Company Announcements

Pillar 3 Disclosures at 30 June 2020

Source: RNS
RNS Number : 6315V
HSBC Holdings PLC
10 August 2020
 

 http://www.rns-pdf.londonstockexchange.com/rns/6315V_1-2020-8-10.pdf

HSBC Holdings plc

Pillar 3 Disclosures at 30 June 2020
 

 

Contents

 

Page

Introduction

2

Highlights

2

Regulatory framework for disclosures

2

Pillar 3 disclosures

2

Key metrics

3

Regulatory developments

3

Risk management response to Covid-19

4

Linkage to the Interim Report

5

Capital and RWAs

7

Own funds

7

Leverage ratio

9

Capital buffers

10

Pillar 1 minimum capital requirements and RWA flow

10

Minimum requirement for own funds and eligible liabilities

13

Credit risk

19

Credit quality of assets

19

Non-performing and forborne exposures

22

Defaulted exposures

27

Risk mitigation

27

Counterparty credit risk

37

Securitisation

42

Market risk

46

Other information

50

Abbreviations

50

Cautionary statement regarding forward-looking statements

51

Contacts

52

Tables

 

 

Ref

Page

1

Key metrics (KM1/IFRS9-FL)
 

a

3

2

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

 

6

3

Own funds disclosure

b

7

4

Leverage ratio common disclosure ('LRCom')

a

9

5

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

b

9

6

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

a

10

7

Overview of RWAs ('OV1')

b

11

8

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

 

11

9

RWA flow statements of CCR exposures under IMM ('CCR7')

 

12

10

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

 

12

11.i

Key metrics of the European resolution group ('KM2')

a

13

11.ii

Key metrics of the Asian resolution group ('KM2')

 

14

11.iii

Key metrics of the US resolution group ('KM2')

 

14

12

TLAC composition ('TLAC1')

a

15

13

HSBC Holdings plc creditor ranking ('TLAC3')

 

16

14

HSBC UK Bank plc creditor ranking ('TLAC2')

 

16

15

HSBC Bank plc creditor ranking ('TLAC2')

 

17

16

HSBC Asia Holdings Ltd creditor ranking ('TLAC3')

 

17

17

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

 

18

18

Hang Seng Bank Ltd creditor ranking ('TLAC2')

 

18

19

HSBC North America Holdings Inc. creditor ranking ('TLAC3')

 

18

20

Credit quality of exposures by exposure class and instrument ('CR1-A')

 

19

21

Credit quality of exposures by industry or counterparty types¹, ('CR1-B')

 

21

22

Credit quality of exposures by geography 1,2 ('CR1-C')

 

22

23

Credit quality of forborne exposures

 

23

24

Collateral obtained by taking possession and execution processes

 

23

25

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

 

24

26

Performing and non-performing exposures and related provisions

 

25

27

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

 

27

28

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

 

27

29

Credit risk mitigation techniques - overview ('CR3')

 

27

30

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

b

28

31

Standardised approach - exposures by asset classes and risk weights ('CR5')

b

29

32

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

a

30

33

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

 

36

34

Specialised lending on slotting approach ('CR10')

 

36

35

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

 

37

36

Credit valuation adjustment capital charge ('CCR2')

 

37

37

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

 

37

38

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

 

38

39

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

 

40

40

Composition of collateral for CCR exposure ('CCR5-B')

 

40

41

Exposures to central counterparties ('CCR8')

 

40

42

Credit derivatives exposures ('CCR6')

 

41

43

Securitisation exposures in the non-trading book ('SEC1')

 

43

44

Securitisation exposures in the trading book ('SEC2')

 

44

45

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

 

44

46

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

 

45

47

Market risk under standardised approach (MR1)

 

46

48

Market risk under IMA (MR2-A)

 

46

49

IMA values for trading portfolios (MR3)

 

47

50

Comparison of VaR estimates with gains/losses (MR4)

 

48

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

a.    Some figures have been prepared on an IFRS 9 transitional basis. Details are provided in the table footnotes.

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

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

This document should be read in conjunction with the Interim Report 2020, which has been published on our website www.hsbc.com

Certain defined terms

Unless the context requires otherwise, 'HSBC Holdings' means HSBC Holdings plc and 'HSBC', the 'Group', 'we', 'us' and 'our' refer to HSBC Holdings together with its subsidiaries. Within this document the Hong Kong Special Administrative Region of the People's Republic of China is referred to as 'Hong Kong'. When used in the terms 'shareholders' equity' and 'total shareholders' equity', 'shareholders' means holders of HSBC Holdings ordinary shares and those preference shares and capital securities issued by HSBC Holdings classified as equity. The abbreviations '$m', '$bn' and '$tn' represent millions, billions (thousands of millions) and trillions of US dollars, respectively.

 

 

 

 

 

Introduction

 

Highlights

Common equity tier 1 ('CET1') ratio increased over 2Q20 to 15% due to higher CET1 capital, which included an increase from the cancellation of the 4Q19 dividend and the current suspension of dividends on ordinary shares, more than offsetting the impact of RWA growth.

 

 

Please click on the link below to view the following chart and Pillar 3 document in full:

http://www.rns-pdf.londonstockexchange.com/rns/6315V_1-2020-8-10.pdf

 

 

Common equity tier 1 ($bn and %)

        

Risk-weighted assets by risk type and global business ($bn)

 

 

 

 

Credit risk

 

 

 

Counterparty credit risk

 

 

 

Market risk

 

 

 

Operational risk

 

 

 

 

 

Commercial Banking

 

Global Banking and Markets

 

Wealth and Personal  Banking

 

Corporate Centre

  

 

Regulatory framework for disclosures

We are supervised on a consolidated basis in the UK by the Prudential Regulation Authority ('PRA'), which receives information on the capital adequacy of, and sets capital requirements for, the Group as a whole. Individual banking subsidiaries are directly regulated by their local banking supervisors, which set and monitor their local capital adequacy requirements. In most jurisdictions, non-banking financial subsidiaries are also subject to the supervision and capital requirements of local regulatory authorities.

At a consolidated Group level, capital is calculated for prudential regulatory reporting purposes using the Basel III framework of the Basel Committee on Banking Supervision ('Basel'), as implemented by the European Union ('EU') in the revisions to the Capital Requirements Regulation, as implemented ('CRR II'), and in the PRA Rulebook for the UK banking industry. The regulators of Group banking entities outside the EU are at varying stages of implementing the Basel III framework, so the Group may have been subject to local regulations in the first half of 2020 that were on the basis of the Basel I, II or III frameworks.

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

Pillar 3 disclosures

Our Pillar 3 Disclosures at 30 June 2020

comprises quantitative and qualitative information required under Pillar 3. They are made in accordance with Part Eight of the Capital Requirements Regulation, as implemented by CRR II and the European Banking Authority ('EBA') guidelines on disclosure requirements. These disclosures are supplemented by specific additional requirements of the PRA and discretionary disclosures on our part.

The Pillar 3 disclosures are governed by the disclosure policy framework approved by the Group Audit Committee.

To give insight into movements during the year, we provide comparative figures, commentary of variances and flow tables for capital requirements. In all tables where the term 'capital requirements' is used, this represents the minimum total capital charge set at 8% of risk-weighted assets ('RWAs') by article 92 of the Capital Requirements Regulation.

Where disclosures have been enhanced, or are new, we do not generally restate or provide comparatives. Wherever specific rows and columns in the tables prescribed by the EBA or Basel are not applicable or immaterial to our activities, we omit them and follow the same approach for comparatives.

Pillar 3 requirements may be met by inclusion in other disclosure media. Where we adopt this approach, references are provided to the relevant pages of the Interim Report 2020 or to other documents.

We continue to engage in the work of the UK authorities and industry associations to improve the transparency and comparability of UK banks' Pillar 3 disclosures.

 

Reporting and disclosure of exposures subject to measures applied in response to the Covid-19 outbreak

On 2 June, the EBA announced temporary additional reporting and disclosure requirements concerning payment moratoria and forbearance measures related to the Covid-19 outbreak.  
On 28 July, the PRA issued a statement setting out its  expectations on how the disclosure guidelines are to be applied, amending the EBA instructions and definitions to reflect the UK approach to payment deferrals.

We will publish these disclosures on or around 24 August 2020 on the HSBC website, hsbc.com.

 

 

 

 

 

Key metrics

Table 1: Key metrics (KM1/IFRS9-FL)
 

 

 

 

At

 

 

 

30 Jun

31 Mar

31 Dec

30 Sep

30 Jun

Ref*

 

Footnotes

2020

2020

2019

2019

2019

 

Available capital ($bn)1

2

 

 

 

 

 

1

Common equity tier 1 ('CET1') capital

^

128.4

 

125.2

 

124.0

 

123.8

 

126.9

 

2

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

 

127.4

 

124.5

 

123.1

 

122.9

 

126.0

 

3

Tier 1 capital

^

152.5

 

149.2

 

148.4

 

149.7

 

152.8

 

4

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

 

151.4

 

148.5

 

147.5

 

148.8

 

151.9

 

5

Total capital

^

177.2

 

174.0

 

172.2

 

175.1

 

178.3

 

6

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

 

176.1

 

173.3

 

171.3

 

174.2

 

177.4

 

 

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

 

 

 

 

 

 

7

Total RWAs

 

854.6

 

857.1

 

843.4

 

865.2

 

886.0

 

8

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

 

854.1

 

856.7

 

842.9

 

864.7

 

885.5

 

 

Capital ratios (%)

2

 

 

 

 

 

9

CET1

^

15.0

 

14.6

 

14.7

 

14.3

 

14.3

 

10

CET1 as if IFRS 9 transitional arrangements had not been applied

 

14.9

 

14.5

 

14.6

 

14.2

 

14.2

 

11

Tier 1

^

17.8

 

17.4

 

17.6

 

17.3

 

17.2

 

12

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

 

17.7

 

17.3

 

17.5

 

17.2

 

17.2

 

13

Total capital

^

20.7

 

20.3

 

20.4

 

20.2

 

20.1

 

14

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

 

20.6

 

20.2

 

20.3

 

20.1

 

20.0

 

 

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

 

 

 

 

 

 

 

Capital conservation buffer requirement

 

2.50

 

2.50

 

2.50

 

2.50

 

2.50

 

 

Countercyclical buffer requirement

 

0.20

 

0.22

 

0.61

 

0.69

 

0.68

 

 

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

 

2.00

 

2.00

 

2.00

 

2.00

 

2.00

 

 

Total of bank CET1 specific buffer requirements

 

4.70

 

4.72

 

5.11

 

5.19

 

5.18

 

 

Total capital requirement (%)

3

 

 

 

 

 

 

Total capital requirement

 

11.1

 

11.0

 

11.0

 

11.0

 

11.0

 

 

CET1 available after meeting the bank's minimum capital requirements

 

8.8

 

8.4

 

8.5

 

8.1

 

8.1

 

 

Leverage ratio

4

 

 

 

 

 

15

Total leverage ratio exposure measure ($bn)

 

2,801.4

 

2,782.7

 

2,726.5

 

2,708.2

 

2,786.5

 

16

Leverage ratio (%)

^

5.3

 

5.3

 

5.3

 

5.4

 

5.4

 

17

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

 

5.3

 

5.2

 

5.3

 

5.4

 

5.3

 

 

Liquidity coverage ratio ('LCR')

5

 

 

 

 

 

 

Total high-quality liquid assets ($bn)

 

654.4

 

617.2

 

601.4

 

513.2

 

532.8

 

 

Total net cash outflow ($bn)

 

442.9

 

395.0

 

400.5

 

378.0

 

391.0

 

 

LCR ratio (%)

 

147.8

 

156.3

 

150.2

 

135.8

 

136.3

 

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

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

1     Where applicable, our reporting throughout this document also reflects government relief schemes intended to mitigate the impact of the Covid-19 outbreak.

2     Capital figures and ratios are reported on a CRR II transitional basis for capital instruments.

3     Total capital requirement is defined as the sum of Pillar 1 and Pillar 2A capital requirements set by the PRA. The minimum requirements represent the total capital requirement to be met by CET1.

4     Leverage ratio is calculated using the CRR II end point basis for capital.

5     The EU's regulatory transitional arrangements for IFRS 9 'Financial Instruments' in article 473a of the Capital Requirements Regulation do not apply to liquidity coverage measures. LCR is calculated as at the end of each period rather than using average values. For further details, refer to page 83 of the Interim Report 2020.

 

 

 

We have adopted the regulatory transitional arrangements for IFRS 9 'Financial Instruments', including paragraph four within article 473a of the Capital Requirements Regulation, published by the EU on 27 December 2017. These transitional arrangements permit banks to add back to their capital base a proportion of the impact that IFRS 9 has upon their loan loss allowances during the first five years of use. The impact of IFRS 9 on loan loss allowances is defined as:

•    the increase in loan loss allowances on day one of IFRS 9 adoption; and

•    any subsequent increase in expected credit losses ('ECL') in the non-credit-impaired book thereafter.

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

The EU's CRR 'Quick Fix' relief package enacted in June 2020

increased from 70% to 100% the relief that banks may take for

loan loss allowances recognised since 1 January 2020 on the

non-credit-impaired book.

In the current period, the add-back to the capital base amounted to $1.4bn under the STD approach with a tax impact of $0.3bn.

At 31 December 2019, the add-back to the capital base under the STD approach was $1.0bn with a tax impact of $0.2bn.

 

Regulatory developments

Covid-19

The current Covid-19 pandemic has created an unprecedented challenge to the global economy. Governments, central banks and regulatory authorities have responded to this challenge with a number of regulatory measures. The substance of the announcements and the pace of response varies by jurisdiction, but broadly these have included a number of customer support measures, operational capacity measures and amendments to the RWAs, capital and liquidity frameworks.

In the EU, the relief measures have included a package known as the 'CRR Quick Fix' that was enacted in June 2020. The package represents an acceleration of some of the beneficial elements of the amendments to CRR II that were originally scheduled for June 2021, together with other amendments to mitigate the potential volatility in capital ratios arising from the pandemic. The material changes that were finalised in June, include:

•    a resetting of the transitional provisions in relation to recognising IFRS 9 provisions in CET1 capital;

•    the acceleration of the timetable for the changes to the CET1 deduction of software assets so that once the EBA finishes its current consultation on the new methodology, the rules can go live;

•    the CRR II changes to the small and medium-sized enterprises ('SME') supporting factor and the new infrastructure supporting factor; and

•    the CRR II change to the netting in the leverage ratio exposure measure of regular-way purchases and sales.

The PRA has published a statement in response to the package, stating that it will be undertaking a quantitative analysis of the benefits, which will be used to inform its supervisory approach. This will include an assessment of whether further action is necessary in Pillar 2. The accelerated application of the revised SME and infrastructure supporting factors will be implemented by the Group in the second half of 2020.

In addition to the CRR Quick Fix package, there were other changes to the regime in response to the Covid-19 outbreak. These included the enactment by the EU of beneficial changes to the CET1 deduction for prudent valuation adjustments, which will remain in place until 1 January 2021, and the PRA announcing that it is setting all Pillar 2A requirements in 2020 and 2021 as a nominal amount, instead of as a percentage of total RWAs.

 

The Basel Committee

In December 2017, the Basel Committee ('Basel') published the Basel III Reforms. The package was finalised in July 2020 when Basel published the final revisions to the credit valuation adjustment ('CVA') framework.

In March 2020, Basel announced a one-year delay to the implementation of the package. It is now to be implemented on 
1 January 2023, with a five-year transitional provision for the output floor. This floor ensures that, at the end of the transitional period, banks' total RWAs will be no lower than 72.5% of those generated by the standardised approaches. The final standards will need to be transposed into the relevant local law before coming into effect. The EU, the UK and Hong Kong authorities have already indicated that they will apply the new timetable.

There remains a significant degree of uncertainty about the impact of these changes due to the number of national discretions within Basel's reforms and the need for further supporting technical standards to be developed. Furthermore, any impact needs to be viewed in light of the possibility of offsets against Pillar 2, which may arise as shortcomings within Pillar 1 are addressed.

 

The Capital Requirements Regulation amendments

In June 2019, the EU enacted CRR II. This is the EU's implementation of changes to the own funds regime and to the Financial Stability Board's ('FSB') requirements for total loss-absorbing capacity ('TLAC'), known in the EU as the minimum requirements for own funds and eligible liabilities ('MREL'). CRR II will also implement the first tranche of changes to the EU's legislation to reflect the Basel III Reforms, including the changes to market risk ('FRTB') rules, revisions to the standardised approach for measuring counterparty risk, changes to the equity investments in funds rules and the new leverage ratio rules. The CRR II rules will follow a phased implementation with significant elements entering into force in 2021, in advance of Basel's timeline.

 

The EU's implementation of the Basel III Reforms

The remaining elements of the Basel III Reforms will be implemented in the EU by a further set of amendments to the Capital Requirements Regulation. In 2019, the European Commission began consulting on its implementation, which will include reforms to the credit and operational risk rules and a new output floor. However, draft legislative text has not yet been published. The EU implementation will be subject to an extensive negotiation process with the EU Council and Parliament. As a result, the final form of the rules remains unclear.

 

The UK's withdrawal from the EU

The UK left the EU on 31 January 2020. In order to smooth the transition, the UK remains subject to EU law during an implementation period, which will end on 31 December 2020. The PRA has announced its intention that, save for in certain limited circumstances, the changes to the prudential framework arising as a result of the UK's withdrawal will be delayed until 31 March 2022.

In June, Her Majesty's Treasury ('HMT') published an update on the framework to implement future prudential changes in the UK. This will be in the form of a Financial Services Bill in which powers will be delegated to the PRA for detailed rule making. The UK has stated that it intends to implement its own version of CRR II to the same timetable as the EU.

At the same time, HMT published a consultation on the implementation of the amendments to the Bank Recovery and Resolution Directive, the main EU regulation overseeing resolution and MREL standards. It also subsequently published a consultation on aspects of the amendments to the Capital Requirements Directive ('CRD V'). HMT proposes to implement in UK law only those elements of the Bank Recovery and Resolution Directive and CRD V that will be live on 31 December 2020.

In July 2020, the PRA also issued a consultation on implementing parts of CRD V, which includes its requirements for Pillar 2, remuneration and governance. In the autumn, the PRA will consult on the remaining elements of CRD V and the CRR II elements that apply from December 2020.

 

Other developments

In July 2020, the PRA published its final policy on reducing Pillar 2A to reflect the additional resilience associated with the higher countercyclical capital buffer ('CCyB') in a standard risk environment proposed by the Bank of England's Financial Policy Committee. However, reflecting the reduction of the UK's CCyB to 0% and the fact that the UK's structural CCyB rate set in a standard risk environment has not changed, the PRA introduced a requirement to temporarily increase the PRA buffer to offset some of the reductions in Pillar 2A that firms receive under this proposal. The rules take immediate effect.

Also in July, the PRA published a statement outlining its views on the implications of London interbank offered rate ('Libor') transition for contracts in scope of its resolution-related rules. The EBA also published its final guidelines on the treatment of structural foreign exchange positions, which will apply from 
1 January 2022, one year later than originally planned.

On 1 July, the PRA sent a letter to CEOs outlining its expectations of firms in managing climate-related financial risks and advising firms that they must have fully embedded their approaches to managing such risk by the end of 2021.

 

Risk management response to Covid-19

The first half of 2020 was marked by unprecedented global economic events, leading to banks playing an expanded role to support society and customers. The Covid-19 outbreak and its impact on the global economy have impacted many of our customers' business models and income, requiring significant levels of support from both governments and banks. In response, we have enhanced our approach to the management of risk in this rapidly changing environment.

Throughout the Covid-19 outbreak, we have supported our customers and adapted our operational processes. Our people, processes and systems have responded to the changes needed and increased the workload in serving our customers through this time. To meet the additional challenges, we supplemented our existing approach to risk management with additional tools and practices. We increased our focus on the quality and timeliness of the data used to inform management decisions, through measures such as early warning indicators, prudent active risk management against our risk appetite, and ensuring regular communication with our Board and other key stakeholders. This section sets out how we have managed our key risks resulting from the outbreak and its impacts.

 

Capital and liquidity management

The management of capital was a key focus in 1H20 to ensure the Group responded to unprecedented customer and capital demands arising from Covid-19 outbreak. All major entities remained in excess of their capital risk appetite.

In response to a written request from the PRA, we cancelled the fourth interim dividend for 2019 of $0.21 per ordinary share. Similar requests were also made to other UK incorporated banking groups. We also announced that until the end of 2020, we will make no quarterly or interim dividend payments or accruals in respect of ordinary shares. We also plan to suspend share buy-backs in respect of ordinary shares in 2020 and 2021.

The reduction of the UK countercyclical buffer rate to 0% was reflected in the Group's risk appetite statement, and together with other regulatory relief, resulted in a reduction to Group CET1 and leverage ratio requirements.

In 1H20, all entities remained within the CET1 risk appetite and the Group continues to maintain the appropriate resources required to adequately support risks to which it is exposed. This has been further informed by additional internal stress tests carried out in response to the Covid-19 outbreak. Capital risk management practices continued to be enhanced across the Group through the capital risk management function, focusing on both adequacy of capital and sufficiency of returns.

The management of liquidity risk was enhanced during 1H20 in response to the Covid-19 pandemic to ensure the Group anticipated, monitored and responded to the impacts both at Group and entity level. Liquidity levels were impacted by drawdown of committed facilities and buy-backs of short-term debt. However, this was offset by an increase in deposits, use of central bank facilities where appropriate and the ability to issue in the short-term markets as they stabilised. As a result of these liability enhancing actions, the Group and all entities have significant surplus liquidity, resulting in heightened liquidity coverage ratios ('LCR') in 1H20.

 

Prudential valuation adjustment

To achieve the degree of certainty prescribed for prudent valuation, banks must adjust fair valued exposures for valuation uncertainties and deduct the resulting prudent valuation adjustment ('PVA') charge from CET1. Market turmoil caused by the Covid-19 outbreak resulted in a significant increase in asset price dispersion, bid-offer spreads and subsequent hypothetical exit costs, leading to a material increase of the PVA charge in 1Q20 when compared with 4Q19. For 2Q20, the charge materially reduced from bid offer spreads and price dispersion reduction as market volatility reduced, as well as from the application of a higher diversification benefit temporarily permitted by regulators.

 

Credit risk management

During 1Q20, a number of relief programmes were initiated across the Group in response to the Covid-19 outbreak. These remained in place during the second quarter, with some programmes extended to support our customers where required.

Enhanced model monitoring has been established to detect any trends, shifts in key risk drivers or early performance indicators that could signal that our IRB models are no longer performing as expected. Using the latest available data from May 2020 for our retail models, the monitoring outputs indicate there have been limited impacts on the performance of IRB models as a direct consequence of the outbreak. Within wholesale, the most recent financial data received from customers do not always reflect current business performance during the outbreak, so we apply appropriate levels of judgemental overrides to the model outputs. As better information emerges on the outbreak's impact on the credit quality of loan portfolios and the creditworthiness of groups of borrowers, credit risk evaluations will be modified accordingly. We will continue to monitor the credit risk within our business and take the appropriate mitigating actions to help support our customers and our franchise.

For further details of the customer relief programmes that we are participating in, see page 66 of the Interim Report 2020.

 

Non-financial risk

As a result of the Covid-19 outbreak, business continuity plans have been implemented successfully. Despite high levels of working from home, the majority of service level agreements are being maintained. We have experienced no major impacts to the supply chain from our third-party service providers. The risk of damage or theft to our physical assets or criminal injury to our employees remains unchanged. No significant incidents have impacted our buildings or staff. Expedited decisions to ensure the continuity of critical customer services are being documented through governance.

 

Market risk management

We managed market risk prudently in the first half of 2020. Sensitivity exposures remained within appetite as the business pursued its core market-making activity in support of our customers during the pandemic. We have also undertaken hedging activities to protect the business from potential future deterioration in credit conditions. Market risk continued to be managed using a complementary set of exposure measures and limits, including stress and scenario analysis.

 

Linkage to the Interim Report

 

Structure of the regulatory group

Assets, liabilities and post-acquisition reserves of subsidiaries engaged in insurance activities are excluded from the regulatory consolidation. Our investments in these insurance subsidiaries are recorded at cost and deducted from CET1 capital, subject to thresholds.

The regulatory consolidation also excludes special purpose entities ('SPEs') where significant risk has been transferred to third parties. Exposures to these SPEs are risk weighted as securitisation positions for regulatory purposes.

Participating interests in banking associates are proportionally consolidated for regulatory purposes by including our share of assets, liabilities, profits and losses, and RWAs in accordance with the PRA's application of EU legislation. Non-participating significant investments along with non-financial associates are deducted from capital, subject to thresholds.

For further explanation of the differences between the accounting and regulatory scope of consolidation and their definition of exposure, see pages 8 to 13 of the Pillar 3 Disclosures at 31 December 2019.

 

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

 

 

Accounting

balance

sheet

Deconsolidation

of insurance/

other entities

Consolidation

of banking

associates

Regulatory

balance

sheet

 

Ref

$m

$m

$m

$m

Assets

 

 

 

 

 

Cash and balances at central banks

 

249,673

 

(10

)

323

 

249,986

 

Items in the course of collection from other banks

 

6,289

 

-

 

-

 

6,289

 

Hong Kong Government certificates of indebtedness

 

39,519

 

-

 

-

 

39,519

 

Trading assets

 

208,964

 

(810

)

-

 

208,154

 

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

 

41,785

 

(31,488

)

535

 

10,832

 

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

r

-

 

597

 

-

 

597

 

Derivatives

 

313,781

 

(169

)

160

 

313,772

 

Loans and advances to banks

 

77,015

 

(2,071

)

1,248

 

76,192

 

Loans and advances to customers

 

1,018,681

 

(1,074

)

12,306

 

1,029,913

 

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

 

r

-

 

411

 

-

 

411

 

    expected credit losses on IRB portfolios

 

h

(10,630

)

-

 

-

 

(10,630

)

Reverse repurchase agreements - non-trading

 

226,345

 

2,078

 

161

 

228,584

 

Financial investments

 

494,109

 

(70,116

)

4,625

 

428,618

 

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

r

-

 

369

 

-

 

369

 

Capital invested in insurance and other entities

 

-

 

2,286

 

-

 

2,286

 

Prepayments, accrued income and other assets

 

197,425

 

(6,414

)

452

 

191,463

 

-  of which: retirement benefit assets

j

9,894

 

-

 

-

 

9,894

 

Current tax assets

 

821

 

(69

)

14

 

766

 

Interests in associates and joint ventures

 

24,800

 

(410

)

(4,626

)

19,764

 

-  of which: positive goodwill on acquisition

e

478

 

(12

)

-

 

466

 

Goodwill and intangible assets

e

19,438

 

(9,651

)

1,222

 

11,009

 

Deferred tax assets

f

4,153

 

128

 

16

 

4,297

 

Total assets at 30 Jun 2020

 

2,922,798

 

(117,790

)

16,436

 

2,821,444

 

Liabilities and equity

 

 

 

 

 

Hong Kong currency notes in circulation

 

39,519

 

-

 

-

 

39,519

 

Deposits by banks

 

82,715

 

(29

)

624

 

83,310

 

Customer accounts

 

1,532,380

 

3,432

 

14,656

 

1,550,468

 

Repurchase agreements - non-trading

 

112,799

 

-

 

-

 

112,799

 

Items in the course of transmission to other banks

 

6,296

 

-

 

-

 

6,296

 

Trading liabilities

 

79,612

 

-

 

-

 

79,612

 

Financial liabilities designated at fair value

 

156,608

 

(4,396

)

-

 

152,212

 

-  of which: included in tier 2

o, q, i

10,054

 

-

 

-

 

10,054

 

Derivatives

 

303,059

 

72

 

229

 

303,360

 

-  of which: debit valuation adjustment

i

138

 

-

 

-

 

138

 

Debt securities in issue

 

110,114

 

(1,611

)

-

 

108,503

 

Accruals, deferred income and other liabilities

 

173,181

 

(2,823

)

640

 

170,998

 

Current tax liabilities

 

1,141

 

(28

)

106

 

1,219

 

Liabilities under insurance contracts

 

98,832

 

(98,832

)

-

 

-

 

Provisions

 

3,209

 

(7

)

55

 

3,257

 

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

h

687

 

-

 

-

 

687

 

Deferred tax liabilities

 

4,491

 

(1,455

)

8

 

3,044

 

Subordinated liabilities

 

23,621

 

1

 

118

 

23,740

 

-  of which:

 

 

 

 

 

included in tier 1

l, n

1,763

 

-

 

-

 

1,763

 

included in tier 2

o, q

20,168

 

-

 

-

 

20,168

 

Total liabilities at 30 Jun 2020

 

2,727,577

 

(105,676

)

16,436

 

2,638,337

 

Equity

 

 

 

 

 

Called up share capital

a

10,346

 

-

 

-

 

10,346

 

Share premium account

a, l

14,268

 

-

 

-

 

14,268

 

Other equity instruments

k

20,914

 

-

 

-

 

20,914

 

Other reserves

c, g

(301

)

1,888

 

-

 

1,587

 

Retained earnings

b, c

141,809

 

(12,851

)

-

 

128,958

 

Total shareholders' equity

 

187,036

 

(10,963

)

-

 

176,073

 

Non-controlling interests

d, m, n, p

8,185

 

(1,151

)

-

 

7,034

 

Total equity at 30 Jun 2020

 

195,221

 

(12,114

)

-

 

183,107

 

Total liabilities and equity at 30 Jun 2020

 

2,922,798

 

(117,790

)

16,436

 

2,821,444

 

†     The references (a)-(r) identify balance sheet components that are used in the calculation of regulatory capital in Table 3: Own funds disclosure. This table shows such items at their accounting values, which may be subject to analysis or adjustment in the calculation of regulatory capital shown in Table 3.

 

 

 

Capital and RWAs

 

Capital management

Approach and policy

Our approach to capital management is driven by our strategic and organisational requirements, taking into account the regulatory, economic and commercial environment. We aim to maintain a strong capital base to support the risks inherent in our business and invest in accordance with our strategy, meeting both consolidated and local regulatory capital requirements at all times.

Our capital management process culminates in the annual Group capital plan, which is approved by the Board. HSBC Holdings is the primary provider of equity capital to its subsidiaries and also provides them with non-equity and loss-absorbing capital where necessary. These investments are substantially funded by HSBC Holdings' issuance of equity and non-equity capital and by profit retention. As part of its capital management process, HSBC

Holdings seeks to maintain a balance between the composition of its capital and its investment in subsidiaries, including management of double leverage.

The main features of capital securities issued by the Group, categorised as tier 1 ('T1') capital and tier 2 ('T2') capital, are set out on the HSBC website, www.hsbc.com.

The values disclosed are the IFRS balance sheet carrying amounts, not the amounts that these securities contribute to regulatory capital. For example, the IFRS accounting and the regulatory treatments differ in their approaches to issuance costs, regulatory amortisation and regulatory eligibility limits prescribed by the relevant regulatory legislation.

A list of the main features of our capital instruments, in accordance with Annex III of Commission Implementing Regulation 1423/2013, is also published on our website. This is in addition to the full terms and conditions of our securities, also available on our website.

For further details on our management of capital, see page 77 of the Interim Report 2020.

 

 

 

Own funds

 

Table 3: Own funds disclosure

 

 

 

 

At

 

 

 

30 Jun

31 Dec

 

 

 

2020

2019

 

 

Ref †

$m

$m

 

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

 

 

 

1

Capital instruments and the related share premium accounts

 

23,209

 

22,873

 

 

-  ordinary shares

a

23,209

 

22,873

 

2

Retained earnings

b

127,989

 

127,188

 

3

Accumulated other comprehensive income (and other reserves)

c

2,594

 

1,735

 

5

Minority interests (amount allowed in consolidated CET1)

d

4,036

 

4,865

 

5a

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

b

1,729

 

(3,381

)

6

Common equity tier 1 capital before regulatory adjustments

 

159,557

 

153,280

 

 

Common equity tier 1 capital: regulatory adjustments

 

 

 

7

Additional value adjustments1

 

(1,162

)

(1,327

)

8

Intangible assets (net of related deferred tax liability)

e

(11,181

)

(12,372

)

10

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

f

(1,505

)

(1,281

)

11

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

g

(426

)

(41

)

12

Negative amounts resulting from the calculation of expected loss amounts

h

(1,191

)

(2,424

)

14

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

i

5

 

2,450

 

15

Defined-benefit pension fund assets

j

(7,409

)

(6,351

)

16

Direct and indirect holdings of own CET1 instruments2

 

(40

)

(40

)

19

Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10% threshold and net of eligible short positions)3

 

(8,202

)

(7,928

)

28

Total regulatory adjustments to common equity tier 1

 

(31,111

)

(29,314

)

29

Common equity tier 1 capital

 

128,446

 

123,966

 

 

Additional tier 1 ('AT1') capital: instruments

 

 

 

30

Capital instruments and the related share premium accounts

 

20,914

 

20,871

 

31

-  classified as equity under IFRSs

k

20,914

 

20,871

 

33

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

from AT1

l

2,305

 

2,305

 

34

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

m, n

872

 

1,277

 

35

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

m

812

 

1,218

 

36

Additional tier 1 capital before regulatory adjustments

 

24,091

 

24,453

 

 

Additional tier 1 capital: regulatory adjustments

 

 

 

37

Direct and indirect holdings of own AT1 instruments2

 

(60

)

(60

)

43

Total regulatory adjustments to additional tier 1 capital

 

(60

)

(60

)

44

Additional tier 1 capital

 

24,031

 

24,393

 

45

Tier 1 capital (T1 = CET1 + AT1)

 

152,477

 

148,359

 

 

 

 

Table 3: Own funds disclosure (continued)

 

 

 

At

 

 

 

30 Jun

31 Dec

 

 

 

2020

2019

 

 

Ref †

$m

$m

 

Tier 2 capital: instruments and provisions

 

 

 

46

Capital instruments and the related share premium accounts

o

21,338

 

20,525

 

 

-  of which: instruments grandfathered under CRR II

 

7,572

 

7,067

 

48

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

p, q

4,843

 

4,667

 

49

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

q

2,172

 

2,251

 

 

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

 

1,500

 

1,452

 

51

Tier 2 capital before regulatory adjustments

 

26,181

 

25,192

 

 

Tier 2 capital: regulatory adjustments

 

 

 

52

Direct and indirect holdings of own T2 instruments

 

(40

)

(40

)

55

Direct and indirect holdings by the institution of the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions)

r

(1,376

)

(1,361

)

57

Total regulatory adjustments to tier 2 capital

 

(1,416

)

(1,401

)

58

Tier 2 capital

 

24,765

 

23,791

 

59

Total capital (TC = T1 + T2)

 

177,242

 

172,150

 

60

Total risk-weighted assets

 

854,552

 

843,395

 

 

Capital ratios and buffers

 

 

 

61

Common equity tier 1

 

15.0%

14.7%

62

Tier 1

 

17.8%

17.6%

63

Total capital

 

20.7%

20.4%

64

Institution specific buffer requirement

 

4.70%

5.11%

65

-  capital conservation buffer requirement

 

2.50%

2.50%

66

-  countercyclical buffer requirement

 

0.20%

0.61%

67a

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

 

2.00%

2.00%

68

Common equity tier 1 available to meet buffers

 

8.8%

8.5%

 

Amounts below the threshold for deduction (before risk weighting)

 

 

 

72

Direct and indirect holdings of the capital of financial sector entities where the institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions)

 

2,425

 

2,938

 

73

Direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount below 10% threshold and net of eligible short positions)

 

13,556

 

13,189

 

75

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

 

3,915

 

4,529

 

 

Applicable caps on the inclusion of provisions in tier 2

 

 

 

77

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

 

2,035

 

2,163

 

79

Cap for inclusion of credit risk adjustments in T2 under IRB approach

 

3,233

 

3,128

 

 

Capital instruments subject to phase out arrangements (only applicable between 1 Jan 2013 and 1 Jan 2022)

 

 

 

82

Current cap on AT1 instruments subject to phase out arrangements

 

3,461

 

5,191

 

83

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

 

51

 

122

 

84

Current cap on T2 instruments subject to phase out arrangements

 

1,825

 

2,737

 

 

 

 

 

†     The references (a)-(r) identify balance sheet components in Table 2: Reconciliation of balance sheets - financial accounting to regulatory scope of consolidation which is used in the calculation of regulatory capital. This table shows how they contribute to the regulatory capital calculation. Their contribution may differ from their accounting value in Table 2 as a result of adjustment or analysis to apply regulatory definitions of capital.

1     Additional value adjustments are deducted from CET1. These are calculated on assets measured at fair value.

2     The deduction for holdings of own CET1, T1 and T2 instruments is set by the PRA.

3     The threshold deduction for significant investments relates to balances recorded on numerous lines on the balance sheet and includes: investments in insurance subsidiaries and non-consolidated associates, other CET1 equity held in financial institutions, and connected funding of a capital nature etc.

 

At 30 June 2020, our common equity tier 1 ('CET1') capital ratio increased to 15.0% from 14.7% at 31 December 2019.

CET1 capital increased in 1H20 by $4.5bn, mainly as a result of:

•    the cancellation of the 4Q19 unpaid dividend of $3.4bn at the PRA's request;

•    a $1.8bn increase as a result of lower deductions for excess expected loss. ECL against IRB exposures rose by $4.3bn compared with 31 December 2019, while regulatory expected losses rose by $2.5bn;

•    capital generation of $1.7bn through profits, net of dividends relating to other equity instruments; and

•    a $1.5bn increase in the fair value through other comprehensive income reserve.

These increases were partly offset by:

•     foreign currency translation differences of $3.7bn; and

•    a $0.8bn fall in allowable non-controlling interests in CET1. This partly reflected the acquisition in May 2020 of additional shares representing 18.66% of the capital of HSBC Trinkaus & Burkhardt AG from Landesbank Baden-Württemberg, the principal minority shareholder.

At 30 June 2020, our Pillar 2A requirement was $26.3bn,  equivalent to 3.1% of RWAs. Of this, 1.7% was met by CET1. Pillar 2A requirements are set by the PRA as part of our total capital requirement.

 

Leverage ratio

The risk of excessive leverage is managed as part of HSBC's global risk appetite framework and monitored using a leverage ratio metric within our risk appetite statement ('RAS'). The RAS articulates the aggregate level and types of risk that HSBC is willing to accept in its business activities in order to achieve its strategic business objectives.

The RAS is monitored via the risk appetite profile report, which includes comparisons of actual performance against the risk appetite and tolerance thresholds assigned to each metric. This is to ensure that any excessive risk is highlighted, assessed and mitigated appropriately. The risk appetite profile report is presented monthly to the Risk Management Meeting of the Group Management Board and the Group Risk Committee.

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

 

 

 

Table 4: Leverage ratio common disclosure ('LRCom')

 

 

 

At

 

 

 

30 Jun

31 Dec

 

 

 

2020

2019

 

 

Footnotes

$bn

$bn

 

On-balance sheet exposures (excluding derivatives and SFTs)

 

 

 

1

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

 

2,232.1

 

2,119.1

 

2

(Asset amounts deducted in determining tier 1 capital)

 

(29.6

)

(30.5

)

3

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

 

2,202.5

 

2,088.6

 

 

Derivative exposures

 

 

 

4

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

 

85.4

 

53.5

 

5

Add-on amounts for potential future exposure associated with all derivatives transactions

(mark-to-market method)

 

146.3

 

162.1

 

6

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

 

13.3

 

8.3

 

7

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

 

(58.5

)

(43.1

)

8

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

 

(80.3

)

(53.2

)

9

Adjusted effective notional amount of written credit derivatives

 

153.6

 

159.4

 

10

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

 

(147.1

)

(150.4

)

11

Total derivative exposures

 

112.7

 

136.6

 

 

Securities financing transaction exposures

 

 

 

12

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

 

483.0

 

451.0

 

13

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

 

(228.3

)

(196.1

)

14

Counterparty credit risk exposure for SFT assets

 

10.7

 

10.7

 

16

Total securities financing transaction exposures

 

265.4

 

265.6

 

 

Other off-balance sheet exposures

 

 

 

17

Off-balance sheet exposures at gross notional amount

 

859.9

 

865.5

 

18

(Adjustments for conversion to credit equivalent amounts)

 

(639.1

)

(629.8

)

19

Total off-balance sheet exposures

 

220.8

 

235.7

 

 

Capital and total exposures

 

 

 

20

Tier 1 capital

1

149.4

 

144.8

 

21

Total leverage ratio exposure

 

2,801.4

 

2,726.5

 

22

Leverage ratio (%)

1

5.3

 

5.3

 

EU-23

Choice of transitional arrangements for the definition of the capital measure

 

Fully phased-in

 Fully phased-in

1     Leverage ratio is calculated using the CRR II end point basis for capital.

 

 

 

 

 

Table 5: Summary reconciliation of accounting assets and leverage ratio exposures ('LRSum')

 

 

At

 

 

30 Jun

31 Dec

 

 

2020

2019

 

 

$bn

$bn

1

Total assets as per published financial statements

2,922.8

 

2,715.2

 

 

Adjustments for:

 

 

2

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

(101.4

)

(101.2

)

4

-  derivative financial instruments

(201.0

)

(106.4

)

5

-  SFTs

12.2

 

2.8

 

6

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

220.8

 

235.7

 

7

-  other

(52.0

)

(19.6

)

8

Total leverage ratio exposure

2,801.4

 

2,726.5

 

 

 

 

Table 6: Leverage ratio - Split of on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures) ('LRSpl')

 

 

At

 

 

30 Jun

31 Dec

 

 

2020

2019

 

 

$bn

$bn

EU-1

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

2,173.6

 

2,076.0

 

EU-2

-  trading book exposures

181.2

 

230.8

 

EU-3

-  banking book exposures

1,992.4

 

1,845.2

 

 

   'banking book exposures' comprises:

 

 

EU-4

covered bonds

2.6

 

2.6

 

EU-5

exposures treated as sovereigns

682.3

 

539.3

 

EU-6

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

8.8

 

9.4

 

EU-7

institutions

66.3

 

59.3

 

EU-8

secured by mortgages of immovable properties

342.9

 

330.4

 

EU-9

retail exposures

83.6

 

106.2

 

EU-10

corporate

589.8

 

603.2

 

EU-11

exposures in default

12.7

 

9.9

 

EU-12

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

203.4

 

184.9

 

 

 

 

Capital buffers

Our geographical breakdown and institution-specific countercyclical capital buffer ('CCyB') disclosure and G-SIB Indicators Disclosure are published annually on the HSBC website, www.hsbc.com.

 

Pillar 1 minimum capital requirements and

RWA flow

 

Pillar 1 covers the minimum capital resource requirements for credit risk, counterparty credit risk ('CCR'), equity, securitisation, market risk and operational risk. These requirements are expressed in terms of RWAs.

 

 

 

 

 

 

 

Credit risk

The Basel Committee's framework applies three approaches of increasing sophistication to the calculation of Pillar 1 credit risk capital requirements. The most basic level, the standardised approach, requires banks to use external credit ratings to determine the risk weightings applied to rated counterparties. Other counterparties are grouped into broad categories and standardised risk weightings are applied to these categories. The next level, the foundation IRB ('FIRB') approach, allows banks to calculate their credit risk capital requirements on the basis of their internal assessment of a counterparty's probability of default ('PD'), but subjects their quantified estimates of exposure at default ('EAD') and loss given default ('LGD') to standard supervisory parameters. Finally, the advanced IRB ('AIRB') approach allows banks to use their own internal assessment in both determining PD and quantifying EAD and LGD.

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

Some portfolios remain on the standardised or FIRB approaches:

•   pending the issuance of local regulations or model approval;

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

•   under exemptions from IRB treatment.

 
 
 
 
 

Counterparty credit risk

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

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

 

Equity

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

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

 

Securitisation

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

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

•   standardised approach ('SEC-SA');

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

•   internal assessment approach ('IAA').

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

Under the new framework:

•   Our originated positions are reported under SEC-IRBA.

•   Our positions in the sponsored Solitaire programme and our investment in third-party positions are reported under SEC-SA and SEC-ERBA.

•   Our sponsored positions in Regency are reported under IAA. Our IAA approach is audited annually by internal model review and is subject to review by the PRA.

 

Market risk

Market risk capital requirements can be determined under either the standard rules or the internal models approach ('IMA'). The latter involves the use of internal value at risk ('VaR') models to measure market risks and determine the appropriate capital requirement.

In addition to the VaR models, other internal models include stressed VaR ('SVaR'), incremental risk charge ('IRC') and comprehensive risk measure.

 

The market risk capital requirement is measured using internal market risk models, where approved by the PRA, or under the standard rules. Our internal market risk models comprise VaR, stressed VaR and IRC. Non-proprietary details of the scope of our IMA permission are available in the Financial Services Register on the PRA website. We are in compliance with the requirements set out in articles 104 and 105 of the Capital Requirements Regulation.

 

Operational risk

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

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

 

 

 

 

Table 7: Overview of RWAs ('OV1')

 

 

 

At

 

 

 

30 Jun

31 Mar

30 Jun

 

 

 

2020

2020

2020

 

 

 

RWAs

RWAs

Capital

requirements

 

 

Footnotes

$bn

$bn

$bn

1

Credit risk (excluding counterparty credit risk)

 

632.6

 

631.9

 

50.6

 

2

-  standardised approach

 

116.8

 

119.9

 

9.3

 

3

-  foundation IRB approach

 

103.9

 

101.2

 

8.3

 

4

-  advanced IRB approach

 

411.9

 

410.8

 

33.0

 

6

Counterparty credit risk

 

43.1

 

47.3

 

3.4

 

7

-  mark-to-market

 

20.6

 

23.2

 

1.6

 

10

-  internal model method

 

18.3

 

20.0

 

1.5

 

11

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

 

0.5

 

0.6

 

-

 

12

-  credit valuation adjustment

 

3.7

 

3.5

 

0.3

 

13

Settlement risk

 

-

 

0.2

 

-

 

14

Securitisation exposures in the non-trading book

 

10.4

 

10.4

 

0.8

 

14a

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

 

 

1.8

 

1.8

 

0.1

 

14b

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

 

 

3.9

 

3.6

 

0.3

 

14c

-  internal assessment approach ('IAA')

 

 

2.3

 

2.5

 

0.2

 

14d

-  standardised approach ('SEC-SA')

 

2.4

 

2.5

 

0.2

 

19

Market risk

 

35.2

 

34.8

 

2.8

 

20

-  standardised approach

 

8.4

 

8.8

 

0.7

 

21

-  internal models approach

 

26.8

 

26.0

 

2.1

 

23

Operational risk

 

89.6

 

89.2

 

7.2

 

25

-  standardised approach

 

89.6

 

89.2

 

7.2

 

27

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

 

43.7

 

43.3

 

3.5

 

29

Total

 

854.6

 

857.1

 

68.3

 

 

Credit risk, including amounts below the thresholds for deduction

Credit risk RWAs increased by $1.1bn in 2Q20. This included a $11.7bn fall in asset size attributable to repayments and management initiatives, largely offset by an increase in RWAs due to changes in asset quality of $11.6bn. Asset quality movements reflected significant credit migration, largely in North America, Europe and Asia. A $3.9bn increase in RWAs due to foreign currency exchange differences was partly offset by a decrease due to methodology and policy changes of $3.3bn, mainly due to risk parameter refinements.

 

Counterparty credit risk

The $4.0bn decrease in counterparty credit risk RWAs was primarily due to management initiatives, lower market volatility and trade maturities.

 

Market risk

The $0.4bn increase in market risk RWAs included a $3.5bn increase from asset size movements largely due to market volatility, partly offset by management initiatives. This was largely offset by a $2.1bn decrease due to methodology and policy changes, mostly in the calculation of foreign exchange risk, and a $1.0bn fall due to model updates from a temporary adjustment to the calculation of risks not in VaR.

 

Table 8: RWA flow statements of credit risk exposures under IRB¹ ('CR8')

 

 

RWAs

Capital

requirements

 

 

$bn

$bn

1

RWAs at 1 Apr 2020

512.0

 

41.0

 

2

Asset size

(10.2

)

(0.8

)

3

Asset quality

11.4

 

0.8

 

4

Model updates

0.8

 

0.1

 

5

Methodology and policy

(1.4

)

(0.1

)

7

Foreign exchange movements

3.2

 

0.3

 

9

RWAs at 30 Jun 2020

515.8

 

41.3

 

1     Securitisation positions are not included in this table.

 

 

 

IRB RWAs increased by $3.8bn in 2Q20, including a rise of $3.2bn due to foreign currency translation differences. The remaining increase of $0.6bn was mostly from a $11.4bn RWA rise due to asset quality movements, reflecting an increase in credit migration in North America, Europe and Asia. This was partly offset by a fallfrom asset size movements of $10.2bn due to customer repayments and active portfolio management in the same regions. A $1.4bn fall in RWAs from methodology and policy was largely due to risk parameter refinements, and a $0.8bn increase from model updates included changes to global corporate models.

 

 

 

Table 9: RWA flow statements of CCR exposures under IMM ('CCR7')

 

 

RWAs

Capital

requirements

 

 

$bn

$bn

1

RWAs at 1 Apr 2020

22.9

 

1.8

 

2

Asset size

(1.6

)

(0.1

)

3

Asset quality

0.4

 

-

 

5

Methodology and policy

(0.3

)

-

 

9

RWAs at 30 Jun 2020

21.4

 

1.7

 

 

IMM RWAs fell by $1.5bn in 2Q20 predominantly due to management initiatives and a fall in mark-to-market as a result of lower market volatility.

 

 

 

Table 10: RWA flow statements of market risk exposures under IMA ('MR2-B')

 

 

VaR

Stressed

VaR

IRC

Other

Total

RWAs

Total capital requirements

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

RWAs at 1 Apr 2020

5.8

 

8.6

 

9.2

 

2.4

 

26.0

 

2.1

 

2

Movement in risk levels

1.9

 

2.3

 

(2.1

)

-

 

2.1

 

0.1

 

3

Model updates/changes

(0.4

)

(0.6

)

-

 

-

 

(1.0

)

(0.1

)

4

Methodology and policy

-

 

-

 

-

 

(0.3

)

(0.3

)

-

 

8

RWAs at 30 Jun 2020

7.3

 

10.3

 

7.1

 

2.1

 

26.8

 

2.1

 

 

RWAs under IMA increased by $0.8bn in 2Q20 due to a $2.1bn increase in risk levels, largely offset by a $1.0bn fall due to model updates from a temporary adjustment to the calculation of risks not in VaR. The increase in risk levels reflected heightened market volatility, partly offset by management initiatives and a $2.1bn fall in IRC RWAs following a reduction in exposures.

 

Minimum requirement for own

funds and eligible liabilities

A requirement for total loss-absorbing capacity ('TLAC'), as defined in the final standards adopted by the Financial Stability Board, came into effect on 1 January 2019. In the EU, TLAC requirements were implemented via CRR II, which came into force in June 2019 and includes a new framework on minimum requirement for own funds and eligible liabilities ('MREL').

MREL includes own funds and liabilities that can be written down or converted into capital resources in order to absorb losses or recapitalise a bank in the event of its failure. The new framework is complemented with new disclosure requirements. As the specific EU format for disclosure is yet to be agreed, the disclosures are based on the formats provided in the Basel Committee Standards for Pillar 3 disclosures requirements.

The preferred resolution strategy for the Group, as confirmed by the BoE, is a multiple point of entry ('MPE') strategy - allowing each individual resolution group to be resolved by its respective local resolution authority. Aligned with this strategy, the Group issues TLAC to the market from HSBC Holdings only, and then downstreams the proceeds to its subsidiaries as necessary and in accordance with requirements set by our regulators. This approach gives host authorities the option to recapitalise local subsidiaries through the write-down of internal TLAC resources, with the BoE applying bail-in powers at the HSBC Holdings level where necessary and subsequently conducting any necessary restructuring and separation of the Group in coordination with host authorities.
In line with the existing structure and business model of the Group, we have three resolution groups. There are some smaller entities that fall outside of the resolution groups, and can be separately resolved.

The table below lists the resolution groups, the related resolution entities and their material subsidiaries subject to TLAC requirements as currently agreed with the BoE.

The external MREL requirement for the Group as a whole is currently the highest of:

•    16% of the Group's consolidated RWAs;

•    6% of the Group's consolidated leverage exposure; and

•    the sum of all loss-absorbing capacity requirements and other capital requirements relating to Group entities or sub-groups.

The indicative, external MREL requirements applying to the Group from 2020 to 2021 follow the same calibration. The indicative, external MREL requirement applicable in 2022 is expected to be the highest of:

•    18% of the Group's consolidated RWAs;

•    6.75% of the Group's consolidated leverage exposure; and

•    the sum of all loss-absorbing capacity requirements and other capital requirements relating to other Group entities or sub-groups.

These indicative requirements remain subject to the BoE MREL recalibration as part of setting the 2021 requirements, based on BoE deliberation in 2020.

Further details of our approach to capital management can be found in  'Capital risk management' on page 77 of the Interim Report 2020.

 

 

 

 

 

European resolution group

HSBC Holdings plc

HSBC UK Holdings Limited

 

HSBC Bank plc

 

HSBC UK Bank plc

 

HSBC France

 

Asian resolution group

HSBC Asia Holdings Limited

The Hongkong and Shanghai Banking Corporation Limited

 

Hang Seng Bank Limited

 

US resolution group

HSBC North America Holdings Inc

N/A

 

 

The tables below summarise the key metrics for the Group's three resolution groups.

Table 11.i: Key metrics of the European resolution group¹ ('KM2')

 

 

At

 

 

30 Jun

31 Mar

31 Dec

30 Sep

30 Jun

 

 

2020

2020

2019

2019

2019

1

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

94.3

98.5

94.6

95.5

 

97.3

 

1a

Fully loaded ECL accounting model TLAC available ($bn)

94.2

98.4

94.4

95.3

 

97.1

 

2

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

295.7

299.6

297.4

316.8

 

321.1

 

3

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

31.9

32.9

31.8

30.1

 

30.3

 

3a

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

31.9

32.8

31.8

30.1

 

30.2

 

4

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

1,166

1,163

1,167

1,133

 

1,176

 

5

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

8.1

8.5

8.1

8.4

 

8.3

 

5a

Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model Leverage exposure measure (%)

8.1

8.5

8.1

8.4

 

8.3

 

6a

Does the subordination exemption in the antepenultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?

No

No

 No

No

No

6b

Does the subordination exemption in the penultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?

No

No

 No

No

No

6c

If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognised as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognised as external TLAC if no cap was applied (%)

N/A

N/A

 N/A

N/A

N/A

Footnotes can be found at the end of the table.

 

 

Table 11.ii: Key metrics of the Asian resolution group² ('KM2')

 

 

At

 

 

30 Jun

31 Mar

31 Dec

30 Sep

30 Jun

 

 

2020

2020

2019

2019

2019

1

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

99.8

96.0

98.8

97.2

 

97.0

 

1a

Fully loaded ECL accounting model TLAC available ($bn)

99.8

96.0

98.8

97.2

 

97.0

 

2

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

379.7

374.8

366.1

370.6

 

371.1

 

3

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

26.3

25.6

27.0

26.2

 

26.1

 

3a

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

26.3

25.6

27.0

26.2

 

26.1

 

4

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

1,092

1,055

1,036

1,025

 

1,041

 

5

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

9.1

9.1

9.5

9.5

 

9.3

 

5a

Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model Leverage exposure measure (%)

9.1

9.1

9.5

9.5

 

9.3

 

6a

Does the subordination exemption in the antepenultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?

No

No

No

No

No

6b

Does the subordination exemption in the penultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?

No

No

No

No

No

6c

If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognised as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognised as external TLAC if no cap was applied (%)

N/A

N/A

N/A

N/A

N/A

Footnotes can be found at the end of the table.

 

Table 11.iii: Key metrics of the US resolution group³ ('KM2')

 

 

At

 

 

30 Jun

31 Mar

31 Dec

30 Sep

30 Jun

 

 

2020

2020

2019

2019

2019

1

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

30.4

30.5

29.8

30.2

 

31.7

 

1a

Fully loaded ECL accounting model TLAC available ($bn)

30.3

30.4

N/A

N/A

N/A

2

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

127.2

140.4

128.7

139.0

 

140.8

 

3

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

23.9

21.7

23.2

21.7

 

22.5

 

3a

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

23.8

21.7

N/A

N/A

N/A

4

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

306

367

 

332

373

 

363

 

5

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

9.9

8.3

9.0

8.1

 

8.8

 

5a

Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model Leverage exposure measure (%)

N/A

N/A

N/A

N/A

N/A

6a

Does the subordination exemption in the antepenultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?

No

No

No

No

No

6b

Does the subordination exemption in the penultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?

No

No

No

No

No

6c

If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognised as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognised as external TLAC if no cap was applied (%)

N/A

N/A

N/A

N/A

N/A

                   

1     The European resolution group reports in accordance with the applicable provisions of the Capital Requirements Regulation as amended by 
CRR II. Unless otherwise stated, all figures are calculated using the EU's regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation.

2     Reporting for the Asian resolution group follows the Hong Kong Monetary Authority regulatory rules. IFRS 9 has been implemented but no regulatory transitional arrangements apply.

3     Reporting for the US resolution group is prepared in accordance with local regulatory rules. The US accounting standard for current expected credit losses ('CECL') became effective in 2020. On 31 March 2020, in response to the Covid-19 outbreak, the federal banking agencies issued an interim final rule that provides the option to transition regulatory capital impacts of the new CECL accounting standard over a five-year period. HSBC North America Holdings Inc. has adopted this option. Leverage exposure and ratio are calculated under the US supplementary leverage ratio ('SLR') rules. On 15 May 2020, in response to the continuing economic impact of Covid-19, the US agencies also issued an interim final rule that allows US banks to temporarily exclude on-balance sheet US Treasury securities and deposits held at the Federal Reserve from the SLR denominator until 31 March 2021.

 

As the Bank of England framework includes requirements set on the basis of the Group consolidated position, we present data for both the consolidated Group and the resolution groups in the table below. The difference between Group CET1 and the aggregate of resolution groups' CET1 is driven by entities that fall outside of the resolution groups and by differences in regulatory frameworks.

Table 12: TLAC composition ('TLAC1')

 

 

 

 

At 30 Jun 2020

 

 

At 31 Dec 2019

 

 

Group1

 

Resolution group

Group1

 

Resolution group

 

 

European1

Asian2

US3

European1

Asian2

US3

 

Regulatory capital elements of TLAC and adjustments ($bn)

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital before adjustments

128.4

 

114.2

63.5

17.4

124.0

 

110.2

63.2

16.8

 

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

-

 

 

100.4

 

-

 

-

 

 

100.0

-

 

-

 

1

Common equity tier 1 capital ('CET1')

128.4

 

13.8

63.5

17.4

124.0

 

10.2

63.2

16.8

2

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

24.0

 

23.5

5.9

2.2

24.4

 

23.5

5.8

2.2

4

Other adjustments

-

 

 

6.7

-

 

-

 

-

 

 

6.7

-

 

-

 

5

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

24.0

 

16.8

5.9

2.2

24.4

 

16.8

5.8

2.2

6

Tier 2 capital ('T2') before TLAC adjustments

24.8

 

25.3

7.7

5.8

23.8

 

25.0

7.9

4.6

7

Amortised portion of T2 instruments where remaining maturity > 1 year

0.8

 

0.7

-

 

-

 

0.6

 

0.6

-

 

-

 

8

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

-

 

 

-

 

0.4

 

-

 

-

 

 

-

 

0.4

 

-

 

9

Other adjustments

0.1

 

8.4

-

 

3.0

0.2

 

 

8.1

-

 

1.8

10

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

25.5

 

17.6

7.3

2.9

24.2

 

17.5

7.5

2.8

11

TLAC arising from regulatory capital

177.9

 

48.2

76.6

22.4

172.6

 

44.5

76.5

21.8

 

Non-regulatory capital elements of TLAC ($bn)

 

 

 

 

 

 

 

 

 

 

12

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

77.5

 

46.1

23.2

8.0

81.2

 

50.1

22.3

8.0

17

TLAC arising from non-regulatory capital instruments before adjustments

77.5

 

46.1

23.2

 

8.0

 

81.2

 

50.1

22.3

 

8.0

 

 

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

 

 

 

 

 

 

 

 

 

 

18

TLAC before deductions

255.4

 

94.3

99.8

 

30.4

 

253.8

 

94.6

98.8

 

29.8

 

20

Deduction of investments in own other TLAC liabilities

-

 

 

-

 

-

 

-

 

0.1

 

-

 

-

 

-

 

22

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

255.4

 

94.3

99.8

30.4

 

253.7

 

94.6

98.8

29.8

 

 

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

 

 

 

 

 

 

 

 

 

 

23

Total risk-weighted assets

854.6

 

295.7

379.7

 

127.2

 

843.4

 

297.4

366.1

 

128.7

 

24

Leverage exposure measure

2,801.4

 

1,166.3

1,092.4

 

306.0

 

2,726.5

 

1,166.6

1,036.2

 

331.9

 

 

TLAC ratios and buffers (%)

 

 

 

 

 

 

 

 

 

 

25

TLAC (as a percentage of risk-weighted assets)

29.9%

 

31.9%

26.3%

23.9%

30.1%

 

31.8%

27.0%

23.2%

26

TLAC (as a percentage of leverage exposure)

9.1%

 

8.1%

9.1%

9.9%

9.3%

 

8.1%

9.5%

9.0%

27

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

8.8%

 

N/A

N/A

5.9%

8.5%

 

N/A

N/A

5.2%

28

Institution-specific buffer requirement (capital conservation buffer plus countercyclical buffer requirements plus higher loss absorbency requirement, expressed as a percentage of risk-weighted assets)

4.7%

 

N/A

N/A

2.5%

5.1%

 

N/A

N/A

2.5%

29

-  Of which: capital conservation buffer requirement

2.5%

 

N/A

N/A

2.5%

2.5%

 

N/A

N/A

2.5%

30

-  Of which: bank specific countercyclical buffer requirement

0.2%

 

N/A

N/A

N/A

0.6%

 

N/A

N/A

N/A

31

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

2.0%

 

N/A

N/A

N/A

2.0%

 

N/A

N/A

N/A

1     The European resolution group reports in accordance with the applicable provisions of the Capital Requirements Regulation as amended by 
CRR II. Unless otherwise stated, all figures are calculated using the EU's regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation.

2     Reporting for the Asian resolution group follows the Hong Kong Monetary Authority regulatory rules. IFRS 9 has been implemented but no regulatory transitional arrangements apply.

3     Reporting for the US resolution group is prepared in accordance with local regulatory rules. The US accounting standard for current expected credit losses ('CECL') became effective in 2020. On 31 March 2020, in response to the Covid-19 outbreak, the federal banking agencies issued an interim final rule that provides the option to transition regulatory capital impacts of the new CECL accounting standard over a five-year period. HSBC North America Holdings Inc. has adopted this option. Leverage exposure and ratio are calculated under the US supplementary leverage ratio rules.

4     For the Group, minimum capital requirement is defined as the sum of Pillar 1 and Pillar 2A capital requirements set by the PRA. The minimum requirements represent the total capital requirement to be met by CET1.

 

 

Creditor ranking at legal entity level

The following tables present information regarding the ranking of creditors in the liability structure of legal entities at 30 June 2020. The tables present the ranking of creditors of HSBC Holdings plc, its resolution entities, and their material sub-group entities. Nominal values are disclosed.

The main features of capital instruments disclosure for the Group, Asia and US resolution groups is published on our website, www.hsbc.com/investors/fixed-income-investors/regulatory-capital-securities.
 

European resolution group

The European resolution group comprises HSBC Holdings plc, the designated resolution entity, together with its material operating entities - namely HSBC Bank plc and its subsidiaries, and HSBC UK Bank plc and its subsidiaries. The following tables present information regarding the ranking of creditors of HSBC Holdings plc, HSBC Bank plc and HSBC UK Bank plc.

 

Table 13: HSBC Holdings plc creditor ranking ('TLAC3')

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

 

1

 

2

 

3

4

 

 

 

Footnotes

(most junior)

 

 

(most senior)

1

Description of creditor ranking

 

Ordinary shares1

Preference shares and AT1 instruments

Subordinated notes

Senior notes and other pari passu liabilities

 

2

Total capital and liabilities net of credit risk mitigation

 

10,346

 

21,993

 

20,553

 

81,527

 

134,419

 

3

-  of row 2 that are excluded liabilities

2

-

 

-

 

-

 

6,870

 

6,870

 

4

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

 

10,346

 

21,993

 

20,553

 

74,657

 

127,549

 

5

-  of row 4 that are potentially eligible as TLAC

 

10,346

 

21,993

 

20,553

 

73,406

 

126,298

 

6

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

 

-

 

-

 

-

 

12,555

 

12,555

 

7

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

 

-

 

-

 

3,683

 

24,252

 

27,935

 

8

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

 

-

 

-

 

5,725

 

32,349

 

38,074

 

9

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

 

-

 

-

 

10,245

 

4,250

 

14,495

 

10

-  of row 5 that are perpetual securities

 

10,346

 

21,993

 

900

 

-

 

33,239

 

1     Excludes the value of share premium and reserves attributable to ordinary shareholders.

2     Excluded liabilities are defined in CRR II Article 72a (2). The balance mainly relates to TLAC eligible liabilities maturing within one year and accruals for service company recharges.

 

Table 14: HSBC UK Bank plc creditor ranking ('TLAC2')

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

 

1

 

2

 

3

 

4

 

 

 

Footnotes

(most junior)

 

 

(most senior)

1

Is the resolution entity the creditor/investor?

1

 No

 No

 No

 No

 

2

Description of creditor ranking

 

Ordinary shares2

AT1 instruments

Subordinated loans

Senior subordinated loans

 

3

Total capital and liabilities net of credit risk mitigation

 

-

 

2,707

 

3,676

 

8,241

 

14,624

 

4

-  of row 3 that are excluded liabilities

 

-

 

-

 

-

 

-

 

-

 

5

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

 

-

 

2,707

 

3,676

 

8,241

 

14,624

 

6

-  of row 5 that are eligible as TLAC

 

-

 

2,707

 

3,676

 

8,241

 

14,624

 

7

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

 

-

 

-

 

-

 

-

 

-

 

8

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

 

-

 

-

 

-

 

-

 

-

 

9

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

 

-

 

-

 

1,641

 

8,241

 

9,882

 

10

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

 

-

 

-

 

2,035

 

-

 

2,035

 

11

-  of row 6 that are perpetual securities

 

-

 

2,707

 

-

 

-

 

2,707

 

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

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

 

Table 15: HSBC Bank plc creditor ranking ('TLAC2')

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

 

1

 

2

 

3

 

4

 

 

 

Footnotes

(most junior)

 

 

(most senior)

1

Is the resolution entity the creditor/investor?

1

No

No

No

No

 

2

Description of creditor ranking

 

Ordinary shares2

Third Dollar preference shares and AT1 instruments

Undated primary capital notes

Subordinated notes and subordinated loans

 

3

Total capital and liabilities net of credit risk mitigation

 

983

 

5,069

 

1,550

 

17,723

 

25,325

 

4

-  of row 3 that are excluded liabilities

3

-

 

-

 

-

 

450

 

450

 

5

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

 

983

 

5,069

 

1,550

 

17,273

 

24,875

 

6

-  of row 5 that are eligible as TLAC

 

983

 

5,069

 

1,550

 

17,273

 

24,875

 

7

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

 

-

 

-

 

-

 

750

 

750

 

8

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

 

-

 

-

 

-

 

10,523

 

10,523

 

9

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

 

-

 

-

 

-

 

3,072

 

3,072

 

10

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

 

-

 

-

 

-

 

2,065

 

2,065

 

11

-  of row 6 that are perpetual securities

 

983

 

5,069

 

1,550

 

863

 

8,465

 

1     The entity's ordinary shares are owned by HSBC UK Holdings Limited. Other instruments are either owned by HSBC UK Holdings Limited or by third parties.

2     Excludes the value of share premium and reserves attributable to ordinary shareholders.

3     Excluded liabilities balance relates to TLAC eligible liabilities maturing within one year.

 

Asian resolution group

The Asian resolution group comprises HSBC Asia Holdings Ltd, The Hongkong and Shanghai Banking Corporation Limited, Hang Seng Bank Limited and their subsidiaries. HSBC Asia Holdings Ltd is the designated resolution entity. The following table presents information regarding the ranking of creditors of HSBC Asia Holdings Limited.

 

Table 16: HSBC Asia Holdings Ltd creditor ranking¹ ('TLAC3')

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

1

 

2

 

3

4

 

 

 

(most junior)

 

 

(most senior)

1

Description of creditor ranking

Ordinary shares2

AT1 instruments
 

Tier 2 instruments
 

 

LAC loans

 

2

Total capital and liabilities net of credit risk mitigation

56,587

 

5,700

 

1,780

 

21,173

 

85,240

 

3

-  of row 2 that are excluded liabilities

-

 

-

 

-

 

-

 

-

 

4

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

56,587

 

5,700

 

1,780

 

21,173

 

85,240

 

5

-  of row 4 that are potentially eligible as TLAC

56,587

 

5,700

 

1,780

 

21,173

 

85,240

 

6

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

-

 

-

 

-

 

2,500

 

2,500

 

7

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

-

 

-

 

-

 

7,318

 

7,318

 

8

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

-

 

-

 

-

 

9,355

 

9,355

 

9

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

-

 

-

 

1,780

 

2,000

 

3,780

 

10

-  of row 5 that are perpetual securities

56,587

 

5,700

 

-

 

-

 

62,287

 

1     The entity's capital and TLAC are held by HSBC Holdings plc.

2     Excludes the value of share premium and reserves attributable to ordinary shareholders.

 

Within the Asian resolution group, the identified material sub-group entities are The Hongkong and Shanghai Banking Corporation Ltd and Hang Seng Bank Ltd. The following tables presents the make-up of their issued MREL and its ranking on a legal entity basis.

 

Table 17: The Hongkong and Shanghai Banking Corporation Ltd creditor ranking ('TLAC2')

 

 

Creditor ranking ($m)

Sum of
1 to 5

 

 

1

 

2

 

3

 

4

 

5

 

 

 

(most junior)

 

 

 

(most senior)

1

Is the resolution entity the creditor/investor?

Yes

Yes

No1

Yes

Yes

 

2

Description of creditor ranking

Ordinary shares 2

AT1 instruments

Primary capital notes

Tier 2 instruments

LAC loans

 

3

Total capital and liabilities net of credit risk mitigation

22,236

 

5,700

 

400

 

1,780

 

21,173

 

51,289

 

4

-  of row 3 that are excluded liabilities

-

 

-

 

-

 

-

 

-

 

-

 

5

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

22,236

 

5,700

 

400

 

1,780

 

21,173

 

51,289

 

6

-  of row 5 that are eligible as TLAC

22,236

 

5,700

 

-

 

1,780

 

21,173

 

50,889

 

7

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

-

 

-

 

-

 

-

 

2,500

 

2,500

 

8

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

-

 

-

 

-

 

-

 

7,318

 

7,318

 

9

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

-

 

-

 

-

 

-

 

9,355

 

9,355

 

10

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

-

 

-

 

-

 

1,780

 

2,000

 

3,780

 

11

-  of row 6 that are perpetual securities

22,236

 

5,700

 

-

 

-

 

-

 

27,936

 

1     The company's primary capital notes are held by third parties.

2     Excludes the value of share premium and reserves attributable to ordinary shareholders.

 

Table 18: Hang Seng Bank Ltd creditor ranking ('TLAC2')

 

 

 

Creditor ranking ($m)

Sum of
1 to 3

 

 

 

1

 

2

 

3

 

 

 

Footnotes

(most junior)

 

(most senior)

1

Is the resolution entity the creditor/investor?

1

No

No

No

 

2

Description of creditor ranking

 

Ordinary shares 2

AT1 instruments

LAC loans

 

3

Total capital and liabilities net of credit risk mitigation

 

1,246

 

1,500

 

2,513

 

5,259

 

4

-  of row 3 that are excluded liabilities

 

-

 

-

 

-

 

-

 

5

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

 

1,246

 

1,500

 

2,513

 

5,259

 

6

-  of row 5 that are eligible as TLAC

 

1,246

 

1,500

 

2,513

 

5,259

 

7

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

 

-

 

-

 

-

 

-

 

8

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

 

-

 

-

 

-

 

-

 

9

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

 

-

 

-

 

2,513

 

2,513

 

10

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

 

-

 

-

 

-

 

-

 

11

-  of row 6 that are perpetual securities

 

1,246

 

1,500

 

-

 

2,746

 

1     A total of 62.14% of Hang Seng Bank Limited's ordinary share capital is owned by The Hongkong and Shanghai Banking Corporation Limited. Hang Seng Bank Limited's other TLAC eligible securities are directly held by The Hongkong and Shanghai Banking Corporation Limited.

2     Excludes the value of reserves attributable to ordinary shareholders.

 

US resolution group

The US resolution group comprises HSBC North America Holdings Inc. and its subsidiaries. HSBC North America Holdings Inc. is the

designated resolution entity. The following table presents information regarding the ranking of creditors of HSBC North America Holdings Inc.

 

Table 19: HSBC North America Holdings Inc. creditor ranking¹ ('TLAC3')

 

 

 

Creditor ranking ($m)

Sum of
1 to 4

 

 

 

1

 

2

 

3

4

 

 

 

 

(most junior)

 

 

(most senior)

1

Description of creditor ranking

Footnotes

Common stock2

Preferred stock

Subordinated loans

Senior unsecured loans and other pari passu liabilities

 

2

Total capital and liabilities net of credit risk mitigation

 

-

 

2,240

 

2,850

 

8,350

 

13,440

 

3

-  of row 2 that are excluded liabilities

3

-

 

-

 

-

 

204

 

204

 

4

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

 

-

 

2,240

 

2,850

 

8,146

 

13,236

 

5

-  of row 4 that are potentially eligible as TLAC

 

-

 

2,240

 

2,850

 

8,000

 

13,090

 

6

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

 

-

 

-

 

-

 

-

 

-

 

7

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

 

-

 

-

 

850

 

3,500

 

4,350

 

8

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

 

-

 

-

 

2,000

 

4,500

 

6,500

 

9

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

 

-

 

-

 

-

 

-

 

-

 

10

-  of row 5 that are perpetual securities

 

-

 

2,240

 

-

 

-

 

2,240

 

1     The entity's capital and TLAC are held by HSBC Overseas Holdings (UK) Limited.

2     The nominal value of common stock is $2. This excludes the value of share premium and reserves attributable to ordinary shareholders.

3     Excluded liabilities consists of 'unrelated liabilities' as defined in the Final US TLAC rules. This mainly represents accrued employee benefit obligations.

 

 

 

Credit risk

Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises principally from direct lending, trade finance and leasing business, but also from other products, such as guarantees and credit derivatives and from holding assets in the form of debt securities. Credit risk represents our largest regulatory capital requirement.

There have been no material changes to our policies and practices, which are described in the Pillar 3 Disclosures at 31 December 2019.

Further details of our approach to credit risk may be found in 'Credit Risk' on page 54 of the Interim Report 2020.

 

Credit quality of assets

We are a universal bank with a conservative approach to credit risk. This is reflected in our credit risk profile being diversified across a number of asset classes and geographies with a credit quality profile concentrated in the higher quality bands. The following tables present information on the credit quality of exposures by exposure class, industry and geography.

 

 

 

 

Table 20: Credit quality of exposures by exposure class and instrument¹ ('CR1-A')

 

 

Gross carrying values of

Specific credit risk adjustments

 
Write-offs in the year2

Credit risk adjustment charges of the period2

Net carrying values

 

 

Defaulted exposures

Non-defaulted exposures

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

Central governments and central banks

0.2

 

406.7

 

0.1

 

-

 

-

 

406.8

 

2

Institutions

-

 

85.7

 

0.1

 

-

 

0.1

 

85.6

 

3

Corporates

11.5

 

1,039.7

 

7.5

 

0.5

 

3.9

 

1,043.7

 

4

-  of which: specialised lending

0.9

 

51.1

 

0.5

 

-

 

-

 

51.5

 

6

Retail

3.4

 

552.8

 

3.1

 

0.3

 

1.5

 

553.1

 

7

-  secured by real estate property

2.3

 

329.8

 

0.5

 

-

 

0.3

 

331.6

 

 

-  of which:

 

 

 

 

 

 

8

SMEs

-

 

1.4

 

-

 

-

 

-

 

1.4

 

9

Non-SMEs

2.3

 

328.4

 

0.5

 

-

 

0.3

 

330.2

 

10

-  qualifying revolving retail

0.4

 

137.6

 

1.4

 

0.2

 

0.5

 

136.6

 

11

-  other retail

0.7

 

85.4

 

1.2

 

0.1

 

0.7

 

84.9

 

 

-  of which:

 

 

 

 

 

 

12

SMEs

0.3

 

11.1

 

0.4

 

-

 

0.2

 

11.0

 

13

Non-SMEs

0.4

 

74.3

 

0.8

 

0.1

 

0.5

 

73.9

 

15

Total IRB approach

15.1

 

2,084.9

 

10.8

 

0.8

 

5.5

 

2,089.2

 

16

Central governments and central banks

-

 

260.0

 

-

 

-

 

-

 

260.0

 

17

Regional governments or local authorities

-

 

9.3

 

-

 

-

 

-

 

9.3

 

18

Public sector entities

-

 

15.9

 

-

 

-

 

-

 

15.9

 

19

Multilateral development banks

-

 

-

 

-

 

-

 

-

 

-

 

20

International organisations

-

 

1.4

 

-

 

-

 

-

 

1.4

 

21

Institutions

-

 

1.6

 

-

 

-

 

-

 

1.6

 

22

Corporates

3.4

 

140.1

 

2.3

 

0.1

 

0.5

 

141.2

 

24

Retail

1.1

 

76.4

 

1.8

 

0.3

 

0.9

 

75.7

 

25

-  of which: SMEs

0.1

 

3.5

 

0.1

 

-

 

-

 

3.5

 

26

Secured by mortgages on immovable property

0.7

 

32.1

 

0.2

 

-

 

-

 

32.6

 

27

-  of which: SMEs

-

 

0.1

 

-

 

-

 

-

 

0.1

 

28

Exposures in default

5.2

 

-

 

2.1

 

0.4

 

0.6

 

3.1

 

29

Items associated with particularly high risk

-

 

5.5

 

-

 

-

 

-

 

5.5

 

32

Collective investment undertakings ('CIU')

-

 

0.4

 

-

 

-

 

-

 

0.4

 

33

Equity exposures

-

 

17.0

 

-

 

-

 

-

 

17.0

 

34

Other exposures

-

 

14.9

 

-

 

-

 

-

 

14.9

 

35

Total standardised approach

5.2

 

574.6

 

4.3

 

0.4

 

1.4

 

575.5

 

36

Total at 30 Jun 2020

20.3

 

2,659.5

 

15.1

 

1.2

 

6.9

 

2,664.7

 

 

-  of which: loans

17.8

 

1,357.8

 

13.9

 

1.2

 

6.3

 

1,361.7

 

 

-  of which: debt securities

0.2

 

423.1

 

0.2

 

-

 

0.1

 

423.1

 

 

-  of which: off-balance sheet exposures

2.3

 

838.8

 

1.0

 

-

 

0.5

 

840.1

 

 

 

 

 

 

Table 20: Credit quality of exposures by exposure class and instrument¹ ('CR1-A') (continued)

 

 

Gross carrying values of

Specific credit risk adjustments

 

Write-offs in the year2

Credit risk adjustment charges of the period2

Net carrying values

 

 

Defaulted exposures

Non-defaulted exposures

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

Central governments and central banks

-

 

355.4

 

-

 

-

 

-

 

355.4

 

2

Institutions

-

 

93.2

 

-

 

-

 

-

 

93.2

 

3

Corporates

6.9

 

1,038.9

 

4.0

 

0.3

 

0.4

 

1,041.8

 

4

-  of which: specialised lending

1.1

 

50.6

 

0.4

 

-

 

-

 

51.3

 

6

Retail

3.3

 

501.4

 

1.9

 

0.5

 

0.6

 

502.8

 

7

-  secured by real estate property

2.4

 

301.6

 

0.3

 

-

 

-

 

303.7

 

 

-  of which:

 

 

 

 

 

 

8

SMEs

0.1

 

3.5

 

0.1

 

-

 

-

 

3.5

 

9

Non-SMEs

2.3

 

298.1

 

0.2

 

-

 

-

 

300.2

 

10

-  qualifying revolving retail

0.2

 

134.5

 

0.8

 

0.3

 

0.2

 

133.9

 

11

-  other retail

0.7

 

65.3

 

0.8

 

0.2

 

0.4

 

65.2

 

 

-  of which:

 

 

 

 

 

 

12

SMEs

0.4

 

7.8

 

0.4

 

0.1

 

0.2

 

7.8

 

13

Non-SMEs

0.3

 

57.5

 

0.4

 

0.1

 

0.2

 

57.4

 

15

Total IRB approach

10.2

 

1,988.9

 

5.9

 

0.8

 

1.0

 

1,993.2

 

16

Central governments and central banks

-

 

163.1

 

-

 

-

 

-

 

163.1

 

17

Regional governments or local authorities

-

 

7.8

 

-

 

-

 

-

 

7.8

 

18

Public sector entities

-

 

12.9

 

-

 

-

 

-

 

12.9

 

19

Multilateral development banks

-

 

0.1

 

-

 

-

 

-

 

0.1

 

20

International organisations

-

 

1.5

 

-

 

-

 

-

 

1.5

 

21

Institutions

-

 

2.2

 

-

 

-

 

-

 

2.2

 

22

Corporates

3.4

 

193.5

 

2.2

 

0.3

 

-

 

194.7

 

24

Retail

1.0

 

68.5

 

1.5

 

0.3

 

0.4

 

68.0

 

25

-  of which: SMEs

-

 

1.3

 

0.1

 

-

 

-

 

1.2

 

26

Secured by mortgages on immovable property

0.7

 

31.4

 

0.2

 

-

 

-

 

31.9

 

28

Exposures in default

5.1

 

-

 

2.2

 

0.6

 

0.5

 

2.9

 

29

Items associated with particularly high risk

0.1

 

5.3

 

-

 

-

 

-

 

5.4

 

32

Collective investment undertakings ('CIU')

-

 

0.4

 

-

 

-

 

-

 

0.4

 

33

Equity exposures

-

 

16.5

 

-

 

-

 

-

 

16.5

 

34

Other exposures

-

 

16.8

 

-

 

-

 

-

 

16.8

 

35

Total standardised approach

5.2

 

520.0

 

3.9

 

0.6

 

0.4

 

521.3

 

36

Total at 30 Jun 2019

15.4

 

2,508.9

 

9.8

 

1.4

 

1.4

 

2,514.5

 

 

-  of which: loans

14.0

 

1,289.8

 

9.3

 

1.4

 

1.5

 

1,294.5

 

 

-  of which: debt securities

-

 

363.2

 

-

 

-

 

-

 

363.2

 

 

-  of which: off-balance sheet exposures

1.4

 

813.9

 

0.5

 

-

 

(0.1

)

814.8

 

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

2     Presented on a year-to-date basis.

 

 

 

 

 

Table 21: Credit quality of exposures by industry or counterparty types1,3 ('CR1-B')

 

 

Gross carrying values of

Specific credit risk adjustments

 
Write-offs in the year2

Credit risk adjustment charges of the period2

Net carrying values

 

 

Defaulted exposures

Non-defaulted exposures

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

Agriculture

0.4

 

9.1

 

0.2

 

-

 

-

 

9.3

 

2

Mining and oil extraction

1.4

 

39.4

 

0.7

 

-

 

0.4

 

40.1

 

3

Manufacturing

2.3

 

255.9

 

1.9

 

0.4

 

0.8

 

256.3

 

4

Utilities

0.1

 

33.4

 

0.1

 

-

 

-

 

33.4

 

5

Water supply

-

 

3.2

 

-

 

-

 

-

 

3.2

 

6

Construction

1.0

 

42.8

 

0.7

 

-

 

0.1

 

43.1

 

7

Wholesale and retail trade

3.6

 

194.2

 

2.5

 

0.1

 

1.3

 

195.3

 

8

Transportation and storage

0.9

 

47.4

 

0.4

 

-

 

0.2

 

47.9

 

9

Accommodation and food services

0.3

 

29.8

 

0.3

 

-

 

0.2

 

29.8

 

10

Information and communication

0.2

 

15.3

 

0.2

 

-

 

0.1

 

15.3

 

11

Financial and insurance

0.9

 

645.1

 

0.4

 

-

 

0.2

 

645.6

 

12

Real estate

1.1

 

196.3

 

1.0

 

-

 

0.3

 

196.4

 

13

Professional activities

0.3

 

27.2

 

0.2

 

-

 

0.1

 

27.3

 

14

Administrative service

1.9

 

158.2

 

1.3

 

-

 

0.5

 

158.8

 

15

Public administration and defence

0.4

 

255.2

 

0.2

 

-

 

-

 

255.4

 

16

Education

-

 

3.9

 

-

 

-

 

-

 

3.9

 

17

Human health and social work

0.3

 

7.2

 

0.2

 

-

 

0.1

 

7.3

 

18

Arts and entertainment

-

 

7.7

 

0.1

 

-

 

0.1

 

7.6

 

19

Other services

0.2

 

15.6

 

0.1

 

-

 

0.1

 

15.7

 

20

Personal

5.0

 

626.6

 

4.6

 

0.7

 

2.4

 

627.0

 

21

Extraterritorial bodies

-

 

46.0

 

-

 

-

 

-

 

46.0

 

22

Total at 30 Jun 2020

20.3

 

2,659.5

 

15.1

 

1.2

 

6.9

 

2,664.7

 

 

 

 

 

 

 

 

 

1

Agriculture

0.3

 

9.0

 

0.2

 

-

 

-

 

9.1

 

2

Mining and oil extraction

0.3

 

42.6

 

0.3

 

-

 

-

 

42.6

 

3

Manufacturing

1.7

 

261.3

 

1.2

 

0.3

 

0.2

 

261.8

 

4

Utilities

0.2

 

31.3

 

0.1

 

0.1

 

-

 

31.4

 

5

Water supply

-

 

3.5

 

-

 

-

 

-

 

3.5

 

6

Construction

1.3

 

41.1

 

0.6

 

0.1

 

0.1

 

41.8

 

7

Wholesale and retail trade

2.0

 

196.7

 

1.3

 

0.1

 

0.1

 

197.4

 

8

Transportation and storage

0.6

 

44.2

 

0.2

 

-

 

-

 

44.6

 

9

Accommodation and food services

0.3

 

28.5

 

0.1

 

-

 

-

 

28.7

 

10

Information and communication

-

 

17.9

 

-

 

-

 

-

 

17.9

 

11

Financial and insurance

0.7

 

567.6

 

0.2

 

-

 

-

 

568.1

 

12

Real estate

0.9

 

202.0

 

0.6

 

-

 

-

 

202.3

 

13

Professional activities

0.1

 

27.1

 

0.1

 

-

 

-

 

27.1

 

14

Administrative service

1.6

 

156.5

 

1.2

 

0.1

 

0.2

 

156.9

 

15

Public administration and defence

0.3

 

237.5

 

0.3

 

-

 

-

 

237.5

 

16

Education

-

 

3.6

 

-

 

-

 

-

 

3.6

 

17

Human health and social work

0.1

 

7.0

 

0.1

 

-

 

-

 

7.0

 

18

Arts and entertainment

0.1

 

9.0

 

0.1

 

-

 

0.1

 

9.0

 

19

Other services

0.3

 

14.0

 

0.1

 

-

 

-

 

14.2

 

20

Personal

4.6

 

594.8

 

3.1

 

0.7

 

0.7

 

596.3

 

21

Extraterritorial bodies

-

 

13.7

 

-

 

-

 

-

 

13.7

 

22

Total at 30 Jun 2019

15.4

 

2,508.9

 

9.8

 

1.4

 

1.4

 

2,514.5

 

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

2     Presented on a year-to-date basis.

3     The industry classifications of this disclosure have been revised. 30 June 2019 data has been restated to be on a consistent basis with the current year.

 

 

 

 

 

Table 22: Credit quality of exposures by geography1,2 ('CR1-C')

 

 

Gross carrying values of

Specific credit risk adjustments

 
Write-offs in the year3

Credit risk adjustment charges of the period3

Net carrying values

 

 

Defaulted exposures

Non-defaulted exposures

 

 

$bn

$bn

$bn

$bn

$bn

$bn

1

Europe

9.3

 

883.8

 

6.1

 

0.4

 

2.9

 

887.0

 

2

-  UK

5.4

 

532.0

 

4.4

 

0.4

 

2.3

 

533.0

 

3

-  France

1.4

 

167.5

 

0.7

 

-

 

0.2

 

168.2

 

4

-  Other countries

2.5

 

184.3

 

1.0

 

-

 

0.4

 

185.8

 

5

Asia

4.0

 

1,095.0

 

3.7

 

0.3

 

1.8

 

1,095.3

 

6

-  Hong Kong

1.1

 

556.9

 

1.2

 

0.2

 

0.5

 

556.8

 

7

-  China

0.3

 

167.0

 

0.5

 

-

 

0.1

 

166.8

 

8

-  Singapore

1.0

 

85.8

 

0.9

 

-

 

0.8

 

85.9

 

9

-  Australia

0.2

 

62.1

 

0.2

 

-

 

0.1

 

62.1

 

10

-  Other countries

1.4

 

223.2

 

0.9

 

0.1

 

0.3

 

223.7

 

11

Middle East and North Africa ('MENA')

3.3

 

146.8

 

2.5

 

0.1

 

0.6

 

147.6

 

12

North America

2.5

 

463.7

 

1.5

 

0.2

 

1.0

 

464.7

 

13

-  US

1.6

 

328.3

 

0.8

 

0.2

 

0.7

 

329.1

 

14

-  Canada

0.3

 

120.4

 

0.4

 

-

 

0.2

 

120.3

 

15

-  Other countries

0.6

 

15.0

 

0.3

 

-

 

0.1

 

15.3

 

16

Latin America

1.2

 

52.7

 

1.3

 

0.2

 

0.6

 

52.6

 

17

Other geographical areas

-

 

17.5

 

-

 

-

 

-

 

17.5

 

18

Total at 30 Jun 2020

20.3

 

2,659.5

 

15.1

 

1.2

 

6.9

 

2,664.7

 

 

 

 

 

 

 

 

 

1

Europe

6.8

 

800.5

 

3.7

 

0.6

 

0.6

 

803.6

 

2

-  UK

4.1

 

495.8

 

2.5

 

0.4

 

0.6

 

497.4

 

3

-  France

1.3

 

134.5

 

0.6

 

-

 

0.1

 

135.2

 

4

-  Other countries

1.4

 

170.2

 

0.6

 

0.2

 

(0.1

)

171.0

 

5

Asia

2.5

 

1,049.9

 

2.0

 

0.3

 

0.3

 

1,050.4

 

6

-  Hong Kong

0.7

 

523.1

 

0.7

 

0.1

 

0.1

 

523.1

 

7

-  China

0.3

 

163.6

 

0.4

 

-

 

0.1

 

163.5

 

8

-  Singapore

0.1

 

75.1

 

0.1

 

-

 

-

 

75.1

 

9

-  Australia

 

0.2

 

58.4

 

0.1

 

-

 

-

 

58.5

 

10

-  Other countries

1.2

 

229.7

 

0.7

 

0.2

 

0.1

 

230.2

 

11

MENA

3.3

 

142.2

 

2.4

 

0.2

 

0.1

 

143.1

 

12

North America

1.9

 

436.7

 

0.7

 

0.1

 

0.1

 

437.9

 

13

-  US

1.2

 

306.9

 

0.3

 

0.1

 

0.1

 

307.8

 

14

-  Canada

0.3

 

114.4

 

0.2

 

-

 

-

 

114.5

 

15

-  Other countries

0.4

 

15.4

 

0.2

 

-

 

-

 

15.6

 

16

Latin America

0.9

 

64.3

 

1.0

 

0.2

 

0.3

 

64.2

 

17

Other geographical areas

-

 

15.3

 

-

 

-

 

-

 

15.3

 

18

Total at 30 Jun 2019

15.4

 

2,508.9

 

9.8

 

1.4

 

1.4

 

2,514.5

 

1     Amounts shown by geographical region and country/territory in this table are based on the country/territory of residence of the counterparty.

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

3     Presented on a year-to-date basis.

 

 

 

Non-performing and forborne exposures

Tables 23 to 26 are presented in accordance with the EBA's 'Guidelines on disclosure of non-performing and forborne exposures'.

The EBA defines non-performing exposures as exposures with material amounts that are more than 90 days past due or exposures where the debtor is assessed as unlikely to pay its credit obligations in full without the realisation of collateral, regardless of the existence of any past due amounts or number days past due. Any debtors that are in default for regulatory purposes or impaired under the applicable accounting framework are always considered as non-performing exposures. The Annual Report and Accounts 2019 does not define non-performing exposures, although the definition of credit impaired (stage 3) is aligned to the EBA's definition of non-performing exposures.

Forborne exposures are defined by the EBA as exposures where the bank has made concessions toward a debtor that is experiencing or about to experience financial difficulties in meeting its financial commitments. In the Annual Report and Accounts 2019, forborne exposures are reported as 'renegotiated loans'. This term is aligned to the EBA definition of forborne exposure, except in its treatment of 'cures'.

Under the EBA definition, exposures cease to be reported as forborne if they pass three tests:

•    the forborne exposure must have been considered to be performing for a 'probation period' of at least two years;

•    regular payments of more than an insignificant aggregate amount of principal or interest have been made during at least half of the probation period; and

•    no exposure to the debtor is more than 30 days past due at the end of the probation period.

In the Annual Report and Accounts 2019, renegotiated loans retain this classification until maturity or de-recognition.

Under EBA and PRA guidelines, the use of support measures introduced as a result of the Covid-19 outbreak does not in itself trigger identification as non-performing or forborne. Borrower-specific support measures are assessed under the existing rules to determine whether forbearance has been granted.

 

 

 

 

Table 23: Credit quality of forborne exposures

 

 

Gross carrying amount/nominal amount

 

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

 

Collateral received and financial guarantees received on forborne exposures

 

 

Performing forborne

Non-performing forborne

 

On performing forborne exposures

On non-performing forborne exposures

 

Total

Of which: forborne non-performing exposures

 

 

Total

Of which: defaulted

Of which: impaired

 

 

 

$bn

$bn

$bn

$bn

 

$bn

$bn

 

$bn

$bn

1

Loans and advances

1.1

 

5.8

 

5.8

 

5.8

 

 

(0.1

)

(1.8

)

 

3.0

 

2.7

 

2

Central banks

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

3

General governments

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

4

Credit institutions

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

5

Other financial corporations

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

6

Non-financial corporations

1.1

 

3.7

 

3.7

 

3.7

 

 

(0.1

)

(1.4

)

 

1.7

 

1.4

 

7

Households

-

 

2.1

 

2.1

 

2.1

 

 

-

 

(0.4

)

 

1.3

 

1.3

 

8

Debt securities

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

9

Loan commitments given

-

 

0.2

 

0.2

 

0.2

 

 

-

 

-

 

 

0.2

 

0.2

 

10

Total at 30 Jun 2020

1.1

 

6.0

 

6.0

 

6.0

 

 

(0.1

)

(1.8

)

 

3.2

 

2.9

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Loans and advances

1.7

 

5.7

 

5.7

 

5.7

 

 

-

 

(1.8

)

 

3.2

 

2.4

 

2

Central banks

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

3

General governments

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

4

Credit institutions

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

5

Other financial corporations

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

6

Non-financial corporations

1.7

 

3.5

 

3.5

 

3.5

 

 

-

 

(1.4

)

 

1.8

 

1.0

 

7

Households

-

 

2.2

 

2.2

 

2.2

 

 

-

 

(0.4

)

 

1.4

 

1.4

 

8

Debt securities

-

 

-

 

-

 

-

 

 

-

 

-

 

 

-

 

-

 

9

Loan commitments given

-

 

0.1

 

0.1

 

0.1

 

 

-

 

-

 

 

0.1

 

0.1

 

10

Total at 31 Dec 2019

1.7

 

5.8

 

5.8

 

5.8

 

 

-

 

(1.8

)

 

3.3

 

2.5

 

 

 

 

The table below provides information on the value of the collateral obtained by taking possession. The value at initial recognition represents the gross carrying amount of the collateral obtained by taking possession at initial recognition on the balance sheet. The accumulated negative change represents the accumulated impairment or negative change on the initial recognition value of the collateral obtained by taking possession, including amortisation in the case of property, plant and equipment and investment properties.

Table 24: Collateral obtained by taking possession and execution processes

 

 

At 30 Jun 2020

At 31 Dec 2019

 

 

Collateral obtained by taking possession

Collateral obtained by taking possession

 

 

Value at initial recognition

Accumulated negative changes

Value at initial recognition

Accumulated negative changes

 

 

$bn

$bn

$bn

$bn

1

Property, plant and equipment

-

 

-

 

-

 

-

 

2

Other than property, plant and equipment

0.1

 

-

 

0.1

 

-

 

3

Residential immovable property

0.1

 

-

 

0.1

 

-

 

8

Total

0.1

 

-

 

0.1

 

-

 

 

 

 

Table 25 presents an analysis of performing and non-performing exposures by days past due. The gross non-performing loan ('NPL') ratio at 30 June 2020 calculated in line with the EBA guidelines was 1.08%.

Table 25: Credit quality of performing and non-performing exposures by past due days

 

 

Gross carrying amount/nominal amount1

 

 

Performing exposures

 

Non-performing exposures

 

 

Total

Not past due or past due ≤ 30 days

Past due > 30 days ≤ 90 days

 

Total

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

Past due > 90 days ≤ 180 days

Past due > 180 days ≤ 1 year

Past due > 1 year ≤ 2 years

Past due > 2 years ≤ 5 years

Past due > 5 years ≤ 7 years

Past due > 7 years

of which: defaulted

 

 

$bn

$bn

$bn

 

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

1

Loans and advances

1,649.3

 

1,647.1

 

2.2

 

 

18.0

 

11.2

 

2.4

 

0.9

 

0.8

 

1.9

 

0.3

 

0.5

 

18.0

 

2

Central banks

290.5

 

290.5

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

3

General governments

11.0

 

11.0

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

4

Credit institutions

140.9

 

140.9

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5

Other financial corporations

248.0

 

248.0

 

-

 

 

0.5

 

0.5

 

-

 

-

 

-

 

-

 

-

 

-

 

0.5

 

6

Non-financial corporations

539.3

 

538.8

 

0.5

 

 

12.3

 

8.4

 

1.2

 

0.3

 

0.5

 

1.3

 

0.2

 

0.4

 

12.3

 

8

Households

419.6

 

417.9

 

1.7

 

 

5.2

 

2.3

 

1.2

 

0.6

 

0.3

 

0.6

 

0.1

 

0.1

 

5.2

 

9

Debt securities

428.2

 

428.2

 

-

 

 

0.4

 

0.2

 

0.2

 

-

 

-

 

-

 

-

 

-

 

0.4

 

10

Central banks

81.0

 

81.0

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

11

General governments

259.6

 

259.6

 

-

 

 

0.4

 

0.2

 

0.2

 

-

 

-

 

-

 

-

 

-

 

0.4

 

12

Credit institutions

41.2

 

41.2

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

13

Other financial corporations

42.0

 

42.0

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

14

Non-financial corporations

4.4

 

4.4

 

-

 

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

-

 

15

Off-balance-sheet exposures

751.4

 

N/A

N/A

 

1.9

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1.9

 

16

Central banks

0.1

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

17

General governments

3.9

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

18

Credit institutions

81.0

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

19

Other financial corporations

68.2

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

20

Non-financial corporations

368.1

 

N/A

N/A

 

1.7

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1.7

 

21

Households

230.1

 

N/A

N/A

 

0.2

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

0.2

 

22

Total at 30 Jun 2020

2,828.9

 

2,075.3

 

2.2

 

 

20.3

 

11.4

 

2.6

 

0.9

 

0.8

 

1.9

 

0.3

 

0.5

 

20.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Loans and advances

1,535.0

 

1,533.2

 

1.8

 

 

14.6

 

7.4

 

2.8

 

0.8

 

1.1

 

1.7

 

0.3

 

0.5

 

14.6

 

2

Central banks

191.7

 

191.7

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

3

General governments

9.9

 

9.9

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

4

Credit institutions

126.0

 

126.0

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5

Other financial corporations

238.5

 

238.4

 

0.1

 

 

0.3

 

0.3

 

-

 

-

 

-

 

-

 

-

 

-

 

0.3

 

6

Non-financial corporations

537.6

 

537.2

 

0.4

 

 

9.5

 

4.8

 

1.9

 

0.3

 

0.8

 

1.1

 

0.2

 

0.4

 

9.5

 

8

Households

431.3

 

430.0

 

1.3

 

 

4.8

 

2.3

 

0.9

 

0.5

 

0.3

 

0.6

 

0.1

 

0.1

 

4.8

 

9

Debt securities

381.2

 

381.2

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

10

Central banks

66.9

 

66.9

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

11

General governments

229.9

 

229.9

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

12

Credit institutions

36.8

 

36.8

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

13

Other financial corporations

41.0

 

41.0

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

14

Non-financial corporations

6.6

 

6.6

 

-

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

15

Off-balance-sheet exposures

709.5

 

N/A

N/A

 

1.2

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1.2

 

16

Central banks

0.1

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

17

General governments

2.7

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

18

Credit institutions

56.3

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

19

Other financial corporations

54.9

 

N/A

N/A

 

-

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-

 

20

Non-financial corporations

373.1

 

N/A

N/A

 

1.0

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1.0

 

21

Households

222.4

 

N/A

N/A

 

0.2

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

0.2

 

22

Total at 31 Dec 2019

2,625.7

 

1,914.4

 

1.8

 

 

15.8

 

7.4

 

2.8

 

0.8

 

1.1

 

1.7

 

0.3

 

0.5

 

15.8

 

 

 

 

 

 

 

The following table provides information on the gross carrying amount of exposures and related impairment with further details on the IFRS 9 stage, accumulated partial write off and collateral. The IFRS 9 stages have the following characteristics:

•    Stage 1: These financial assets are unimpaired and without a significant increase in credit risk. A 12-month allowance for ECL is recognised.

•    Stage 2: A significant increase in credit risk has been experienced on these financial assets since initial recognition.
A lifetime ECL is recognised.

•    Stage 3: There is objective evidence of impairment and the financial assets are therefore considered to be in default or otherwise credit impaired. A lifetime ECL is recognised.

•    Purchased or originated credit-impaired ('POCI'): Financial assets purchased or originated at a deep discount are seen to reflect incurred credit losses. A lifetime ECL is recognised. These exposures are included in Stage 3 in the table below.

Credit-impaired (Stage 3) exposures are disclosed on pages 105 and 120 of the Annual Report and Accounts 2019.

 

Table 26: Performing and non-performing exposures and related provisions

 

 

Gross carrying amount/nominal amount1

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

Accu-mulated partial write-off

Collaterals and financial guarantees received

 

 

Performing exposures

Non-performing exposures

Performing exposures

Non-performing exposures

On perfor-ming expo-

sures

On non-perfo-rming expo-

sures

 

 

 

of which: Stage 1

of which: Stage 2

 

of which: Stage 2

of which: Stage 3

 

of which: Stage 1

of which: Stage 2

 

of which: Stage 2

of which: Stage 3

 

 

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

1

Loans and advances

1,649.3

 

1,470.0

 

173.5

 

18.0

 

-

 

18.0

 

(6.8

)

(2.0

)

(4.8

)

(7.0

)

-

 

(7.0

)

(0.7

)

924.5

 

6.3

 

2

Central banks

290.5

 

288.2

 

2.3

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

8.1

 

-

 

3

General governments

11.0

 

9.6

 

1.4

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2.3

 

-

 

4

Credit institutions

140.9

 

136.3

 

4.6

 

-

 

-

 

-

 

 

 

-

 

-

 

-

 

-

 

-

 

86.5

 

-

 

5

Other financial corporations

248.0

 

230.7

 

12.3

 

0.5

 

-

 

0.5

 

(0.2

)

(0.1

)

(0.1

)

(0.1

)

-

 

(0.1

)

-

 

156.3

 

-

 

6

Non-financial corporations

539.3

 

413.0

 

125.8

 

12.3

 

-

 

12.3

 

(3.5

)

(1.0

)

(2.5

)

(5.5

)

-

 

(5.5

)

(0.3

)

303.1

 

3.3

 

8

Households

419.6

 

392.2

 

27.1

 

5.2

 

-

 

5.2

 

(3.1

)

(0.9

)

(2.2

)

(1.4

)

-

 

(1.4

)

(0.4

)

368.2

 

3.0

 

9

Debt securities

428.2

 

424.4

 

2.4

 

0.4

 

-

 

0.4

 

(0.1

)

(0.1

)

-

 

-

 

-

 

-

 

-

 

17.6

 

-

 

10

Central banks

81.0

 

80.3

 

0.7

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

11

General governments

259.6

 

258.9

 

0.3

 

0.4

 

-

 

0.4

 

(0.1

)

(0.1

)

-

 

-

 

-

 

-

 

-

 

6.5

 

-

 

12

Credit institutions

41.2

 

40.5

 

0.7

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

13

Other financial corporations

42.0

 

40.8

 

0.6

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

11.1

 

-

 

14

Non-financial corporations

4.4

 

3.9

 

0.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

15

Off-balance-sheet exposures

751.4

 

617.5

 

58.3

 

1.9

 

-

 

1.5

 

(0.8

)

(0.2

)

(0.4

)

(0.3

)

-

 

(0.2

)

-

 

127.2

 

0.2

 

16

Central banks

0.1

 

0.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

17

General governments

3.9

 

2.8

 

0.4

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

0.2

 

-

 

18

Credit institutions

81.0

 

75.4

 

2.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1.1

 

-

 

19

Other financial corporations

68.2

 

63.0

 

3.4

 

-

 

-

 

-

 

(0.1

)

-

 

-

 

-

 

-

 

-

 

-

 

10.5

 

-

 

20

Non-financial corporations

368.1

 

248.5

 

50.0

 

1.7

 

-

 

1.3

 

(0.7

)

(0.2

)

(0.4

)

(0.3

)

-

 

(0.2

)

-

 

64.8

 

0.2

 

21

Households

230.1

 

227.7

 

2.4

 

0.2

 

-

 

0.2

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

50.6

 

-

 

22

At 30 Jun 2020

2,828.9

 

2,511.9

 

234.2

 

20.3

 

-

 

19.9

 

(7.7

)

(2.3

)

(5.2

)

(7.3

)

-

 

(7.2

)

(0.7

)

1,069.3

 

6.5

 

 

 

 

 

 

Table 26: Performing and non-performing exposures and related provisions (continued)

 

 

Gross carrying amount/nominal amount1

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

Accu-mulated partial write-off

Collaterals and financial guarantees received

 

 

Performing exposures

Non-performing exposures

Performing exposures

Non-performing exposures

On perfor-ming expo-

sures

On non-perfo-rming expo-

sures

 

 

 

of which: Stage 1

of which: Stage 2

 

of which: Stage 2

of which: Stage 3

 

of which: Stage 1

of which: Stage 2

 

of which: Stage 2

of which: Stage 3

 

 

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

1

Loans and advances

1,535.0

 

1,448.0

 

82.0

 

14.6

 

-

 

14.6

 

(3.8

)

(1.4

)

(2.5

)

(5.5

)

-

 

(5.5

)

(0.5

)

931.4

 

5.6

 

2

Central banks

191.7

 

190.4

 

1.3

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

8.3

 

-

 

3

General governments

9.9

 

9.3

 

0.6

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2.1

 

-

 

4

Credit institutions

126.0

 

125.8

 

0.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

83.9

 

-

 

5

Other financial corporations

238.5

 

229.4

 

5.2

 

0.3

 

-

 

0.3

 

(0.1

)

(0.1

)

(0.1

)

(0.2

)

-

 

(0.2

)

-

 

169.3

 

-

 

6

Non-financial corporations

537.6