TIDMHSBA
RNS Number : 0560X
HSBC Holdings PLC
16 December 2019
STATEMENT ON THE BANK OF ENGLAND
2019 STRESS TEST RESULTS
HSBC Holdings plc ('HSBC' or together with its subsidiaries,
'the Group') notes the publication today of the results of the Bank
of England's 2019 stress test. Under the annual cyclical stress
scenario, the Bank of England's results show that the Group's
common equity tier 1 ('CET1') capital ratio on an IFRS 9
transitional basis(1) would fall to a low point of 8.9%, above
HSBC's CET1 hurdle rate of 7.7%.
On an IFRS 9 non-transitional basis, HSBC's CET1 capital ratio
is projected to reach a low point of 8.1% which is above HSBC's
IFRS 9 non-transitional CET1 hurdle rate of 6.6%.
The hurdle rates include the Group's updated Pillar 2A capital
requirement which has been set at 3.0% of risk-weighted assets on a
total capital basis, of which a minimum of 1.7% must be met with
CET1 capital.
The Bank of England's 2019 test scenario for the domestic UK
economy is broadly similar to the 2018 exercise, however the global
recession scenario is very slightly more severe than in 2018. The
scenario models a hypothetical synchronised global downturn with
growth in Hong Kong, China and other emerging market economies in
which HSBC operates being particularly adversely affected.
Today's results demonstrate HSBC's continued capital strength
under this severe downside scenario.
The results incorporate strategic management actions which have
been accepted by the Bank of England for the purposes of this
exercise. In practice, under such adverse economic circumstances,
HSBC would consider a variety of management actions depending on
the prevailing circumstances at the time. HSBC's intention, as
evidenced by its past actions, is to maintain a conservative and
prudent approach to capital management.
The Bank of England's 2019 stress test results are available to
view in full at www.bankofengland.co.uk/news
HSBC's results under the annual cyclical stress scenario are
shown below.
Minimum stressed
ratio after 'strategic'
management actions
and before conversion
of AT1
-----------------------------
Actual Minimum Non-dividend All 'strategic' Minimum Hurdle Actual
(end-2018) stressed 'strategic' management stress ratio rate (2019
ratio (before management actions (after the Q3)
'strategic' actions including impact of
management only(i) CRD IV 'strategic'
actions related management
or AT1 restrictions actions
conversions) and conversion
of AT1)
----------------------- ----------- -------------- ------------ --------------- --------------- ------ ------
IFRS9 Transitional
Common equity tier
1 ratio(a)(b) 14.0% 5.4% 6.8% 8.9% 8.9% 7.7% 14.3%
Tier 1 capital
ratio(c) 17.0% 7.5%(g) 9.1%(g) 11.2%(g) 11.2%(g) 17.3%
Total capital ratio(d) 20.0% 9.4%(g) 11.2%(g) 13.3%(g) 13.3%(g) 20.2%
Memo: risk weighted
assets (US$ bn) 865 1,189(g) 1,066(g) 1,071(g) 1,071(g) 865
Memo: CET1 (US$
bn) 121 65(g) 72(g) 95(g) 95 (g) 124
----------------------- ----------- -------------- ------------ --------------- --------------- ------ ------
Tier 1 leverage
ratio(a)(e) 6.0% 4.2% 4.7% 5.3% 5.3% 3.86% 5.8%
Memo: leverage
exposure (US$ bn) 2,413 2,292(h) 2,160(h) 2,162(h) 2,162(h) 2,571
----------------------- ----------- -------------- ------------ --------------- --------------- ------ ------
IFRS9 non-transitional
Common equity tier
1 ratio(f) 13.9% 5.9% 6.9% 8.1% 8.1% 6.6% 14.2%
Tier 1 leverage
ratio(f) 6.0% 3.8% 4.2% 4.8% 4.8% 3.35% 5.8%
----------------------- ----------- -------------- ------------ --------------- --------------- ------ ------
Sources: HSBC's published accounts and STDF submissions, Bank of
England analysis and calculations
a) The low points for the common equity Tier 1 (CET1) ratio and
leverage ratio shown in the table do not necessarily occur in the
same year of the stress scenario and correspond to the year where
the minimum stressed ratio is calculated after 'strategic'
management actions and before AT1 conversion.
b) The CET1 capital ratio is defined as CET1 capital expressed
as a percentage of risk-weighted assets, where these are in line
with CRR and the UK implementation of CRD IV via the PRA
Rulebook.
c) Tier 1 capital ratio is defined as Tier 1 capital expressed
as a percentage of RWAs where Tier 1 capital is defined as the sum
of CET1 capital and additional Tier 1 capital in line with the UK
implementation of CRD IV.
d) Total capital ratio is defined as total capital expressed as
a percentage of RWAs where total capital is defined as the sum of
Tier 1 capital and Tier 2 capital in line with the UK
implementation of CRD IV.
e) The Tier 1 leverage ratio is Tier 1 capital expressed as a
percentage of the leverage exposure measure excluding central bank
reserves, in line with the PRA's Policy Statement PS21/17.
f) The low point year on a non-transitional IFRS 9 basis may
differ to the low point year on a transitional IFRS 9 basis.
g) Corresponds to the same year as the minimum CET1 ratio over
the stress scenario after 'strategic' management actions.
h) Corresponds to the same year as the minimum leverage ratio
over the stress scenario after 'strategic' management actions.
i) This excludes CRD IV distribution restrictions. Where a bank
is subject to such restrictions all non-business as usual cuts to
distributions subject to CRD IV restrictions will appear in the
next column - 'All 'strategic' management actions including CRD IV
related restrictions. This should not be interpreted as a judgement
by the Bank of England that any or all of such cuts are conditional
on such restrictions.
Investor enquiries to:
Richard O'Connor (London) +44 (0) 207 991 6590 richard.j.oconnor@hsbc.com
Mark Phin (Hong Kong) +852 2822 4908 mark.j.phin@hsbc.com
Media enquiries to:
Ankit Patel +44 (0) 207 991 9813 ankit.patel@hsbc.com
Footnotes:
(1) HSBC's CET1 ratio on a transitional basis is calculated
using the EU's regulatory transitional arrangements for IFRS 9 in
article 473a of the Capital Requirements Regulation.
Note to editors:
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered
in London. HSBC serves customers worldwide from offices in 65
countries and territories in Europe, Asia, North America, Latin
America, and the Middle East and North Africa. With assets of
US$2,728bn at 30 September 2019, HSBC is one of the world's largest
banking and financial services organisations.
Forward-looking statements
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations,
capital position, strategy and business of HSBC and its
consolidated subsidiaries (together, the 'HSBC Group') which can be
identified by the use of forward-looking terminology such as 'may',
'will', 'should', 'expect', 'anticipate', 'project' or 'estimate'
(together, 'forward-looking statements'). Any such forward-looking
statements are not a reliable indicator of future performance, as
they may involve significant stated or implied assumptions and
subjective judgements which may or may not prove to be correct, and
they may involve significant risks and uncertainties, many of which
are outside the control of the HSBC Group. Actual outcomes may
differ materially from those stated or implied in any
forward-looking statements. Any such forward-looking statements are
based on the current beliefs and expectations of the HSBC Group,
and the HSBC Group does not assume any obligation to update, revise
or supplement them if circumstances or management's beliefs or
expectations should change. For these reasons, recipients should
not rely on any forward-looking statements. No representations or
warranties, expressed or implied, are given by or on behalf of the
HSBC Group as to the achievement or reasonableness of any
projections, estimates or forecasts contained herein.
Additional detailed information concerning important factors
that could cause actual results to differ materially from this
announcement is available in HSBC's Annual Report and Accounts for
the fiscal year ended 31 December 2018 on Form 20-F and in HSBC's
Interim Report for the six months ended 30 June 2019, which are
available on the SEC's website (www.sec.gov).
ends/all
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END
MSCGGGPWPUPBGMQ
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