued by central banks.

Debt securities in issue

Debt securities in issue are transferrable certificates of indebtedness of the Group to the bearer of the certificate. These are liabilities of the Group and include certificates of deposits.

DTA or Deferred tax asset

Income taxes recoverable in future periods in respect of deductible temporary differences between the accounting and tax base of an asset or liability that will result in tax deductible amounts in future periods, the carry-forward of tax losses or the carry-forward of unused tax credits.

DTL or Deferred tax liability

Income taxes payable in future periods in respect of taxable temporary differences between the accounting and tax base of an asset or liability that will result in taxable amounts in future periods.

Default

Financial assets in default represent those that are at least 90 days past due in respect of principal or interest and/or where the assets are otherwise considered to be unlikely to pay, including those that are credit-impaired.

Defined benefit obligation

The present value of expected future payments required to settle the obligations of a defined benefit scheme resulting from employee service.

Defined benefit scheme

Pension or other post-retirement benefit scheme other than a defined contribution scheme.

Defined contribution scheme

A pension or other post-retirement benefit scheme where the employer's obligation is limited to its contributions to the fund.

Delinquency

A debt or other financial obligation is considered to be in a state of delinquency when payments are overdue. Loans and advances are considered to be delinquent when consecutive payments are missed. Also known as arrears.

Deposits by banks

Deposits by banks comprise amounts owed to other domestic or foreign credit institutions by the Group including securities sold under repo.

Diluted underlying earnings per share (EPS)

Represents the underlying earnings divided by the diluted weighted average number of shares.

Dividend per share

Represents the entitlement of each shareholder in the share of the profits of the Company. Calculated in the lowest unit of currency in which the shares are quoted.

Early alert, purely and non-purely precautionary

A borrower's account which exhibits risks or potential weaknesses of a material nature requiring closer monitoring, supervision, or attention by management. Weaknesses in such a borrower's account, if left uncorrected, could result in deterioration of repayment prospects and the likelihood of being downgraded to credit grade 12 or worse. When an account is on early alert, it is classified as either purely precautionary or non-purely precautionary. A purely precautionary account is one that exhibits early alert characteristics but these do not present any imminent credit concern. If the symptoms present an imminent credit concern, an account will be considered for classification as non-purely precautionary.

Effective tax rate

The tax on profit/(losses) on ordinary activities as a percentage of profit/(loss) on ordinary activities before taxation.

Encumbered assets

On-balance sheet assets pledged or used as collateral in respect of certain of the Group's liabilities.

EU or European Union

The European Union (EU) is a political and economic union of 28 member states that are located primarily in Europe.

Eurozone

Represents the 19 EU countries that have adopted the euro as their common currency.

ECL or Expected credit loss

Represents the present value of expected cash shortfalls over the residual term of a financial asset, undrawn commitment or financial guarantee.

Expected loss

The Group measure of anticipated loss for exposures captured under an internal ratings-based credit risk approach for capital adequacy calculations. It is measured as the Group-modelled view of anticipated loss based on probability of default, loss given default and exposure at default, with a one-year time horizon.

Exposures

Credit exposures represent the amount lent to a customer, together with any undrawn commitments.

EAD or Exposure at default

The estimation of the extent to which the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty's default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit.

ECAI or External Credit Assessment Institution

External credit ratings are used to assign risk-weights under the standardised approach for sovereigns, corporates and institutions. The external ratings are from credit rating agencies that are registered or certified in accordance with the credit rating agencies regulation or from a central bank issuing credit ratings which is exempt from the application of this regulation.

FCA or Financial Conduct Authority

The Financial Conduct Authority regulates the conduct of financial firms and, for certain firms, prudential standards in the UK. It has a strategic objective to ensure that the relevant markets function well.

Forbearance

Forbearance takes place when a concession is made to the contractual terms of a loan in response to an obligor's financial difficulties. The Group classifies such modified loans as either 'Forborne - not impaired loans' or 'Loans subject to forbearance - impaired'. Once a loan is categorised as either of these, it will remain in one of these two categories until the loan matures or satisfies the 'curing' conditions.

Forborne - not impaired loans

Loans where the contractual terms have been modified due to financial difficulties of the borrower, but the loan is not considered to be impaired. See 'Forbearance'.

Free deliveries

A transaction where a bank takes receipt of a debt or equity security, a commodity or foreign exchange without making immediate payment, or where a bank delivers a debt or equity security, a commodity or foreign exchange without receiving immediate payment.

Free funds

Free funds include equity capital, retained reserves, current year unremitted profits and capital injections net of proposed dividends. It does not include debt capital instruments, unrealised profits or losses or any non-cash items.

Funded/unfunded exposures

Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where a commitment to provide future funding is made but funds have been released/not released.

FVA or Funding valuation adjustments

FVA reflects an adjustment to fair value in respect of derivative contracts that reflects the funding costs that the market participant would incorporate when determining an exit price.

G-SIBs or Global Systemically Important Banks

Global banking financial institutions whose size, complexity and systemic interconnectedness mean that their distress or failure would cause significant disruption to the wider financial system and economic activity. The list of G-SIBs is assessed under a framework established by the FSB and the BCBS. In the EU, the G-SIB framework is implemented via CRD IV and G-SIBs are referred to as Global Systemically Important Institutions (G-SIIs).

G-SIB buffer

A CET1 capital buffer which results from designation as a G-SIB. The G-SIB buffer is between 1 per cent and 3.5 per cent, depending on the allocation to one of five buckets based on the annual scoring. The G-SIB buffer is being phased in by 1 January 2019. In the EU, the G-SIB buffer is implemented via CRD IV as Global Systemically Important Institutions (G-SII) buffer requirement.

Interest rate risk

The risk of an adverse impact on the Group's income statement due to changes in interest rates.

IRB or internal ratings-based approach

Risk-weighting methodology in accordance with the Basel Capital Accord where capital requirements are based on a firm's own estimates of prudential parameters.

IMA approach or internal model approach

The approach used to calculate market risk capital and RWA with an internal market risk model approved by the PRA under the terms of CRD IV/CRR.

IAS or International Accounting Standard

A standard that forms part of the International Financial Reporting Standards framework.

IASB or International Accounting Standards Board

An independent standard-setting body responsible for the development and publication of IFRS, and approving interpretations of IFRS standards that are recommended by the IFRS Interpretations Committee (IFRIC).

IFRS or International Financial Reporting Standards

A set of international accounting standards developed and issued by the International Accounting Standards Board, consisting of principles-based guidance contained within IFRSs and IASs. All companies that have issued publicly traded securities in the EU are required to prepare annual and interim reports under IFRS and IAS standards that have been endorsed by the EU.

IFRIC

The IFRS Interpretations Committee supports the IASB in providing authoritative guidance on the accounting treatment of issues not specifically dealt with by existing IFRSs and IASs.

Investment grade

A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB.

Leverage ratio

A ratio introduced under CRD IV that compares Tier 1 capital to total exposures, including certain exposures held off-balance sheet as adjusted by stipulated credit conversion factors. Intended to be a simple, non-risk-based backstop measure.

Liquid asset ratio

Ratio of total liquid assets to total assets. Liquid assets comprise cash (less restricted balances), net interbank, treasury bills and debt securities less illiquid securities.

Liquidation portfolio

A portfolio of assets which is beyond our current risk appetite metrics and is held for liquidation.

LCR or Liquidity coverage ratio

The ratio of the stock of high-quality liquid assets to expected net cash outflows over the following 30 days. High-quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible.

Loan exposure

Loans and advances to customers reported on the balance sheet held at amortised cost or FVOCI, non-cancellable credit commitments and cancellable credit commitments for credit cards and overdraft facilities.

Loans and advances

This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument.

Loans to banks

Amounts loaned to credit institutions including securities bought under Reverse repo.

LTV or loan-to-value ratio

A calculation which expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. The loan-to-value ratio is used in determining the appropriate level of risk for the loan and therefore the correct price of the loan to the borrower.

Loans past due

Loans on which payments have been due for up to a maximum of 90 days including those on which partial payments are being made.

Loans subject to forbearance - impaired

Loans where the terms have been renegotiated on terms not consistent with current market levels due to financial difficulties of the borrower. Loans in this category are necessarily impaired. See 'Forbearance'.

Loss rate

Uses an adjusted gross charge-off rate, developed using monthly write-off and recoveries over the preceding 12 months and total outstanding balances.

LGD or Loss given default

The percentage of an exposure that a lender expects to lose in the event of obligor default.

Low returning clients

See 'Perennial sub-optimal clients'.

Malus

An arrangement that permits the Group to prevent vesting of all or part of the amount of an unvested variable remuneration award, due to a specific crystallised risk, behaviour, conduct or adverse performance outcome.

Master netting agreement

An agreement between two counterparties that have multiple derivative contracts with each other that provides for the net settlement of all contracts through a single payment, in a single currency, in the event of default on, or termination of, any one contract.

Mezzanine capital

Financing that combines debt and equity characteristics. For example, a loan that also confers some profit participation to the lender.

MREL or minimum requirement for own funds and eligible liabilities

A requirement under the Bank Recovery and Resolution Directive for EU resolution authorities to set a minimum requirement for own funds and eligible liabilities for banks, implementing the FSB's Total Loss Absorbing Capacity (TLAC) standard. MREL is intended to ensure that there is sufficient equity and specific types of liabilities to facilitate an orderly resolution that minimises any impact on financial stability and ensures the continuity of critical functions and avoids exposing taxpayers to loss.

Net asset value (NAV) per share

Ratio of net assets (total assets less total liabilities) to the number of ordinary shares outstanding at the end of a reporting period.

Net exposure

The aggregate of loans and advances to customers/loans and advances to banks after impairment provisions, restricted balances with central banks, derivatives (net of master netting agreements), investment debt and equity securities, and letters of credit and guarantees.

NII or Net interest income

The difference between interest received on assets and interest paid on liabilities.

NSFR or Net stable funding ratio

The ratio of available stable funding to required stable funding over a one-year time horizon, assuming a stressed scenario. It is a longer-term liquidity measure designed to restrain the amount of wholesale borrowing and encourage stable funding over a one-year time horizon.

NPLs or non-performing loans

An NPL is any loan that is more than 90 days past due or is otherwise individually impaired. This excludes Retail loans renegotiated at or after 90 days past due, but on which there has been no default in interest or principal payments for more than 180 days since renegotiation, and against which no loss of principal is expected.

Non-linearity

Non-linearity of expected credit loss occurs when the average of expected credit loss for a portfolio is higher than the base case (median) due to the fact that bad economic environment could have a larger impact on ECL calculation than good economic environment.

Normalised items

See 'Underlying earnings'.

Operating expenses

Staff and premises costs, general and administrative expenses, depreciation and amortisation. Underlying operating expenses exclude expenses as described in 'Underlying earnings'. A reconciliation between underlying and statutory earnings is contained in the notes to the financial statements in the Half Year Report.

Operating income or operating profit

Net interest, net fee and net trading income, as well as other operating income. Underlying operating income represents the income line items above, on an underlying basis. See 'Underlying earnings'.

OTC or Over-the-counter derivatives

A bilateral transaction (e.g. derivatives) that is not exchange traded and that is valued using valuation models.

OCA or Own credit adjustment

An adjustment to the Group's issued debt designated at fair value through profit or loss that reflects the possibility that the Group may default and not pay the full market value of the contracts.

Perennial sub-optimal clients

Clients that have returned below 3% return on risk-weighted assets for the last three years.

Physical risks

The risk of increased extreme weather events including flood, drought and sea level rise.

Pillar 1

The first pillar of the three pillars of the Basel framework which provides the approach to calculation of the minimum capital requirements for credit, market and operational risk. Minimum capital requirements are 8 per cent of the Group's risk-weighted assets.

Pillar 2

The second pillar of the three pillars of the Basel framework which requires banks to undertake a comprehensive assessment of their risks and to determine the appropriate amounts of capital to be held against these risks where other suitable mitigants are not available.

Pillar 3

The third pillar of the three pillars of the Basel framework which aims to provide a consistent and comprehensive disclosure framework that enhances comparability between banks and further promotes improvements in risk practices.

Priority Banking

Priority Banking customers are individuals who have met certain criteria for deposits, AUM, mortgage loans or monthly payroll. Criteria varies by country.

Private equity investments

Equity securities in operating companies generally not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.

PD or Probability of default

PD is an internal estimate for each borrower grade of the likelihood that an obligor will default on an obligation over a given time horizon.

Probability weighted

Obtained by considering the values the metric can assume, weighted by the probability of each value occurring.

Profit (loss) attributable to ordinary shareholders

Profit (loss) for the year after non-controlling interests and dividends declared in respect of preference shares classified as equity.

PVA or Prudent valuation adjustment

An adjustment to CET1 capital to reflect the difference between fair value and prudent value positions, where the application of prudence results in a lower absolute carrying value than recognised in the financial statements.

PRA or Prudential Regulation Authority

The Prudential Regulation Authority is the statutory body responsible for the prudential supervision of banks, building societies, credit unions, insurers and a small number of significant investment firms in the UK. The PRA is a part of the Bank of England.

Repo/reverse repo

A repurchase agreement or repo is a short-term funding agreement, which allows a borrower to sell a financial asset, such as asset-backed securities or government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future), it is a reverse repurchase agreement or reverse repo.

Residential mortgage

A loan to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a home loan.

RoRWA or Return on risk-weighted assets

Profit before tax for year as a percentage of RWA. Profit may be statutory or underlying and is specified where used. See 'RWA' and 'Underlying earnings'.

RWA or Risk-weighted assets

A measure of a bank's assets adjusted for their associated risks, expressed as a percentage of an exposure value in accordance with the applicable standardised or IRB approach provisions.

Risks-not-in-VaR (RNIV)

A framework for identifying and quantifying marginal types of market risk that are not captured in the Value at Risk (VaR) measure for any reason, such as being a far-tail risk or the necessary historical market data not being available.

Roll rate

Uses a matrix that gives average loan migration rate from delinquency states from period to period. A matrix multiplication is then performed to generate the final PDs by delinquency bucket over different time horizons.

Secured (fully and partially)

A secured loan is a loan in which the borrower pledges an asset as collateral for a loan which, in the event that the borrower defaults, the Group is able to take possession of. All secured loans are considered fully secured if the fair value of the collateral is equal to or greater than the loan at the time of origination. All other secured loans are considered to be partly secured.

Securitisation

Securitisation is a process by which credit exposures are aggregated into a pool, which is used to back new securities. Under traditional securitisation transactions, assets are sold to a structured entity (SE) which then issues new securities to investors at different levels of seniority (credit tranching). This allows the credit quality of the assets to be separated from the credit rating of the originating institution and transfers risk to external investors in a way that meets their risk appetite. Under synthetic securitisation transactions, the transfer of risk is achieved by the use of credit derivatives or guarantees, and the exposures being securitised remain exposures of the originating institution.

Senior debt

Debt that takes priority over other unsecured or otherwise more 'junior' debt owed by the issuer. Senior debt has greater seniority in the issuer's capital structure after subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment.

SICR or Significant increase in credit risk

Assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at origination (after considering the passage of time).

Sovereign exposures

Exposures to central governments and central government departments, central banks and entities owned or guaranteed by the aforementioned. Sovereign exposures, as defined by the European Banking Authority, include only exposures to central governments.

Stage 1

Assets have not experienced a significant increase in credit risk since origination and impairment recognised on the basis of 12 months expected credit losses.

Stage 2

Assets have experienced a significant increase in credit risk since origination and impairment is recognised on the basis of lifetime expected credit losses.

Stage 3

Assets that are in default and considered credit-impaired (non-performing loans).

Standardised approach

In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institutions (ECAI) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the application of a supervisory defined percentage charge to the gross income of eight specified business lines.

Structured note

An investment tool which pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency.

Subordinated liabilities

Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.

Tier 1 capital

The sum of Common Equity Tier 1 capital and Additional Tier 1 capital.

Tier 1 capital ratio

Tier 1 capital as a percentage of risk-weighted assets.

Tier 2 capital

Tier 2 capital comprises qualifying subordinated liabilities and related share premium accounts.

TLAC or Total loss absorbing capacity

An international standard for TLAC issued by the FSB, which requires G-SIBs to have sufficient loss-absorbing and recapitalisation capacity available in resolution, to minimise impacts on financial stability, maintain the continuity of critical functions and avoid exposing public funds to loss.

Transition risks

The risk of changes to market dynamics or sectoral economics due to governments' response to climate change.

UK bank levy

A levy that applies to certain UK banks and the UK operations of foreign banks. The levy is payable each year based on a percentage of the chargeable equities and liabilities on the Group's consolidated balance sheet date. Key exclusions from chargeable equities and liabilities include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liabilities subject to netting.

Unbiased

Not overly optimistic or pessimistic, represents information that is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to increase the probability that the financial information will be received favourably or unfavourably by users.

Unlikely to pay

Indications of unlikeliness to pay shall include placing the credit obligation on non-accrued status; the recognition of a specific credit adjustment resulting from a significant perceived decline in credit quality subsequent to the Group taking on the exposure; selling the credit obligation at a material credit-related economic loss; the Group consenting to a distressed restructuring of the credit obligation where this is likely to result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or, where relevant fees; filing for the obligor's bankruptcy or a similar order in respect of an obligor's credit obligation to the Group; the obligor has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of a credit obligation to the Group.

VaR or Value at Risk

A quantitative measure of market risk estimating the potential loss that will not be exceeded in a set time period at a set statistical confidence level.

ViU or Value-in-Use

The present value of the future expected cash flows expected to be derived from an asset or CGU.

Write-downs

After an advance has been identified as impaired and is subject to an impairment provision, the stage may be reached whereby it is concluded that there is no realistic prospect of further recovery. Write-downs will occur when, and to the extent that, the whole or part of a debt is considered irrecoverable.

XVA

The term used to incorporate credit, debit and funding valuation adjustments to the fair value of derivative financial instruments. See 'CVA', 'DVA' and 'FVA'.

Standard Chartered PLC - Shareholder information

Forward-looking statements

This document may contain 'forward-looking statements' that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'may', 'could', 'will', expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek', 'continue' or other words of similar meaning. By their very nature, such statements are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

Recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. The factors that could cause actual results to differ materially from those described in the forward-looking statements include (but are not limited to) changes in global, political, economic, business, competitive, market and
regulatory forces or conditions, future exchange and interest rates, changes in tax rates, future business combinations or dispositions and other factors specific to the Group. Any forward-looking statement contained in this document is based on past or current trends and/or activities of the Group and should not be taken as a representation that such trends or activities will continue in the future.

No statement in this document is intended to be a profit forecast or to imply that the earnings of the Group for the current year or future years will necessarily match or exceed the historical or published earnings of the Group. Each forward-looking statement speaks only as of the date of the particular statement. Except as required by any applicable laws or regulations, the Group expressly disclaims any obligation to revise or update any forward-looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.

Nothing in this document shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation or advice in respect of any securities or other financial instruments or any other matter.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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