TIDMHSBA
RNS Number : 0683Q
HSBC Holdings PLC
23 February 2021
Fair value valuation bases
Financial instruments measured at fair value using a valuation technique
with significant unobservable inputs - Level 3
Assets Liabilities
Designated
and
otherwise
mandatorily
measured
at fair
value
through Designated
Financial Trading profit Trading at fair
investments assets or loss Derivatives Total liabilities value Derivatives Total
$m $m $m $m $m $m $m $m $m
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -------
Private equity
including
strategic
investments 930 4 10,971 - 11,905 4 - - 4
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Asset-backed
securities 1,286 523 25 - 1,834 - - - -
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Loans held for - - - - - - - - -
securitisation
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Structured
notes - - - - - 29 5,301 - 5,330
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Derivatives
with
monolines - - - 68 68 - - - -
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Other
derivatives - - - 2,602 2,602 - - 4,187 4,187
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Other
portfolios 1,438 1,972 481 - 3,891 129 5 1 135
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
At 31 Dec 2020 3,654 2,499 11,477 2,670 20,300 162 5,306 4,188 9,656
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Private equity
including
strategic
investments 716 4 8,831 - 9,551 4 - - 4
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Asset-backed
securities 874 934 28 - 1,836 - - - -
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Loans held for
securitisation - 1 39 - 40 - - - -
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Structured
notes - 3 - - 3 47 5,016 - 5,063
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Derivatives
with
monolines - - - 66 66 - - - -
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Other
derivatives - - - 2,070 2,070 - - 2,302 2,302
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Other
portfolios 1,628 4,037 578 - 6,243 2 - - 2
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
At 31 Dec 2019 3,218 4,979 9,476 2,136 19,809 53 5,016 2,302 7,371
--------------- ----------- ------- ----------- ----------- ------ ----------- ---------- ----------- -----
Balances from 2019 have been re-presented to disclose a
consistent application of the levelling methodology. This resulted
in an increase of $2.9bn of assets in Level 3. 'Other portfolios'
increased by $1.4bn and 'Private equity including strategic
investments' increased by $1.5bn.
Level 3 instruments are present in both ongoing and legacy
businesses. Loans held for securitisation, derivatives with
monolines, certain 'other derivatives' and predominantly all Level
3 ABSs are legacy positions. HSBC has the capability to hold these
positions.
Private equity including strategic investments
The fair value of a private equity investment (including
strategic investments) is estimated on the basis of an analysis of
the investee's financial position and results, risk profile,
prospects and other factors; by reference to market valuations for
similar entities quoted in an active market; the price at which
similar companies have changed ownership; or from published net
asset values ('NAVs') received. If necessary, adjustments are made
to the NAV of funds to obtain the best estimate of fair value.
Asset-backed securities
While quoted market prices are generally used to determine the
fair value of the asset-backed securities ('ABSs'), valuation
models are used to substantiate the reliability of the limited
market data available and to identify whether any adjustments to
quoted market prices are required. For certain ABSs, such as
residential mortgage-backed securities, the valuation uses an
industry standard model with assumptions relating to prepayment
speeds, default rates and loss severity based on collateral type,
and performance, as appropriate. The valuations output is
benchmarked for consistency against observable data for securities
of a similar nature.
Structured notes
The fair value of Level 3 structured notes is derived from the
fair value of the underlying debt security, and the fair value of
the embedded derivative is determined as described in the paragraph
below on derivatives. These structured notes comprise principally
equity-linked notes issued by HSBC, which provide the counterparty
with a return linked to the performance of equity securities and
other portfolios.
Examples of the unobservable parameters include long-dated
equity volatilities and correlations between equity prices, and
interest and foreign exchange rates.
Derivatives
OTC derivative valuation models calculate the present value of
expected future cash flows, based upon 'no arbitrage' principles.
For many vanilla derivative products, the modelling approaches used
are standard across the industry. For more complex derivative
products, there may be some differences in market practice. Inputs
to valuation models are determined from observable market data
wherever possible, including prices available from exchanges,
dealers, brokers or providers of consensus pricing. Certain inputs
may not be observable in the market directly, but can be determined
from observable prices via model calibration procedures or
estimated from historical data or other sources.
Reconciliation of fair value measurements in Level 3 of the fair
value hierarchy
Movement in Level 3 financial instruments
Assets Liabilities
Designated
and
otherwise
mandatorily
measured
at fair
value
through Designated
Financial Trading profit Trading at fair
investments assets or loss Derivatives liabilities value Derivatives
Footnotes $m $m $m $m $m $m $m
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -------------
At 1 Jan 2020 3,218 4,979 9,476 2,136 53 5,016 2,302
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Total gains/(losses)
recognised in profit
or loss 17 (6) 504 2,281 307 (59) 3,398
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (6) - 2,281 307 - 3,398
----------------------------------------------------------- ---------
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 504 - - (59) -
----------------------------------------------------------- ---------
* gains less losses from financial investments at fair
value through other comprehensive income 17 - - - - - -
----------------------------------------------------------- ---------
- - - - - - -
* expected credit loss charges and other credit risk
charges
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Total gains recognised
in other comprehensive
income ('OCI') 1 394 115 286 143 17 204 169
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
- financial investments:
fair value gains 270 - - - - - -
- exchange differences 124 115 286 143 17 204 169
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Purchases 671 687 3,701 - 66 - -
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
New issuances - - 1 - 6 1,876 -
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Sales (674) (1,579) (2,042) - (260) - -
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Settlements (530) (1,122) (435) (1,542) (26) (1,531) (1,462)
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Transfers out (101) (1,790) (140) (565) (9) (777) (528)
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Transfers in 659 1,215 126 217 8 577 309
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
At 31 Dec 2020 3,654 2,499 11,477 2,670 162 5,306 4,188
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Unrealised gains/(losses)
recognised in profit
or loss relating to
assets and liabilities
held at 31 Dec 2020 - (32) 412 707 1 (91) (1,621)
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (32) - 707 1 - (1,621)
----------------------------------------------------------- ---------
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 412 - - (91) -
----------------------------------------------------------- ---------
* loan impairment recoveries and other credit risk
provisions - - - - - - -
----------------------------------------------------------- --------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Movement in Level 3 financial instruments (continued)
Assets Liabilities
Designated
and
otherwise
mandatorily
measured
at fair
value
through Designated
Financial Trading profit Trading at fair
investments assets or loss Derivatives liabilities value Derivatives
Footnotes $m $m $m $m $m $m $m
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -------------
At 1 Jan 2019 2,796 6,759 7,080 2,423 58 5,328 1,756
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Total gains/(losses)
recognised in profit
or loss 6 (112) 587 278 (4) 195 930
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (112) - 278 (4) - 930
----------------------------------------------------------- -----------
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 587 - - 195 -
----------------------------------------------------------- -----------
* gains less losses from financial investments at fair
value through other comprehensive income 10 - - - - - -
----------------------------------------------------------- -----------
* expected credit loss charges and other credit risk
charges (4) - - - - - -
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Total gains/(losses)
recognised in other
comprehensive income
('OCI') 1 309 76 (4) 49 1 18 52
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
- financial investments:
fair value gains 301 - - - - - -
-----------------------------------------------------------
- exchange differences 8 76 (4) 49 1 18 52
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Purchases 693 2,206 2,506 - 8 157 -
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
New issuances - 154 - - 6 1,601 -
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Sales (56) (895) (276) - (9) (193) -
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Settlements (329) (2,107) (434) (100) (7) (1,048) (162)
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Transfers out (488) (1,558) (23) (710) (9) (1,079) (473)
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Transfers in 287 456 40 196 9 37 199
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
At 31 Dec 2019 3,218 4,979 9,476 2,136 53 5,016 2,302
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
Unrealised gains/(losses)
recognised in profit
or loss relating to
assets and liabilities
held at 31 Dec 2019 (4) (22) 465 279 - 57 (407)
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (22) - 279 - - (407)
----------------------------------------------------------- -----------
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 465 - - 57 -
----------------------------------------------------------- -----------
* loan impairment recoveries and other credit risk
provisions (4) - - - - - -
----------------------------------------------------------- ----------- ----------- ------- ----------- ----------- ----------- ---------- -----------
1 Included in 'financial investments: fair value gains/(losses)'
in the current year and 'exchange differences' in the consolidated
statement of comprehensive income.
Balances from 2019 have been re-presented to disclose a
consistent application of the levelling methodology. The result of
this is an increase of $2.9bn of assets in Level 3. 'Financial
investments' increased by $1.2bn and 'Private equity including
strategic investments financial assets designated and otherwise
mandatorily measured at fair value' increased by $1.7bn.
Transfers between levels of the fair value hierarchy are deemed
to occur at the end of each quarterly reporting period. Transfers
into and out of levels of the fair value hierarchy are primarily
attributable to observability of valuation inputs and price
transparency.
Effect of changes in significant unobservable assumptions to
reasonably possible alternatives
Sensitivity of fair values to reasonably possible alternative assumptions
2020 2019
Reflected in Reflected in Reflected in Reflected in
profit or loss OCI profit or loss OCI
Un- Un- Un- Un-
Favourable favourable Favourable favourable Favourable favourable Favourable favourable
changes changes changes changes changes changes changes changes
Footnotes $m $m $m $m $m $m $m $m
------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
Derivatives,
trading
assets and
trading
liabilities 1 229 (244) - - 255 (230) - -
------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Financial
assets
and
liabilities
designated
and
otherwise
mandatorily
measured at
fair
value
through
profit or
loss 644 (643) - - 618 (503) - -
------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Financial
investments 35 (35) 110 (110) 48 (53) 81 (81)
------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 Dec 908 (922) 110 (110) 921 (786) 81 (81)
------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 'Derivatives, trading assets and trading liabilities' are
presented as one category to reflect the manner in which these
instruments are risk-managed.
Balances from 2019 have been re-presented to disclose a
consistent application of the levelling methodology. The result of
this is an increase in 'Financial investments reflected through
OCI' and 'Financial asset designated and mandatorily measured at
fair value reflected in profit or loss' of $59m and $86m
respectively.
The sensitivity analysis aims to measure a range of fair values
consistent with the application of a 95% confidence interval.
Methodologies take account of the nature of the valuation technique
employed, as well as the availability and reliability of observable
proxy and historical data.
When the fair value of a financial instrument is affected by
more than one unobservable assumption, the above table reflects the
most favourable or the most unfavourable change from varying the
assumptions individually.
Key unobservable inputs to Level 3 financial instruments
The following table lists key unobservable inputs to Level 3
financial instruments and provides the range of those inputs at 31
December 2020.
Quantitative information about significant unobservable inputs in Level
3 valuations
Fair value 2020 2019
-------------------
Valuation Key unobservable Full range Full range
Assets Liabilities techniques inputs of inputs of inputs
$m $m Lower Higher Lower Higher
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Private equity
including
strategic investments 11,905 4 See below See below
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Asset-backed securities 1,834 -
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
- collateralised Prepayment
loan/debt obligation 59 - Market proxy rate 0% 9% 0% 9%
----------------------- ------------------ ------------------ ----- ------ ----- ------
Market proxy Bid quotes 0 100 0 100
----------------------- ------------------ ------------------ ----- ------ ----- ------
- other ABSs 1,775 - Market proxy Bid quotes 0 101 0 101
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Loans held for
securitisation - -
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Structured notes - 5,330
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Model - Option
- equity-linked notes - 4,069 model Equity volatility 6% 115% 5% 90%
----------------------- ------------------ ------------------ ----- ------ ----- ------
Model - Option
model Equity correlation (4)% 88% 9% 93%
----------------------- ------------------ ------------------ ----- ------ ----- ------
Model - Option
- FX-linked notes - 608 model FX volatility 0% 36% 1% 23%
----------------------- ------------------ ------------------ ----- ------ ----- ------
- other - 653
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Derivatives with Model - Discounted
monolines 68 - cash flow Credit spread 2% 2% 0% 2%
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Other derivatives 2,602 4,187
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
- interest rate
derivatives 1,300 1,414
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Model - Discounted Prepayment
securitisation swaps 285 707 cash flow rate 6% 6% 6% 7%
----------------------- ------------------ ------------------ ----- ------ ----- ------
Model - Option
long-dated swaptions 529 370 model IR volatility 6% 28% 8% 22%
----------------------- ------------------ ------------------ ----- ------ ----- ------
other 486 337
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
- FX derivatives 468 466
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Model - Option
FX options 152 194 model FX volatility 0% 43% 1% 25%
----------------------- ------------------ ------------------ ----- ------ ----- ------
other 316 272
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
- equity derivatives 754 2,244
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
long-dated single Model - Option
stock options 583 1,091 model Equity volatility 0% 120% 0% 89%
----------------------- ------------------ ------------------ ----- ------ ----- ------
other 171 1,153
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
- credit derivatives 80 63
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
other 80 63
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
Other portfolios 3,891 135
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
- structured Model - Discounted
certificates - - cash flow Credit volatility - - 4% 4%
----------------------- ------------------ ------------------ ----- ------ ----- ------
Model - Discounted
- repurchase agreements 872 128 cash flow IR curve 0% 5% 1% 8%
----------------------- ------------------ ------------------ ----- ------ ----- ------
- other(1) 3,019 7
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
At 31 Dec 2020 20,300 9,656
----------------------- ------ ----------- ------------------ ------------------ ----- ------ ----- ------
1 'Other' includes a range of smaller asset holdings.
Private equity including strategic investments
Given the bespoke nature of the analysis in respect of each
private equity holding, it is not practical to quote a range of key
unobservable inputs.
Prepayment rates
Prepayment rates are a measure of the anticipated future speed
at which a loan portfolio will be repaid in advance of the due
date. They vary according to the nature of the loan portfolio and
expectations of future market conditions, and may be estimated
using a variety of evidence, such as prepayment rates implied from
proxy observable security prices, current or historical prepayment
rates and macroeconomic modelling.
Market proxy
Market proxy pricing may be used for an instrument when specific
market pricing is not available but there is evidence from
instruments with common characteristics. In some cases it might be
possible to identify a specific proxy, but more generally evidence
across a wider range of instruments will be used to understand the
factors that influence current market pricing and the manner of
that influence.
Volatility
Volatility is a measure of the anticipated future variability of
a market price. It varies by underlying reference market price, and
by strike and maturity of the option. Certain volatilities,
typically those of a longer-dated nature, are unobservable and are
estimated from observable data. The range of unobservable
volatilities reflects the wide variation in volatility inputs by
reference market price. The core range is significantly narrower
than the full range because these examples with extreme
volatilities occur relatively rarely within the HSBC portfolio.
Correlation
Correlation is a measure of the inter-relationship between two
market prices and is expressed as a number between minus one and
one. It is used to value more complex instruments where the payout
is dependent upon more than one market price. There is a wide range
of instruments for which correlation is an input, and consequently
a wide range of both same-asset correlations and cross-asset
correlations is used. In general, the range of same-asset
correlations will be narrower than the range of cross-asset
correlations.
Unobservable correlations may be estimated based upon a range of
evidence, including consensus pricing services, HSBC trade prices,
proxy correlations and examination of historical price
relationships. The range of unobservable correlations quoted in the
table reflects the wide variation in correlation inputs by market
price pair.
Credit spread
Credit spread is the premium over a benchmark interest rate
required by the market to accept lower credit quality. In a
discounted cash flow model, the credit spread increases the
discount factors applied to future cash flows, thereby reducing the
value of an asset. Credit spreads may be implied from market prices
and may not be observable in more illiquid markets.
Inter-relationships between key unobservable inputs
Key unobservable inputs to Level 3 financial instruments may not
be independent of each other. As described above, market variables
may be correlated. This correlation typically reflects the manner
in which different markets tend to react to macroeconomic or other
events. Furthermore, the effect of changing market variables on the
HSBC portfolio will depend on HSBC's net risk position in respect
of each variable.
HSBC Holdings
Basis of valuing HSBC Holdings' financial assets and liabilities measured
at fair value
2020 2019
$m $m
------------------------------------------------------------ ------- ---------
Valuation technique using observable inputs: Level
2
------------------------------------------------------------ ------- ---------
Assets at 31 Dec
------------------------------------------------------------ ------- ---------
- derivatives 4,698 2,002
------------------------------------------------------------- ------- -------
- designated and otherwise mandatorily measured at
fair value through profit or loss 65,253 61,964
------------------------------------------------------------- ------- -------
Liabilities at 31 Dec
------------------------------------------------------------ ------- ---------
- designated at fair value 25,664 30,303
------------------------------------------------------------- ------- -------
- derivatives 3,060 2,021
------------------------------------------------------------- ------- -------
13 Fair values of financial instruments not carried at fair value
--------------------------------------------------------------
Fair values of financial instruments not carried at fair value and bases
of valuation
Fair value
----------------------------------------------------
Quoted Significant
market Observable unobservable
Carrying price Level inputs inputs
amount 1 Level 2 Level 3 Total
$m $m $m $m $m
------------------------------- --------- ------------ ---------- ------------- -----------
At 31 Dec 2020
------------------------------- --------- ------------ ---------- ------------- -----------
Assets
------------------------------- --------- ------------ ---------- ------------- -----------
Loans and advances to
banks 81,616 - 80,457 1,339 81,796
------------------------------- --------- ------------ ---------- ------------- ---------
Loans and advances to
customers 1,037,987 - 9,888 1,025,573 1,035,461
------------------------------- --------- ------------ ---------- ------------- ---------
Reverse repurchase agreements
- non-trading 230,628 - 230,330 272 230,602
------------------------------- --------- ------------ ---------- ------------- ---------
Financial investments
- at amortised cost 88,639 28,722 67,572 507 96,801
------------------------------- --------- ------------ ---------- ------------- ---------
Liabilities
------------------------------- --------- ------------ ---------- ------------- -----------
Deposits by banks 82,080 - 81,996 - 81,996
------------------------------- --------- ------------ ---------- ------------- ---------
Customer accounts 1,642,780 - 1,642,988 143 1,643,131
------------------------------- --------- ------------ ---------- ------------- ---------
Repurchase agreements
- non-trading 111,901 3 111,898 - 111,901
------------------------------- --------- ------------ ---------- ------------- ---------
Debt securities in issue 95,492 - 96,371 657 97,028
------------------------------- --------- ------------ ---------- ------------- ---------
Subordinated liabilities 21,951 - 28,552 - 28,552
------------------------------- --------- ------------ ---------- ------------- ---------
At 31 Dec 2019
------------------------------- --------- ------------ ---------- ------------- -----------
Assets
------------------------------- --------- ------------ ---------- ------------- -----------
Loans and advances to
banks 69,203 - 68,508 739 69,247
------------------------------- --------- ------------ ---------- ------------- ---------
Loans and advances to
customers 1,036,743 - 10,365 1,027,178 1,037,543
------------------------------- --------- ------------ ---------- ------------- ---------
Reverse repurchase agreements
- non-trading 240,862 16 240,199 691 240,906
------------------------------- --------- ------------ ---------- ------------- ---------
Financial investments
- at amortised cost 85,735 26,202 62,572 287 89,061
------------------------------- --------- ------------ ---------- ------------- ---------
Liabilities
------------------------------- --------- ------------ ---------- ------------- -----------
Deposits by banks 59,022 - 58,951 - 58,951
------------------------------- --------- ------------ ---------- ------------- ---------
Customer accounts 1,439,115 - 1,439,362 150 1,439,512
------------------------------- --------- ------------ ---------- ------------- ---------
Repurchase agreements
- non-trading 140,344 - 140,344 - 140,344
------------------------------- --------- ------------ ---------- ------------- ---------
Debt securities in issue 104,555 - 104,936 - 104,936
------------------------------- --------- ------------ ---------- ------------- ---------
Subordinated liabilities 24,600 - 28,861 385 29,246
------------------------------- --------- ------------ ---------- ------------- ---------
Other financial instruments not carried at fair value are
typically short term in nature and reprice to current market rates
frequently. Accordingly, their carrying amount is a reasonable
approximation of fair value. They include cash and balances at
central banks, items in the course of collection from and
transmission to other banks, Hong Kong Government certificates of
indebtedness and Hong Kong currency notes in circulation, all of
which are measured at amortised cost.
Valuation
Fair value is an estimate of the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. It
does not reflect the economic benefits and costs that HSBC expects
to flow from an instrument's cash flow over its expected future
life. Our valuation methodologies and assumptions in determining
fair values for which no observable market prices are available may
differ from those of other companies.
Loans and advances to banks and customers
To determine the fair value of loans and advances to banks and
customers, loans are segregated, as far as possible, into
portfolios of similar characteristics. Fair values are based on
observable market transactions, when available. When they are
unavailable, fair values are estimated using valuation models
incorporating a range of input assumptions. These assumptions may
include: value estimates from third-party brokers reflecting
over-the-counter trading activity; forward-looking discounted cash
flow models, taking account of expected customer prepayment rates,
using assumptions that HSBC believes are consistent with those that
would be used by market participants in valuing such loans; new
business rates estimates for similar loans; and trading inputs from
other market participants including observed primary and secondary
trades. From time to time, we may engage a third-party valuation
specialist to measure the fair value of a pool of loans.
The fair value of loans reflects expected credit losses at the
balance sheet date and estimates of market participants'
expectations of credit losses over the life of the loans, and the
fair value effect of repricing between origination and the balance
sheet date. For credit-impaired loans, fair value is estimated by
discounting the future cash flows over the time period they are
expected to be recovered.
Financial investments
The fair values of listed financial investments are determined
using bid market prices. The fair values of unlisted financial
investments are determined using valuation techniques that
incorporate the prices and future earnings streams of equivalent
quoted securities.
Deposits by banks and customer accounts
The fair values of on-demand deposits are approximated by their
carrying value. For deposits with longer-term maturities, fair
values are estimated using discounted cash flows, applying current
rates offered for deposits of similar remaining maturities.
Debt securities in issue and subordinated liabilities
Fair values in debt securities in issue and subordinated
liabilities are determined using quoted market prices at the
balance sheet date where available, or by reference to quoted
market prices for similar instruments.
Repurchase and reverse repurchase agreements - non-trading
Fair values of repurchase and reverse repurchase agreements that
are held on a non-trading basis provide approximate carrying
amounts. This is due to the fact that balances are generally short
dated.
HSBC Holdings
The methods used by HSBC Holdings to determine fair values of
financial instruments for the purposes of measurement and
disclosure are described above.
Fair values of HSBC Holdings' financial instruments not carried at fair
value on the balance sheet
2020 2019
Carrying Carrying
amount Fair value(1) amount Fair value(1)
$m $m $m $m
--------------------------------------------- -------- ------------- -------- ---------------
Assets at 31 Dec
--------------------------------------------- -------- ------------- -------- ---------------
Loans and advances to HSBC undertakings 10,443 10,702 10,218 10,504
--------------------------------------------- -------- ------------- -------- -------------
Financial investments - at amortised
cost 17,485 17,521 16,106 16,121
--------------------------------------------- -------- ------------- -------- -------------
Liabilities at 31 Dec
--------------------------------------------- -------- ------------- -------- ---------------
Amounts owed to HSBC undertakings 330 330 464 464
--------------------------------------------- -------- ------------- -------- -------------
Debt securities in issue 64,029 67,706 56,844 59,140
--------------------------------------------- -------- ------------- -------- -------------
Subordinated liabilities 17,916 22,431 18,361 22,536
--------------------------------------------- -------- ------------- -------- -------------
1 Fair values (other than Level 1 financial investments) were
determined using valuation techniques with observable inputs (Level
2).
14 Financial assets designated and otherwise mandatorily measured at
fair value through profit
or loss
-----------------------------------------------------------------
2020 2019
---------- ----------- --------
Mandatorily Mandatorily
Designated measured Designated measured
at fair at fair at fair at fair
value value Total value value Total
$m $m $m $m $m $m
------------------------ ---------- ----------- ------ ---------- ----------- --------
Securities 2,492 39,088 41,580 2,344 35,808 38,152
------------------------- ---------- ----------- ------ ---------- ----------- ------
- treasury and
other eligible
bills 635 26 661 630 31 661
-------------------------
- debt securities 1,857 5,250 7,107 1,714 4,838 6,552
-------------------------
- equity securities - 33,812 33,812 - 30,939 30,939
------------------------- ---------- ----------- ------ ---------- ----------- ------
Loans and advances
to banks and customers - 2,988 2,988 1 4,555 4,556
------------------------- ---------- ----------- ------ ---------- ----------- ------
Other - 985 985 - 919 919
------------------------- ---------- ----------- ------ ---------- ----------- ------
At 31 Dec 2,492 43,061 45,553 2,345 41,282 43,627
------------------------- ---------- ----------- ------ ---------- ----------- ------
Securities(1)
--------
2020 2019
---------- ----------- --------
Mandatorily Mandatorily
Designated measured Designated measured
at fair at fair at fair at fair
value value Total value value Total
Footnotes $m $m $m $m $m $m
Hong Kong Government 22 - 22 4 - 4
------------------------ --------- ---------- ----------- ------ ---------- ----------- ------
Other governments 648 674 1,322 666 754 1,420
------------------------ --------- ---------- ----------- ------ ---------- ----------- ------
Asset-backed securities 2 - 235 235 - 363 363
------------------------ --------- ---------- ----------- ------ ---------- ----------- ------
Corporate debt
and other securities 1,822 4,367 6,189 1,674 3,752 5,426
------------------------ --------- ---------- ----------- ------ ---------- ----------- ------
Equities - 33,812 33,812 - 30,939 30,939
------------------------ --------- ---------- ----------- ------ ---------- ----------- ------
At 31 Dec 2,492 39,088 41,580 2,344 35,808 38,152
------------------------ --------- ---------- ----------- ------ ---------- ----------- ------
1 Included within these figures are debt securities issued by
banks and other financial institutions of $1,180m (2019
re-presented: $1,244m), of which nil (2019: nil) are guaranteed by
various governments.
2 Excludes asset-backed securities included under US Treasury and US Government agencies.
15 Derivatives
-----------
Notional contract amounts and fair values of derivatives by product contract
type held by HSBC
Notional contract
amount Fair value - Assets Fair value - Liabilities
Trading Hedging Trading Hedging Total Trading Hedging Total
$m $m $m $m $m $m $m $m
------------------ ----------- -------- ------- ------- -------- --------- ------- -----------
Foreign exchange 7,606,446 35,021 106,696 309 107,005 108,903 1,182 110,085
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Interest rate 15,240,867 157,436 249,204 1,914 251,118 236,594 2,887 239,481
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Equities 652,288 - 14,043 - 14,043 15,766 - 15,766
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Credit 269,401 - 2,590 - 2,590 3,682 - 3,682
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Commodity and
other 120,259 - 2,073 - 2,073 3,090 - 3,090
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Gross total fair
values 23,889,261 192,457 374,606 2,223 376,829 368,035 4,069 372,104
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Offset (Note 30) (69,103) (69,103)
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
At 31 Dec 2020 23,889,261 192,457 374,606 2,223 307,726 368,035 4,069 303,001
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Foreign exchange 8,207,629 31,899 84,083 455 84,538 84,498 740 85,238
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Interest rate 17,895,349 177,006 183,668 1,208 184,876 175,095 2,031 177,126
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Equities 1,077,347 - 9,053 - 9,053 11,237 - 11,237
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Credit 345,644 - 4,744 - 4,744 5,597 - 5,597
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Commodity and
other 93,245 - 1,523 - 1,523 2,038 - 2,038
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Gross total fair
values 27,619,214 208,905 283,071 1,663 284,734 278,465 2,771 281,236
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
Offset (Note 30) (41,739) (41,739)
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
At 31 Dec 2019 27,619,214 208,905 283,071 1,663 242,995 278,465 2,771 239,497
------------------ ----------- -------- ------- ------- -------- --------- ------- ---------
The notional contract amounts of derivatives held for trading
purposes and derivatives designated in hedge accounting
relationships indicate the nominal value of transactions
outstanding at the balance sheet date. They do not represent
amounts at risk.
Derivative assets and liabilities increased during 2020, driven
by yield curve movements and changes in foreign exchange rates.
Notional contract amounts and fair values of derivatives by product contract
type held by HSBC Holdings with subsidiaries
Notional contract Assets Liabilities
amount
Trading Hedging Trading Hedging Total Trading Hedging Total
$m $m $m $m $m $m $m $m
----------------------- --------- --------- ------- ------- ------ ------- ------- --------
Foreign exchange 23,413 - 506 - 506 870 - 870
----------------------- --------- --------- ------- ------- ------ ------- ------- ------
Interest rate 47,569 34,006 966 3,221 4,187 2,176 8 2,184
----------------------- --------- --------- ------- ------- ------ ------- ------- ------
At 31 Dec 2020 70,982 34,006 1,472 3,221 4,693 3,046 8 3,054
----------------------- --------- --------- ------- ------- ------ ------- ------- ------
Foreign exchange 24,980 - 161 - 161 766 - 766
----------------------- --------- --------- ------- ------- ------ ------- ------- ------
Interest rate 48,937 36,769 435 1,406 1,841 1,072 183 1,255
----------------------- --------- --------- ------- ------- ------ ------- ------- ------
At 31 Dec 2019 73,917 36,769 596 1,406 2,002 1,838 183 2,021
----------------------- --------- --------- ------- ------- ------ ------- ------- ------
Use of derivatives
For details regarding the use of derivatives, see page 186 under
'Market risk'.
Trading derivatives
Most of HSBC's derivative transactions relate to sales and
trading activities. Sales activities include the structuring and
marketing of derivative products to customers to enable them to
take, transfer, modify or reduce current or expected risks. Trading
activities include market-making and risk management. Market-making
entails quoting bid and offer prices to other market participants
for the purpose of generating revenue based on spread and volume.
Risk management activity is undertaken to manage the risk arising
from client transactions, with the principal purpose of retaining
client margin. Other derivatives classified as held for trading
include non-qualifying hedging derivatives.
Substantially all of HSBC Holdings' derivatives entered into
with subsidiaries are managed in conjunction with financial
liabilities designated at fair value.
Derivatives valued using models with unobservable inputs
The difference between the fair value at initial recognition
(the transaction price) and the value that would have been derived
had valuation techniques used for subsequent measurement been
applied at initial recognition, less subsequent releases, is as
shown in the following table:
Unamortised balance of derivatives valued using models with significant
unobservable inputs
2020 2019
Footnotes $m $m
---------------------------------------------------- ---------- ----- -------
Unamortised balance at 1 Jan 73 86
---------------------------------------------------- ---------- ----- -----
Deferral on new transactions 232 145
---------------------------------------------------- ---------- ----- -----
Recognised in the income statement during
the year: (205) (154)
---------------------------------------------------- ---------- ----- -----
- amortisation (116) (80)
---------------------------------------------------- ----------
- subsequent to unobservable inputs becoming
observable (4) (3)
---------------------------------------------------- ----------
- maturity, termination or offsetting derivative (85) (71)
Exchange differences 4 1
---------------------------------------------------- ---------- ----- -----
Other - (5)
---------------------------------------------------- ---------- ----- -----
Unamortised balance at 31 Dec 1 104 73
---------------------------------------------------- ---------- ----- -----
1 This amount is yet to be recognised in the consolidated income statement.
1
Hedge accounting derivatives
HSBC applies hedge accounting to manage the following risks:
interest rate, foreign exchange and net investment in foreign
operations. Further details on how these risks arise and how they
are managed by the Group can be found in the 'Risk review'.
Fair value hedges
HSBC enters into fixed-for-floating-interest-rate swaps to
manage the exposure to changes in fair value caused by movements in
market interest rates on certain fixed-rate financial instruments
that are not measured at fair value through profit or loss,
including debt securities held and issued.
HSBC hedging instrument by hedged risk
Hedging instrument
---------------------------------------------------------------------------
Carrying amount
------------------ -------------
Change in
Notional amount(1) Assets Liabilities fair value(2)
Balance sheet
Hedged risk $m $m $m presentation $m
----------------- ------------------ --------- ----------- ----------------
Interest rate(3) 121,573 1,675 3,761 Derivatives (1,894)
----------------- ------------------ --------- ----------- ------------- --------------
At 31 Dec 2020 121,573 1,675 3,761 (1,894)
----------------- ------------------ --------- ----------- ------------- --------------
Interest rate(3) 122,753 1,056 2,208 Derivatives (1,531)
----------------- ------- ----- ----- ----------- -------
At 31 Dec 2019 122,753 1,056 2,208 (1,531)
----------------- ------- ----- ----- ----------- -------
1 The notional contract amounts of derivatives designated in
qualifying hedge accounting relationships indicate the nominal
value of transactions outstanding at the balance sheet date. They
do not represent amounts at risk.
2 Used in effectiveness testing; comprising the full fair value
change of the hedging instrument not excluding any component.
3 The hedged risk 'interest rate' includes inflation risk.
HSBC hedged item by hedged risk
Hedged item Ineffectiveness
Accumulated fair value hedge
adjustments included in carrying
Carrying amount amount(2)
Change Recognised
in fair in profit
Assets Liabilities Assets Liabilities value(1) and loss
Profit and
Balance sheet loss
Hedged risk $m $m $m $m presentation $m $m presentation
----------- --------- ----------- ------ ----------- --------- ----------
Financial
assets
designated
and
otherwise
mandatorily
measured at
fair value
through
other
Interest comprehensive
rate(3) 102,260 3,392 income 2,456 (11)
--------- ----------- ------ ----------- ------------- ---------
Loans and
advances
6 3 to banks 1
--------- ----------- ------ ----------- ------------- ---------
Loans and
advances
2,280 56 to customers 21
--------- ----------- ------ ----------- ------------- ---------
Debt
securities
12,148 1,620 in issue (613)
--------- ----------- ------ ----------- ------------- ---------
Net income
from
financial
instruments
held for
trading or
managed on
Deposits by a fair value
89 3 banks 18 basis
--------- ----------- ------ ----------- ------------- ---------
At 31 Dec
2020 104,546 12,237 3,451 1,623 1,883 (11)
----------- --------- ----------- ------ ----------- ------------- --------- ---------- ------------
HSBC hedged item by hedged risk (continued)
Hedged item Ineffectiveness
Accumulated fair value
hedge adjustments included
Carrying amount in carrying amount(2)
Change Recognised
in fair in profit
Assets Liabilities Assets Liabilities value(1) and loss
Profit and
Balance sheet loss
Hedged risk $m $m $m $m presentation $m $m presentation
----------- -------- ----------- ------ ----------- --------- ----------
Financial
assets
designated
and Net income
otherwise from
mandatorily financial
measured at instruments
fair value held for
through trading or
other managed on
Interest comprehensive a fair value
rate(3) 90,617 1,859 income 2,304 (7) basis
----------- -------- ----------- ------ ----------- ------------- ---------
Loans and
advances
153 4 to banks 5
----------- -------- ----------- ------ ----------- ------------- ---------
Loans and
advances
1,897 12 to customers 24
-------- ----------- ------ ----------- ------------- ---------
Debt
securities
15,206 797 in issue (1,011)
-------- ----------- ------ ----------- ------------- ---------
Deposits by
3,009 39 banks 202
----------- -------- ----------- ------ ----------- ------------- --------- ----------
At 31 Dec
2019 92,667 18,215 1,875 836 1,524 (7)
----------- -------- ----------- ------ ----------- ------------- --------- ---------- ------------
1 Used in effectiveness testing; comprising amount attributable
to the designated hedged risk that can be a risk component.
2 The accumulated amount of fair value adjustments remaining in
the statement of financial position for hedged items that have
ceased to be adjusted for hedging gains and losses were assets of
$855m for FVOCI and assets of $17m for debt issued.
3 The hedged risk 'interest rate' includes inflation risk.
HSBC Holdings hedging instrument by hedged risk
Hedging instrument
----------------------------------------------------------------------
Carrying amount
------------ -------------
Notional Change in
amount(1,4) Assets Liabilities fair value(2)
Balance sheet
Hedged risk $m $m $m presentation $m
----------------- ------------ ---------- ----------- ----------------
Interest rate(3) 34,006 3,221 8 Derivatives 1,927
----------------- ------------ ---------- ----------- ------------- --------------
At 31 Dec 2020 34,006 3,221 8 1,927
----------------- ------------ ---------- ----------- ------------- --------------
Interest rate(3) 36,769 1,406 183 Derivatives 1,704
----------------- ------------ ---------- ----------- ------------- --------------
At 31 Dec 2019 36,769 1,406 183 1,704
----------------- ------------ ---------- ----------- ------------- --------------
1 The notional contract amounts of derivatives designated in
qualifying hedge accounting relationships indicate the nominal
value of transactions outstanding at the balance sheet date; they
do not represent amounts at risk.
2 Used in effectiveness testing; comprising the full fair value
change of the hedging instrument not excluding any component.
3 The hedged risk 'interest rate' includes foreign exchange risk.
4 The notional amount of non-dynamic fair value hedges is equal
to $34,006m, of which the weighted-average maturity date is
February 2028 and the weighted-average swap rate is 1.71%. The
majority of these hedges are internal to the Group.
HSBC Holdings hedged item by hedged risk
Hedged item Ineffectiveness
Accumulated
fair value hedge
adjustments
included in
Carrying amount carrying amount(2)
------------
Recognised
Change in
in fair profit
Assets Liabilities Assets Liabilities value(1) and loss
------------
Balance Profit and
Hedged sheet loss
risk $m $m $m $m presentation $m $m presentation
---------- ---------- ----------- --------- ----------- --------- ---------- ------------
Net income
from
financial
instruments
held for
trading
Debt or managed
securities on a fair
Interest rate(3) 37,338 3,027 in issue (1,910) 17 value basis
---------------------- ----------- --------- ----------- ------------ --------- ---------- ------------
At 31 Dec
2020 - 37,338 - 3,027 (1,910) 17
---------- ---------- ----------- --------- ----------- ------------ --------- ---------- ------------
Net income
from
financial
instruments
held for
trading
Debt or managed
securities on a fair
Interest rate(3) 38,126 1,088 in issue (1,697) 7 value basis
---------------------- ----------- --------- ----------- ------------ --------- ---------- ------------
At 31 Dec
2019 - 38,126 - 1,088 (1,697) 7
---------- ---------- ----------- --------- ----------- ------------ --------- ---------- ------------
1 Used in effectiveness testing; comprising amount attributable
to the designated hedged risk that can be a risk component.
2 The accumulated amount of fair value adjustments remaining in
the statement of financial position for hedged items that have
ceased to be adjusted for hedging gains and losses were liabilities
of $62.8m for debt issued.
3 The hedged risk 'interest rate' includes foreign exchange risk.
Sources of hedge ineffectiveness may arise from basis risk,
including but not limited to the discount rates used for
calculating the fair value of derivatives, hedges using instruments
with a non-zero fair value, and notional and timing differences
between the hedged items and hedging instruments.
For some debt securities held, HSBC manages interest rate risk
in a dynamic risk management strategy. The assets in scope of this
strategy are high-quality fixed-rate debt securities, which may be
sold to meet liquidity and funding requirements.
The interest rate risk of the HSBC fixed-rate debt securities
issued is managed in a non-dynamic risk management strategy.
Cash flow hedges
HSBC's cash flow hedging instruments consist principally of
interest rate swaps and cross-currency swaps that are used to
manage the variability in future interest cash flows of non-trading
financial assets and liabilities, arising due to changes in market
interest rates and foreign-currency basis.
HSBC applies macro cash flow hedging for interest rate risk
exposures on portfolios of replenishing current and forecasted
issuances of non-trading assets and liabilities that bear interest
at variable rates, including rolling such instruments. The amounts
and timing of future cash flows, representing both principal and
interest flows, are projected for each portfolio of financial
assets and liabilities on the basis of their contractual terms and
other relevant factors, including estimates of prepayments and
defaults. The aggregate cash flows representing both principal
balances and interest cash flows across all portfolios are used to
determine the effectiveness and ineffectiveness. Macro cash flow
hedges are considered to be dynamic hedges.
HSBC also hedges the variability in future cash flows on
foreign-denominated financial assets and liabilities arising due to
changes in foreign exchange market rates with cross-currency swaps,
which are considered dynamic hedges.
Hedging instrument by hedged risk
--------- ---------- ---------------
Hedged
Hedging instrument item Ineffectiveness
---------
Carrying amount
--------- ------------
Change Change Recognised
Notional in fair in fair in profit
amount(1) Assets Liabilities value(2) value(3) and loss
Balance Profit and
Hedged sheet loss
risk $m $m $m presentation $m $m $m presentation
--------- --------- --------- ----------- --------- --------- ----------
Foreign
currency 24,506 309 448 Derivatives (630) (630) -
--------- --------- --------- ----------- ------------ --------- --------- ----------
Net income
from
financial
instruments
held for
trading or
managed
Interest on a fair
rate 35,863 239 2 Derivatives 519 514 5 value basis
--------- --------- --------- ----------- ------------ --------- --------- ----------
At 31 Dec
2020 60,369 548 450 (111) (116) 5
--------- --------- --------- ----------- ------------ --------- --------- ---------- ---------------
Net income
from financial
instruments
held for
trading or
managed on
a fair value
Foreign currency 21,385 455 254 Derivatives 341 341 - basis
----------------- ------ --- --- ----------- --- ---
Interest rate 54,253 152 46 Derivatives 195 193 2
----------------- ------ --- --- ----------- --- ---
At 31 Dec 2019 75,638 607 300 536 534 2
----------------- ------ --- --- ----------- --- --- ---------------
1 The notional contract amounts of derivatives designated in
qualifying hedge accounting relationships indicate the nominal
value of transactions outstanding at the balance sheet date. They
do not represent amounts at risk.
2 Used in effectiveness testing; comprising the full fair value
change of the hedging instrument not excluding any component.
3 Used in effectiveness assessment; comprising amount
attributable to the designated hedged risk that can be a risk
component.
Sources of hedge ineffectiveness may arise from basis risk,
including but not limited to timing differences between the hedged
items and hedging instruments and hedges using instruments with a
non-zero fair value.
Reconciliation of equity and analysis of other comprehensive income by
risk type
Interest Foreign
rate currency
$m $m
------------------------------------------------------------- -------- -----------
Cash flow hedging reserve at 1 Jan 2020 204 (205)
------------------------------------------------------------- -------- ---------
Fair value gains/(losses) 514 (630)
------------------------------------------------------------- -------- ---------
Fair value (gains)/losses reclassified from the cash
flow hedge reserve to the income statement in respect
of:
------------------------------------------------------------- -------- -----------
Hedged items that have affected profit or loss (107) 822
------------------------------------------------------------- -------- ---------
Income taxes (79) (23)
------------------------------------------------------------- -------- ---------
Others (37) (1)
------------------------------------------------------------- -------- ---------
Cash flow hedging reserve at 31 Dec 2020 495 (37)
------------------------------------------------------------- -------- ---------
Cash flow hedging reserve at 1 Jan 2019 (26) (182)
------------------------------------------------------- ---- -----
Fair value gains/(losses) 193 341
------------------------------------------------------- ---- -----
Fair value (gains)/losses reclassified from the cash
flow hedge reserve to the income statement in respect
of:
------------------------------------------------------- ---- -------
Hedged items that has affected profit or loss 99 (371)
------------------------------------------------------- ---- -----
Income taxes (53) 4
------------------------------------------------------- ---- -----
Others (9) 3
------------------------------------------------------- ---- -----
Cash flow hedging reserve at 31 Dec 2019 204 (205)
------------------------------------------------------- ---- -----
Hedges of net investments in foreign operations
The Group applies hedge accounting in respect of certain
consolidated net investments. Hedging is undertaken for Group
structural exposure to changes in the US dollar-sterling exchange
rate using forward foreign exchange contracts or by financing with
foreign currency borrowings. This risk arises due to the Group
investment in sterling functional currency subsidiaries and is only
hedged for changes in spot exchange rates. At 31 December 2020, the
fair values of outstanding financial instruments designated as
hedges of net investments in foreign operations were assets of nil
(2019: nil), liabilities of $733m (2019: $485m) and notional
derivative contract values of $10,500m (2019: $10,500m). These
values are included in 'Derivatives' presented in the balance
sheet. Ineffectiveness recognised in 'Net income from financial
instruments held for trading or managed on a fair value basis' in
the year ended 31 December 2020 was nil (2019: nil) and the net
investment hedge reserve was a negative $56m as of 31 December 2020
($304m in 2019 and $780m in 2018). There were no amounts
reclassified to the profit and loss account during the accounting
periods presented.
Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39
'Financial Instruments'
The first set of amendments ('Phase 1') to IFRS 9 and IAS 39,
published in September 2019 and endorsed in January 2020, primarily
allows the assumption that interbank offered rates ('Ibors') are to
continue unaltered for the purposes of forecasting hedged cash
flows until such time as the uncertainty of transitioning to near
risk-free rates ('RFRs') is resolved. The second set of amendments
('Phase 2'), issued in August 2020 and endorsed in January 2021,
allows the modification of hedge documentation to reflect the
components of hedge relationships that have transitioned to RFRs on
an economically equivalent basis as a direct result of the Ibor
transition.
While the application of Phase 1 amendments is mandatory for
accounting periods starting on or after 1 January 2020, the Group
chose to early adopt the Phase 2 amendments from the beginning of
2020. Significant judgement will be required in determining when
Ibor transition uncertainty is resolved and therefore decide when
Phase 1 amendments cease to apply and when some of the Phase 2
amendments can be applied.
The notional value of the derivatives impacted by the Ibors
reform but which are not used in designated hedge accounting
relationships is disclosed on page 113 in the section 'Financial
instruments impacted by the Ibor reform'.
The Group has cash flow and fair value hedge accounting
relationships that are exposed to different Ibors, predominantly US
dollar Libor, sterling Libor and Euribor, as well as overnight
rates subject to the market-wide benchmarks reform such as the
European Overnight Index Average rate ('Eonia'). Existing financial
instruments (such as derivatives, loans and bonds) designated in
relationships referencing these benchmarks are expected to
transition to RFRs in different ways and at different times.
External progress on the transition to RFRs is being monitored,
with the objective of ensuring a smooth transition for the Group's
hedge accounting relationships. The specific issues arising will
vary with the details of each hedging relationship, but may arise
due to the transition of existing products included in the
designation, a change in expected volumes of products to be issued,
a change in contractual terms of new products issued, or a
combination of these factors. Some hedges may need to be
de-designated and new relationships entered into, while others may
survive the market-wide benchmarks reform.
The hedge accounting relationships that are affected by Phase 1
and Phase 2 amendments are presented in the balance sheet as
'Financial assets designated and otherwise mandatorily measured at
fair value through other comprehensive income', 'Loans and advances
to customers', 'Debt securities in issue' and 'Deposits by
banks'.
The notional amounts of interest rate derivatives designated in
hedge accounting relationships represent the extent of the risk
exposure managed by the Group that is expected to be directly
affected by market-wide Ibors reform and in scope of Phase 1 and
Phase 2 amendments. The cross-currency swaps designated in hedge
accounting relationships and affected by Ibor reform are not
significant and have not been presented below:
Hedging instrument impacted by Ibor reform
Hedging instrument
-------------------------------------------------------------------
Impacted by Ibor reform
---------------------------------------
EUR GBP $ Other Total Not impacted
by Ibor Notional
reform amount(1)
$m $m $m $m $m $m $m
------------------ ------ ------ ------ ------ ------- ------------ ------------
Fair value hedges 17,792 3,706 32,789 10,128 64,415 57,157 121,572
------------------ ------ ------ ------ ------ ------- ------------ ----------
Cash flow hedges 8,344 2,522 8,705 6,797 26,368 9,495 35,863
------------------ ------ ------ ------ ------ ------- ------------ ----------
At 31 Dec 2020 26,136 6,228 41,494 16,925 90,783 66,652 157,435
------------------ ------ ------ ------ ------ ------- ------------ ----------
Fair value hedges 20,378 4,533 41,274 13,435 79,620 43,133 122,753
------------------ ------ ------ ------ ------ ------- ------------ ----------
Cash flow hedges 5,724 6,594 15,750 15,979 44,047 10,206 54,253
------------------ ------ ------ ------ ------ ------- ------------ ----------
At 31 Dec 2019 26,102 11,127 57,024 29,414 123,667 53,339 177,006
------------------ ------ ------ ------ ------ ------- ------------ ----------
1 The notional contract amounts of interest rate derivatives
designated in qualifying hedge accounting relationships indicate
the nominal value of transactions outstanding at the balance sheet
date; they do not represent amounts at risk.
During 2019, the main market event in scope of Ibor reform was
the change to the calculation of Eonia to be calculated as the euro
short-term rate ('EURSTR') plus a fixed spread of 8.5 basis points.
This event had no material impact to the valuation of components of
designated hedge accounting relationships and there were no
discontinuations of existing designated relationships. The main
market events in scope of Ibor reform during 2020 were the changes
applied by central clearing counterparties to remunerating euro and
US dollar collateral. While there was a minimal valuation impact to
the derivatives in scope that are used for hedge accounting, these
changes had no discontinuation impact to any of the designated
relationships affected.
For further details of Ibor transition, see 'Areas of special
interest' in the Risk review on page 116.
Hedging instrument impacted by Ibor reform held by HSBC Holdings
Hedging instrument
--------------------------------------------------------------------
Impacted by Ibor reform
------------------------------------------
Not impacted
by Ibor Notional
EUR GBP $ Other Total reform amount
$m $m $m $m $m $m $m
----------------------- ------- ------- ------- ------ ------- ------------ ----------
Fair value hedges 4,290 5,393 21,081 3,242 34,006 - 34,006
----------------------- ------- ------- ------- ------ ------- ------------ --------
At 31 Dec 2020 4,290 5,393 21,081 3,242 34,006 - 34,006
----------------------- ------- ------- ------- ------ ------- ------------ --------
Fair value hedges 3,928 5,222 24,500 3,119 36,769 - 36,769
----------------------- ------- ------- ------- ------ ------- ------------ --------
At 31 Dec 2019 3,928 5,222 24,500 3,119 36,769 - 36,769
----------------------- ------- ------- ------- ------ ------- ------------ --------
16 Financial investments
---------------------
Carrying amount of financial investments
2020 2019
$m $m
----------------------------------------------------- ------- ---------
Financial investments measured at fair value through
other comprehensive income 402,054 357,577
----------------------------------------------------- ------- -------
- treasury and other eligible bills 118,163 95,043
-----------------------------------------------------
- debt securities 281,467 260,536
-----------------------------------------------------
- equity securities 2,337 1,913
-----------------------------------------------------
- other instruments 87 85
----------------------------------------------------- ------- -------
Debt instruments measured at amortised cost 88,639 85,735
----------------------------------------------------- ------- -------
- treasury and other eligible bills 11,757 10,476
-----------------------------------------------------
- debt securities 76,882 75,259
----------------------------------------------------- ------- -------
At 31 Dec 490,693 443,312
----------------------------------------------------- ------- -------
Equity instruments measured at fair value through other comprehensive
income
Dividends
Fair value recognised
Type of equity instruments $m $m
------------------------------------------------------------- ---------- -------------
Investments required by central institutions 904 22
------------------------------------------------------------- ---------- -----------
Business facilitation 1,387 22
------------------------------------------------------------- ---------- -----------
Others 46 3
------------------------------------------------------------- ---------- -----------
At 31 Dec 2020 2,337 47
------------------------------------------------------------- ---------- -----------
Investments required by central institutions 738 22
------------------------------------------------------------- ---------- -----------
Business facilitation 1,124 19
------------------------------------------------------------- ---------- -----------
Others 51 9
------------------------------------------------------------- ---------- -----------
At 31 Dec 2019 1,913 50
------------------------------------------------------------- ---------- -----------
Financial investments at amortised cost and fair value
2020 2019
Amortised Amortised
cost Fair value(1) cost Fair value(1)
Footnotes $m $m $m $m
------------------------------------ --------- --------- ------------- --------- ---------------
US Treasury 75,531 78,251 79,633 80,589
------------------------------------ --------- --------- ------------- --------- -------------
US Government agencies 2 19,851 20,320 26,356 26,387
------------------------------------ --------- --------- ------------- --------- -------------
US Government-sponsored entities 10,691 11,224 8,070 8,259
------------------------------------ --------- --------- ------------- --------- -------------
UK Government 28,094 28,754 28,621 28,973
------------------------------------ --------- --------- ------------- --------- -------------
Hong Kong Government 55,483 55,507 47,824 47,820
------------------------------------ --------- --------- ------------- --------- -------------
Other governments 178,091 180,881 140,510 142,511
------------------------------------ --------- --------- ------------- --------- -------------
Asset-backed securities 3 2,708 2,536 2,954 2,889
------------------------------------ --------- --------- ------------- --------- -------------
Corporate debt and other securities 110,015 118,960 101,750 107,364
------------------------------------ --------- --------- ------------- --------- -------------
Equities 1,410 2,337 1,241 1,913
------------------------------------ --------- --------- ------------- --------- -------------
At 31 Dec 481,874 498,770 436,959 446,705
------------------------------------ --------- --------- ------------- --------- -------------
1 Included within 'fair value' figures are debt securities
issued by banks and other financial institutions of $62bn (2019:
$61bn), of which $10bn (2019: $11bn) are guaranteed by various
governments.
2 Includes securities that are supported by an explicit guarantee issued by the US Government.
3 Excludes asset-backed securities included under US Government agencies and sponsored entities.
Maturities of investments in debt securities at their carrying amount
Up to 1 to 5 5 to 10 Over 10
1 year years years years Total
$m $m $m $m $m
-------------------------------------- ------- ------- ------- ------- ---------
Debt securities measured at fair
value through other comprehensive
income 72,250 131,859 42,168 35,190 281,467
-------------------------------------- ------- ------- ------- ------- -------
Debt securities measured at amortised
cost 6,135 16,499 19,437 34,811 76,882
-------------------------------------- ------- ------- ------- ------- -------
At 31 Dec 2020 78,385 148,358 61,605 70,001 358,349
-------------------------------------- ------- ------- ------- ------- -------
Debt securities measured at fair
value through other comprehensive
income 61,833 123,740 42,831 32,132 260,536
-------------------------------------- ------- ------- ------- ------- -------
Debt securities measured at amortised
cost 5,472 14,395 21,431 33,961 75,259
-------------------------------------- ------- ------- ------- ------- -------
At 31 Dec 2019 67,305 138,135 64,262 66,093 335,795
-------------------------------------- ------- ------- ------- ------- -------
Contractual maturities and weighted average yields of investment debt
securities
Up to 1 year 1 to 5 years 5 to 10 years Over 10 years
Amount Yield Amount Yield Amount Yield Amount Yield
$m % $m % $m % $m %
----------------------------- -------- ----- -------- ----- --------- ----- --------- -------
Debt securities measured
at fair value through
other comprehensive
income
----------------------------- -------- ----- -------- ----- --------- ----- --------- -------
US Treasury 6,596 1.2 22,945 1.6 15,618 1.5 4,195 2.3
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
US Government agencies - - 95 1.8 43 2.8 12,608 1.8
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
US Government-sponsored
agencies 30 2.8 789 2.2 2,988 2.5 4,968 1.8
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
UK Government 2,765 1.5 5,126 0.8 6,220 0.2 4,910 2.3
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Hong Kong Government 84 1.6 247 1.6 167 1.8 - -
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Other governments 51,507 1.7 62,587 2.3 8,184 1.6 2,089 4.3
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Asset-backed securities 18 2.9 93 1.4 399 1.8 2,199 1.2
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Corporate debt and
other securities 10,831 2.1 35,615 1.4 7,169 1.8 2,583 3.4
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Total amortised cost
at 31 Dec 2020 71,831 127,497 40,788 33,552
----------------------------- -------- ----- -------- ----- --------- ----- --------- -------
Total carrying value 72,250 131,859 42,168 35,190
----------------------------- -------- ----- -------- ----- --------- ----- --------- -------
Debt securities measured
at amortised cost
----------------------------- -------- ----- -------- ----- --------- ----- --------- -------
US Treasury 3,769 0.1 4,618 1.6 3,003 2.0 969 2.8
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
US Government agencies - - 9 3.8 13 4.5 7,084 2.6
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
US Government-sponsored
agencies 110 2.5 258 2.7 436 2.2 1,112 3.3
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Hong Kong Government 13 3.0 23 1.6 118 2.6 12 4.8
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Other governments 179 3.4 370 4.1 426 3.8 1,011 4.2
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Asset-backed securities - - - - - - 2 6.0
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Corporate debt and
other securities 2,064 3.3 11,221 3.4 15,441 3.4 24,621 3.8
----------------------------- -------- ----- -------- ----- --------- ----- --------- -----
Total amortised cost
at 31 Dec 2020 6,135 16,499 19,437 34,811
----------------------------- -------- ----- -------- ----- --------- ----- --------- -------
Total carrying value 6,135 16,497 19,439 34,812
----------------------------- -------- ----- -------- ----- --------- ----- --------- -------
The maturity distributions of ABSs are presented in the above
table on the basis of contractual maturity dates. The weighted
average yield for each range of maturities is calculated by
dividing the annualised interest income for the year ended 31
December 2020 by the book amount of debt securities at that date.
The yields do not include the effect of related derivatives.
HSBC Holdings
HSBC Holdings carrying amount of financial investments
2020 2019
$m $m
-------------------------------------------- ------ --------
Debt instruments measured at amortised cost
-------------------------------------------- ------ --------
- treasury and other eligible bills 10,941 10,081
-------------------------------------------- ------ ------
- debt securities 6,544 6,025
-------------------------------------------- ------ ------
At 31 Dec 17,485 16,106
-------------------------------------------- ------ ------
Financial investments at amortised cost and fair value
2020 2019
Amortised Amortised
cost Fair value cost Fair value
$m $m $m $m
--------------------------------- --------- ---------- --------- ------------
US Treasury 17,485 17,521 16,106 16,121
--------------------------------- --------- ---------- --------- ----------
US Government agencies - - - -
--------------------------------- --------- ---------- --------- ----------
US Government-sponsored entities - - - -
--------------------------------- --------- ---------- --------- ----------
At 31 Dec 17,485 17,521 16,106 16,121
--------------------------------- --------- ---------- --------- ----------
Maturities of investments in debt securities at their carrying amount
Up to 1 1 to 5 5 to 10 Over 10
year years years years Total
$m $m $m $m $m
------------------------------------------------- ------- ------ ------- ------- --------
Debt securities measured at amortised
cost 3,767 2,777 - - 6,544
------------------------------------------------- ------- ------ ------- ------- ------
At 31 Dec 2020 3,767 2,777 - - 6,544
------------------------------------------------- ------- ------ ------- ------- ------
Debt securities measured at amortised
cost 3,010 3,015 - - 6,025
------------------------------------------------- ------- ------ ------- ------- ------
At 31 Dec 2019 3,010 3,015 - - 6,025
------------------------------------------------- ------- ------ ------- ------- ------
Contractual maturities and weighted average yields of investment debt
securities
Up to 1 year 1 to 5 years 5 to 10 years Over 10 years
Amount Yield Amount Yield Amount Yield Amount Yield
$m % $m % $m % $m %
-------------------------- -------- ----- -------- ----- ------------ ----- ------------ -------
Debt securities measured
at amortised cost
-------------------------- -------- ----- -------- ----- ------------ ----- ------------ -------
US Treasury 3,767 1.5 2,777 0.3 - - - -
-------------------------- -------- ----- -------- ----- ------------ ----- ------------ -----
US Government agencies - - - - - - - -
-------------------------- -------- ----- -------- ----- ------------ ----- ------------ -----
US Government-sponsored - - - - - - - -
agencies
-------------------------- -------- ----- -------- ----- ------------ ----- ------------ -----
Total amortised cost
at 31 Dec 2020 3,767 2,777 - -
-------------------------- -------- ----- -------- ----- ------------ ----- ------------ -------
Total carrying value 3,767 2,777 - -
-------------------------- -------- ----- -------- ----- ------------ ----- ------------ -------
The weighted average yield for each range of maturities is
calculated by dividing the annualised interest income for the year
ended 31 December 2020 by the book amount of debt securities at
that date. The yields do not include the effect of related
derivatives.
17 Assets pledged, collateral received and assets transferred
----------------------------------------------------------
Assets pledged
Financial assets pledged as collateral
2020 2019
$m $m
--------------------------------------------- ------- ---------
Treasury bills and other eligible securities 12,774 14,034
---------------------------------------------- ------- -------
Loans and advances to banks 236 1,975
---------------------------------------------- ------- -------
Loans and advances to customers 43,168 26,017
---------------------------------------------- ------- -------
Debt securities 67,312 60,995
---------------------------------------------- ------- -------
Equity securities 26,101 24,626
---------------------------------------------- ------- -------
Other 60,810 50,231
---------------------------------------------- ------- -------
Assets pledged at 31 Dec 210,401 177,878
---------------------------------------------- ------- -------
Assets pledged as collateral include all assets categorised as
encumbered in the disclosure on page 78 of the Pillar 3 Disclosures
at 31 December 2020 .
The amount of assets pledged to secure liabilities may be
greater than the book value of assets utilised as collateral. For
example, in the case of securitisations and covered bonds, the
amount of liabilities issued plus mandatory over-collateralisation
is less than the book value of the pool of assets available for use
as collateral. This is also the case where assets are placed with a
custodian or a settlement agent that has a floating charge over all
the assets placed to secure any liabilities under settlement
accounts.
These transactions are conducted under terms that are usual and
customary for collateralised transactions including, where
relevant, standard securities lending and borrowing, repurchase
agreements and derivative margining. HSBC places both cash and
non-cash collateral in relation to derivative transactions.
Hong Kong currency notes in circulation are secured by the
deposit of funds in respect of which the Hong Kong Government
certificates of indebtedness are held.
Financial assets pledged as collateral which the counterparty has the
right to sell or repledge
2020 2019
$m $m
--------------------------------------------- ------------- --------------
Trading assets 64,225 63,163
--------------------------------------------- ------------- ------------
Financial investments 16,915 10,782
--------------------------------------------- ------------- ------------
At 31 Dec 81,140 73,945
--------------------------------------------- ------------- ------------
Collateral received
The fair value of assets accepted as collateral relating
primarily to standard securities lending, reverse repurchase
agreements, swaps of securities and derivative margining that HSBC
is permitted to sell or repledge in the absence of default was
$447,101m (2019: $468,798m). The fair value of any such collateral
sold or repledged was $246,520m (2019: $304,261m).
HSBC is obliged to return equivalent securities. These
transactions are conducted under terms that are usual and customary
to standard securities lending, reverse repurchase agreements and
derivative margining.
Assets transferred
The assets pledged include transfers to third parties that do
not qualify for derecognition, notably secured borrowings such as
debt securities held by counterparties as collateral under
repurchase agreements and equity securities lent under securities
lending agreements, as well as swaps of equity and debt securities.
For secured borrowings, the transferred asset collateral continues
to be recognised in full while a related liability, reflecting the
Group's obligation to repurchase the assets for a fixed price at a
future date, is also recognised on the balance sheet. Where
securities are swapped, the transferred asset continues to be
recognised in full. There is no associated liability as the
non-cash collateral received is not recognised on the balance
sheet. The Group is unable to use, sell or pledge the transferred
assets for the duration of the transaction, and remains exposed to
interest rate risk and credit risk on these pledged assets. With
the exception of 'Other sales' in the following table, the
counterparty's recourse is not limited to the transferred
assets.
Transferred financial assets not qualifying for full derecognition and
associated financial liabilities
Carrying amount
of: Fair value of:
-----------
Transferred Associated Transferred Associated Net
assets liabilities assets liabilities position
$m $m $m $m $m
------------------------------------------- ----------- ------------ ----------- ------------ -----------
At 31 Dec 2020
------------------------------------------- ----------- ------------ ----------- ------------ -----------
Repurchase agreements 52,413 51,092
------------------------------------------- ----------- ------------ ----------- ------------ -----------
Securities lending agreements 38,364 124
------------------------------------------- ----------- ------------ ----------- ------------ -----------
Other sales (recourse to transferred
assets only) 3,564 3,478 3,619 3,564 55
------------------------------------------- ----------- ------------ ----------- ------------ ---------
At 31 Dec 2019
------------------------------------------- ----------- ------------ ----------- ------------ -----------
Repurchase agreements 45,831 45,671
------------------------------------------- ----------- ------------ ----------- ------------ -----------
Securities lending agreements 35,122 3,225
------------------------------------------- ----------- ------------ ----------- ------------ -----------
Other sales (recourse to transferred
assets only) 2,971 2,885 2,974 2,897 77
------------------------------------------- ----------- ------------ ----------- ------------ ---------
18 Interests in associates and joint ventures
------------------------------------------
Carrying amount of HSBC's interests in associates and
joint ventures
------ --------
2020 2019
$m $m
------------------------------------------------------ ------ --------
Interests in associates 26,594 24,384
------------------------------------------------------ ------ ------
Interests in joint ventures 90 90
------------------------------------------------------ ------ ------
Interests in associates and joint ventures 26,684 24,474
------------------------------------------------------ ------ ------
Principal associates of HSBC
2020 2019
Carrying Fair value(1) Carrying
amount amount Fair value(1)
$m $m $m $m
------------------------------------ -------- ------------- -------- ---------------
Bank of Communications Co., Limited 21,248 7,457 18,982 10,054
------------------------------------- -------- ------------- -------- -------------
The Saudi British Bank 4,215 4,197 4,370 5,550
------------------------------------- -------- ------------- -------- -------------
1 Principal associates are listed on recognised stock exchanges.
The fair values are based on the quoted market prices of the shares
held (Level 1 in the fair value hierarchy).
At 31 Dec 2020
------------------------------------------------
Country of
incorporation
and principal HSBC's
place of Principal interest
Footnotes business activity %
---------------------------- --------- ----------------- ---------------- -----------
Bank of Communications Co., People's Republic
Limited of China Banking services 19.03
---------------------------- --------- ----------------- ---------------- ---------
The Saudi British Bank 1 Saudi Arabia Banking services 31.00
---------------------------- --------- ----------------- ---------------- ---------
1 In December 2020, HSBC purchased additional shares and
increased its shareholding in The Saudi British Bank ('SABB') from
29.2% to 31.0%. SABB will continue to be accounted for as an
associate of HSBC.
A list of all associates and joint ventures is set out in Note
37.
Bank of Communications Co., Limited
The Group's investment in Bank of Communications Co., Limited
('BoCom') is classified as an associate. Significant influence in
BoCom was established with consideration of all relevant factors,
including representation on BoCom's Board of Directors and
participation in a Resource and Experience Sharing ('RES')
agreement. Under the RES, HSBC staff have been seconded to assist
in the maintenance of BoCom's financial and operating policies.
Investments in associates are recognised using the equity method of
accounting in accordance with IAS 28, whereby the investment is
initially recognised at cost and adjusted thereafter for the
post-acquisition change in the Group's share of BoCom's net assets.
An impairment test is required if there is any indication of
impairment.
Impairment testing
At 31 December 2020, the fair value of the Group's investment in
BoCom had been below the carrying amount for approximately nine
years. As a result, the Group performed an impairment test on the
carrying amount, which confirmed that there was no impairment at 31
December 2020 as the recoverable amount as determined by a
value-in-use ('VIU') calculation was higher than the carrying
value.
At 31 Dec 2020 At 31 Dec 2019
VIU Carrying Fair value Carrying
value VIU value Fair value
$bn $bn $bn $bn $bn $bn
-------------------------- ------ -------- ---------- ------ -------- ------------
BoCom 21.8 21.2 7.5 21.5 19.0 10.1
-------------------------- ------ -------- --------- ------ -------- ---------
Compared with 31 December 2019, the extent to which the VIU
exceeds the carrying value ('headroom') decreased by $1.9bn. The
reduction in headroom was principally due to the impact on the VIU
from BoCom's actual performance, which was lower than earlier
forecasts due to the impact of the Covid-19 outbreak and the
disruption to global economic activity, downward revisions to
management's best estimates of BoCom's future earnings in the short
to medium term, and the net impact of revisions to certain
long-term assumptions. Both the VIU and the carrying value
increased due to the impact of foreign exchange movements.
In future periods, the VIU may increase or decrease depending on
the effect of changes to model inputs. The main model inputs are
described below and are based on factors observed at period-end.
The factors that could result in a change in the VIU and an
impairment include a short-term underperformance by BoCom, a change
in regulatory capital requirements or an increase in uncertainty
regarding the future performance of BoCom resulting in a downgrade
of the forecast of future asset growth or profitability. An
increase in the discount rate as a result of an increase in the
risk premium or risk-free rates could also result in a reduction of
VIU and an impairment. At the point where the carrying value
exceeds the VIU, impairment would be recognised.
If the Group did not have significant influence in BoCom, the
investment would be carried at fair value rather than the current
carrying value.
Basis of recoverable amount
The impairment test was performed by comparing the recoverable
amount of BoCom, determined by a VIU calculation, with its carrying
amount. The VIU calculation uses discounted cash flow projections
based on management's best estimates of future earnings available
to ordinary shareholders prepared in accordance with IAS 36.
Significant management judgement is required in arriving at the
best estimate. There are two main components to the VIU
calculation. The first component is management's best estimate of
BoCom's earnings, which is based on explicit forecasts over the
short to medium term. This results in forecast earnings growth that
is lower than recent historical actual growth and also reflects the
uncertainty arising from the current economic outlook. Earnings
beyond the short to medium term are then extrapolated into
perpetuity using a long-term growth rate to derive a terminal
value, which comprises the majority of the VIU. The second
component is the capital maintenance charge ('CMC'), which is
management's forecast of the earnings
that need to be withheld in order for BoCom to meet regulatory
capital requirements over the forecast period, meaning that CMC is
deducted when arriving at management's estimate of future earnings
available to ordinary shareholders. The principal inputs to the CMC
calculation include estimates of asset growth, the ratio of
risk-weighted assets to total assets and the expected minimum
regulatory capital requirements. An increase in the CMC as a result
of a change to these principal inputs would reduce VIU.
Additionally, management considers other factors, including
qualitative factors, to ensure that the inputs to the VIU
calculation remain appropriate.
Key assumptions in value-in-use calculation
We used a number of assumptions in our VIU calculation, in
accordance with the requirements of IAS 36:
-- Long-term profit growth rate: 3% (2019: 3%) for periods after
2024, which does not exceed forecast GDP growth in mainland China
and is consistent with forecasts by external analysts.
-- Long-term asset growth rate: 3% (2019: 3%) for periods after
2024, which is the rate that assets are expected to grow to achieve
long-term profit growth of 3%.
-- Discount rate: 11.37% (2019: 11.24%). This is based on a
capital asset pricing model ('CAPM') calculation for BoCom, using
market data. Management also compares the rate derived from the
CAPM with discount rates from external sources. The discount rate
used is within the range of 10.3% to 15.0% (2019: 10.0% to 15.0%)
indicated by external sources. The increased rate reflects the net
impact of updates to certain components of CAPM due to elevated
levels of risk arising from the impact of the Covid-19 outbreak and
the disruption to global economic activity.
-- Expected credit losses ('ECL') as a percentage of customer
advances: This ranges from 0.98% to 1.22% (2019: 0.95%) in the
short to medium term, reflecting increases due to the Covid-19
outbreak and BoCom's actual results. For periods after 2024, the
ratio is 0.88% (2019: 0.76%), which is slightly higher than BoCom's
average ECL in recent years. This ratio was increased to reflect
trends in BoCom's actual results in recent years of increasing ECL
and of changes to BoCom's loan portfolio.
-- Risk-weighted assets as a percentage of total assets: This
ranges from 61% to 62% (2019: 61%) in the short to medium term,
reflecting increases that may arise from higher ECL in the short
term, followed by reductions that may arise from a subsequent
lowering of ECL and a continuation of the trend of strong retail
loan growth. For periods after 2024, the ratio is 61% (2019: 61%).
These rates are similar to BoCom's actual results in recent years
and are slightly below forecasts disclosed by external
analysts.
-- Operating income growth rate: This ranges from 3.5% to 6.7%
(2019: 4.9% to 9.4%) in the short to medium term, and is lower than
BoCom's actual results in recent years and the forecasts disclosed
by external analysts, reflecting economic pressures from the
Covid-19 outbreak, global trade tensions and industry developments
in mainland China.
-- Cost-income ratio: This ranges from 36.3% to 36.8% (2019:
37.1% to 38.8%) in the short to medium term. These ratios are
similar to BoCom's actual results in recent years and slightly
higher than forecasts disclosed by external analysts.
-- Effective tax rate: This ranges from 7.8% to 16.5% (2019:
12.0% to 17.0%) in the short to medium term, reflecting BoCom's
actual results and an expected increase towards the long-term
assumption through the forecast period. For periods after 2024, the
rate is 16.8% (2019: 22.5%), which is higher than the recent
historical average. This rate was reduced on expectations of a
lower effective tax rate in the long term, reflecting BoCom's
actual results in recent years and forecast financial asset
composition, and forecasts disclosed by external analysts.
-- Capital requirements: This was based on a capital adequacy
ratio of 11.5% (2019: 11.5%) and tier 1 capital adequacy ratio of
9.5% (2019: 9.5%), based on the minimum regulatory
requirements.
The following table shows the change to each key assumption in
the VIU calculation that on its own would reduce the headroom to
nil:
Changes to key assumption to reduce
Key assumption headroom to nil
* Decrease by 22 basis points
* Long-term profit growth rate
* Increase by 20 basis points
* Long-term asset growth rate
* Increase by 26 basis points
* Discount rate
* Increase by 3 basis points
* Expected credit losses as a percentage of customer
advances
* Risk-weighted assets as a percentage of total assets * Increase by 136 basis points
* Decrease by 28 basis points
* Operating income growth rate
* Increase by 77 basis points
* Cost-income ratio
* Long-term effective tax rate * Increase by 216 basis points
* Increase by 26 basis points
* Capital requirements - capital adequacy ratio
* Increase by 90 basis points
* Capital requirements - tier 1 capital adequacy ratio
=========================================================== ===================================
The following table further illustrates the impact on VIU of
reasonably possible changes to key assumptions. This reflects the
sensitivity of the VIU to each key assumption on its own and it is
possible that more than one favourable and/or unfavourable change
may occur at the same time. The selected rates of reasonably
possible changes to key assumptions are largely based on external
analysts' forecasts, which can change period to period.
Sensitivity of VIU to reasonably possible changes in key assumptions
Favourable change Unfavourable change
Increase Decrease
in VIU VIU in VIU VIU
bps $bn $bn bps $bn $bn
--------------------------------------- -------------- ---------- ----- -------------- -------- -------
At 31 Dec 2020
--------------------------------------- -------------- ---------- ----- -------------- -------- -------
Long-term profit growth rate - - 21.8 (50) (1.3) 20.5
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Long-term asset growth rate (50) 1.4 23.2 - - 21.8
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Discount rate - 1.2 23.0 53 (1.2) 20.6
--------------------------------------- -------------- ------ ---- -------------- ------- ----
2020 to 2020 to
2024: 96 2.3 24.1 2024: 122 (2.1) 19.7
Expected credit losses as a 2025 onwards: 2025 onwards:
percentage of customer advances 76 95
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Risk-weighted assets as a percentage
of total assets (40) 0.1 21.9 166 (0.8) 21.0
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Operating income growth rate 2 0.2 22.0 (69) (1.5) 20.3
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Cost-income ratio (149) 1.3 23.1 120 (1.2) 20.6
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Long-term effective tax rate (316) 0.9 22.7 820 (2.2) 19.6
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Capital requirements - capital
adequacy ratio - - 21.8 297 (7.8) 14.0
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Capital requirements - tier
1 capital adequacy ratio - - 21.8 263 (5.3) 16.5
--------------------------------------- -------------- ------ ---- -------------- ------- ----
At 31 Dec 2019
--------------------------------------- -------------- ---------- ----- -------------- -------- -------
Long-term profit growth rate - - 21.5 (50) (1.3) 20.2
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Long-term asset growth rate (50) 1.4 22.9 - - 21.5
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Discount rate (54) 1.4 22.9 56 (1.2) 20.3
--------------------------------------- -------------- ------ ---- -------------- ------- ----
2019 to 2019 to
2023: 90 1.0 22.5 2023: 108 (1.2) 20.3
Expected credit losses as a 2024 onwards: 2024 onwards:
percentage of customer advances 70 81
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Risk-weighted assets as a percentage
of total assets (96) 0.4 21.9 12 - 21.5
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Operating income growth rate 14 - 21.8 (102) (1.8) 19.7
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Cost-income ratio (175) 1.0 22.5 95 (1.2) 20.3
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Long-term effective tax rate (352) 1.0 22.5 250 (0.7) 20.8
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Capital requirements - capital
adequacy ratio - - 21.5 337 (8.2) 13.3
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Capital requirements - tier
1 capital adequacy ratio - - 21.5 322 (6.0) 15.5
--------------------------------------- -------------- ------ ---- -------------- ------- ----
Considering the interrelationship of the changes set out in the
table above, management estimates that the reasonably possible
range of VIU is $18.2bn to $24.2bn (2019: $18.5bn to $22.8bn). The
range is based on the favourable/unfavourable change in the
earnings in the short- to medium-term, and long-term expected
credit losses as a percentage of customer advances as set out in
the table above. All other long-term assumptions, the discount rate
and the basis of the CMC have been kept unchanged when determining
the reasonably possible range of the VIU.
Selected financial information of BoCom
The statutory accounting reference date of BoCom is 31 December.
For the year ended 31 December 2020, HSBC included the associate's
results on the basis of the financial statements for the 12 months
ended 30 September 2020, taking into account changes in the
subsequent period from 1 October 2020 to 31 December 2020 that
would have materially affected the results.
Selected balance sheet information of BoCom
At 30 Sep
----------------------
2020 2019
$m $m
------------------------------------------------------------- --------- -----------
Cash and balances at central banks 121,987 112,239
-------------------------------------------------------------- --------- ---------
Loans and advances to banks and other financial institutions 107,334 108,026
-------------------------------------------------------------- --------- ---------
Loans and advances to customers 870,728 730,510
-------------------------------------------------------------- --------- ---------
Other financial assets 508,328 435,740
-------------------------------------------------------------- --------- ---------
Other assets 44,622 40,101
-------------------------------------------------------------- --------- ---------
Total assets 1,652,999 1,426,616
-------------------------------------------------------------- --------- ---------
Deposits by banks and other financial institutions 273,708 290,492
-------------------------------------------------------------- --------- ---------
Customer accounts 1,012,732 868,627
-------------------------------------------------------------- --------- ---------
Other financial liabilities 207,110 131,772
-------------------------------------------------------------- --------- ---------
Other liabilities 31,105 23,074
-------------------------------------------------------------- --------- ---------
Total liabilities 1,524,655 1,313,965
-------------------------------------------------------------- --------- ---------
Total equity 128,344 112,651
-------------------------------------------------------------- --------- ---------
Reconciliation of BoCom's total shareholders' equity to the carrying
amount in HSBC's consolidated financial statements
At 30 Sep
-------------------
2020 2019
$m $m
------------------------------------------------------ -------- ---------
HSBC's share of total shareholders' equity 20,743 18,509
------------------------------------------------------ -------- -------
Goodwill and other intangible assets 505 473
------------------------------------------------------ -------- -------
Carrying amount 21,248 18,982
------------------------------------------------------ -------- -------
Selected income statement information of BoCom
For the 12 months
ended 30 Sep
---------------------
2020 2019
$m $m
------------------------------------------------------------- --------- ----------
Net interest income 21,994 20,558
------------------------------------------------------------- --------- --------
Net fee and commission income 6,398 6,411
------------------------------------------------------------- --------- --------
Change in expected credit losses and other credit impairment
charges (9,698) (7,479)
------------------------------------------------------------- --------- --------
Depreciation and amortisation (2,072) (1,934)
------------------------------------------------------------- --------- --------
Tax expense (858) (1,636)
------------------------------------------------------------- --------- --------
Profit for the year 10,261 11,175
------------------------------------------------------------- --------- --------
Other comprehensive income (769) 315
------------------------------------------------------------- --------- --------
Total comprehensive income 9,492 11,490
------------------------------------------------------------- --------- --------
Dividends received from BoCom 633 613
------------------------------------------------------------- --------- --------
The Saudi British Bank
The Group's investment in The Saudi British Bank ('SABB') is
classified as an associate. In June 2019, the merger between SABB
and
Alawwal bank ('Alawwal') became effective, which reduced HSBC's
40% interest in SABB to 29.2%. On 3 December 2020, HSBC purchased
additional shares in SABB, which increased the Group's shareholding
to 31%. HSBC remains the largest shareholder in SABB. Significant
influence in SABB is established via representation on the Board of
Directors. Investments in associates are recognised using the
equity method of accounting in accordance with IAS 28, as described
previously for BoCom.
Impairment testing
At 31 December 2020, the fair value of the Group's investment in
SABB of $4.20bn was below the carrying amount of $4.22bn. As a
result, the Group performed an impairment test on the carrying
amount, which confirmed no impairment. The recoverable amount as
determined by a VIU calculation is $4.74bn.
The basis of recoverable amount
The impairment test was performed by comparing the recoverable
amount of SABB, determined by a VIU calculation, with its carrying
amount. The VIU calculation uses discounted cash flow projections
based on management's best estimates of future earnings available
to ordinary shareholders prepared in accordance with IAS 36, which
requires significant management judgement. A key component to the
VIU calculation is management's best estimate of SABB's earnings,
which is based on explicit forecasts over the short to medium term.
This reflects the uncertainty arising from the current economic
outlook. Earnings beyond the short to medium term are then
extrapolated in perpetuity using a long-term growth rate to derive
a terminal value, which comprises the majority of the VIU.
Additionally, management considers other factors (including
qualitative factors) to ensure that the inputs to the VIU
calculation remain appropriate.
Key assumptions in value-in-use calculation
We used a number of assumptions in our VIU calculation, in
accordance with the requirements of IAS 36:
-- Long-term profit growth rate: 2.85% for periods after 2024.
This does not exceed forecast GDP growth in Saudi Arabia.
-- Long-term asset growth rate: 2.85% for periods after 2024.
This is the rate that assets are expected to grow to achieve
long-term profit growth of 2.85%.
-- Discount rate: 10.4%. This is based on a CAPM calculation for
Saudi Arabia using market data. Management also compares the rate
derived from the CAPM with cost of capital rates from external
sources.
-- Management's judgement in estimating the cash flows of SABB:
Cash flow projections have considered the scale of the entity
following the merger with Alawwal, current market conditions and
our macroeconomic outlook.
Sensitivity of VIU to reasonably possible changes in key
assumptions
At 31 December 2020, the Group's investment in SABB was
sensitive to reasonably possible adverse changes in key assumptions
supporting the recoverable amount. The most sensitive inputs to the
impairment test are set out in the following table. A reasonable
change in a single key assumption may not result in impairment,
although taken together a combination of reasonable changes in key
assumptions could result in a recoverable amount that is lower than
the carrying amount.
Key assumption Reasonably possible change
* Cash flow projections * Cash flow projections decrease by 15%. This could
result in an impairment of $0.2bn.
* Discount rate * Discount rate increases by 100 basis points. This
does not result in impairment.
============================ ========================================================
19 Investments in subsidiaries
---------------------------
Main subsidiaries of HSBC Holdings
At 31 Dec 2020
----------------------------------------------------------------------
HSBC's
Place of incorporation interest
or registration % Share class
----------------------------------- -----------------------------------
Europe
----------------------------------- ---------------------- --------- -----------------------------------
England and GBP1 Ordinary, $0.01 Non-cumulative
HSBC Bank plc Wales 100 third Dollar Preference
----------------------------------- ---------------------- --------- -----------------------------------
England and
HSBC UK Bank plc Wales 100 GBP1 Ordinary
----------------------------------- ---------------------- --------- -----------------------------------
HSBC Continental Europe France 99.99 EUR5 Actions
----------------------------------- ---------------------- --------- -----------------------------------
HSBC Trinkaus & Burkhardt Germany 99.33 Stückaktien no par
AG(1) value
----------------------------------- ---------------------- --------- -----------------------------------
Asia
----------------------------------- ---------------------- --------- -----------------------------------
Hang Seng Bank Limited Hong Kong 62.14 HK$5 Ordinary
HSBC Bank (China) Company People's Republic
Limited of China 100 CNY1 Ordinary
----------------------------------- ---------------------- --------- -----------------------------------
HSBC Bank Malaysia Berhad Malaysia 100 RM0.5 Ordinary
HSBC Life (International) Bermuda 100 HK$1 Ordinary
Limited
----------------------------------- ---------------------- --------- -----------------------------------
The Hongkong and Shanghai Hong Kong 100 Ordinary no par value
Banking Corporation Limited
----------------------------------- ---------------------- --------- -----------------------------------
Middle East and North Africa
----------------------------------- ---------------------- --------- -----------------------------------
$1 Ordinary and $1 Cumulative
United Arab Redeemable Preference shares
HSBC Bank Middle East Limited Emirates 100 (CRP)
----------------------------------- ---------------------- --------- -----------------------------------
North America
----------------------------------- ---------------------- --------- -----------------------------------
HSBC Bank Canada Canada 100 Common no par value and
Preference no par value
----------------------------------- ---------------------- --------- -----------------------------------
HSBC Bank USA, N.A. US 100 $100 Common and $0.01 Preference
----------------------------------- ---------------------- --------- -----------------------------------
Latin America
----------------------------------- ---------------------- --------- -----------------------------------
HSBC Mexico, S.A., Institución
de Banca Múltiple,
Grupo Financiero HSBC Mexico 99.99 MXN2 Ordinary
----------------------------------- ---------------------- --------- -----------------------------------
1 The Group acquired the remaining minority equity interest in
HSBC Trinkaus & Burkhardt AG on 1 February 2021. The Group now
owns 100% of this subsidiary.
Details of the debt, subordinated debt and preference shares
issued by the main subsidiaries to parties external to the Group
are included in Note 25 'Debt securities in issue' and Note 28
'Subordinated liabilities', respectively.
A list of all related undertakings is set out in Note 37. The
principal countries of operation are the same as the countries and
territories of incorporation except for HSBC Life (International)
Limited, which operates mainly in Hong Kong.
HSBC is structured as a network of regional banks and locally
incorporated regulated banking entities. Each bank is separately
capitalised in accordance with applicable prudential requirements
and maintains a capital buffer consistent with the Group's risk
appetite for the relevant country or region. HSBC's capital
management process is incorporated in the annual operating 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 capital where
necessary. These investments are substantially funded by HSBC
Holdings' issuance of equity and non-equity capital, and by profit
retention. The net reduction in investments in subsidiaries was
partly due to the impairment of HSBC Overseas Holdings (UK) Limited
of $0.4bn .
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. Subject to this, there is no
current or foreseen impediment to HSBC Holdings' ability to provide
funding for such investments. During 2020, consistent with the
Group's capital plan, the Group's subsidiaries did not experience
any significant restrictions on paying dividends or repaying loans
and advances. Also, there are no foreseen restrictions envisaged
with regard to planned dividends or payments. However, the ability
of subsidiaries to pay dividends or advance monies to HSBC Holdings
depends on, among other things, their respective local regulatory
capital and banking requirements, exchange controls, statutory
reserves, and financial and operating performance.
The amount of guarantees by HSBC Holdings in favour of other
Group entities is set out in Note 32.
Information on structured entities consolidated by HSBC where
HSBC owns less than 50% of the voting rights is included in Note 20
'Structured entities'. In each of these cases, HSBC controls and
consolidates an entity when it is exposed, or has rights, to
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the
entity.
Subsidiaries with significant non-controlling interests
2020 2019
--------------------------------------------------------- ----------- -----------
Hang Seng Bank Limited
--------------------------------------------------------- ----------- -----------
Proportion of ownership interests and voting rights held
by non-controlling interests 37.86% 37.86%
--------------------------------------------------------- ------- -----------
Place of business Hong Kong Hong Kong
--------------------------------------------------------- ----------- -----------
$m $m
--------------------------------------------------------- ----------- -----------
Profit attributable to non-controlling interests 843 1,229
--------------------------------------------------------- ----------- --------
Accumulated non-controlling interests of the subsidiary 7,604 7,262
--------------------------------------------------------- ----------- --------
Dividends paid to non-controlling interests 625 720
--------------------------------------------------------- ----------- --------
Summarised financial information:
--------------------------------------------------------- ----------- -----------
- total assets 224,483 212,485
--------------------------------------------------------- ----------- --------
- total liabilities 202,907 191,819
--------------------------------------------------------- ----------- --------
- net operating income before changes in expected credit
losses and other credit impairment charges 4,568 5,558
--------------------------------------------------------- ----------- --------
- profit for the year 2,230 3,251
--------------------------------------------------------- ----------- --------
- total comprehensive income for the year 2,535 3,461
--------------------------------------------------------- ----------- --------
20 Structured entities
-------------------
HSBC is mainly involved with both consolidated and
unconsolidated structured entities through the securitisation of
financial assets, conduits and investment funds, established either
by HSBC or a third party.
Consolidated structured entities
Total assets of HSBC's consolidated structured entities, split by entity
type
HSBC
managed
Conduits Securitisations funds Other Total
$bn $bn $bn $bn $bn
--------------------------------- -------- --------------- -------- --------- -----------
At 31 Dec 2020 6.9 11.7 5.3 10.8 34.7
--------------------------------- -------- --------------- -------- --------- ---------
At 31 Dec 2019 8.6 9.6 6.8 6.7 31.7
--------------------------------- -------- --------------- -------- --------- ---------
Conduits
HSBC has established and manages two types of conduits:
securities investment conduits ('SICs') and multi-seller
conduits.
Securities investment conduits
The SICs purchase highly rated ABSs to facilitate tailored
investment opportunities.
-- At 31 December 2020, Solitaire, HSBC's principal SIC, held
$1.9bn of ABSs (2019: $2.1bn). It is currently funded entirely by
commercial paper ('CP') issued to HSBC. At 31 December 2020, HSBC
held $2.1bn of CP (2019: $3.2bn).
Multi-seller conduit
HSBC's multi-seller conduit was established to provide access to
flexible market-based sources of finance for its clients.
Currently, HSBC bears risk equal to the transaction-specific
facility offered to the multi-seller conduit, amounting to $9.6bn
at 31 December 2020 (2019: $12.4bn). First loss protection is
provided by the originator of the assets, and not by HSBC, through
transaction-specific credit enhancements. A layer of secondary loss
protection is provided by HSBC in the form of programme-wide
enhancement facilities.
Securitisations
HSBC uses structured entities to securitise customer loans and
advances it originates in order to diversify its sources of funding
for asset origination and capital efficiency purposes. The loans
and advances are transferred by HSBC to the structured entities for
cash or synthetically through credit default swaps, and the
structured entities issue debt securities to investors.
HSBC managed funds
HSBC has established a number of money market and non-money
market funds. Where it is deemed to be acting as principal rather
than agent in its role as investment manager, HSBC controls these
funds.
Other
HSBC has entered into a number of transactions in the normal
course of business, which include asset and structured finance
transactions where it has control of the structured entity. In
addition, HSBC is deemed to control a number of third-party managed
funds through its involvement as a principal in the funds.
Unconsolidated structured entities
The term 'unconsolidated structured entities' refers to all
structured entities not controlled by HSBC. The Group enters into
transactions with unconsolidated structured entities in the normal
course of business to facilitate customer transactions and for
specific investment opportunities.
Nature and risks associated with HSBC interests in unconsolidated structured
entities
Total asset values of the entities Non-HSBC
($m) HSBC managed managed
Securitisations funds funds Other Total
-----------------------------------------------------------
0-500 86 292 1,430 47 1,855
----------------------------------------------------------- --------------- ----------- -------- ----- -----
500-2,000 9 94 733 2 838
----------------------------------------------------------- --------------- ----------- -------- ----- -----
2,000-5,000 - 32 389 - 421
----------------------------------------------------------- --------------- ----------- -------- ----- -----
5,000-25,000 - 14 311 - 325
----------------------------------------------------------- --------------- ----------- -------- ----- -----
25,000+ - 5 41 - 46
----------------------------------------------------------- --------------- ----------- -------- ----- -----
Number of entities at 31 Dec
2020 95 437 2,904 49 3,485
----------------------------------------------------------- --------------- ----------- -------- ----- -----
$bn $bn $bn $bn $bn
----------------------------------------------------------- ----------------- ------------- ---------- ------- -------
Total assets in relation to HSBC's
interests in the unconsolidated
structured entities 4.4 9.9 17.5 2.1 33.9
----------------------------------------------------------- --------------- ----------- -------- ----- -----
* trading assets - 0.3 3.2 - 3.5
-----------------------------------------------------------
* financial assets designated and otherwise mandatorily
measured at fair value - 8.6 13.8 - 22.4
* loans and advances to customers 4.4 - - 1.5 5.9
-----------------------------------------------------------
* financial investments - 1 0.5 - 1.5
-----------------------------------------------------------
* other assets - - - 0.6 0.6
----------------------------------------------------------- --------------- ----------- -------- ----- -----
Total liabilities in relation
to HSBC's interests in the unconsolidated
structured entities - - - 0.3 0.3
----------------------------------------------------------- --------------- ----------- -------- ----- -----
* other liabilities - - - 0.3 0.3
----------------------------------------------------------- --------------- ----------- -------- ----- -----
Other off-balance sheet commitments 0.1 0.5 4.9 1.2 6.7
----------------------------------------------------------- --------------- ----------- -------- ----- -----
HSBC's maximum exposure at 31
Dec 2020 4.5 10.4 22.4 3.6 40.9
----------------------------------------------------------- --------------- ----------- -------- ----- -----
Total asset values of the entities
($m)
----------------------------------------------------------- ----------------- ------------- ---------- ------- -------
0-500 91 236 670 70 1,067
----------------------------------------------------------- --------------- ----------- -------- ----- -----
500-2,000 12 70 642 7 731
----------------------------------------------------------- --------------- ----------- -------- ----- -----
2,000-5,000 - 28 345 - 373
----------------------------------------------------------- --------------- ----------- -------- ----- -----
5,000-25,000 - 14 260 - 274
----------------------------------------------------------- --------------- ----------- -------- ----- -----
25,000+ - 3 39 2 44
----------------------------------------------------------- --------------- ----------- -------- ----- -----
Number of entities at 31 Dec
2019 103 351 1,956 79 2,489
----------------------------------------------------------- --------------- ----------- -------- ----- -----
$bn $bn $bn $bn $bn
----------------------------------------------------------- ----------------- ------------- ---------- ------- -------
Total assets in relation to HSBC's
interests in the unconsolidated
structured entities 5.3 9.1 15.1 4.2 33.7
----------------------------------------------------------- --------------- ----------- -------- ----- -----
* trading assets - 0.2 3.5 1.3 5
-----------------------------------------------------------
* financial assets designated and otherwise mandatorily
measured at fair value - 8.4 10.7 - 19.1
-----------------------------------------------------------
* loans and advances to customers 5.3 - 0.4 2.3 8
-----------------------------------------------------------
* financial investments - 0.5 0.5 - 1
-----------------------------------------------------------
* other assets - - - 0.6 0.6
----------------------------------------------------------- --------------- ----------- -------- ----- -----
Total liabilities in relation
to HSBC's interests in the unconsolidated
structured entities - - - 0.3 0.3
----------------------------------------------------------- --------------- ----------- -------- ----- -----
* other liabilities - - - 0.3 0.3
----------------------------------------------------------- --------------- ----------- -------- ----- -----
Other off-balance sheet commitments 0.3 0.3 3.9 0.7 5.2
----------------------------------------------------------- --------------- ----------- -------- ----- -----
HSBC's maximum exposure at 31
Dec 2019 5.6 9.4 19.0 4.6 38.6
----------------------------------------------------------- --------------- ----------- -------- ----- -----
The maximum exposure to loss from HSBC's interests in
unconsolidated structured entities represents the maximum loss it
could incur as a result of its involvement with these entities
regardless of the probability of the loss being incurred.
-- For commitments, guarantees and written credit default swaps,
the maximum exposure to loss is the notional amount of potential
future losses.
-- For retained and purchased investments and loans to
unconsolidated structured entities, the maximum exposure to loss is
the carrying value of these interests at the balance sheet
reporting date.
The maximum exposure to loss is stated gross of the effects of
hedging and collateral arrangements that HSBC has entered into in
order to mitigate the Group's exposure to loss.
Securitisations
HSBC has interests in unconsolidated securitisation vehicles
through holding notes issued by these entities. In addition, HSBC
has investments in ABSs issued by third-party structured
entities.
HSBC managed funds
HSBC establishes and manages money market funds and non-money
market investment funds to provide customers with investment
opportunities. Further information on funds under management is
provided on page 90.
HSBC, as fund manager, may be entitled to receive management and
performance fees based on the assets under management. HSBC may
also retain units in these funds.
Non-HSBC managed funds
HSBC purchases and holds units of third-party managed funds in
order to facilitate business and meet customer needs.
Other
HSBC has established structured entities in the normal course of
business, such as structured credit transactions for customers, to
provide finance to public and private sector infrastructure
projects, and for asset and structured finance transactions.
In addition to the interests disclosed above, HSBC enters into
derivative contracts, reverse repos and stock borrowing
transactions with structured entities. These interests arise in the
normal course of business for the facilitation of third-party
transactions and risk management solutions.
HSBC sponsored structured entities
The amount of assets transferred to and income received from
such sponsored structured entities during 2020 and 2019 were not
significant.
21 Goodwill and intangible assets
------------------------------
2020 2019
Footnotes $m $m
------------------------------------------------------- --------- ------ --------
Goodwill 5,881 5,590
------------------------------------------------------- --------- ------ ------
Present value of in-force long-term insurance business 9,435 8,945
------------------------------------------------------- --------- ------ ------
Other intangible assets 1 5,127 5,628
------------------------------------------------------- --------- ------ ------
At 31 Dec 20,443 20,163
------------------------------------------------------- --------- ------ ------
1 Included within other intangible assets is internally
generated software with a net carrying value of $4,452m (2019:
$4,829m). During the year, capitalisation of internally generated
software was $1,934m (2019: $2,086m), impairment was $1,322m (2019:
$38m) and amortisation was $1,085m (2019: $947m).
1
Movement analysis of goodwill
2020 2019
$m $m
------------------------------ -------- ----------
Gross amount
------------------------------ -------- ----------
At 1 Jan 22,084 22,180
------------------------------ -------- --------
Exchange differences 967 (154)
------------------------------ -------- --------
Other 84 58
------------------------------ -------- --------
At 31 Dec 23,135 22,084
------------------------------ -------- --------
Accumulated impairment losses
------------------------------ -------- ----------
At 1 Jan (16,494) (9,194)
------------------------------ -------- --------
Impairment losses (41) (7,349)
------------------------------ -------- --------
Exchange differences (719) 49
------------------------------ -------- --------
At 31 Dec (17,254) (16,494)
------------------------------ -------- --------
Net carrying amount at 31 Dec 5,881 5,590
------------------------------ -------- --------
Goodwill
Impairment testing
In previous years the Group's annual impairment test in respect
of goodwill allocated to each CGU was performed at 1 July.
Beginning in 2020 the annual impairment test will be performed as
at 1 October to better align the timing of the test with cash flow
projections approved by the Board. A review for indicators of
impairment is undertaken at each subsequent quarter-end.
Basis of the recoverable amount
The recoverable amount of all CGUs to which goodwill has been
allocated was equal to its value in use ('VIU') at each respective
testing date. The VIU is calculated by discounting management's
cash flow projections for the CGU. At 1 October 2020, all CGUs
supporting goodwill had a VIU larger than their respective carrying
amounts. The key assumptions used in the VIU calculation for each
individually significant CGU that is not impaired are discussed
below.
Key assumptions in VIU calculation - significant CGUs
at 1 October 2020
-------- ---------- -------------
Nominal Nominal
growth growth
Growth rate rate
rate beyond beyond
Goodwill beyond Goodwill initial Goodwill initial
at initial at cash at 31 cash
1 Oct Discount cash 1 Jul Discount flow Dec Discount flow
2020 rate flow 2020 rate projections 2019 rate projections
$m % % $m % % $m % %
Cash-generating
unit
Europe - WPB(1) 3,582 9.6 1.9 3,496 8.3 3.2 3,464 8.3 1.7
------------------- -------- -------- ------- -------- -------- ------- ---- ------- ------ ------- ----
1 CGU tested as Europe - RBWM at 31 December 2019. Details
regarding our change in global businesses are set out in Note
10.
At 1 October 2020, aggregate goodwill of $2,059m (1 July 2019:
$2,938m; 31 December 2019: $2,126m) had been allocated to CGUs that
were not considered individually significant. The Group's CGUs do
not carry on their balance sheets any significant intangible assets
with indefinite useful lives, other than goodwill.
Management's judgement in estimating the cash flows of a CGU
The cash flow projections for each CGU are based on plans
approved by the Board. The Board challenges and endorses planning
assumptions in light of internal capital allocation decisions
necessary to support our strategy, current market conditions and
macroeconomic outlook. For the 1 October 2020 impairment test, cash
flow projections until the end of the first quarter of 2025 were
considered. As required by IFRSs, estimates of future cash flows
exclude estimated cash inflows or outflows that are expected to
arise from restructuring initiatives before an entity has a
constructive obligation to carry out the plan, and would therefore
have recognised a provision for restructuring costs.
Discount rate
The rate used to discount the cash flows is based on the cost of
capital assigned to each CGU, which is derived using a capital
asset pricing model ('CAPM'). CAPM depends on a number of inputs
reflecting financial and economic variables, including the
risk-free rate and a premium to reflect the inherent risk of the
business being evaluated. These variables are based on the market's
assessment of the economic variables and management's judgement.
The discount rates for each CGU are refined to reflect the rates of
inflation for the countries within which the CGU operates. In
addition, for the purposes of testing goodwill for impairment,
management supplements this process by comparing the discount rates
derived using the internally generated CAPM, with the cost of
capital rates produced by external sources for businesses operating
in similar markets.
Long-term growth rate
The long-term growth rate is used to extrapolate the cash flows
in perpetuity because of the long-term perspective within the Group
of business units making up the CGUs. These growth rates reflect
inflation for the countries within which the CGU operates or from
which it derives revenue.
Sensitivities of key assumptions in calculating VIU
At 31 December 2020, Europe - WPB was sensitive to reasonably
possible adverse changes in key assumptions supporting the
recoverable amount. In making an estimate of reasonably possible
changes to assumptions, management considers the available evidence
in respect of each input to the model, such as the external range
of discount rates observable, historical performance against
forecast and risks attaching to the key assumptions underlying cash
flow projections. A reasonable change in one or more of these
assumptions could result in an impairment.
Cash-generating
unit
--------------- ----------- ----------------------------------------------------------- ---------------------------------------------------------- --------------------------------------------
Europe - Cash
WPB flow * Level of interest rates and yield curves. * Uncertain regulatory environment. * Cash flow projections decrease by 30%.
projections
* Competitors' position within the market. * Customer remediation and regulatory actions.
* Level and change in unemployment rates.
--------------- ----------- ----------------------------------------------------------- ---------------------------------------------------------- --------------------------------------------
Discount
rate * Discount rate used is a reasonable estimate of a * External evidence suggests that the rate used is not * Discount rate increases by 100bps. Thi
suitable market rate for the profile of the business. appropriate to the business. s does not
result in an impairment.
--------------- ----------- ----------------------------------------------------------- ---------------------------------------------------------- --------------------------------------------
Sensitivity of VIU to reasonably possible changes in key assumptions
and changes to current assumptions to achieve nil headroom
Europe -
WPB
In $bn (unless otherwise stated)
--------------------------------------------------------------- ----------
At 31 December 2020
--------------------------------------------------------------- ----------
Carrying amount 11.1
--------------------------------------------------------------- --------
VIU 16.4
--------------------------------------------------------------- --------
Impact on VIU
--------------------------------------------------------------- ----------
100 bps increase in the discount rate - single variable (2.3)
--------------------------------------------------------------- --------
30% decrease in cash flow projections - single variable (6.0)
--------------------------------------------------------------- --------
Cumulative impact of all changes (7.6)
--------------------------------------------------------------- --------
Changes to key assumption to reduce headroom to nil - single
variable
--------------------------------------------------------------- ----------
Discount rate - bps 271
--------------------------------------------------------------- --------
Cash flows - % (26.5)
--------------------------------------------------------------- --------
30 June impairment indicators review
At 30 June 2020, we considered the pervasive macroeconomic
deterioration caused by the outbreak of Covid-19, along with the
impact on forecast profitability in some businesses, to be an
indicator of goodwill impairment. As a result, an interim
impairment test was performed by comparing the estimated
recoverable amount of each CGU carrying goodwill, determined by a
VIU calculation, with its carrying amount. At 30 June 2020, the
goodwill allocated to Middle East and North Africa - WPB ($41m) was
fully impaired. This CGU carried no further significant
non-financial assets.
Other intangible assets
Impairment testing
We considered the pervasive macroeconomic deterioration caused
by the outbreak of Covid-19, along with the impact of forecast
profitability in some businesses, to be indicators of intangible
asset impairment during the period. The impairment tests were
performed by comparing the net carrying amount of CGUs containing
intangible assets with their recoverable amounts. Recoverable
amounts were determined by calculating an estimated VIU or fair
value, as appropriate, for each CGU. Our cash flow forecasts were
updated for changes in the external outlook, although economic and
geopolitical risks increase the inherent estimation
uncertainty.
We recognised $1.3bn of capitalised software impairment related
principally to businesses within HSBC Bank plc, our non-ring-fenced
bank in Europe, and to a lesser degree businesses within HSBC USA
Inc. This impairment reflected underperformance and deterioration
in the future forecasts of these businesses, substantially relating
to prior periods in HSBC Bank plc.
Key assumptions in VIU calculation
We used a number of assumptions in our VIU calculation, in
accordance with the requirements of IAS 36:
-- Management's judgement in estimating future cash flows: We
considered past business performance, the scale of the current
impact from the Covid-19 outbreak on our operations, current market
conditions and our macroeconomic outlook to estimate future
earnings. As required by IFRSs, estimates of future cash flows
exclude estimated cash inflows or outflows that are expected to
arise from restructuring initiatives before an entity has a
constructive obligation to carry out the plan, and would therefore
have recognised a provision for restructuring costs. For some
businesses, this means that the benefit of certain strategic
actions are not included in this impairment assessment, including
capital releases.
-- Long-term growth rates: The long-term growth rate is used to
extrapolate the cash flows in perpetuity because of the long-term
perspective of the businesses within the Group.
-- Discount rates: Rates are based on a CAPM calculation
considering market data for the businesses and geographies in which
the Group operates. Discount rates ranged from 8.5% to 9.7% for
HSBC Bank plc's businesses.
Future software capitalisation
We will continue to invest in digital capabilities to meet our
strategic objectives. However, software capitalisation within
businesses where impairment was identified will not resume until
the performance outlook for each business indicates future profits
are sufficient to support capitalisation. The cost of additional
software investment in these businesses will be recognised as an
operating expense until such time.
Sensitivity of estimates relating to non-financial assets
As explained in Note 1.2(a), estimates of future cash flows for
cash-generating units ('CGUs') are made in the review of goodwill
and non-financial assets for impairment. Non-financial assets
include other intangible assets shown above, and owned property,
plant and equipment and right-of-use assets (see Note 22). The most
significant sources of estimation uncertainty are in respect of the
goodwill balances disclosed above. There are no non-financial asset
balances relating to individual CGUs which involve estimation
uncertainty that represents a significant risk of resulting in a
material adjustment to the results and financial position of the
Group within the next financial year. Non-financial assets are
widely distributed across CGUs within the legal entities of the
Group, including Corporate Centre assets that cannot be allocated
to CGUs and are therefore tested for impairment at consolidated
level, and the recoverable amounts of other intangible assets,
owned property, plant and equipment, and right-of-use assets cannot
be lower than individual asset fair values less costs to dispose,
where relevant. At HSBC Holdings plc consolidated level, Corporate
Centre assets that cannot be allocated to CGUs within the legal
entities of the Group were sensitive to reasonably possible adverse
changes in cash flow projections and discount rates, which could
result in a recoverable amount that is lower than the carrying
amount. Corporate Centre non-financial assets include owned
property, plant and equipment ($2.1bn), right-of-use assets
($0.6bn) and other intangible assets ($0.5bn). A 12% decrease in
cash flow projections or a 110bps increase in the discount rate
(from 10.5% to 11.6%) would reduce the current CGU headroom
($27.5bn) to nil.
Present value of in-force long-term insurance business
When calculating the present value of in-force long-term
('PVIF') insurance business, expected cash flows are projected
after adjusting for a variety of assumptions made by each insurance
operation to reflect local market conditions, and management's
judgement of future trends and uncertainty in the underlying
assumptions is reflected by applying margins (as opposed to a cost
of capital methodology) including valuing the cost of policyholder
options and guarantees using stochastic techniques.
Actuarial Control Committees of each key insurance entity meet
on a quarterly basis to review and approve PVIF assumptions. All
changes to non-economic assumptions, economic assumptions that are
not observable and model methodologies must be approved by the
Actuarial Control Committee.
Movements in PVIF
2020 2019
Footnotes $m $m
--------------------------------------------------- --------- ------- -------
At 1 Jan 8,945 7,149
--------------------------------------------------- --------- ------- -----
Change in PVIF of long-term insurance business 382 1,749
--------------------------------------------------- --------- ------- -----
- value of new business written during the year 776 1,225
--------------------------------------------------- ---------
- expected return 1 (1,003) (836)
--------------------------------------------------- ---------
- assumption changes and experience variances (see
below) 604 1,378
--------------------------------------------------- ---------
- other adjustments 5 (18)
Exchange differences and other movements 108 47
--------------------------------------------------- --------- ------- -----
At 31 Dec 9,435 8,945
--------------------------------------------------- --------- ------- -----
1 'Expected return' represents the unwinding of the discount
rate and reversal of expected cash flows for the period.
1
Assumption changes and experience variances
Included within this line item are:
-- $132m (2019: $1,126m), directly offsetting interest
rate-driven changes to the valuation of liabilities under insurance
contracts;
-- $247m (2019: $36m), reflecting the future expected sharing of
returns with policyholders on contracts with discretionary
participation features ('DPF'), to the extent this sharing is not
already included in liabilities under insurance contracts; and
-- $225m (2019: $216m), driven by other assumptions changes and experience variances.
Key assumptions used in the computation of PVIF for main life
insurance operations
Economic assumptions are set in a way that is consistent with
observable market values. The valuation of PVIF is sensitive to
observed market movements and the impact of such changes is
included in the sensitivities presented below.
2020 2019
Hong Kong France(1) Hong Kong France(1)
% % % %
------------------------------------ --------- --------- --------- -----------
Weighted average risk-free rate 0.71 0.34 1.84 0.44
------------------------------------ --------- --------- --------- ---------
Weighted average risk discount rate 4.96 1.34 5.44 1.27
------------------------------------ --------- --------- --------- ---------
Expense inflation 3.00 1.60 3.00 1.70
------------------------------------ --------- --------- --------- ---------
1 For 2020, the calculation of France's PVIF assumes a risk
discount rate of 1.34% (2019: 1.27%) plus a risk margin of $213m
(2019: $130m).
1
Sensitivity to changes in economic assumptions
The Group sets the risk discount rate applied to the PVIF
calculation by starting from a risk-free rate curve and adding
explicit allowances for risks not reflected in the best-estimate
cash flow modelling. Where the insurance operations provide options
and guarantees to policyholders, the cost of these options and
guarantees is accounted for as a deduction from the PVIF asset,
unless the cost of such guarantees is already allowed for as an
explicit addition to liabilities under insurance contracts. For
further details of these guarantees and the impact of changes in
economic assumptions on our insurance manufacturing subsidiaries,
see page 193.
Sensitivity to changes in non-economic assumptions
Policyholder liabilities and PVIF are determined by reference to
non-economic assumptions, including mortality and/or morbidity,
lapse rates and expense rates. For further details on the impact of
changes in non-economic assumptions on our insurance manufacturing
operations, see page 194.
22 Prepayments, accrued income and other assets
--------------------------------------------
2020 2019
$m $m
----------------------------------------------------------- ------- ---------
Prepayments and accrued income 8,114 9,057
----------------------------------------------------------- ------- -------
Settlement accounts 17,316 14,744
----------------------------------------------------------- ------- -------
Cash collateral and margin receivables 59,543 49,148
----------------------------------------------------------- ------- -------
Assets held for sale 299 123
----------------------------------------------------------- ------- -------
Bullion 20,151 14,830
----------------------------------------------------------- ------- -------
Endorsements and acceptances 10,278 10,198
----------------------------------------------------------- ------- -------
Reinsurers' share of liabilities under insurance contracts
(Note 4) 3,448 3,592
----------------------------------------------------------- ------- -------
Employee benefit assets (Note 5) 10,450 8,280
----------------------------------------------------------- ------- -------
Right-of-use assets 4,002 4,222
----------------------------------------------------------- ------- -------
Owned property, plant and equipment 10,412 10,480
----------------------------------------------------------- ------- -------
Other accounts 12,399 12,006
----------------------------------------------------------- ------- -------
At 31 Dec 156,412 136,680
----------------------------------------------------------- ------- -------
Prepayments, accrued income and other assets include $105,469m
(2019: $92,979m) of financial assets, the majority of which are
measured at amortised cost.
23 Trading liabilities
-------------------
2020 2019
Footnotes $m $m
------------------------------------------------------ --------- ------ --------
Deposits by banks 1 6,689 4,187
------------------------------------------------------ --------- ------ ------
Customer accounts 1 10,681 6,999
------------------------------------------------------ --------- ------ ------
Other debt securities in issue (Note 25) 1,582 1,404
------------------------------------------------------ --------- ------ ------
Other liabilities - net short positions in securities 56,314 70,580
------------------------------------------------------ --------- ------ ------
At 31 Dec 75,266 83,170
------------------------------------------------------ --------- ------ ------
1 'Deposits by banks' and 'Customer accounts' include repos, stock lending and other amounts.
1
24 Financial liabilities designated at fair value
----------------------------------------------
HSBC
2020 2019
Footnotes $m $m
---------------------------------------------------- --------- ------- ---------
1,
Deposits by banks and customer accounts 2 19,176 17,660
---------------------------------------------------- --------- ------- -------
Liabilities to customers under investment contracts 6,385 5,893
---------------------------------------------------- --------- ------- -------
Debt securities in issue (Note 25) 121,034 130,364
---------------------------------------------------- --------- ------- -------
Subordinated liabilities (Note 28) 10,844 10,130
---------------------------------------------------- --------- ------- -------
Preferred securities (Note 28) - 419
---------------------------------------------------- --------- ------- -------
At 31 Dec 157,439 164,466
---------------------------------------------------- --------- ------- -------
1 Structured deposits placed at HSBC Bank USA are insured by the
Federal Deposit Insurance Corporation, a US government agency, up
to $250,000 per depositor.
2 In 2020, cash prime brokerage balances of $3,889m have been
presented as a single balance, resulting in a reclassification from
customer accounts at amortised cost to provide more relevant
information on the effect of these transactions on the Group's
financial position. Comparatives have not been re-presented.
The carrying amount of financial liabilities designated at fair
value was $9,333m more than the contractual amount at maturity
(2019: $6,120m more). The cumulative amount of change in fair value
attributable to changes in credit risk was a loss of $2,542m (2019:
loss of $2,877m).
HSBC Holdings
2020 2019
$m $m
----------------------------------- ------ --------
Debt securities in issue (Note 25) 19,624 24,687
----------------------------------- ------ ------
Subordinated liabilities (Note 28) 6,040 5,616
----------------------------------- ------ ------
At 31 Dec 25,664 30,303
----------------------------------- ------ ------
The carrying amount of financial liabilities designated at fair
value was $3,019m more than the contractual amount at maturity
(2019: $2,227m more). The cumulative amount of change in fair
value attributable to changes in credit risk was a loss of $1,210m
(2019: $1,386m).
25 Debt securities in issue
------------------------
HSBC
2020 2019
$m $m
------------------------------------------------- --------- -----------
Bonds and medium-term notes 176,570 180,969
-------------------------------------------------- --------- ---------
Other debt securities in issue 41,538 55,354
-------------------------------------------------- --------- ---------
Total debt securities in issue 218,108 236,323
-------------------------------------------------- --------- ---------
Included within:
------------------------------------------------- --------- -----------
- trading liabilities (Note 23) (1,582) (1,404)
-------------------------------------------------- --------- ---------
- financial liabilities designated at fair value
(Note 24) (121,034) (130,364)
-------------------------------------------------- --------- ---------
At 31 Dec 95,492 104,555
-------------------------------------------------- --------- ---------
HSBC Holdings
2020 2019
$m $m
------------------------------------------------------- -------- ----------
Debt securities 83,653 81,531
------------------------------------------------------- -------- --------
Included within:
------------------------------------------------------- -------- ----------
- financial liabilities designated at fair value (Note
24) (19,624) (24,687)
------------------------------------------------------- -------- --------
At 31 Dec 64,029 56,844
------------------------------------------------------- -------- --------
26 Accruals, deferred income and other liabilities
-----------------------------------------------
2020 2019
$m $m
-------------------------------------- ------- ---------
Accruals and deferred income 10,406 11,808
-------------------------------------- ------- -------
Settlement accounts 13,008 14,356
-------------------------------------- ------- -------
Cash collateral and margin payables 65,557 56,646
-------------------------------------- ------- -------
Endorsements and acceptances 10,293 10,127
-------------------------------------- ------- -------
Employee benefit liabilities (Note 5) 2,025 1,771
-------------------------------------- ------- -------
Lease liabilities 4,614 4,604
-------------------------------------- ------- -------
Other liabilities 22,721 18,844
-------------------------------------- ------- -------
At 31 Dec 128,624 118,156
-------------------------------------- ------- -------
Accruals, deferred income and other liabilities include
$120,229m (2019: $111,395m) of financial liabilities, the majority
of which are measured at amortised cost.
27 Provisions
----------
Legal proceedings
Restructuring and regulatory Customer Other
costs matters remediation provisions Total
$m $m $m $m $m
---------------------------------- ------------- ----------------- ------------ ----------- ---------
Provisions (excluding contractual
commitments)
---------------------------------- ------------- ----------------- ------------ ----------- ---------
At 1 Jan 2020 356 605 1,646 280 2,887
---------------------------------- ------------- ----------------- ------------ ----------- -------
Additions 698 347 189 222 1,456
---------------------------------- ------------- ----------------- ------------ ----------- -------
Amounts utilised (322) (177) (739) (125) (1,363)
---------------------------------- ------------- ----------------- ------------ ----------- -------
Unused amounts reversed (74) (75) (240) (80) (469)
---------------------------------- ------------- ----------------- ------------ ----------- -------
Exchange and other movements 13 56 2 8 79
---------------------------------- ------------- ----------------- ------------ ----------- -------
At 31 Dec 2020 671 756 858 305 2,590
---------------------------------- ------------- ----------------- ------------ ----------- -------
Contractual commitments(1)
---------------------------------- ------------- ----------------- ------------ ----------- ---------
At 1 Jan 2020 511
---------------------------------- ------------- ----------------- ------------ ----------- -------
Net change in expected credit
loss provision and other
movements 577
---------------------------------- ------------- ----------------- ------------ ----------- -------
At 31 Dec 2020 1,088
---------------------------------- ------------- ----------------- ------------ ----------- -------
Total provisions
---------------------------------- ------------- ----------------- ------------ ----------- ---------
At 31 Dec 2019 3,398
---------------------------------- ------------- ----------------- ------------ ----------- -------
At 31 Dec 2020 3,678
---------------------------------- ------------- ----------------- ------------ ----------- -------
Provisions (excluding contractual
commitments)
---------------------------------- ----- ----- ----- ----- ---------
At 1 Jan 2019 130 1,128 788 357 2,403
---------------------------------- ----- ----- ----- ----- -------
Additions 402 282 1,674 223 2,581
---------------------------------- ----- ----- ----- ----- -------
Amounts utilised (203) (660) (837) (81) (1,781)
---------------------------------- ----- ----- ----- ----- -------
Unused amounts reversed (34) (158) (49) (108) (349)
---------------------------------- ----- ----- ----- ----- -------
Exchange and other movements 61 13 70 (111) 33
---------------------------------- ----- ----- ----- ----- -------
At 31 Dec 2019 356 605 1,646 280 2,887
---------------------------------- ----- ----- ----- ----- -------
Contractual commitments(1)
---------------------------------- ----- ----- ----- ----- ---------
At 1 Jan 2019 517
---------------------------------- ----- ----- ----- ----- -------
Net change in expected credit
loss provision and other
movements (6)
---------------------------------- ----- ----- ----- ----- -------
At 31 Dec 2019 511
---------------------------------- ----- ----- ----- ----- -------
Total provisions
---------------------------------- ----- ----- ----- ----- ---------
At 31 Dec 2018 2,920
---------------------------------- ----- ----- ----- ----- -------
At 31 Dec 2019 3,398
---------------------------------- ----- ----- ----- ----- -------
1 Contractual commitments include the provision for contingent
liabilities measured under IFRS 9 'Financial Instruments' in
respect of financial guarantees and the expected credit loss
provision on off-balance sheet guarantees and commitments.
Further details of 'Legal proceedings and regulatory matters'
are set out in Note 34. Legal proceedings include civil court,
arbitration or tribunal proceedings brought against HSBC companies
(whether by way of claim or counterclaim) or civil disputes that
may, if not settled, result in court, arbitration or tribunal
proceedings. Regulatory matters refer to investigations, reviews
and other actions carried out by, or in response to the actions of,
regulators or law enforcement agencies in connection with alleged
wrongdoing by HSBC.
Customer remediation refers to HSBC's activities to compensate
customers for losses or damages associated with a failure to comply
with regulations or to treat customers fairly. Customer remediation
is often initiated by HSBC in response to customer complaints
and/or industry developments in sales practices and is not
necessarily initiated by regulatory action. Further details of
customer remediation are set out in this note.
At 31 December 2020, $0.3bn (2019: $1.1bn) of the customer
remediation provision related to the estimated liability for
redress in respect of the possible mis-selling of payment
protection insurance ('PPI') policies in previous years. Of the
$1.1bn balance at 31 December 2019, $0.6bn has been utilised during
2020 and an unused release of $0.1bn was recognised.
At 31 December 2020, a provision of $0.3bn (2019: $0.3bn) was
held relating to the estimated liability for redress payable to
customers following a review of historical collections and
recoveries practices in the UK.
For further details of the impact of IFRS 9 on undrawn loan
commitments and financial guarantees, presented in 'Contractual
commitments', see Note 32. This provision results from the adoption
of IFRS 9 and has no comparatives. Further analysis of the movement
in the expected credit loss provision is disclosed within the
'Reconciliation of allowances for loans and advances to banks and
customers including loan commitments and financial guarantees'
table on page 136.
28 Subordinated liabilities
------------------------
HSBC's subordinated liabilities
2020 2019
$m $m
----------------------------------- ------ --------
At amortised cost 21,951 24,600
----------------------------------- ------ ------
- subordinated liabilities 20,095 22,775
-----------------------------------
- preferred securities 1,856 1,825
----------------------------------- ------ ------
Designated at fair value (Note 24) 10,844 10,549
----------------------------------- ------ ------
- subordinated liabilities 10,844 10,130
-----------------------------------
- preferred securities - 419
----------------------------------- ------ ------
At 31 Dec 32,795 35,149
----------------------------------- ------ ------
Issued by HSBC subsidiaries 10,223 12,363
----------------------------------- ------ ------
Issued by HSBC Holdings 22,572 22,786
----------------------------------- ------ ------
Subordinated liabilities rank behind senior obligations and
generally count towards the capital base of HSBC. Capital
securities may be called and redeemed by HSBC subject to prior
notification to the PRA and, where relevant, the consent of the
local banking regulator. If not redeemed at the first call date,
coupons payable may reset or become floating rate based on
interbank rates. On subordinated liabilities other than floating
rate notes, interest is payable at fixed rates of up to
10.176%.
The balance sheet amounts disclosed in the following table are
presented on an IFRS basis and do not reflect the amount that the
instruments contribute to regulatory capital, principally due to
regulatory amortisation and regulatory eligibility limits.
HSBC's subsidiaries subordinated liabilities in issue
2020 2019
First
call Maturity
Footnotes date date $m $m
--------- ---------- -------- -------- --------
Additional tier 1 capital securities guaranteed
by HSBC Holdings 1
--------- ---------- -------- -------- --------
10.176% non-cumulative step-up perpetual
$900m preferred securities, series 2 Jun 2030 900 900
------- ---------------------------------------- --------- ---------- -------- ------ ------
900 900
------- ---------------------------------------- --------- ---------- -------- ------ ------
Additional tier 1 capital securities guaranteed
by HSBC Bank plc 1
--------- ---------- -------- -------- --------
5.862% non-cumulative step-up perpetual
GBP300m preferred securities 2 Apr 2020 - 420
------- ---------------------------------------- --------- ---------- -------- ------ ------
5.844% non-cumulative step-up perpetual
GBP700m preferred securities Nov 2031 956 925
------- ---------------------------------------- --------- ---------- -------- ------ ------
956 1,345
------- ---------------------------------------- --------- ---------- -------- ------ ------
Tier 2 securities issued by HSBC Bank plc
------------------------------------------------- --------- ---------- -------- -------- --------
Undated floating rate primary capital
$750m notes Jun 1990 750 750
------- ---------------------------------------- --------- ---------- -------- ------ ------
Undated floating rate primary capital
$500m notes Sep 1990 500 500
------- ---------------------------------------- --------- ---------- -------- ------ ------
Undated floating rate primary capital
$300m notes, series 3 Jun 1992 300 300
------- ---------------------------------------- --------- ---------- -------- ------ ------
$300m 7.65% subordinated notes - May 2025 300 300
------- ---------------------------------------- --------- -------- -------- ------ ------
1,850 1,850
------- ---------------------------------------- --------- ---------- -------- ------ ------
GBP300m 6.50% subordinated notes - Jul 2023 409 396
------- ---------------------------------------- --------- -------- -------- ------ ------
5.375% callable subordinated step-up
GBP350m notes 3 Nov 2025 Nov 2030 583 549
------- ---------------------------------------- --------- ---------- -------- ------ ------
GBP500m 5.375% subordinated notes - Aug 2033 981 875
------- ---------------------------------------- --------- -------- -------- ------ ------
GBP225m 6.25% subordinated notes - Jan 2041 306 296
------- ---------------------------------------- --------- -------- -------- ------ ------
GBP600m 4.75% subordinated notes - Mar 2046 812 785
------- ---------------------------------------- --------- -------- -------- ------ ------
3,091 2,901
------- ---------------------------------------- --------- ---------- -------- ------ ------
4,941 4,751
------- ---------------------------------------- --------- ---------- -------- ------ ------
Tier 2 securities issued by The Hongkong
and Shanghai Banking Corporation Ltd
--------- ---------- -------- -------- --------
Primary capital undated floating
$400m rate notes (third series) Jul 1991 400 400
------- ---------------------------------------- --------- ---------- -------- ------ ------
400 400
------- ---------------------------------------- --------- ---------- -------- ------ ------
Tier 2 securities issued by HSBC Bank Malaysia
Berhad
--------- ---------- -------- -------- --------
MYR500m 5.05% subordinated bonds 7 Nov 2022 Nov 2027 124 122
------- ---------------------------------------- --------- ---------- -------- ------ ------
124 122
------- ---------------------------------------- --------- ---------- -------- ------ ------
Tier 2 securities issued by HSBC USA Inc. 7
------------------------------------------------- --------- ---------- -------- -------- --------
$750m 5.00% subordinated notes 8 - Sep 2020 - 748
------- ---------------------------------------- --------- -------- -------- ------ ------
$250m 7.20% subordinated debentures - Jul 2097 222 221
------- ---------------------------------------- --------- -------- -------- ------ ------
Other subordinated liabilities each
less than $150m 200 202
------- ---------------------------------------- --------- ---------- -------- ------ ------
422 1,171
------- ---------------------------------------- --------- ---------- -------- ------ ------
Tier 2 securities issued by HSBC Bank USA,
N.A.
--------- ---------- -------- -------- --------
$1,250m 4.875% subordinated notes 8 - Aug 2020 - 1,246
------- ---------------------------------------- --------- -------- -------- ------ ------
$1,000m 5.875% subordinated notes 5 - Nov 2034 497 463
------- ---------------------------------------- --------- -------- -------- ------ ------
$750m 5.625% subordinated notes 5 - Aug 2035 533 496
------- ---------------------------------------- --------- -------- -------- ------ ------
$700m 7.00% subordinated notes - Jan 2039 700 700
------- ---------------------------------------- --------- -------- -------- ------ ------
1,730 2,905
------- ---------------------------------------- --------- ---------- -------- ------ ------
Tier 2 securities issued by HSBC Finance
Corporation
------------------------------------------------- --------- ---------- -------- -------- --------
$2,939m 6.676% senior subordinated notes 6,7 - Jan 2021 509 507
------- ---------------------------------------- --------- -------- -------- ------ ------
Tier 2 securities issued by HSBC Bank Canada
------------------------------------------------- --------- ---------- -------- -------- --------
Other subordinated liabilities each
less than $150.00m Oct 1996 Nov 2083 9 26
------- ---------------------------------------- --------- ---------- -------- ------ ------
9 26
------- ---------------------------------------- --------- ---------- -------- ------ ------
Securities issued by other HSBC subsidiaries
--------- ---------- -------- -------- --------
Other subordinated liabilities each less
than $200m 4 232 236
--------- ---------- -------- ------ ------
Subordinated liabilities issued by HSBC
subsidiaries at 31 Dec 10,223 12,363
------------------------------------------------- --------- ---------- -------- ------ ------
1 See paragraph below, 'Guaranteed by HSBC Holdings or HSBC Bank plc'.
2 HSBC Bank plc exercised the call option on the security in
April 2020 and the security was subsequently redeemed.
3 The interest rate payable after November 2025 is the sum of
the three-month sterling Libor plus 1.5 percentage points.
4 These securities are included in the capital base of HSBC, a
subset of which are included in accordance with the grandfathering
provisions under CRR II, with the exception of $109m in relation to
securities which matured 31 December 2020, settlement expected in
June 2021, which are no longer eligible for inclusion in the
capital base of HSBC.
5 HSBC tendered for these securities in November 2019. The
principal balance is $358m and $383m respectively. The original
notional value of these securities are $1,000m and $750m
respectively.
6 HSBC tendered for these securities in 2017. In January 2018, a
further tender was conducted. The principal balance is $507m. The
original notional of these securities is $2,939m. This instrument
matured and settled in January 2021.
7 These securities are ineligible for inclusion in the capital base of HSBC.
8 These securities matured in 2020 and were redeemed.
HSBC Holdings' subordinated liabilities
2020 2019
$m $m
----------------------------------- ------ --------
At amortised cost 17,916 18,361
----------------------------------- ------ ------
Designated at fair value (Note 24) 6,040 5,616
----------------------------------- ------ ------
At 31 Dec 23,956 23,977
----------------------------------- ------ ------
HSBC Holdings' subordinated liabilities in issue
First
call Maturity 2020 2019
Footnotes date date $m $m
--------- ---------- --------- -------- --------
Tier 2 securities issued by HSBC Holdings
--------- ---------- --------- -------- --------
Amounts owed to third parties
--------- ---------- --------- -------- --------
$2,000m 4.25% subordinated notes 2,3 - Mar 2024 2,151 2,076
---------- ------------------------------- --------- -------- --------- ------ ------
$1,500m 4.25% subordinated notes 2 - Aug 2025 1,702 1,611
---------- ------------------------------- --------- -------- --------- ------ ------
$1,500m 4.375% subordinated notes 2 - Nov 2026 1,736 1,626
---------- ------------------------------- --------- -------- --------- ------ ------
$488m 7.625% subordinated notes 1 - May 2032 541 545
---------- ------------------------------- --------- -------- --------- ------ ------
$222m 7.35% subordinated notes 1 - Nov 2032 243 245
---------- ------------------------------- --------- -------- --------- ------ ------
$2,000m 6.50% subordinated notes 1 - May 2036 2,034 2,036
---------- ------------------------------- --------- -------- --------- ------ ------
$2,500m 6.50% subordinated notes 1 - Sep 2037 3,033 2,738
---------- ------------------------------- --------- -------- --------- ------ ------
$1,500m 6.80% subordinated notes 1 - Jun 2038 1,490 1,490
---------- ------------------------------- --------- -------- --------- ------ ------
$1,500m 5.25% subordinated notes 2 - Mar 2044 2,092 1,886
---------- ------------------------------- --------- -------- --------- ------ ------
GBP650m 5.75% subordinated notes 2 - Dec 2027 1,130 1,059
---------- ------------------------------- --------- -------- --------- ------ ------
GBP650m 6.75% subordinated notes 2 - Sep 2028 884 855
---------- ------------------------------- --------- -------- --------- ------ ------
GBP750m 7.00% subordinated notes 2 - Apr 2038 1,157 1,064
---------- ------------------------------- --------- -------- --------- ------ ------
GBP900m 6.00% subordinated notes 2 - Mar 2040 1,483 1,294
---------- ------------------------------- --------- -------- --------- ------ ------
EUR1,500m 3.0% subordinated notes 2 - Jun 2025 1,916 1,736
---------- ------------------------------- --------- -------- --------- ------ ------
EUR1,000m 3.125% subordinated notes 2 - Jun 2028 1,472 1,321
---------- ------------------------------- --------- -------- --------- ------ ------
23,064 21,582
---------- ------------------------------- --------- ---------- --------- ------ ------
Amounts owed to HSBC undertakings
--------- ---------- --------- -------- --------
10.176% subordinated step-up
$900m cumulative notes Jun 2030 Jun 2040 892 892
---------- ------------------------------- --------- ---------- --------- ------ ------
892 892
---------- ------------------------------- --------- ---------- --------- ------ ------
Other securities issued by HSBC Holdings
--------- ---------- --------- -------- --------
Amounts owed to third parties
--------- ---------- --------- -------- --------
5.625% contingent convertible
$1,500m securities 4 Nov 2019 Jan 2020 - 1,503
---------- ------------------------------- --------- ---------- --------- ------ ------
- 1,503
---------- ------------------------------- --------- ---------- --------- ------ ------
At 31 Dec 23,956 23,977
------------------------------------------- --------- ---------- --------- ------ ------
1 Amounts owed to third parties represent securities included in
the capital base of HSBC as tier 2 securities in accordance with
the grandfathering provisions under CRR II. Prior period figures
are included on a CRD IV basis.
2 These securities are included in the capital base of HSBC as
fully CRR II-compliant tier 2 securities on an end point basis.
3 These subordinated notes are measured at amortised cost in
HSBC Holdings, where the interest rate risk is hedged using a fair
value hedge, while they are measured at fair value in the
Group.
4 This security was called by HSBC Holdings on 22 November 2019
and was redeemed and cancelled on 17 January 2020. Between the date
of exercise of the call option and the redemption, this security
was considered to be a subordinated liability. Refer to Note 31 for
further details on additional tier 1 securities.
Guaranteed by HSBC Holdings or HSBC Bank plc
Capital securities guaranteed by HSBC Holdings or HSBC Bank plc
were issued by the Jersey limited partnerships. The proceeds of
these were lent to the respective guarantors by the limited
partnerships in the form of subordinated notes. They qualify as
additional tier 1 capital for HSBC under CRR II by virtue of the
application of grandfathering provisions. The capital security
guaranteed by HSBC Bank plc also qualifies as additional tier 1
capital for HSBC Bank plc (on a solo and a consolidated basis)
under CRR II by virtue of the same grandfathering process.
These preferred securities, together with the guarantee, are
intended to provide investors with rights to income and capital
distributions and distributions upon liquidation of the relevant
issuer that are equivalent to the rights that they would have had
if they had purchased non-cumulative perpetual preference shares of
the relevant issuer. There are limitations on the payment of
distributions if such payments are prohibited under UK banking
regulations or other requirements, if a payment would cause a
breach of HSBC's capital adequacy requirements, or if HSBC Holdings
or HSBC Bank plc has insufficient distributable reserves (as
defined).
HSBC Holdings and HSBC Bank plc have individually covenanted
that, if prevented under certain circumstances from paying
distributions on the preferred securities in full, they will not
pay dividends or other distributions in respect of their ordinary
shares, or repurchase or redeem their ordinary shares, until the
distribution on the preferred securities has been paid in full.
If the consolidated total capital ratio of HSBC Holdings falls
below the regulatory minimum required or if the Directors expect it
to do so in the near term, provided that proceedings have not been
commenced for the liquidation, dissolution or winding up of HSBC
Holdings, the holders' interests in the preferred securities
guaranteed by HSBC Holdings will be exchanged for interests in
preference shares issued by HSBC Holdings that have economic terms
which are in all material respects equivalent to the preferred
securities and their guarantee.
If the preferred securities guaranteed by HSBC Bank plc are
outstanding in November 2048, or if the total capital ratio of HSBC
Bank plc (on a solo or consolidated basis) falls below the
regulatory minimum required, or if the Directors expect it to do so
in the near term, provided that proceedings have not been commenced
for the liquidation, dissolution or winding up of HSBC Bank plc,
the holders' interests in the preferred security guaranteed by HSBC
Bank plc will be exchanged for interests in preference shares
issued by HSBC Bank plc that have economic terms which are in all
material respects equivalent to the preferred security and its
guarantee.
Tier 2 securities
Tier 2 capital securities are either perpetual or dated
subordinated securities on which there is an obligation to pay
coupons. These capital securities are included within HSBC's
regulatory capital base as tier 2 capital under CRR II, either as
fully eligible capital or by virtue of the application of
grandfathering provisions. In accordance with CRR II, the capital
contribution of all tier 2 securities is amortised for regulatory
purposes in their final five years before maturity.
29 Maturity analysis of assets, liabilities and off-balance sheet commitments
--------------------------------------------------------------------------
The table on page 348 provides an analysis of consolidated total
assets, liabilities and off-balance sheet commitments by residual
contractual maturity at the balance sheet date. These balances are
included in the maturity analysis as follows:
-- Trading assets and liabilities (including trading derivatives
but excluding reverse repos, repos and debt securities in issue)
are included in the 'Due not more than 1 month' time bucket,
because trading balances are typically held for short periods of
time.
-- Financial assets and liabilities with no contractual maturity
(such as equity securities) are included in the 'Due over 5 years'
time bucket. Undated or perpetual instruments are classified based
on the contractual notice period, which the counterparty of the
instrument is entitled to give. Where there is no contractual
notice period, undated or perpetual contracts are included in the
'Due over 5 years' time bucket.
-- Non-financial assets and liabilities with no contractual
maturity are included in the 'Due over 5 years' time bucket.
-- Financial instruments included within assets and liabilities
of disposal groups held for sale are classified on the basis of the
contractual maturity of the underlying instruments and not on the
basis of the disposal transaction.
-- Liabilities under insurance contracts are included in the
'Due over 5 years' time bucket. Liabilities under investment
contracts are classified in accordance with their contractual
maturity. Undated investment contracts are included in the 'Due
over 5 years' time bucket, although such contracts are subject to
surrender and transfer options by the policyholders.
-- Loan and other credit-related commitments are classified on
the basis of the earliest date they can be drawn down.
--
HSBC
Maturity analysis of assets, liabilities and off-balance sheet commitments
Due Due
Due over over Due
over 3 6 over Due Due
1 month months months 9 over over
but but but months 1 year 2 years
Due not not not but but but
not more more more not not not
more than than than more more more Due
than 3 6 9 than than than over
1 month months months months 1 year 2 years 5 years 5 years Total
$m $m $m $m $m $m $m $m $m
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- -----------
Financial assets
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- -----------
Cash and balances at
central banks 304,481 - - - - - - - 304,481
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Items in the course
of collection from other
banks 4,094 - - - - - - - 4,094
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Hong Kong Government
certificates of indebtedness 40,420 - - - - - - - 40,420
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Trading assets 228,434 1,778 458 135 67 644 474 - 231,990
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Financial assets designated
or otherwise mandatorily
measured at fair value 3,061 240 466 262 454 1,424 1,992 37,654 45,553
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Derivatives 306,561 15 12 14 14 441 424 245 307,726
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Loans and advances to
banks 51,652 11,283 5,640 3,068 2,284 4,059 3,359 271 81,616
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Loans and advances to
customers 172,306 70,746 65,838 44,392 38,606 112,440 206,448 327,211 1,037,987
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
* personal 51,711 9,645 7,918 7,270 7,033 26,318 70,447 275,736 456,078
--------------------------------------------------------
* corporate and commercial 101,684 55,009 51,755 31,529 28,553 76,225 125,393 47,446 517,594
--------------------------------------------------------
* financial 18,911 6,092 6,165 5,593 3,020 9,897 10,608 4,029 64,315
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Reverse repurchase agreements
- non-trading 157,234 44,658 16,655 5,113 1,324 3,058 2,586 - 230,628
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Financial investments 47,270 77,450 44,255 14,523 24,112 48,741 100,007 134,335 490,693
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Accrued income and other
financial assets 93,118 5,951 2,743 475 458 267 444 2,107 105,563
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Financial assets at
31 Dec 2020 1,408,631 212,121 136,067 67,982 67,319 171,074 315,734 501,823 2,880,751
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Non-financial assets - - - - - - - 103,413 103,413
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Total assets at 31 Dec
2020 1,408,631 212,121 136,067 67,982 67,319 171,074 315,734 605,236 2,984,164
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Off-balance sheet commitments
received
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- -----------
Loan and other credit-related
commitments 60,849 - - - - - - - 60,849
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Financial liabilities
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- -----------
Hong Kong currency notes
in circulation 40,420 - - - - - - - 40,420
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Deposits by banks 60,973 1,396 714 695 197 718 16,757 630 82,080
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Customer accounts(1) 1,533,595 61,376 22,568 9,375 8,418 4,467 2,859 122 1,642,780
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
* personal 766,631 32,429 15,511 6,276 5,825 3,591 1,976 39 832,278
--------------------------------------------------------
* corporate and commercial 588,887 22,856 5,963 2,966 2,058 627 777 37 624,171
--------------------------------------------------------
* financial 178,077 6,091 1,094 133 535 249 106 46 186,331
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Repurchase agreements
- non-trading 102,633 3,979 2,165 386 675 16 1,035 1,012 111,901
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Items in the course
of transmission to other
banks 4,343 - - - - - - - 4,343
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Trading liabilities 70,799 3,377 400 143 185 289 72 1 75,266
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Financial liabilities
designated at
fair value 18,434 7,333 6,973 6,775 6,593 14,182 40,510 56,639 157,439
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
* debt securities in issue: covered bonds - - - - - 1,239 2,918 - 4,157
--------------------------------------------------------
* debt securities in issue: unsecured 10,762 4,470 5,522 5,604 5,530 10,455 31,710 42,825 116,878
--------------------------------------------------------
* subordinated liabilities and preferred securities - - - - - - 3,912 6,932 10,844
--------------------------------------------------------
* other(2) 7,672 2,863 1,451 1,171 1,063 2,488 1,970 6,882 25,560
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Derivatives 300,902 264 198 38 55 237 726 581 303,001
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Debt securities in issue 6,552 12,329 14,964 9,764 3,878 9,215 16,618 22,172 95,492
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
* covered bonds - - 28 - 750 1,275 999 - 3,052
--------------------------------------------------------
* otherwise secured 1,094 1,585 1,001 1,000 - 274 1,640 1,590 8,184
--------------------------------------------------------
* unsecured 5,458 10,744 13,935 8,764 3,128 7,666 13,979 20,582 84,256
Accruals and other financial
liabilities 96,821 9,794 3,886 692 1,174 1,742 3,179 3,053 120,341
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Subordinated liabilities 619 - 237 - 12 12 2,658 18,413 21,951
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Total financial liabilities
at 31 Dec 2020 2,236,091 99,848 52,105 27,868 21,187 30,878 84,414 102,623 2,655,014
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Non-financial liabilities - - - - - - - 124,155 124,155
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Total liabilities at
31 Dec 2020 2,236,091 99,848 52,105 27,868 21,187 30,878 84,414 226,778 2,779,169
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Off-balance sheet commitments
given
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- -----------
Loan and other credit-related
commitments 842,974 435 172 243 296 180 299 171 844,770
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
* personal 235,606 172 27 47 115 125 288 171 236,551
--------------------------------------------------------
* corporate and commercial 471,410 250 138 194 178 37 11 - 472,218
--------------------------------------------------------
* financial 135,958 13 7 2 3 18 - - 136,001
-------------------------------------------------------- --------- ------- ------- ------ ------ ------- ------- ------- ---------
Maturity analysis of assets, liabilities and off-balance sheet commitments
(continued)
Due Due
Due over over Due
over 3 6 over Due Due
1 month months months 9 over over
but but but months 1 year 2 years
Due not not not but but but
not more more more not not not
more than than than more more more Due
than 3 6 9 than than than over
1 month months months months 1 year 2 years 5 years 5 years Total
$m $m $m $m $m $m $m $m $m
--------------- --------- ------- ------- ------- ------- ------- ------- ------- -----------
Financial
assets
--------------- --------- ------- ------- ------- ------- ------- ------- ------- -----------
Cash and
balances at
central banks 154,099 - - - - - - - 154,099
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Items in the
course
of collection
from other
banks 4,956 - - - - - - - 4,956
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Hong Kong
Government
certificates
of
indebtedness 38,380 - - - - - - - 38,380
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Trading assets 252,009 644 412 62 452 152 540 - 254,271
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Financial
assets
designated
at fair value 4,846 74 381 200 422 780 2,356 34,568 43,627
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Derivatives 241,941 150 24 27 22 112 294 425 242,995
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Loans and
advances to
banks 41,554 7,826 4,877 2,592 2,859 6,848 2,005 642 69,203
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Loans and
advances to
customers 190,675 82,379 61,254 36,005 36,755 106,203 227,811 295,661 1,036,743
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
- personal 51,893 14,547 8,562 7,245 6,931 22,923 66,761 252,275 431,137
---------------
- corporate and
commercial 118,585 61,629 45,924 25,006 25,069 71,751 147,139 39,958 535,061
---------------
- financial 20,197 6,203 6,768 3,754 4,755 11,529 13,911 3,428 70,545
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Reverse
repurchase
agreements
- non-trading 164,741 38,997 17,933 8,226 6,305 2,298 2,362 - 240,862
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Financial
investments 36,128 64,472 35,795 17,485 18,202 48,427 90,193 132,610 443,312
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Accrued income
and other
financial
assets 80,661 5,544 2,532 915 495 432 363 2,037 92,979
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Financial
assets at
31 Dec 2019 1,209,990 200,086 123,208 65,512 65,512 165,252 325,924 465,943 2,621,427
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Non-financial
assets - - - - - - - 93,725 93,725
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Total assets at
31 Dec
2019 1,209,990 200,086 123,208 65,512 65,512 165,252 325,924 559,668 2,715,152
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Off-balance
sheet
commitments
received
--------------- --------- ------- ------- ------- ------- ------- ------- ------- -----------
Loan and other
credit-related
commitments 63,199 - - - - - - - 63,199
Financial
liabilities
--------------- --------- ------- ------- ------- ------- ------- ------- ------- -----------
Hong Kong
currency notes
in circulation 38,380 - - - - - - - 38,380
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Deposits by
banks 46,397 4,167 2,773 454 844 2,455 876 1,056 59,022
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Customer
accounts(1) 1,287,358 81,038 38,343 11,530 11,342 5,275 4,075 154 1,439,115
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
- personal 646,843 49,405 29,320 8,484 6,852 3,631 2,646 71 747,252
---------------
- corporate and
commercial 479,763 24,214 7,162 2,621 3,009 1,119 1,388 41 519,317
---------------
- financial 160,752 7,419 1,861 425 1,481 525 41 42 172,546
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Repurchase
agreements
- non-trading 132,042 3,402 1,579 1,882 59 354 2 1,024 140,344
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Items in the
course
of
transmission
to other
banks 4,817 - - - - - - - 4,817
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Trading
liabilities 82,130 209 265 148 102 287 29 - 83,170
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Financial
liabilities
designated at
fair value 12,844 4,667 4,236 4,552 5,196 26,081 43,534 63,356 164,466
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
- debt
securities in
issue: covered
bonds - - - - 1,139 - 2,663 1,159 4,961
---------------
- debt
securities in
issue:
unsecured 8,884 2,046 2,946 3,757 3,030 22,950 34,753 47,036 125,402
---------------
- subordinated
liabilities
and preferred
securities 23 - - - - - 2,131 8,396 10,550
---------------
- other 3,937 2,621 1,290 795 1,027 3,131 3,987 6,765 23,553
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Derivatives 237,901 105 73 10 18 68 540 782 239,497
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Debt securities
in issue 8,183 17,374 12,799 13,152 11,382 14,572 20,048 7,045 104,555
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
- covered bonds - - - - - 749 998 - 1,747
---------------
- otherwise
secured 2,015 2 248 161 - 219 958 1,663 5,266
---------------
- unsecured 6,168 17,372 12,551 12,991 11,382 13,604 18,092 5,382 97,542
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Accruals and
other
financial
liabilities 87,796 9,078 3,914 1,244 2,058 1,592 2,823 2,890 111,395
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Subordinated
liabilities 1,502 - 22 1,993 100 755 424 19,804 24,600
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Total financial
liabilities
at 31 Dec 2019 1,939,350 120,040 64,004 34,965 31,101 51,439 72,351 96,111 2,409,361
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Non-financial
liabilities - - - - - - - 113,123 113,123
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Total
liabilities at
31 Dec 2019 1,939,350 120,040 64,004 34,965 31,101 51,439 72,351 209,234 2,522,484
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
Off-balance
sheet
commitments
given
--------------- --------- ------- ------- ------- ------- ------- ------- ------- -----------
Loan and other
credit-related
commitments 794,336 600 590 313 551 442 458 318 797,608
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
- personal 221,952 40 39 56 167 208 392 299 223,153
---------------
- corporate and
commercial 460,569 117 96 52 381 218 66 19 461,518
---------------
- financial 111,815 443 455 205 3 16 - - 112,937
--------------- --------- ------- ------- ------- ------- ------- ------- ------- ---------
1 'Customer accounts' includes $463,524m (2019: $408,090m) insured by guarantee schemes.
2 In 2020, cash prime brokerage balances of $3,889m have been
presented as a single balance, resulting in a reclassification from
customer accounts at amortised cost to provide more relevant
information on the effect of these transactions on the Group's
financial position. Comparatives have not been re-presented.
1
HSBC Holdings
Maturity analysis of assets, liabilities and off-balance sheet commitments
(continued)
Due Due Due Due Due
over over over Due over over
1 3 6 over 1 2
month months months 9 year years
Due but but but months but but
not not not not but not not
more more more more not more more
than than than than more than than Due
1 3 6 9 than 2 5 over
month months months months 1 year years years 5 years Total
$m $m $m $m $m $m $m $m $m
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- ---------
Financial assets
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- ---------
Cash at bank and in
hand:
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- ---------
* balances with HSBC undertakings 2,913 - - - - - - - 2,913
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Derivatives 1,473 - 5 - - 9 1,131 2,080 4,698
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Loans and advances to
HSBC undertakings - 600 120 - - 312 6,027 3,384 10,443
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Financial assets with
HSBC undertakings designated
and otherwise mandatorily
measured at fair value - 451 - - - 4,320 23,203 37,279 65,253
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Financial investments 3,701 3,769 2,924 799 3,528 2,764 - - 17,485
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Accrued income and other
financial assets 1,015 275 100 33 22 - - - 1,445
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Total financial assets
at 31 Dec 2020 9,102 5,095 3,149 832 3,550 7,405 30,361 42,743 102,237
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Non-financial assets - - - - - - - 160,936 160,936
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Total assets at 31 Dec
2020 9,102 5,095 3,149 832 3,550 7,405 30,361 203,679 263,173
Financial liabilities
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- ---------
Amounts owed to HSBC
undertakings - 330 - - - - - - 330
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Financial liabilities
designated at fair value - 984 859 - - 3,088 3,810 16,923 25,664
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
* debt securities in issue - 984 859 - - 3,088 2,108 12,585 19,624
--------------------------------------------------------
* subordinated liabilities and preferred securities - - - - - - 1,702 4,338 6,040
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Derivatives 3,052 - - - - - - 8 3,060
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Debt securities in issue - 503 1,621 563 - 2,186 24,489 34,667 64,029
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Accruals and other financial
liabilities 3,769 689 301 57 12 - 1 36 4,865
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Subordinated liabilities - - - - - - 4,067 13,849 17,916
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
31 Dec 2020 6,821 2,506 2,781 620 12 5,274 32,367 65,483 115,864
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Non-financial liabilities - - - - - - - 509 509
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Total liabilities at
31 Dec 2020 6,821 2,506 2,781 620 12 5,274 32,367 65,992 116,373
Off-balance sheet commitments
given
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- ---------
Undrawn formal standby
facilities, credit lines
and other commitments
to lend - - - - - - - - -
-------------------------------------------------------- ----- ------ ------ ------ ------ ----- ------ ------- -------
Financial assets
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- ---------
Cash at bank and in
hand:
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- ---------
* balances with HSBC undertakings 2,382 - - - - - - - 2,382
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Derivatives 596 - - - - - 230 1,176 2,002
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Loans and advances to
HSBC undertakings 102 672 120 25 - 600 1,909 6,790 10,218
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Loans and advances to
HSBC undertakings designated
at fair value - - - - - 458 24,845 36,661 61,964
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Financial investments
in HSBC undertakings 2,754 3,493 1,873 2,251 2,721 3,014 - - 16,106
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Accrued income and other
financial assets 93 277 97 48 16 12 - - 543
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Total financial assets
at 31 Dec 2019 5,927 4,442 2,090 2,324 2,737 4,084 26,984 44,627 93,215
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Non-financial assets - - - - - - - 162,025 162,025
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Total assets at 31 Dec
2019 5,927 4,442 2,090 2,324 2,737 4,084 26,984 206,652 255,240
Financial liabilities
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- ---------
Amounts owed to HSBC
undertakings - 464 - - - - - - 464
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Financial liabilities
designated at fair value - - - - - 5,651 6,710 17,942 30,303
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
* debt securities in issue - - - - - 5,651 6,710 12,326 24,687
--------------------------------------------------------
* subordinated liabilities and preferred securities - - - - - - - 5,616 5,616
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Derivatives 1,838 - - - - 20 85 78 2,021
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Debt securities in issue - - - - - 10,134 23,786 22,924 56,844
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Accruals and other financial
liabilities 900 574 303 55 10 - - 35 1,877
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Subordinated liabilities 1,503 - - - - - 2,076 14,782 18,361
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Total financial liabilities
at 31 Dec 2019 4,241 1,038 303 55 10 15,805 32,657 55,761 109,870
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Non-financial liabilities - - - - - - - 326 326
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Total liabilities at
31 Dec 2019 4,241 1,038 303 55 10 15,805 32,657 56,087 110,196
Off-balance sheet commitments
given
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- ---------
Undrawn formal standby
facilities, credit lines
and other commitments
to lend - - - - - - - - -
-------------------------------------------------------- ----- ----- ----- ----- ----- ------ ------ ------- -------
Contractual maturity of financial liabilities
The following table shows, on an undiscounted basis, all cash
flows relating to principal and future coupon payments (except for
trading liabilities and derivatives not treated as hedging
derivatives). For this reason, balances in the following table do
not agree directly with those in our consolidated balance sheet.
Undiscounted cash flows payable in relation to hedging derivative
liabilities are classified according to their contractual
maturities. Trading liabilities and derivatives not treated as
hedging derivatives are included in the 'Due not more than 1 month'
time bucket and not by contractual maturity.
In addition, loans and other credit-related commitments and
financial guarantees are generally not recognised on our balance
sheet. The undiscounted cash flows potentially payable under loan
and other credit-related commitments and financial guarantees are
classified on the basis of the earliest date they can be
called.
Cash flows payable by HSBC under financial liabilities by remaining
contractual maturities
-----------
Due over Due over Due over
1 month 3 months 1 year
Due not but but but not
more not more not more more
than than than than Due over
1 month 3 months 1 year 5 years 5 years Total
$m $m $m $m $m $m
------------------------------------ --------- --------- --------- -------- -------- -----------
Deposits by banks 61,001 1,442 1,639 17,352 632 82,066
------------------------------------ --------- --------- --------- -------- -------- ---------
Customer accounts 1,530,584 64,809 40,755 7,720 153 1,644,021
------------------------------------ --------- --------- --------- -------- -------- ---------
Repurchase agreements - non-trading 102,664 3,984 3,257 1,058 1,017 111,980
------------------------------------ --------- --------- --------- -------- -------- ---------
Trading liabilities 75,266 - - - - 75,266
------------------------------------ --------- --------- --------- -------- -------- ---------
Financial liabilities designated
at fair value(1) 18,815 7,556 19,243 59,835 55,475 160,924
------------------------------------ --------- --------- --------- -------- -------- ---------
Derivatives 300,158 356 579 1,830 2,128 305,051
------------------------------------ --------- --------- --------- -------- -------- ---------
Debt securities in issue 6,551 12,709 29,520 28,787 24,075 101,642
------------------------------------ --------- --------- --------- -------- -------- ---------
Subordinated liabilities 739 170 1,102 7,024 28,812 37,847
------------------------------------ --------- --------- --------- -------- -------- ---------
Other financial liabilities 140,094 9,120 5,113 5,030 2,887 162,244
------------------------------------ --------- --------- --------- -------- -------- ---------
2,235,872 100,146 101,208 128,636 115,179 2,681,041
------------------------------------ --------- --------- --------- -------- -------- ---------
Loan and other credit-related
commitments 842,945 434 740 480 171 844,770
------------------------------------ --------- --------- --------- -------- -------- ---------
Financial guarantees(2) 18,200 13 93 37 41 18,384
------------------------------------ --------- --------- --------- -------- -------- ---------
At 31 Dec 2020 3,097,017 100,593 102,041 129,153 115,391 3,544,195
------------------------------------ --------- --------- --------- -------- -------- ---------
Proportion of cash flows payable
in period 87% 3% 3% 4% 3%
------------------------------------ --------- --------- --------- -------- -------- -----------
Deposits by banks 46,471 4,167 4,227 3,371 1,084 59,320
------------------------------------ --------- --------- --------- -------- -------- ---------
Customer accounts 1,288,577 81,037 62,105 9,900 191 1,441,810
------------------------------------ --------- --------- --------- -------- -------- ---------
Repurchase agreements - non-trading 132,156 3,403 3,565 368 1,036 140,528
------------------------------------ --------- --------- --------- -------- -------- ---------
Trading liabilities 83,170 - - - - 83,170
------------------------------------ --------- --------- --------- -------- -------- ---------
Financial liabilities designated
at fair value 13,447 4,666 14,747 76,155 68,045 177,060
------------------------------------ --------- --------- --------- -------- -------- ---------
Derivatives 237,897 105 522 1,076 1,691 241,291
------------------------------------ --------- --------- --------- -------- -------- ---------
Debt securities in issue 8,757 17,374 38,423 36,584 8,177 109,315
------------------------------------ --------- --------- --------- -------- -------- ---------
Subordinated liabilities 1,847 - 2,908 5,197 27,892 37,844
------------------------------------ --------- --------- --------- -------- -------- ---------
Other financial liabilities 127,898 9,079 6,792 5,637 2,992 152,398
------------------------------------ --------- --------- --------- -------- -------- ---------
1,940,220 119,831 133,289 138,288 111,108 2,442,736
------------------------------------ --------- --------- --------- -------- -------- ---------
Loan and other credit-related
commitments 795,243 601 561 886 317 797,608
------------------------------------ --------- --------- --------- -------- -------- ---------
Financial guarantees(2) 20,007 37 102 68 - 20,214
------------------------------------ --------- --------- --------- -------- -------- ---------
At 31 Dec 2019 2,755,470 120,469 133,952 139,242 111,425 3,260,558
------------------------------------ --------- --------- --------- -------- -------- ---------
Proportion of cash flows payable
in period 85% 4% 4% 4% 3%
------------------------------------ --------- --------- --------- -------- -------- -----------
1 In 2020, cash prime brokerage balances of $3,889m have been
presented as a single balance, resulting in a reclassification from
customer accounts at amortised cost to provide more relevant
information on the effect of these transactions on the Group's
financial position. Comparatives have not been re-presented.
2 Excludes performance guarantee contracts to which the
impairment requirements in IFRS 9 are not applied.
HSBC Holdings
HSBC Holdings' primary sources of liquidity are dividends
received from subsidiaries, interest on and repayment of
intra-Group loans and securities, and interest earned on its own
liquid funds. HSBC Holdings also raises funds in the debt capital
markets to meet the Group's minimum requirement for own funds and
eligible liabilities. HSBC Holdings uses this liquidity to meet its
obligations, including interest and principal repayments on
external debt liabilities, operating expenses and collateral on
derivative transactions.
HSBC Holdings is also subject to contingent liquidity risk by
virtue of credit-related commitments and guarantees and similar
contracts issued relating to its subsidiaries. Such commitments and
guarantees are only issued after due consideration of HSBC
Holdings' ability to finance the commitments and guarantees and the
likelihood of the need arising.
HSBC Holdings actively manages the cash flows from its
subsidiaries to optimise the amount of cash held at the holding
company level. During 2020, consistent with the Group's capital
plan, the Group's subsidiaries did not experience any significant
restrictions on paying dividends or repaying loans and advances.
Also, there are no foreseen restrictions envisaged with regard to
planned dividends or payments. However, the ability of subsidiaries
to pay dividends or advance monies to HSBC Holdings depends on,
among other things, their respective local regulatory capital and
banking requirements, exchange controls, statutory reserves, and
financial and operating performance.
HSBC Holdings currently has sufficient liquidity to meet its
present requirements.
Liquidity risk in HSBC Holdings is overseen by Holdings ALCO.
This risk arises because of HSBC Holdings' obligation to make
payments to debt holders as they fall due and to pay its operating
expenses. The liquidity risk related to these cash flows is managed
by matching external debt obligations with internal loan cash flows
and by maintaining an appropriate liquidity buffer that is
monitored by Holdings ALCO.
The balances in the following table are not directly comparable
with those on the balance sheet of HSBC Holdings as the table
incorporates, on an undiscounted basis, all cash flows relating to
principal and future coupon payments (except for derivatives not
treated as hedging derivatives). Undiscounted cash flows payable in
relation to hedging derivative liabilities are classified according
to their contractual maturities. Derivatives not treated as hedging
derivatives are included in the 'On demand' time bucket.
In addition, loan commitments and financial guarantees and
similar contracts are generally not recognised on our balance
sheet. The undiscounted cash flows potentially payable under
financial guarantees and similar contracts are classified on the
basis of the earliest date on which they can be called.
Cash flows payable by HSBC Holdings under financial liabilities
by remaining contractual maturities
---------
Due over Due over Due over
1 3 1
month months year
Due but not but but not
not more more not more more
than than 3 than than 5 Due over
1 month months 1 year years 5 years Total
Footnotes $m $m $m $m $m $m
---------------------------------- --------- --------- -------- --------- -------- -------- ---------
Amounts owed to HSBC undertakings - 330 - - - 330
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Financial liabilities designated
at fair value 70 1,109 1,412 9,110 16,104 27,805
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Derivatives 3,085 - 2 - - 3,087
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Debt securities in issue 135 760 3,354 31,567 37,103 72,919
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Subordinated liabilities 82 156 726 7,513 21,552 30,029
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Other financial liabilities 3,769 690 370 - 36 4,865
---------------------------------- --------- --------- -------- --------- -------- -------- -------
7,141 3,045 5,864 48,190 74,795 139,035
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Loan commitments - - - - - -
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Financial guarantees 1 13,787 - - - - 13,787
---------------------------------- --------- --------- -------- --------- -------- -------- -------
At 31 Dec 2020 20,928 3,045 5,864 48,190 74,795 152,822
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Amounts owed to HSBC undertakings - 464 - - - 464
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Financial liabilities designated
at fair value 88 168 784 14,776 18,184 34,000
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Derivatives 1,838 - - 105 78 2,021
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Debt securities in issue 128 244 1,137 38,690 25,310 65,509
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Subordinated liabilities 1,588 154 718 5,743 21,533 29,736
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Other financial liabilities 956 519 365 - - 1,840
---------------------------------- --------- --------- -------- --------- -------- -------- -------
4,598 1,549 3,004 59,314 65,105 133,570
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Loan commitments - - - - - -
---------------------------------- --------- --------- -------- --------- -------- -------- -------
Financial guarantees 1 11,061 - - - - 11,061
---------------------------------- --------- --------- -------- --------- -------- -------- -------
At 31 Dec 2019 15,659 1,549 3,004 59,314 65,105 144,631
---------------------------------- --------- --------- -------- --------- -------- -------- -------
1 Excludes performance guarantee contracts to which the
impairment requirements in IFRS 9 are not applied.
30 Offsetting of financial assets and financial liabilities
--------------------------------------------------------
In the following table, the 'Amounts not set off in the balance
sheet' include transactions where:
-- the counterparty has an offsetting exposure with HSBC and a
master netting or similar arrangement is in place with a right to
set off only in the event of default, insolvency or bankruptcy, or
the offset criteria are otherwise not satisfied; and
-- in the case of derivatives and reverse repurchase/repurchase,
stock borrowing/lending and similar agreements, cash and non-cash
collateral has been received/pledged.
For risk management purposes, the net amounts of loans and
advances to customers are subject to limits, which are monitored
and the relevant customer agreements are subject to review and
updated, as necessary, to ensure the legal right to set off remains
appropriate.
Offsetting of financial assets and financial liabilities
Amounts subject to enforceable netting arrangements
------------------------------------------------------------------------
Amounts not set
off in the
balance sheet
-----------------------------------
Amounts
Net not
amounts subject
in to
the enforceable
Gross Amounts balance Financial Non-cash Cash Net netting
amounts offset sheet instruments collateral collateral amount arrangements(5) Total
Footnotes $m $m $m $m $m $m $m $m $m
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- ---------
Financial
assets
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- ---------
Derivatives
(Note 15) 1 368,057 (69,103) 298,954 (230,758) (13,766) (48,154) 6,276 8,772 307,726
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
Reverse
repos,
stock
borrowing
and similar
agreements
classified
as: 2
------------ ---------
- trading
assets 21,204 (461) 20,743 (709) (20,030) - 4 1,534 22,277
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
-
non-trading
assets 318,424 (115,678) 202,746 (13,936) (188,646) (73) 91 28,258 231,004
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
Loans and
advances to
customers 3 30,983 (10,882) 20,101 (17,031) - - 3,070 428 20,529
--------- --------- ------- ----------- ---------- ------
At 31 Dec
2020 738,668 (196,124) 542,544 (262,434) (222,442) (48,227) 9,441 38,992 581,536
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
Derivatives
(Note 15) 1 277,261 (41,739) 235,522 (171,371) (13,095) (47,404) 3,652 7,473 242,995
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
Reverse
repos,
stock
borrowing
and similar
agreements
classified
as: 2
---------
- trading
assets 21,465 (280) 21,185 (1,553) (19,630) - 2 165 21,350
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
-
non-trading
assets 348,561 (134,772) 213,789 (28,826) (184,495) (189) 279 27,549 241,338
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
Loans and
advances to
customers 3 33,039 (10,128) 22,911 (18,893) - - 4,018 735 23,646
--------- ------ -------
At 31 Dec
2019 680,326 (186,919) 493,407 (220,643) (217,220) (47,593) 7,951 35,922 529,329
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
Financial
liabilities
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- ---------
Derivatives
(Note 15) 1 364,121 (69,103) 295,018 (230,758) (21,387) (37,343) 5,530 7,983 303,001
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
Repos, stock
lending and
similar
agreements
classified
as: 2
------------ ---------
- trading
liabilities 16,626 (461) 16,165 (709) (15,456) - - 159 16,324
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
-
non-trading
liabilities 200,999 (115,678) 85,321 (13,936) (71,142) (215) 28 26,580 111,901
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
Customer
accounts 4 41,177 (10,882) 30,295 (17,031) - - 13,264 13 30,308
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
At 31 Dec
2020 622,923 (196,124) 426,799 (262,434) (107,985) (37,558) 18,822 34,735 461,534
------------ --------- ------- --------- ------- ----------- ---------- ---------- ------ --------------- -------
Derivatives
(Note 15) 1 275,286 (41,739) 233,547 (171,371) (20,137) (37,844) 4,195 5,950 239,497
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
Repos, stock
lending and
similar
agreements
classified
as: 2
------------ ---------
- trading
liabilities 10,494 (280) 10,214 (1,553) (8,656) - 5 46 10,260
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
-
non-trading
liabilities 232,675 (134,772) 97,903 (28,826) (68,638) (357) 82 42,441 140,344
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
Customer
accounts 4 36,750 (10,128) 26,622 (18,893) - - 7,729 31 26,653
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
At 31 Dec
2019 555,205 (186,919) 368,286 (220,643) (97,431) (38,201) 12,011 48,468 416,754
------------ --------- --------- ------- ----------- ---------- ------ --------------- -------
1 At 31 December 2020, the amount of cash margin received that
had been offset against the gross derivatives assets was $7,899m
(2019: $2,350m). The amount of cash margin paid that had been
offset against the gross derivatives liabilities was $17,955m
(2019: $8,303m).
2 For the amount of repos, reverse repos, stock lending, stock
borrowing and similar agreements recognised on the balance sheet
within 'Trading assets' $22,277m (2019: $21,350m) and 'Trading
liabilities' $16,324m (2019: $10,260m), see the 'Funding sources
and uses' table on page 178.
3 At 31 December 2020, the total amount of 'Loans and advances
to customers' was $1,037,987m (2019: $1,036,743m), of which
$20,101m (2019: $22,911m) was subject to offsetting.
4 At 31 December 2020, the total amount of 'Customer accounts'
was $1,642,780m (2019: $1,439,115m), of which $30,295m (2019:
$26,622m) was subject to offsetting.
5 These exposures continue to be secured by financial
collateral, but we may not have sought or been able to obtain a
legal opinion evidencing enforceability of the right of offset.
31 Called up share capital and other equity instruments
----------------------------------------------------
Called up share capital and share premium
HSBC Holdings ordinary shares of $0.50 each, issued and fully paid
2020 2019
Footnotes Number $m Number $m
--------- -------------- ------ -------------- --------
At 1 Jan 20,638,524,545 10,319 20,360,841,496 10,180
--------- -------------- ------ -------------- ------
Shares issued under HSBC employee
share plans 55,096,555 28 71,588,032 36
--------- -------------- ------ -------------- ------
Shares issued in lieu of dividends - - 341,872,011 171
--------- -------------- ------ -------------- ------
Less: Shares repurchased and
cancelled - - (135,776,994) (68)
--------- -------------- ------ -------------- ------
At 31 Dec 1 20,693,621,100 10,347 20,638,524,545 10,319
--------- -------------- ------ -------------- ------
HSBC Holdings 6.2% non-cumulative US dollar
preference shares, Series A
2020 2019
Footnotes Number $m Number $m
--------- ---------- -------- ---------- ----------
At 1 Jan and 31 Dec 2 1,450,000 - 1,450,000 -
--------- --------- ------- --------- -------
HSBC Holdings share premium
2020 2019
$m $m
At 31 Dec 14,277 13,959
Total called up share capital and share premium
2020 2019
$m $m
At 31 Dec 24,624 24,278
1 All HSBC Holdings ordinary shares in issue, excluding
325,273,407 shares held in treasury, confer identical rights,
including in respect of capital, dividends and voting.
2 In 2019 this security was included in the capital base of HSBC
as additional tier 1 capital in accordance with the CRR II rules,
by virtue of the application of grandfathering provisions. This
security was called by HSBC Holdings on 10 December 2020 and was
redeemed and cancelled on 13 January 2021. Between the date of
exercise of the call option and the redemption, this security was
considered as an other liability.
HSBC Holdings 6.20% non-cumulative US dollar preference shares,
Series A of $0.01
The 6.20% non-cumulative US dollar preference shares, Series A
of $0.01 each were redeemed on 13 January 2021.
HSBC Holdings non-cumulative preference share of GBP0.01
The one non-cumulative sterling preference share of GBP0.01
('sterling preference share') has been in issue since 29 December
2010 and is held by a subsidiary of HSBC Holdings. Dividends are
paid quarterly at the sole and absolute discretion of the Board.
The sterling preference share carries no rights of conversion into
ordinary shares of HSBC Holdings and no right to attend or vote at
shareholder meetings of HSBC Holdings. These securities can be
redeemed by HSBC Holdings at any time, subject to prior approval by
the PRA.
Other equity instruments
HSBC Holdings includes three types of additional tier 1 capital
securities in its tier 1 capital. Two are presented in this Note
and they are the HSBC Holdings non-cumulative preference shares
outlined above and the contingent convertible securities described
below. These are accounted for as equity because HSBC does not have
an obligation to transfer cash or a variable number of its own
ordinary shares to holders under any circumstances outside its
control. See Note 28 for additional tier 1 securities accounted for
as liabilities.
Additional tier 1 capital - contingent convertible
securities
HSBC Holdings continues to issue contingent convertible
securities that are included in its capital base as fully CRR
II-compliant additional tier 1 capital securities on an end point
basis. These securities are marketed principally and subsequently
allotted to corporate investors and fund managers. The net proceeds
of the issuances are typically used for HSBC Holdings' general
corporate purposes and to further strengthen its capital base to
meet requirements under CRR II. These securities bear a fixed rate
of interest until their initial call dates. After the initial call
dates, if they are not redeemed, the securities will bear interest
at rates fixed periodically in advance for five-year periods based
on credit spreads, fixed at issuance, above prevailing market
rates. Interest on the contingent convertible securities will be
due and payable only at the sole discretion of HSBC Holdings, and
HSBC Holdings has sole and absolute discretion at all times to
cancel for any reason (in whole or part) any interest payment that
would otherwise be payable on any payment date. Distributions will
not be paid if they are prohibited under UK banking regulations or
if the Group has insufficient reserves or fails to meet the
solvency conditions defined in the securities' terms.
The contingent convertible securities are undated and are
repayable at the option of HSBC Holdings in whole typically at the
initial call date or on any fifth anniversary after this date. In
addition, the securities are repayable at the option of HSBC in
whole for certain regulatory or tax reasons. Any repayments require
the prior consent of the PRA. These securities rank pari passu with
HSBC Holdings' sterling preference shares and therefore rank ahead
of ordinary shares. The contingent convertible securities will be
converted into fully paid ordinary shares of HSBC Holdings at a
predetermined price, should HSBC's consolidated non-transitional
CET1 ratio fall below 7.0%. Therefore, in accordance with the terms
of the securities, if the non-transitional CET1 ratio breaches the
7.0% trigger, the securities will convert into ordinary shares at
fixed contractual conversion prices in the issuance currencies of
the relevant securities, equivalent to GBP2.70 at the prevailing
rate of exchange on the issuance date, subject to anti-dilution
adjustments.
HSBC's additional tier 1 capital - contingent convertible securities
in issue which are accounted for in equity
2020 2019
First
call
Footnotes date $m $m
5.625% perpetual subordinated contingent
$1,500m convertible securities 1 Nov 2019 - 1,494
6.875% perpetual subordinated contingent
$2,000m convertible securities Jun 2021 2,000 1,998
6.375% perpetual subordinated contingent
$2,250m convertible securities Sep 2024 2,250 2,244
6.375% perpetual subordinated contingent
$2,450m convertible securities Mar 2025 2,450 2,460
6.000% perpetual subordinated contingent
$3,000m convertible securities May 2027 3,000 2,997
6.250% perpetual subordinated contingent
$2,350m convertible securities Mar 2023 2,350 2,347
6.500% perpetual subordinated contingent
$1,800m convertible securities Mar 2028 1,800 1,798
4.600% perpetual subordinated contingent
$1,500m convertible securities 2 Jun 2031 1,500 -
5.250% perpetual subordinated contingent
EUR1,500m convertible securities Sep 2022 1,945 1,943
6.000% perpetual subordinated contingent
EUR1,000m convertible securities Sep 2023 1,123 1,120
4.750% perpetual subordinated contingent
EUR1,250m convertible securities Jul 2029 1,422 1,420
5.875% perpetual subordinated contingent
GBP1,000m convertible securities Sep 2026 1,301 1,299
4.700% perpetual subordinated contingent
SGD1,000m convertible securities Jun 2022 723 723
5.000% perpetual subordinated contingent
SGD750m convertible securities Sep 2023 550 549
At 31 Dec 22,414 22,392
1 This security was called by HSBC Holdings on 22 November 2019
and was redeemed and cancelled on 17 January 2020. Between the date
of exercise of the call option and the redemption, this security
was considered to be a subordinated liability. See Note 28.
2 This security was issued by HSBC Holdings on 17 December 2020.
The first call date commences six calendar months prior to the
reset date of
17 June 2031.
Shares under option
For details of the options outstanding to subscribe for HSBC
Holdings ordinary shares under the HSBC Holdings Savings-Related
Share Option Plan (UK), see Note 5.
Aggregate options outstanding under these plans
31 Dec 2020 31 Dec 2019
Number of
Number of HSBC Holdings
HSBC Holdings Usual period ordinary Usual period
ordinary shares of exercise Exercise price shares of exercise Exercise price
130,952,539 2019 to 2026 GBP2.6270-GBP5.9640 65,060,681 2018 to 2025 GBP4.0472-GBP5.9640
---------------- ------------ ------------------- --------------
Maximum obligation to deliver HSBC Holdings ordinary shares
At 31 December 2020, the maximum obligation to deliver HSBC
Holdings ordinary shares under all of the above option arrangements
and the HSBC International Employee Share Purchase Plan, together
with GPSP awards, long-term incentive awards and deferred share
awards granted under the HSBC Share Plan 2011, was 238,278,952
(2019: 163,567,253). The total number of shares at 31 December 2020
held by employee benefit trusts that may be used to satisfy such
obligations to deliver HSBC Holdings ordinary shares was 5,179,531
(2019: 5,397,395).
32 Contingent liabilities, contractual commitments and guarantees
--------------------------------------------------------------
HSBC HSBC Holdings(1)
2020 2019 2020 2019
Footnotes $m $m $m $m
---------
Guarantees and other contingent liabilities:
---------
- financial guarantees 18,384 20,214 13,787 11,061
---------
- performance and other guarantees 78,114 75,933 - -
---------
- other contingent liabilities 1,219 1,576 119 289
---------
At 31 Dec 97,717 97,723 13,906 11,350
---------
Commitments: 2
---------
- documentary credits and short-term
trade-related transactions 7,178 6,316 - -
---------
- forward asset purchases and forward
deposits placed 66,506 56,326 - -
---------
- standby facilities, credit lines and
other commitments to lend 771,086 734,966 - -
---------
At 31 Dec 844,770 797,608 - -
---------
1 Guarantees by HSBC Holdings are all in favour of other Group entities.
2 Includes $659,783m of commitments at 31 December 2020 (31
December 2019: $600,029m), to which the impairment requirements in
IFRS 9 are applied where HSBC has become party to an irrevocable
commitment.
The preceding table discloses the nominal principal amounts of
off-balance sheet liabilities and commitments for the Group, which
represent the maximum amounts at risk should the contracts be fully
drawn upon and the clients default. As a significant portion of
guarantees and commitments are expected to expire without being
drawn upon, the total of the nominal principal amounts is not
indicative of future liquidity requirements. The expected credit
loss provision relating to guarantees and commitments under IFRS 9
is disclosed in Note 27.
The majority of the guarantees have a term of less than one
year, while guarantees with terms of more than one year are subject
to HSBC's annual credit review process.
Contingent liabilities arising from legal proceedings,
regulatory and other matters against Group companies are excluded
from this note but are disclosed in Notes 27 and 34.
Financial Services Compensation Scheme
The Financial Services Compensation Scheme ('FSCS') provides
compensation, up to certain limits, to eligible customers of
financial services firms that are unable, or likely to be unable,
to pay claims against them. The FSCS may impose a further levy on
the Group to the extent the industry levies imposed to date are not
sufficient to cover the compensation due to customers in any future
possible collapse. The ultimate FSCS levy to the industry as a
result of a collapse cannot currently be estimated reliably. It is
dependent on various uncertain factors including the potential
recoveries of assets by the FSCS, changes in the level of protected
products (including deposits and investments) and the population of
FSCS members at the time.
Associates
HSBC's share of associates' contingent liabilities, contractual
commitments and guarantees amounted to $53.1bn at 31 December 2020
(2019: $46.7bn). No matters arose where HSBC was severally
liable.
33 Finance lease receivables
-------------------------
HSBC leases a variety of assets to third parties under finance
leases, including transport assets (such as aircraft), property and
general plant and machinery. At the end of lease terms, assets may
be sold to third parties or leased for further terms. Rentals are
calculated to recover the cost of assets less their residual value,
and earn finance income.
2020 2019
Total Total
future Unearned future Unearned
minimum finance Present minimum finance Present
payments income value payments income value
$m $m $m $m $m $m
--------- -------- ------- --------- -------- ---------
Lease receivables:
--------- -------- ------- --------- -------- ---------
No later than one year 3,108 (257) 2,851 1,674 (157) 1,517
--------- -------- ------- --------- -------- -------
One to two years 2,476 (196) 2,280 1,634 (155) 1,479
--------- -------- ------- --------- -------- -------
Two to three years 2,055 (143) 1,912 1,889 (151) 1,738
--------- -------- ------- --------- -------- -------
Three to four years 1,380 (109) 1,271 1,704 (136) 1,568
--------- -------- ------- --------- -------- -------
Four to five years 787 (80) 707 1,558 (132) 1,426
--------- -------- ------- --------- -------- -------
Later than one year and no
later than five years 6,698 (528) 6,170 6,785 (574) 6,211
--------- -------- ------- --------- -------- -------
Later than five years 4,221 (451) 3,770 6,136 (614) 5,522
--------- -------- ------- --------- -------- -------
At 31 Dec 14,027 (1,236) 12,791 14,595 (1,345) 13,250
--------- -------- ------- --------- -------- -------
34 Legal proceedings and regulatory matters
----------------------------------------
HSBC is party to legal proceedings and regulatory matters in a
number of jurisdictions arising out of its normal business
operations. Apart from the matters described below, HSBC considers
that none of these matters are material. The recognition of
provisions is determined in accordance with the accounting policies
set out in Note 1. While the outcomes of legal proceedings and
regulatory matters are inherently uncertain, management believes
that, based on the information available to it, appropriate
provisions have been made in respect of these matters as at 31
December 2020 (see Note 27). Where an individual provision is
material, the fact that a provision has been made is stated and
quantified, except to the extent that doing so would be seriously
prejudicial. Any provision recognised does not constitute an
admission of wrongdoing or legal liability. It is not practicable
to provide an aggregate estimate of potential liability for our
legal proceedings and regulatory matters as a class of contingent
liabilities.
Bernard L. Madoff Investment Securities LLC
Bernard L. Madoff ('Madoff') was arrested in December 2008 and
later pleaded guilty to running a Ponzi scheme. His firm, Bernard
L. Madoff Investment Securities LLC ('Madoff Securities'), is being
liquidated in the US by a trustee (the 'Trustee').
Various non-US HSBC companies provided custodial, administration
and similar services to a number of funds incorporated outside the
US whose assets were invested with Madoff Securities. Based on
information provided by Madoff Securities as at 30 November 2008,
the purported aggregate value of these funds was $8.4bn, including
fictitious profits reported by Madoff.
Based on information available to HSBC, the funds' actual
transfers to Madoff Securities minus their actual withdrawals from
Madoff Securities during the time HSBC serviced the funds are
estimated to have totalled approximately $4bn. Various HSBC
companies have been named as defendants in lawsuits arising out of
Madoff Securities' fraud.
US litigation: The Trustee has brought lawsuits against various
HSBC companies and others in the US Bankruptcy Court for the
Southern District of New York (the 'US Bankruptcy Court'), seeking
recovery of transfers from Madoff Securities to HSBC in an amount
not yet pleaded or determined. HSBC and other parties to the
actions have moved to dismiss the Trustee's claims. The US
Bankruptcy Court granted HSBC's motion to dismiss with respect to
certain of the Trustee's claims in November 2016. In February 2019,
the US Court of Appeals for the Second Circuit (the 'Second Circuit
Court of Appeals') reversed that dismissal. Following the US
Supreme Court's denial of certiorari in June 2020, the cases were
remanded to the US Bankruptcy Court, where they are now
pending.
Fairfield Sentry Limited, Fairfield Sigma Limited and Fairfield
Lambda Limited (together, 'Fairfield') (in liquidation since July
2009) have brought a lawsuit in the US against fund shareholders,
including HSBC companies that acted as nominees for clients,
seeking restitution of redemption payments. In December 2018, the
US Bankruptcy Court issued an opinion, which ruled in favour of the
defendants' motion to dismiss in respect of certain claims by the
liquidators for Fairfield and granted a motion by the liquidators
to file amended complaints. As a result of that opinion, all claims
against one of the HSBC companies, and certain claims against the
remaining HSBC defendants, were dismissed. In May 2019, the
liquidators appealed certain issues from the US Bankruptcy Court to
the US District Court for the Southern District of New York (the
'New York District Court') and, in January 2020, the liquidators
filed amended complaints on the claims remaining in the US
Bankruptcy Court. In March 2020, HSBC and other parties to the
action moved to dismiss the amended complaints in the US Bankruptcy
Court. In December 2020, the US Bankruptcy Court granted in part
and denied in part the defendants' motion. This action remains
pending in the US Bankruptcy Court and the New York District
Court.
UK litigation: The Trustee has filed a claim against various
HSBC companies in the High Court of England and Wales, seeking
recovery of transfers from Madoff Securities to HSBC in an amount
not yet pleaded or determined. The deadline for service of the
claim has been extended to September 2021 for UK-based defendants
and November 2021 for all other defendants.
Cayman Islands litigation: In February 2013, Primeo Fund
('Primeo') (in liquidation since April 2009) brought an action
against HSBC Securities Services Luxembourg ('HSSL') and Bank of
Bermuda (Cayman) Limited (now known as HSBC Cayman Limited),
alleging breach of contract and breach of fiduciary duty and
claiming damages and equitable compensation. The trial concluded in
February 2017 and, in August 2017, the court dismissed all claims
against the defendants. In September 2017, Primeo appealed to the
Court of Appeal of the Cayman Islands and, in June 2019, the Court
of Appeal of the Cayman Islands dismissed Primeo's appeal. In
August 2019, Primeo filed a notice of appeal to the UK Privy
Council, which has listed the first of two possible hearings for
April 2021.
Luxembourg litigation: In April 2009, Herald Fund SPC ('Herald')
(in liquidation since July 2013) brought an action against HSSL
before the Luxembourg District Court, seeking restitution of cash
and securities that Herald purportedly lost because of Madoff
Securities' fraud, or money damages. The Luxembourg District Court
dismissed Herald's securities restitution claim, but reserved
Herald's cash restitution claim and its claim for money damages.
Herald has appealed this judgment to the Luxembourg Court of
Appeal, where the matter is pending. In late 2018, Herald brought
additional claims against HSSL and HSBC Bank plc before the
Luxembourg District Court, seeking further restitution and
damages.
In October 2009, Alpha Prime Fund Limited ('Alpha Prime')
brought an action against HSSL before the Luxembourg District
Court, seeking the restitution of securities, or the cash
equivalent, or money damages. In December 2018, Alpha Prime brought
additional claims before the Luxembourg District Court seeking
damages against various HSBC companies. These matters are currently
pending before the Luxembourg District Court.
In December 2014, Senator Fund SPC ('Senator') brought an action
against HSSL before the Luxembourg District Court, seeking
restitution of securities, or the cash equivalent, or money
damages. In April 2015, Senator commenced a separate action against
the Luxembourg branch of HSBC Bank plc asserting identical claims
before the Luxembourg District Court. In December 2018, Senator
brought additional claims against HSSL and HSBC Bank plc Luxembourg
branch before the Luxembourg District Court, seeking restitution of
Senator's securities or money damages. These matters are currently
pending before the Luxembourg District Court.
Ireland litigation: In November 2013, Defender Limited brought
an action against HSBC Institutional Trust Services (Ireland)
Limited ('HTIE') and others, based on allegations of breach of
contract and claiming damages and indemnification for fund losses.
The trial commenced in October 2018. In December 2018, the Irish
High Court issued a judgment in HTIE's favour on a preliminary
issue, holding that Defender Limited had no effective claim against
HTIE. This judgment concluded the trial without further issues in
dispute being heard. In February 2019, Defender Limited appealed
the decision. In July 2020, the Irish Supreme Court ruled in part
in favour of Defender Limited and returned the case to the High
Court for further proceedings, which will resume in April 2021.
There are many factors that may affect the range of possible
outcomes, and any resulting financial impact, of the various
Madoff-related proceedings described above, including but not
limited to the multiple jurisdictions in which the proceedings have
been brought. Based upon the information currently available,
management's estimate of the possible aggregate damages that might
arise as a result of all claims in the various Madoff-related
proceedings is up to or exceeding $500m, excluding costs and
interest. Due to uncertainties and limitations of this estimate,
any possible damages that might ultimately arise could differ
significantly from this amount.
Anti-money laundering and sanctions-related matters
In December 2012, HSBC Holdings entered into a number of
agreements, including an undertaking with the UK Financial Services
Authority (replaced with a Direction issued by the UK Financial
Conduct Authority ('FCA') in 2013 and again in 2020) as well as a
cease-and-desist order with the US Federal Reserve Board ('FRB'),
both of which contained certain forward-looking anti-money
laundering ('AML') and sanctions-related obligations. HSBC also
agreed to retain an independent compliance monitor (who was, for
FCA purposes, a 'Skilled Person' under section 166 of the Financial
Services and Markets Act and, for FRB purposes, an 'Independent
Consultant') to produce periodic assessments of the Group's AML and
sanctions compliance programme. In 2020, HSBC's engagement with the
independent compliance monitor, acting in his roles as both Skilled
Person and Independent Consultant, concluded. The role of FCA
Skilled Person was assigned to a new individual in the second
quarter of 2020. Separately, a new FRB Independent Consultant will
be appointed pursuant to the cease-and-desist order. The roles of
each of the FCA Skilled Person and the FRB Independent Consultant
are discussed on page 188.
The FCA is conducting an investigation into HSBC Bank plc's and
HSBC UK Bank plc's compliance with UK money laundering regulations
and financial crime systems and controls requirements. HSBC
continues to cooperate with the FCA's investigation, which is at or
nearing completion.
In May 2014, a shareholder derivative action was filed by a
shareholder of HSBC Holdings purportedly on behalf of HSBC
Holdings, HSBC Bank USA N.A. ('HSBC Bank USA'), HSBC North America
Holdings Inc. and HSBC USA Inc. (the 'Nominal Corporate
Defendants') in New York state court against certain current and
former directors and officers of the Nominal Corporate Defendants
(the 'Individual Defendants'). The complaint alleges that the
Individual Defendants breached their fiduciary duties to the
Nominal Corporate Defendants and caused a waste of corporate assets
by allegedly permitting and/or causing the conduct underlying the
five-year deferred prosecution agreement with the US Department of
Justice ('DoJ'), entered into in December 2012. In November 2015,
the New York state court granted the Nominal Corporate Defendants'
motion to dismiss, but the appellate court reversed the decision in
November 2018 and reinstated the action. In June 2020, the parties
reached an agreement to resolve this derivative action, under which
HSBC has received a payment from directors and officers liability
insurance providers and will continue for a period of time certain
corporate governance practices. In November 2020, the court issued
an order granting final settlement approval and dismissing the
action. This matter is now concluded.
Since November 2014, a number of lawsuits have been filed in
federal courts in the US against various HSBC companies and others
on behalf of plaintiffs who are, or are related to, victims of
terrorist attacks in the Middle East or of cartel violence in
Mexico. In each case, it is alleged that the defendants aided and
abetted the unlawful conduct of various sanctioned parties in
violation of the US Anti-Terrorism Act. Currently, 10 actions
remain pending in federal courts in New York or the District of
Columbia. In March, September and October 2019, the courts granted
HSBC's motions to dismiss in three of these cases. In October 2020,
the appellate court affirmed the dismissal of one of the actions on
appeal. An appeal remains pending in another case, and plaintiffs
are seeking certification to appeal in the third case. HSBC filed
motions to dismiss in three further cases, with two of the motions
granted in June 2020, and the third granted in November 2020. These
dismissals are subject to appeal. The four remaining actions are at
a very early stage.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
London interbank offered rates, European interbank offered rates
and other benchmark interest rate investigations and litigation
Euro interest rate derivatives: In December 2016, the European
Commission (the 'EC') issued a decision finding that HSBC, among
other banks, engaged in anti-competitive practices in connection
with the pricing of euro interest rate derivatives in early 2007.
The EC imposed a fine on HSBC based on a one-month infringement.
HSBC appealed the decision and, in September 2019, the General
Court of the European Union (the 'General Court') issued a decision
largely upholding the EC's findings on liability but annulling the
fine. HSBC and the EC have both appealed the General Court's
decision to the European Court of Justice.
US dollar Libor: Beginning in 2011, HSBC and other panel banks
have been named as defendants in a number of private lawsuits filed
in the US with respect to the setting of US dollar Libor. The
complaints assert claims under various US laws, including US
antitrust and racketeering laws, the US Commodity Exchange Act ('US
CEA') and state law. The lawsuits include individual and putative
class actions, most of which have been transferred and/or
consolidated for pre-trial purposes before the New York District
Court.
In 2017 and 2018, HSBC reached agreements with plaintiffs to
resolve putative class actions brought on behalf of the following
five groups of plaintiffs: persons who purchased US dollar
Libor-indexed bonds; persons who purchased US dollar Libor-indexed
exchange-traded instruments; US-based lending institutions that
made or purchased US dollar Libor-indexed loans; persons who
purchased US dollar Libor-indexed interest rate swaps and other
instruments directly from the defendant banks and their affiliates;
and persons who purchased US dollar Libor-indexed interest rate
swaps and other instruments from certain financial institutions
that are not the defendant banks or their affiliates. The New York
District Court has granted final approval of each of the five
referenced settlements. Additionally, a number of other US dollar
Libor-related actions remain pending against HSBC in the New York
District Court and the Second Circuit Court of Appeals.
Intercontinental Exchange ('ICE') Libor: Between January and
March 2019, HSBC and other panel banks were named as defendants in
three putative class actions filed in the New York District Court
on behalf of persons and entities who purchased instruments paying
interest indexed to US dollar ICE Libor from a panel bank. The
complaints allege, among other things, misconduct related to the
suppression of this benchmark rate in violation of US antitrust and
state law. In July 2019, the three putative class actions were
consolidated, and the plaintiffs filed a consolidated amended
complaint. In March 2020, the court granted the defendants' joint
motion to dismiss in its entirety. This matter is on appeal.
Singapore interbank offered rate ('Sibor'), Singapore swap offer
rate ('SOR') and Australia bank bill swap rate ('BBSW'):
In July and August 2016, HSBC and other panel banks were named
as defendants in two putative class actions filed in the New York
District Court on behalf of persons who transacted in products
related to the Sibor, SOR and BBSW benchmark rates. The complaints
allege, among other things, misconduct related to these benchmark
rates in violation of US antitrust, commodities and racketeering
laws, and state law.
In the Sibor/SOR litigation, following a decision on the
defendants' motion to dismiss in October 2018, the claims against a
number of HSBC entities were dismissed, and The Hongkong and
Shanghai Banking Corporation Limited ('HBAP') remained as the only
HSBC defendant in this action. In October 2018, HBAP filed a motion
for reconsideration of the decision based on the issue of personal
jurisdiction. This motion was denied in April 2019. Also in October
2018, the plaintiffs filed a third amended complaint naming only
the Sibor panel members, including HBAP, as defendants. The court
dismissed the third amended complaint in its entirety in July 2019
against all defendants. In August 2019, the plaintiffs filed an
appeal to the Second Circuit Court of Appeals, which remains
pending.
In the BBSW litigation, in November 2018, the court dismissed
all foreign defendants, including all the HSBC entities, on
personal jurisdiction grounds. In April 2019, the plaintiffs filed
an amended complaint, which the defendants moved to dismiss. In
February 2020, the court again dismissed the plaintiffs' amended
complaint against all the HSBC entities.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
Foreign exchange-related investigations and litigation
Since at least 2014, the EC has been conducting an investigation
into trading activities by a number of banks, including HSBC, in
the foreign exchange spot market. HSBC is cooperating with this
investigation.
In January 2021, HSBC Holdings exited its three-year deferred
prosecution agreement with the Criminal Division of the DoJ (the
'FX DPA'), regarding fraudulent conduct in connection with two
particular transactions in 2010 and 2011. HSBC Holdings entered
into the FX DPA in January 2018, following the conclusion of the
DoJ's investigation into HSBC's historical foreign exchange
activities. Under the terms of the FX DPA, the DoJ is expected to
file a motion to dismiss the charges deferred by the FX DPA in due
course.
In December 2016, Brazil's Administrative Council of Economic
Defense initiated an investigation into the onshore foreign
exchange market and identified a number of banks, including HSBC,
as subjects of its investigation.
In June 2020, the Competition Commission of South Africa, having
initially referred a complaint for proceedings before the South
African Competition Tribunal in February 2017, filed a revised
complaint against 28 financial institutions, including HSBC Bank
plc and HSBC Bank USA, for alleged anti-competitive behaviour in
the South African foreign exchange market. In August 2020, HSBC
Bank plc and HSBC Bank USA filed an application to dismiss the
revised complaint, which remains pending.
In late 2013 and early 2014, various HSBC companies and other
banks were named as defendants in various putative class actions
consolidated in the New York District Court. The consolidated
complaint alleged, among other things, that the defendants
conspired to manipulate the WM/Reuters foreign exchange benchmark
rates. In September 2015, HSBC reached an agreement with the
plaintiffs to resolve the consolidated action, and the court
granted final approval of the settlement in August 2018.
A putative class action complaint making similar allegations on
behalf of retail customers of foreign exchange products was filed
in the US District Court for the Northern District of California in
2015, and was subsequently transferred to the New York District
Court where it remains pending. In 2017, putative class action
complaints making similar allegations on behalf of purported
indirect purchasers of foreign exchange products were filed in New
York and were subsequently consolidated in the New York District
Court. In April 2020, HSBC reached an agreement with the plaintiffs
to resolve the indirect purchaser action. In November 2020, the New
York District Court granted final approval of the settlement.
In September 2018, various HSBC companies and other banks were
named as defendants in two motions for certification of class
actions filed in Israel alleging foreign exchange-related
misconduct. In July 2019, the Tel Aviv Court allowed the plaintiffs
to consolidate their claims and, in September 2019, the plaintiffs
filed a motion for certification of the consolidated class action.
In August 2020, HSBC Bank plc filed a motion to dismiss and, in
January 2021, HSBC Holdings filed a motion seeking to challenge the
service of the motion for certification on defendants outside
Israel. These motions remain pending.
In November and December 2018, complaints alleging foreign
exchange-related misconduct were filed in the New York District
Court and the High Court of England and Wales against HSBC and
other defendants by certain plaintiffs that opted out of the US
class action settlement. In May 2020, the New York District Court
granted in part and denied in part the defendants' motion to
dismiss the US opt-out actions. These matters remain at an early
stage. It is possible that additional civil actions will be
initiated against HSBC in relation to its historical foreign
exchange activities.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
Precious metals fix-related litigation
Gold: Beginning in March 2014, numerous putative class actions
were filed in the New York District Court and the US District
Courts for the District of New Jersey and the Northern District of
California, naming HSBC and other members of The London Gold Market
Fixing Limited as defendants. The complaints allege that, from
January 2004 to June 2013, the defendants conspired to manipulate
the price of gold and gold derivatives for their collective benefit
in violation of US antitrust laws, the US CEA and New York state
law. The actions were consolidated in the New York District Court.
The defendants' motion to dismiss the consolidated action was
granted in part and denied in part in October 2016. In June 2017,
the court granted the plaintiffs leave to file a third amended
complaint, naming a new defendant. In October 2020, HSBC reached a
settlement in principle with the plaintiffs to resolve the
consolidated action. The settlement remains subject to court
approval.
Beginning in December 2015, numerous putative class actions
under Canadian law were filed in the Ontario and Quebec Superior
Courts of Justice against various HSBC companies and other
financial institutions. The plaintiffs allege that, among other
things, from January 2004 to March 2014, the defendants conspired
to manipulate the price of gold and gold derivatives in violation
of the Canadian Competition Act and common law. These actions are
ongoing.
Silver: Beginning in July 2014, numerous putative class actions
were filed in federal district courts in New York, naming HSBC and
other members of The London Silver Market Fixing Limited as
defendants. The complaints allege that, from January 2007 to
December 2013, the defendants conspired to manipulate the price of
silver and silver derivatives for their collective benefit in
violation of US antitrust laws, the US CEA and New York state law.
The actions were consolidated in the New York District Court. The
defendants' motion to dismiss the consolidated action was granted
in part and denied in part in October 2016. In June 2017, the court
granted the plaintiffs leave to file a third amended complaint,
which names several new defendants. The court has denied the
pre-existing defendants' request for leave to file a joint motion
to dismiss, and discovery is proceeding.
In April 2016, two putative class actions under Canadian law
were filed in the Ontario and Quebec Superior Courts of Justice
against various HSBC companies and other financial institutions.
The plaintiffs in both actions allege that, from January 1999 to
August 2014, the defendants conspired to manipulate the price of
silver and silver derivatives in violation of the Canadian
Competition Act and common law. These actions are ongoing.
Platinum and palladium: Between late 2014 and early 2015,
numerous putative class actions were filed in the New York District
Court, naming HSBC and other members of The London Platinum and
Palladium Fixing Company Limited as defendants. The complaints
allege that, from January 2008 to November 2014, the defendants
conspired to manipulate the price of platinum group metals ('PGM')
and PGM-based financial products for their collective benefit in
violation of US antitrust laws and the US CEA. In March 2017, the
defendants' motion to dismiss the second amended consolidated
complaint was granted in part and denied in part. In June 2017, the
plaintiffs filed a third amended complaint. In March 2020, the
court granted the defendants' motion to dismiss the third amended
complaint but granted the plaintiffs leave to re-plead certain
claims. The plaintiffs have filed an appeal.
Based on the facts currently known, it is not practicable at
this time for HSBC to predict the resolution of these matters,
including the timing or any possible impact on HSBC, which could be
significant.
Film finance litigation
In July and November 2015, two actions were brought by
individuals against HSBC Private Bank (UK) Limited ('PBGB') in the
High Court of England and Wales seeking damages on various alleged
grounds, including breach of duty to the claimants, in connection
with their participation in certain Ingenious film finance schemes.
These actions are ongoing.
In December 2018, a separate action was brought against PBGB in
the High Court of England and Wales by multiple claimants seeking
damages for alleged unlawful means conspiracy and dishonest
assistance in connection with lending provided by PBGB to third
parties in respect of certain Ingenious film finance schemes in
which the claimants participated. In June 2019, a similar claim was
issued against PBGB in the High Court of England and Wales by
additional claimants. These actions are ongoing.
In June 2020, two separate claims were issued against HSBC UK
Bank plc (as successor to PBGB's business) by two separate groups
of investors in Eclipse film finance schemes in connection with
PBGB's role in the development of such schemes. These matters are
at an early stage.
In February 2020, a claim was issued against HSBC UK Bank plc
(as successor to PBGB's business) by two individuals in relation to
the Zeus film finance schemes. The claimants failed to serve the
claim on time, and this claim has now lapsed. Separately, in June
2020, HSBC UK Bank plc received an application for disclosure of
documents by a law firm acting on behalf of a number of investors
in the Zeus film finance schemes. This application was dismissed by
the court in November 2020.
It is possible that additional actions or investigations will be
initiated against HSBC UK Bank plc as a result of PBGB's historical
involvement in the provision of certain film finance-related
services.
Based on the facts currently known, it is not practicable to
predict the resolution of these matters, including the timing or
any possible impact on HSBC, which could be significant.
Other regulatory investigations, reviews and litigation
HSBC Holdings and/or certain of its affiliates are subject to a
number of other investigations and reviews by various regulators
and competition and law enforcement authorities, as well as
litigation, in connection with various matters relating to the
firm's businesses and operations, including:
-- investigations by tax administration, regulatory and law
enforcement authorities in Argentina, India and elsewhere in
connection with allegations of tax evasion or tax fraud, money
laundering and unlawful cross-border banking solicitation;
-- an investigation by the US Commodity Futures Trading
Commission regarding interest rate swap transactions related to
bond issuances;
-- an investigation by the FCA in connection with collections
and recoveries operations in the UK;
-- an information request from the UK Competition and Markets
Authority concerning the financial services sector;
-- a putative class action brought in the New York District
Court relating to the Mexican government bond market;
-- two group actions pending in the US courts and a claim issued
in the High Court of England and Wales in connection with HSBC Bank
plc's role as a correspondent bank to Stanford International Bank
Ltd from 2003 to 2009; and
-- litigation brought against various HSBC companies in the US
courts relating to residential mortgage-backed securities, based
primarily on (a) claims brought against HSBC Bank USA in connection
with its role as trustee on behalf of various securitisation
trusts; and (b) claims against several HSBC companies seeking that
the defendants repurchase various mortgage loans.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
35 Related party transactions
--------------------------
Related parties of the Group and HSBC Holdings include
subsidiaries, associates, joint ventures, post-employment benefit
plans for HSBC employees, Key Management Personnel ('KMP') as
defined by IAS 24, close family members of KMP and entities that
are controlled or jointly controlled by KMP or their close family
members. KMP are defined as those persons having authority and
responsibility for planning, directing and controlling the
activities of HSBC Holdings. These individuals also constitute
'senior management' for the purposes of the Hong Kong Listing
Rules. In applying IAS 24, it was determined that for this
financial reporting period all KMP included Directors, former
Directors and senior management listed on pages 198 to 203 and that
the roles of Chief Legal Officer, Group Head of Audit, Group Chief
Human Resources Officer, Group Chief Compliance Officer, Group
Company Secretary and Chief Governance Officer did not meet the
criteria for KMP as provided for in the standard.
Particulars of transactions with related parties are tabulated
below. The disclosure of the year-end balance and the highest
amounts outstanding during the year is considered to be the most
meaningful information to represent the amount of the transactions
and outstanding balances during the year.
Key Management Personnel
Details of Directors' remuneration and interest in shares are
disclosed in the 'Directors' remuneration report' on pages 229 to
255. IAS 24 'Related party disclosures' requires the following
additional information for key management compensation.
Compensation of Key Management Personnel
2020 2019 2018
$m $m $m
---- ---- ------
Short-term employee benefits 39 64 52
---- ---- ----
Other long-term employee benefits 5 8 6
---- ---- ----
Share-based payments 20 27 34
---- ---- ----
Year ended 31 Dec 64 99 92
---- ---- ----
Shareholdings, options and other securities of Key Management Personnel
2020 2019
(000s) (000s)
Number of options held over HSBC Holdings ordinary
shares under employee share plans 27 18
------------------------------------------------------------ ------ ------
Number of HSBC Holdings ordinary shares held beneficially
and non-beneficially 11,916 15,546
------------------------------------------------------------ ------ ------
At 31 Dec 11,943 15,564
------------------------------------------------------------ ------ ------
Advances and credits, guarantees and deposit balances during the year
with Key Management Personnel
2020 2019
Highest Highest
amounts amounts
Balance outstanding Balance outstanding
at during at during
31 Dec year 31 Dec year
Footnotes $m $m $m $m
-------------- ------- ------------ ------- --------------
Key Management Personnel
-------------- ------- ------------ ------- --------------
Advances and credits 1 221 357 283 328
-------------- ------- ------------ ------- ------------
Guarantees 30 55 34 34
-------------- ------- ------------ ------- ------------
Deposits 281 874 268 659
-------------- ------- ------------ ------- ------------
1 Advances and credits entered into by subsidiaries of HSBC
Holdings plc during 2020 with Directors and former Directors,
disclosed pursuant to section 413 of the Companies Act 2006,
totalled $4.7m (2019: $3m).
Some of the transactions were connected transactions as defined
by the Rules Governing The Listing of Securities on The Stock
Exchange of Hong Kong Limited, but were exempt from any disclosure
requirements under the provisions of those rules. The above
transactions were made in the ordinary course of business and on
substantially the same terms, including interest rates and
security, as for comparable transactions with persons of a similar
standing or, where applicable, with other employees. The
transactions did not involve more than the normal risk of repayment
or present other unfavourable features.
Associates and joint ventures
The Group provides certain banking and financial services to
associates and joint ventures including loans, overdrafts, interest
and non-interest bearing deposits and current accounts. Details of
the interests in associates and joint ventures are given in Note
18.
Transactions and balances during the year with associates and joint
ventures
2020 2019
Highest Highest
balance Balance balance Balance
during at during at
the year 31 Dec the year 31 Dec
$m $m $m $m
Unsubordinated amounts due from joint
ventures 147 147 132 123
Unsubordinated amounts due from associates 4,330 2,942 4,554 2,054
Amounts due to associates 5,466 2,226 2,517 516
Amounts due to joint ventures 102 102 28 28
Guarantees and commitments 433 283 647 407
The above outstanding balances arose in the ordinary course of
business and on substantially the same terms, including interest
rates and security, as for comparable transactions with third-party
counterparties.
Post-employment benefit plans
At 31 December 2020, $3.5bn (2019: $3.9bn re-presented) of HSBC
post-employment benefit plan assets were under management by HSBC
companies, earning management fees of $13m in 2020 (2019: $8m). The
2019 plan assets under management by HSBC companies have been
re-presented to exclude $1.5bn of assets identified to be managed
by third parties. At 31 December 2020, HSBC's post-employment
benefit plans had placed deposits of $452m (2019: $530m) with its
banking subsidiaries, earning interest payable to the schemes of
nil (2019: $0.3m). The above outstanding balances arose from the
ordinary course of business and on substantially the same terms,
including interest rates and security, as for comparable
transactions with third-party counterparties.
The combined HSBC Bank (UK) Pension Scheme enters into swap
transactions with HSBC to manage inflation and interest rate
sensitivity of its liabilities and selected assets. At 31 December
2020, the gross notional value of the swaps was $7.7bn (2019:
$9.9bn); these swaps had a positive fair value to the scheme of
$1.0bn (2019: $1.2bn); and HSBC had delivered collateral of $1.0bn
(2019: $1.2bn) to the scheme in respect of these arrangements. All
swaps were executed at prevailing market rates and within standard
market bid/offer spreads.
HSBC Holdings
Details of HSBC Holdings' subsidiaries are shown in Note 37.
Transactions and balances during the year with subsidiaries
2020 2019
Highest Highest
balance Balance balance Balance
during at during at
the year 31 Dec the year 31 Dec
$m $m $m $m
--------- ---------
Assets
--------- ---------
Cash and balances with HSBC undertakings 5,476 2,913 5,029 2,382
--------- ---------
Financial assets with HSBC undertakings
designated and otherwise mandatorily
measured at fair value 65,253 65,253 61,964 61,964
--------- ---------
Derivatives 5,784 4,698 3,902 2,002
--------- ---------
Loans and advances to HSBC undertakings 10,785 10,443 43,436 10,218
--------- ---------
Prepayments, accrued income and other
assets 1,838 1,363 655 480
--------- ---------
Investments in subsidiaries 161,546 160,660 163,258 161,473
--------- ---------
Total related party assets at 31 Dec 250,682 245,330 278,244 238,519
Liabilities
Amounts owed to HSBC undertakings 581 330 1,553 464
--------- ---------
Derivatives 3,376 3,060 2,183 2,021
--------- ---------
Accruals, deferred income and other
liabilities 2,737 1,936 - -
--------- ---------
Subordinated liabilities 892 892 892 892
--------- ---------
Total related party liabilities at
31 Dec 7,586 6,218 4,628 3,377
Guarantees and commitments 15,661 13,787 11,541 11,061
--------- ---------
The above outstanding balances arose in the ordinary course of
business and on substantially the same terms, including interest
rates and security, as for comparable transactions with third-party
counterparties.
Some employees of HSBC Holdings are members of the HSBC Bank
(UK) Pension Scheme, which is sponsored by a separate Group
company. HSBC Holdings incurs a charge for these employees equal to
the contributions paid into the scheme on their behalf. Disclosure
in relation to the scheme is made in Note 5.
36 Events after the balance sheet date
-----------------------------------
.
An interim dividend for 2020 of $0.15 per ordinary share (a
distribution of approximately $3,055m) was declared by the
Directors after
31 December 2020. HSBC Holdings called $1,450m 6.20%
non-cumulative US dollar preference shares on 10 December 2020. The
security was redeemed and cancelled on 13 January 2021. These
accounts were approved by the Board of Directors on 23 February
2021 and authorised for issue.
37 HSBC Holdings' subsidiaries, joint ventures and associates
----------------------------------------------------------
In accordance with section 409 of the Companies Act 2006 a list
of HSBC Holdings plc subsidiaries, joint ventures and associates,
the registered office addresses and the effective percentages of
equity owned at 31 December 2020 are disclosed below.
Unless otherwise stated, the share capital comprises ordinary or
common shares that are held by Group subsidiaries. The ownership
percentage is provided for each undertaking. The undertakings below
are consolidated by HSBC unless otherwise indicated.
Subsidiaries
% of share
class held
by immediate
parent company
(or by the
Group where
Subsidiaries this varies) Footnotes
452 TALF Plus ABS Opportunities
SPV LLC 100.00 13
---------
452 TALF SPV LLC 100.00 13
---------
Almacenadora Banpacifico
S.A. (In Liquidation) 99.99 14
---------
Assetfinance December
(F) Limited 100.00 15
---------
Assetfinance December
(H) Limited 100.00 16
---------
Assetfinance December
(M) Limited (In Liquidation) 100.00 17
---------
Assetfinance December
(P) Limited 100.00 16
---------
Assetfinance December
(R) Limited 100.00 16
---------
Assetfinance June (A)
Limited 100.00 16
---------
Assetfinance June (D)
Limited 100.00 15
---------
Assetfinance Limited 100.00 16
---------
Assetfinance March
(B) Limited 100.00 18
---------
Assetfinance March
(D) Limited 100.00 15
---------
Assetfinance March
(F) Limited 100.00 16
---------
Assetfinance September
(F) Limited 100.00 16
---------
Assetfinance September
(G) Limited 100.00 15
---------
B&Q Financial Services
Limited 100.00 16
---------
Banco HSBC S.A. 100.00 19
---------
Banco Nominees (Guernsey)
Limited 100.00 20
---------
Banco Nominees 2 (Guernsey)
Limited 100.00 20
---------
Banco Nominees Limited 100.00 21
---------
Beau Soleil Limited 0,
Partnership N/A 22
---------
Beijing Miyun HSBC
Rural Bank Company 10,
Limited 100.00 23
---------
Billingsgate Nominees
Limited (In Liquidation) 100.00 24
---------
Canada Crescent Nominees
(UK) Limited 100.00 16
---------
Canada Square Nominees
(UK) Limited 100.00 16
---------
Capco/Cove, Inc. 100.00 25
---------
Card-Flo #1, Inc. 100.00 13
---------
Card-Flo #3, Inc. 100.00 13
---------
CC&H Holdings LLC 100.00 26
---------
CCF HOLDING (LIBAN)
S.A.L. (In Liquidation) 74.99 27
---------
Charterhouse Administrators
( D.T.) Limited 100.00 (99.99) 16
---------
Charterhouse Management
Services Limited 100.00 (99.99) 16
Charterhouse Pensions
Limited 100.00 16
---------
Chongqing Dazu HSBC
Rural Bank Company 10,
Limited 100.00 28
---------
Chongqing Fengdu HSBC
Rural Bank Company 10,
Limited 100.00 29
---------
Chongqing Rongchang
HSBC Rural Bank Company 10,
Limited 100.00 30
---------
0,
COIF Nominees Limited N/A 16
---------
Cordico Management
AG (In Liquidation) 100.00 31
---------
Corsair IV Financial
Services Capital Partners-B, 0,
LP N/A 185
---------
Dalian Pulandian HSBC
Rural Bank Company 10,
Limited 100.00 32
---------
Decision One Mortgage 0,
Company, LLC N/A 33
---------
4,
Dem 9 100.00 (99.99) 34
---------
4,
Dempar 1 100.00 (99.99) 34
---------
Desarrollo Turistico,
S.A. de C.V. (In Liquidation) 100.00 (99.99) 14
Electronic Data Process
México, S.A. de
C.V. 100.00 14
---------
Equator Holdings Limited
(In Liquidation) 100.00 17
---------
Eton Corporate Services
Limited 100.00 20
---------
Far East Leasing SA
(In Dissolution) 100.00 35
---------
Flandres Contentieux
S.A. 100.00 (99.99) 34
---------
Foncière Elysées 100.00 (99.99) 34
---------
Fujian Yongan HSBC
Rural Bank Company 10,
Limited 100.00 36
---------
Fulcher Enterprises
Company Limited 100.00 (62.14) 37
---------
9,
Fundacion HSBC, A.C. 100.00 (99.99) 14
---------
Giller Ltd. 100.00 25
---------
GPIF Co-Investment, 0,
LLC N/A 13
---------
% of share
class held
by immediate
parent company
(or by the
Group where
Subsidiaries this varies) Footnotes
Griffin International
Limited 100.00 16
---------
Grundstuecksgesellschaft 0,
Trinkausstrasse Kommanditgesellschaft N/A 38
---------
Grupo Financiero HSBC,
S. A. de C. V. 99.99 14
---------
Guangdong Enping HSBC
Rural Bank Company 10,
Limited 100.00 39
---------
Guangzhou HSBC Real
Estate Company Ltd 100.00 40
---------
Hang Seng (Nominee)
Limited 100.00 (62.14) 37
---------
Hang Seng Bank (China)
Limited 100.00 (62.14) 41
---------
Hang Seng Bank (Trustee)
Limited 100.00 (62.14) 37
---------
Hang Seng Bank Limited 62.14 37
---------
Hang Seng Bullion Company
Limited 100.00 (62.14) 37
---------
Hang Seng Credit Limited 100.00 (62.14) 37
---------
Hang Seng Data Services
Limited 100.00 (62.14) 37
---------
Hang Seng Finance Limited 100.00 (62.14) 37
---------
Hang Seng Financial
Information Limited 100.00 (62.14) 37
---------
Hang Seng Indexes (Netherlands)
B.V. 100.00 (62.14) 42
---------
Hang Seng Indexes Company
Limited 100.00 (62.14) 37
---------
Hang Seng Insurance
Company Limited 100.00 (62.14) 37
---------
Hang Seng Investment
Management Limited 100.00 (62.14) 37
---------
Hang Seng Investment
Services Limited 100.00 (62.14) 37
---------
Hang Seng Life Limited 100.00 (62.14) 37
---------
Hang Seng Real Estate
Management Limited 100.00 (62.14) 37
---------
Hang Seng Securities
Limited 100.00 (62.14) 37
---------
Hang Seng Security
Management Limited 100.00 (62.14) 37
---------
Haseba Investment Company
Limited 100.00 (62.14) 37
---------
HFC Bank Limited (In
Liquidation) 100.00 17
---------
High Time Investments
Limited 100.00 (62.14) 37
---------
Honey Green Enterprises
Ltd. 100.00 43
---------
Honey Grey Enterprises
Limited 100.00 44
---------
Honey Silver Enterprises
Limited 100.00 44
---------
Household International
Europe Limited (In
Liquidation) 100.00 17
Household Pooling Corporation 100.00 45
---------
Housing (USA) LLP N/A
---------
HSBC (BGF) Investments
Limited 100.00 16
---------
HSBC (General Partner) 2,
Limited 100.00 47
---------
HSBC (Guernsey) GP
PCC Limited 100.00 20
---------
HSBC (Kuala Lumpur)
Nominees Sdn Bhd 100.00 48
---------
HSBC (Malaysia) Trustee
Berhad 100.00 49
---------
HSBC (Singapore) Nominees
Pte Ltd 100.00 50
---------
HSBC Agency (India)
Private Limited 100.00 51
---------
HSBC Alternative Credit
Strategies General 0,
Partner S.a r.l. N/A 52
HSBC Alternative Investments
Limited 100.00 16
---------
HSBC Amanah Malaysia
Berhad 100.00 48
---------
HSBC Americas Corporation
(Delaware) 100.00 13
---------
HSBC Argentina Holdings
S.A. 100.00 53
---------
HSBC Asia Holdings
B.V. 100.00 16
---------
HSBC Asia Holdings 2,
Limited 100.00 44
---------
HSBC Asia Pacific Holdings
(UK) Limited 100.00 16
---------
HSBC Asset Finance
(UK) Limited 100.00 16
---------
HSBC Asset Finance
M.O.G. Holdings (UK)
Limited 100.00 16
---------
HSBC Asset Management
(India) Private Limited 100.00 54
---------
HSBC Assurances Vie
(France) 100.00 (99.99) 55
---------
HSBC Australia Holdings
Pty Limited 100.00 56
---------
HSBC BANK (CHILE) 100.00 57
---------
HSBC Bank (China) Company 10,
Limited 100.00 58
---------
HSBC Bank (General
Partner) Limited 100.00 47
---------
HSBC Bank (Mauritius)
Limited 100.00 59
---------
0,
HSBC Bank (RR) (Limited 11,
Liability Company) N/A 60
---------
HSBC Bank (Singapore)
Limited 100.00 50
---------
HSBC Bank (Taiwan)
Limited 100.00 61
---------
HSBC Bank (Uruguay)
S.A. 100.00 62
---------
HSBC Bank (Vietnam)
Ltd. 100.00 63
---------
HSBC Bank A.S. 100.00 64
---------
HSBC Bank Argentina
S.A. 100.00 53
---------
HSBC Bank Armenia cjsc 100.00 65
---------
HSBC Bank Australia
Limited 100.00 56
---------
HSBC Bank Bermuda Limited 100.00 21
---------
HSBC Bank Canada 100.00 66
---------
HSBC Bank Capital Funding 0,
(Sterling 1) LP N/A 47
---------
HSBC Bank Capital Funding 0,
(Sterling 2) LP N/A 47
---------
HSBC Bank Egypt S.A.E 99.63 (94.54) 67
---------
HSBC Bank Malaysia
Berhad 100.00 48
---------
HSBC Bank Malta p.l.c. 70.03 68
---------
HSBC Bank Middle East 5,
Limited 100.00 69
---------
HSBC Bank Middle East
Limited Representative
Office Morocco SARL
(In Liquidation) 100.00 70
HSBC Bank Oman S.A.O.G. 51.00 71
---------
HSBC Bank Pension Trust
(UK) Limited 100.00 16
---------
HSBC Bank plc 100.00 16
---------
HSBC Bank USA, National 3,
Association 100.00 72
---------
HSBC Branch Nominee
(UK) Limited 100.00 15
HSBC Brasil Holding
S.A. 100.00 19
---------
HSBC Broking Forex
(Asia) Limited 100.00 44
HSBC Broking Futures
(Asia) Limited 100.00 44
HSBC Broking Futures
(Hong Kong) Limited 100.00 44
---------
HSBC Broking Securities
(Asia) Limited 100.00 44
---------
HSBC Broking Securities
(Hong Kong) Limited 100.00 44
---------
HSBC Broking Services
(Asia) Limited 100.00 44
---------
HSBC Canadian Covered
Bond (Legislative) 0,
Guarantor Limited Partnership N/A 73
---------
HSBC Capital (USA),
Inc. 100.00 13
---------
HSBC Capital Funding 0,
(Dollar 1) L.P. N/A 47
---------
HSBC Capital Limited 100.00 44
---------
HSBC Card Services
Inc. 100.00 13
---------
HSBC Casa de Bolsa,
S.A. de C.V., Grupo
Financiero HSBC 100.00 (99.99) 14
---------
HSBC Cayman Limited 100.00 74
---------
HSBC Cayman Services
Limited 100.00 74
---------
HSBC City Funding Holdings 100.00 16
---------
HSBC Client Holdings
Nominee (UK) Limited 100.00 16
---------
HSBC Client Nominee
(Jersey) Limited 100.00 75
---------
HSBC Columbia Funding, 0,
LLC N/A 13
---------
HSBC Continental Europe 99.99 34
---------
HSBC Corporate Advisory
(Malaysia) Sdn Bhd 100.00 48
---------
HSBC Corporate Finance
(Hong Kong) Limited 100.00 44
---------
HSBC Corporate Trustee
Company (UK) Limited 100.00 16
---------
HSBC Custody Nominees
(Australia) Limited 100.00 56
---------
HSBC Custody Services
(Guernsey) Limited 100.00 20
---------
HSBC Daisy Investments
(Mauritius) Limited 100.00 76
HSBC Diversified Loan
Fund General Partner
Sarl 100.00 77
HSBC Electronic Data
Processing (Guangdong) 10,
Limited 100.00 78
---------
HSBC Electronic Data
Processing (Malaysia)
Sdn Bhd 100.00 79
---------
HSBC Electronic Data
Processing (Philippines),
Inc. 99.99 80
HSBC Electronic Data
Processing India Private
Limited 100.00 81
---------
HSBC Electronic Data
Processing Lanka (Private)
Limited 100.00 82
---------
HSBC Electronic Data
Service Delivery (Egypt)
S.A.E. 100.00 83
---------
HSBC Enterprise Investment
Company (UK) Limited
(In Liquidation) 100.00 17
HSBC Epargne Entreprise
(France) 100.00 (99.99) 55
---------
HSBC Equator (UK) Limited
(In Liquidation) 100.00 17
---------
HSBC Equipment Finance
(UK) Limited 100.00 15
---------
HSBC Equity (UK) Limited 100.00 16
---------
HSBC Europe B.V. 100.00 16
---------
HSBC Executor & Trustee
Company (UK) Limited 100.00 15
HSBC Factoring (France) 100.00 (99.99) 34
---------
2,
HSBC Finance (Netherlands) 100.00 16
---------
HSBC Finance Corporation 100.00 13
---------
HSBC Finance Limited 100.00 16
---------
HSBC Finance Mortgages
Inc. 100.00 84
---------
HSBC Finance Transformation
(UK) Limited 100.00 16
---------
HSBC Financial Services
(Lebanon) s.a.l. 99.65 85
---------
HSBC Financial Services
(Middle East) Limited
(In Liquidation) 100.00 86
---------
HSBC Financial Services
(Uruguay) S.A. (In
Liquidation) 100.00 87
---------
HSBC FinTech Services
(Shanghai) Company
Limited 100.00 88
HSBC Germany Holdings
GmbH 100.00 38
---------
HSBC Global Asset Management 3,
(Bermuda) Limited 100.00 21
---------
HSBC Global Asset Management
(Canada) Limited 100.00 66
---------
HSBC Global Asset Management
(Deutschland) GmbH 100.00 (99.33) 38
HSBC Global Asset Management
(France) 100.00 (99.99) 55
---------
HSBC Global Asset Management
(Hong Kong) Limited 100.00 22
---------
HSBC Global Asset Management
(International) Limited
(In Liquidation) 100.00 89
---------
HSBC Global Asset Management
(Japan) K. K. 100.00 90
---------
HSBC Global Asset Management
(Malta) Limited 100.00 (70.03) 91
HSBC Global Asset Management
(México), S.A.
de C.V., Sociedad Operadora
de Fondos de Inversión,
Grupo Financiero HSBC 100.00 (99.99) 14
HSBC Global Asset Management 6,
(Oesterreich) GmbH 100.00 (99.33) 92
---------
HSBC Global Asset Management
(Singapore) Limited 100.00 50
---------
HSBC Global Asset Management 4,
(Switzerland) AG 100.00 (99.66) 93
---------
HSBC Global Asset Management
(Taiwan) Limited 100.00 94
---------
HSBC Global Asset Management
(UK) Limited 100.00 16
HSBC Global Asset Management
(USA) Inc. 100.00 95
---------
HSBC Global Asset Management
Argentina S.A. Sociedad
Gerente de Fondos Comunes
de Inversión 100.00 (99.99) 96
HSBC Global Asset Management
Holdings (Bahamas)
Limited 100.00 97
HSBC Global Asset Management 2,
Limited 100.00 16
---------
HSBC Global Custody
Nominee (UK) Limited 100.00 16
---------
HSBC Global Custody
Proprietary Nominee 1,
(UK) Limited 100.00 16
HSBC Global Services
(Canada) Limited 100.00 98
---------
HSBC Global Services
(China) Holdings Limited 100.00 16
---------
HSBC Global Services
(Hong Kong) Limited 100.00 44
---------
HSBC Global Services
(UK) Limited 100.00 16
---------
HSBC Global Services 2,
Limited 100.00 16
---------
HSBC Global Shared
Services (India) Private 1,
Limited (In Liquidation) 99.99 51
---------
HSBC Group Management
Services Limited 100.00 16
---------
HSBC Group Nominees 2,
UK Limited 100.00 16
---------
HSBC Holdings B.V. 100.00 16
---------
HSBC IM Pension Trust
Limited 100.00 16
---------
HSBC Infrastructure
Debt GP 1 S.Ã 0,
r.l. N/A 52
---------
HSBC Infrastructure
Debt GP 2 S.Ã 0,
r.l. N/A 52
---------
HSBC Infrastructure
Limited 100.00 16
---------
HSBC INKA Investment-AG 12,
TGV 100.00 (99.33) 99
---------
HSBC Inmobiliaria (Mexico),
S.A. de C.V. 100.00 (99.99) 14
---------
HSBC Institutional
Trust Services (Asia)
Limited 100.00 44
HSBC Institutional
Trust Services (Bermuda)
Limited 100.00 21
HSBC Institutional
Trust Services (Mauritius)
Limited 100.00 59
HSBC Institutional
Trust Services (Singapore)
Limited 100.00 50
HSBC Insurance (Asia)
Limited 100.00 100
HSBC Insurance (Asia-Pacific)
Holdings Limited 100.00 101
HSBC Insurance (Bermuda)
Limited 100.00 21
---------
HSBC Insurance (Singapore)
Pte. Limited 100.00 50
---------
HSBC Insurance Agency
(USA) Inc. 100.00 95
---------
HSBC Insurance Brokers
(Philippines) Inc 99.99 102
---------
HSBC Insurance Holdings 2,
Limited 100.00 16
---------
HSBC Insurance SAC
1 (Bermuda) Limited 100.00 21
---------
HSBC Insurance SAC
2 (Bermuda) Limited 100.00 21
---------
HSBC Insurance Services
(Lebanon) S.A.L. (In
Liquidation) 99.99 103
HSBC Insurance Services
Holdings Limited 100.00 16
HSBC International
Finance Corporation
(Delaware) 100.00 104
HSBC International 8,
Trustee (BVI) Limited 100.00 105
HSBC International
Trustee (Holdings)
Pte. Limited 100.00 50
HSBC International
Trustee Limited 100.00 106
HSBC Inversiones S.A. 99.99 57
HSBC InvestDirect (India)
Limited 100.00 (99.98) 107
HSBC InvestDirect Financial
Services (India) Limited 99.99 (99.98) 107
HSBC InvestDirect Sales
& Marketing (India)
Limited 98.99 (98.98) 51
HSBC InvestDirect Securities
(India) Private Limited 99.99 107
HSBC Investment Bank
Holdings B.V. 100.00 16
HSBC Investment Bank
Holdings Limited 100.00 16
HSBC Investment Company
(Egypt) S.A.E (In Liquidation) 100.00 (97.81) 108
HSBC Investment Company 2,
Limited 100.00 16
HSBC Investment Funds
(Canada) Inc. 100.00 109
HSBC Investment Funds
(Hong Kong) Limited 100.00 22
HSBC Investment Funds
(Luxembourg) SA 100.00 52
HSBC Invoice Finance
(UK) Limited 100.00 110
HSBC Issuer Services
Common Depositary Nominee
(UK) Limited 100.00 16
HSBC Issuer Services
Depositary Nominee
(UK) Limited 100.00 16
HSBC Latin America
B.V. 100.00 16
---------
HSBC Latin America 2,
Holdings (UK) Limited 100.00 16
---------
HSBC Leasing (Asia)
Limited 100.00 44
---------
HSBC Leasing (France) 100.00 (99.99) 34
---------
HSBC Life (Cornell
Centre) Limited 100.00 100
---------
HSBC Life (Edwick Centre)
Limited 100.00 100
---------
HSBC Life (International)
Limited 100.00 21
---------
HSBC Life (Property
Investment) Limited 100.00 100
---------
HSBC Life (Property
Light) Limited 100.00 100
---------
HSBC Life (Property)
Limited 100.00 100
---------
HSBC Life (Tsing Yi
Industrial) Limited 100.00 100
---------
HSBC Life (UK) Limited 100.00 16
---------
HSBC Life Assurance
(Malta) Limited 100.00 (70.03) 91
---------
HSBC LU Nominees Limited 100.00 16
---------
HSBC Management (Guernsey)
Limited 100.00 20
---------
HSBC Markets (USA)
Inc. 100.00 13
---------
HSBC Marking Name Nominee
(UK) Limited 100.00 16
---------
HSBC Master Trust Trustee
Limited 100.00 16
---------
HSBC Mexico, S.A.,
Institucion de Banca
Multiple, Grupo Financiero
HSBC 99.99 14
---------
HSBC Middle East Finance
Company Limited 100.00 (80.00) 111
---------
HSBC Middle East Holdings 2,
B.V. 100.00 112
---------
HSBC Middle East Leasing 0,
Partnership N/A 113
---------
HSBC Middle East Securities 0,
L.L.C N/A 114
---------
HSBC Mortgage Corporation
(Canada) 100.00 115
---------
HSBC Mortgage Corporation
(USA) 100.00 13
---------
HSBC Nominees (Asing)
Sdn Bhd 100.00 48
---------
HSBC Nominees (Hong
Kong) Limited 100.00 44
---------
HSBC Nominees (New
Zealand) Limited 100.00 116
---------
HSBC Nominees (Tempatan)
Sdn Bhd 100.00 48
---------
HSBC North America 3,
Holdings Inc. 100.00 13
---------
HSBC Operational Services
GmbH 90.10 (89.49) 117
---------
HSBC Overseas Holdings 2,
(UK) Limited 100.00 16
---------
HSBC Overseas Investments
Corporation (New York) 100.00 118
HSBC Overseas Nominee
(UK) Limited 100.00 16
---------
HSBC Participaciones
(Argentina) S.A. 100.00 (99.99) 53
---------
HSBC PB Corporate Services
1 Limited 100.00 119
---------
HSBC PB Services (Suisse)
SA 100.00 120
---------
HSBC Pension Trust
(Ireland) DAC 100.00 121
---------
HSBC Pensiones, S.A. 100.00 14
---------
HSBC PI Holdings (Mauritius)
Limited 100.00 59
---------
HSBC Portfoy Yonetimi
A.S. 100.00 122
---------
HSBC Preferential LP
(UK) 100.00 16
---------
HSBC Private Bank (Luxembourg)
S.A. 100.00 52
---------
HSBC Private Bank (Suisse)
SA 100.00 123
---------
HSBC Private Bank (UK)
Limited 100.00 16
---------
HSBC Private Banking
Holdings (Suisse) SA 100.00 120
---------
HSBC Private Banking
Nominee 3 (Jersey)
Limited 100.00 124
---------
HSBC Private Equity
Investments (UK) Limited 100.00 16
---------
HSBC Private Trustee
(Hong Kong) Limited 100.00 44
---------
HSBC Private Wealth
Services (Canada) Inc. 100.00 109
---------
HSBC Professional Services
(India) Private Limited 100.00 125
---------
HSBC Property (UK)
Limited 100.00 16
---------
HSBC Property Funds
(Holding) Limited 100.00 16
---------
HSBC Provident Fund
Trustee (Hong Kong)
Limited 100.00 44
---------
HSBC Qianhai Securities 10,
Limited 100.00 (51.00) 126
---------
HSBC Real Estate Leasing
(France) 100.00 (99.99) 34
---------
HSBC Realty Credit
Corporation (USA) 100.00 13
---------
HSBC REGIO Fund General
Partner S.Ã r.l. 100.00 52
---------
HSBC REIM (France) 100.00 (99.99) 55
---------
1,
HSBC Retirement Benefits 2,
Trustee (UK) Limited 100.00 16
---------
HSBC Retirement Services 1,
Limited 100.00 16
---------
HSBC Savings Bank (Philippines)
Inc. 99.99 127
---------
HSBC Securities (Asia)
Limited (In Liquidation) 100.00 44
HSBC Securities (Canada)
Inc. 100.00 98
---------
HSBC Securities (Egypt)
S.A.E. 100.00 (94.65) 67
---------
HSBC Securities (Japan)
Limited 100.00 16
---------
HSBC Securities (Singapore)
Pte Limited 100.00 50
---------
HSBC Securities (South
Africa) (Pty) Limited 100.00 128
---------
HSBC Securities (Taiwan)
Corporation Limited 100.00 129
---------
HSBC Securities (USA)
Inc. 100.00 13
---------
HSBC Securities and
Capital Markets (India)
Private Limited 99.99 51
---------
HSBC Securities Asia
Nominees Limited (In
Liquidation) 100.00 44
---------
HSBC Securities Brokers
(Asia) Limited 100.00 44
---------
HSBC Securities Investments
(Asia) Limited 100.00 44
---------
HSBC Securities Services
(Bermuda) Limited 100.00 21
---------
HSBC Securities Services
(Guernsey) Limited 100.00 20
---------
HSBC Securities Services
(Ireland) DAC 100.00 121
---------
HSBC Securities Services
(Luxembourg) S.A. 100.00 52
---------
HSBC Securities Services
Holdings (Ireland)
DAC 100.00 121
---------
HSBC Securities Services
Nominees Limited 100.00 44
---------
HSBC Seguros de Retiro
(Argentina) S.A. 100.00 (99.99) 53
---------
HSBC Seguros de Vida
(Argentina) S.A. 100.00 (99.99) 53
---------
HSBC Seguros, S.A de
C.V., Grupo Financiero 3,
HSBC 100.00 (99.99) 14
HSBC Service Company
Germany GmbH 100.00 (99.33) 130
---------
HSBC Service Delivery
(Polska) Sp. z o.o. 100.00 131
---------
HSBC Services (France) 100.00 (99.99) 34
---------
HSBC Services Japan
Limited 100.00 132
---------
HSBC Services USA Inc. 100.00 133
---------
HSBC Servicios Financieros,
S.A. de C.V 100.00 (99.99) 14
---------
HSBC Servicios, S.A.
DE C.V., Grupo Financiero
HSBC 100.00 (99.99) 14
---------
4,
HSBC SFH (France) 100.00 (99.99) 55
---------
HSBC SFT (C.I.) Limited 100.00 20
---------
HSBC Software Development
(Guangdong) Limited 100.00 134
HSBC Software Development
(India) Private Limited 100.00 135
HSBC Software Development
(Malaysia) Sdn Bhd 100.00 79
HSBC Specialist Investments
Limited 100.00 16
---------
HSBC Technology & Services
(China) Limited 100.00 136
---------
HSBC Technology & Services
(USA) Inc. 100.00 13
---------
HSBC Transaction Services 6,
GmbH 100.00 (99.33) 137
---------
HSBC Trinkaus & Burkhardt
(International) S.A. 100.00 (99.33) 52
---------
HSBC Trinkaus & Burkhardt
AG 99.33 38
---------
HSBC Trinkaus & Burkhardt
Gesellschaft fur Bankbeteiligungen
mbH 100.00 (99.33) 38
HSBC Trinkaus Europa
Immobilien-Fonds Nr.
5 GmbH 100.00 (99.33) 38
HSBC Trinkaus Family 6,
Office GmbH 100.00 (99.33) 38
HSBC Trinkaus Immobilien
Beteiligungs KG 100.00 (99.33) 38
---------
HSBC Trinkaus Real 6,
Estate GmbH 100.00 (99.33) 38
HSBC Trust Company
(Canada) 100.00 115
HSBC Trust Company
(Delaware), National
Association 100.00 104
HSBC Trust Company
(UK) Limited 100.00 16
HSBC Trust Company
AG (In Liquidation) 100.00 31
---------
HSBC Trustee (C.I.)
Limited 100.00 124
HSBC Trustee (Cayman)
Limited 100.00 138
HSBC Trustee (Guernsey)
Limited 100.00 20
HSBC Trustee (Hong
Kong) Limited 100.00 44
HSBC Trustee (Singapore)
Limited 100.00 50
HSBC UK Bank plc 100.00 15
HSBC UK Client Nominee
Limited 100.00 15
2,
HSBC UK Holdings Limited 100.00 16
HSBC USA Inc. 100.00 118
HSBC Ventures USA Inc. 100.00 13
HSBC Violet Investments
(Mauritius) Limited 100.00 76
---------
HSBC Wealth Client 1,
Nominee Limited 100.00 15
---------
HSBC Yatirim Menkul
Degerler A.S. 100.00 122
---------
HSI Asset Securitization
Corporation 100.00 13
---------
HSI International Limited 100.00 (62.14) 37
---------
HSIL Investments Limited 100.00 16
---------
Hubei Macheng HSBC
Rural Bank Company
Limited 100.00 139
---------
Hubei Suizhou Cengdu
HSBC Rural Bank Company 10,
Limited 100.00 140
---------
Hubei Tianmen HSBC
Rural Bank Company
Limited 100.00 141
---------
Hunan Pingjiang HSBC
Rural Bank Company 10,
Limited 100.00 142
---------
Imenson Limited 100.00 (62.14) 37
---------
Infrared NF China Real
Estate Investments 0,
LP N/A 186
---------
INKA Internationale
Kapitalanlagegesellschaft
mbH 100.00 (99.33) 137
---------
Inmobiliaria Banci,
S.A. de C.V. 100.00 (99.68) 14
---------
Inmobiliaria Bisa,
S.A. de C.V. 99.98 14
---------
Inmobiliaria Grufin,
S.A. de C.V. 100.00 (99.99) 14
---------
Inmobiliaria Guatusi,
S.A. de C.V. 100.00 (99.99) 14
---------
James Capel & Co. Limited 100.00 16
---------
James Capel (Nominees)
Limited 100.00 16
---------
James Capel (Taiwan)
Nominees Limited 100.00 16
---------
John Lewis Financial
Services Limited 100.00 16
---------
Keyser Ullmann Limited 100.00 (99.99) 16
---------
Lion Corporate Services
Limited 100.00 44
---------
Lion International
Corporate Services 1,
Limited 100.00 106
---------
Lion International
Management Limited 100.00 106
---------
Lion Management (Hong 1,
Kong) Limited 100.00 44
---------
Lyndholme Limited 100.00 44
---------
Marks and Spencer Financial
Services plc 100.00 143
---------
Marks and Spencer Unit
Trust Management Limited 100.00 143
Maxima S.A. AFJP (In
Liquidation) 99.98 53
---------
Mexicana de Fomento,
S.A. de C.V. 100.00 (99.90) 14
---------
Midcorp Limited 100.00 16
---------
Midland Bank (Branch
Nominees) Limited 100.00 15
---------
Midland Nominees Limited 100.00 15
---------
MIL (Cayman) Limited 100.00 74
---------
MW Gestion SA 100.00 53
---------
Promocion en Bienes
Raices, S.A. de C.V. 100.00 (99.99) 14
---------
Prudential Client HSBC
GIS Nominee (UK) Limited 100.00 16
---------
PT Bank HSBC Indonesia 99.99 (98.93) 144
---------
PT HSBC Sekuritas Indonesia 85.00 145
---------
R/CLIP Corp. 100.00 13
---------
Real Estate Collateral
Management Company 100.00 13
---------
Republic Nominees Limited 100.00 20
---------
Republic Overseas Capital
Corporation 100.00 95
---------
RLUKREF Nominees (UK) 1,
One Limited 100.00 16
---------
RLUKREF Nominees (UK) 1,
Two Limited 100.00 16
---------
S.A.P.C. - Ufipro Recouvrement 99.99 34
---------
4,
Saf Baiyun 100.00 (99.99) 34
---------
4,
Saf Guangzhou 100.00 (99.99) 34
---------
4,
Saf Zhu Jiang Shi Ba 100.00 (99.99) 34
---------
4,
Saf Zhu Jiang Shi Er 100.00 (99.99) 34
---------
4,
Saf Zhu Jiang Shi Jiu 100.00 (99.99) 34
---------
4,
Saf Zhu Jiang Shi Liu 100.00 (99.99) 34
---------
4,
Saf Zhu Jiang Shi Qi 100.00 (99.99) 34
---------
4,
Saf Zhu Jiang Shi Wu 100.00 (99.99) 34
---------
SCI HSBC Assurances
Immo 100.00 (99.99) 55
---------
1,
Serai Limited 100.00 44
---------
Serai Technology Development 10,
(Shanghai) Limited 100.00 147
---------
SFM 100.00 (99.99) 34
---------
SFSS Nominees (Pty)
Limited 100.00 128
---------
Shandong Rongcheng
HSBC Rural Bank Company 10,
Limited 100.00 148
---------
Shenzhen HSBC Development
Company Ltd 100.00 149
---------
Sico Limited 100.00 150
---------
1,
9,
SNC Dorique 99.99 151
---------
1,
9,
SNC Les Mercuriales 100.00 (99.99) 34
---------
SNC Les Oliviers D'Antibes 60.00 55
---------
1,
9,
SNC Makala 100.00 (99.99) 34
---------
SNCB/M6 - 2008 A 100.00 (99.99) 34
---------
4,
SNCB/M6-2007 A 100.00 (99.99) 34
---------
4,
SNCB/M6-2007 B 100.00 (99.99) 34
---------
Société Française
et Suisse 100.00 (99.99) 34
---------
Somers Dublin DAC 100.00 (99.99) 121
---------
Somers Nominees (Far
East) Limited 100.00 21
---------
Sopingest 100.00 (99.99) 34
---------
South Yorkshire Light
Rail Limited 100.00 16
---------
St Cross Trustees Limited 100.00 15
---------
Sun Hung Kai Development 10,
(Lujiazui III) Limited 100.00 152
Swan National Limited 100.00 16
---------
Tasfiye Halinde HSBC
Odeme Sistemleri Bilgisayar
Teknolojileri Basin
Yayin Ve Musteri Hizmetleri
(In Liquidation) 100.00 153
The Hongkong and Shanghai
Banking Corporation
Limited 100.00 44
The Venture Catalysts
Limited 100.00 16
---------
Tooley Street View 2,
Limited 100.00 16
---------
Tower Investment Management 100.00 154
---------
Trinkaus Australien
Immobilien Fonds Nr.
1 Brisbane GmbH & Co.
KG 100.00 (99.33) 38
---------
Trinkaus Australien
Immobilien-Fonds Nr. 6,
1 Treuhand-GmbH 100.00 (99.33) 38
---------
Trinkaus Europa Immobilien-Fonds
Nr.3 Objekt Utrecht
Verwaltungs-GmbH 100.00 (99.33) 38
---------
Trinkaus Immobilien-Fonds 6,
Geschaeftsfuehrungs-GmbH 100.00 (99.33) 38
---------
Trinkaus Immobilien-Fonds 6,
Verwaltungs-GmbH 100.00 (99.33) 38
---------
Trinkaus Private Equity
Management GmbH 100.00 (99.33) 38
---------
Trinkaus Private Equity 6,
Verwaltungs GmbH 100.00 (99.33) 38
---------
Tropical Nominees Limited 100.00 74
---------
Turnsonic (Nominees)
Limited 100.00 15
---------
Valeurs Mobilières
Elysées 100.00 (99.99) 34
---------
Wardley Limited 100.00 44
---------
Wayfoong Nominees Limited 100.00 44
---------
Wayhong (Bahamas) Limited 100.00 97
---------
Westminster House, 0,
LLC N/A 13
---------
Woodex Limited 100.00 21
---------
Yan Nin Development
Company Limited 100.00 (62.14) 37
---------
Joint ventures
The undertakings below are joint ventures and equity
accounted.
% of share
class held
by immediate
parent company
(or by the
Group where
Joint ventures this varies) Footnotes
CCF & Partners Asset
Management Limited 100.00 (99.99) 16
Global Payments Technology
Mexico S.A. De C.V. 50.00 14
House Network Sdn
Bhd 25.00 155
HSBC Life Insurance
Company Limited 50.00 156
HSBC Pollination Climate
Asset Management Limited 40.00 157
ProServe Bermuda Limited 50.00 158
0,
The London Silver 1,
Market Fixing Limited N/A 159
Vaultex UK Limited 50.00 160
Associates
The undertakings below are associates and equity accounted.
% of share
class held
by immediate
parent company
(or by the
Group where
Associates this varies) Footnotes
Bank of Communications
Co., Ltd. 19.03 161
---------
Barrowgate Limited 15.31 162
---------
BGF Group PLC 24.56 163
---------
1,
Bud Financial Limited 10.82 164
---------
Canara HSBC Oriental
Bank of Commerce Life
Insurance Company
Limited 26.00 165
---------
CFAC Payment Scheme
Limited 33.33 166
---------
Chemi & Cotex (Rwanda) 1,
Limited 33.99 167
---------
Chemi & Cotex Kenya 1,
Limited 33.99 168
---------
Chemi and Cotex Industries
Limited 33.99 169
---------
Contour 10.80 191
---------
Episode Six Limited 9.10 187
---------
EPS Company (Hong
Kong) Limited 38.66 44
---------
EURO Secured Notes
Issuer 16.66 170
---------
0,
1,
GIE GNIFI N/A 171
---------
GZHS Research Co Ltd 20.50 172
---------
Hang Seng Qianhai 1,
Fund Management Company 10,
Limited 43.49 173
---------
HCM Holdings Limited
(In Liquidation) 50.99 17
---------
HSBC Canadian Covered
Bond (Legislative)
GP Inc. 100.00 73
---------
HSBC Jintrust Fund
Management Company
Limited 49.00 174
---------
HSBC Saudi Arabia,
a Saudi closed Joint
Stock Company 66.18 175
---------
Icon Brickell LLC 0,
(In Liquidation) N/A 176
---------
Jeppe Star Limited 33.99 177
---------
0,
Liquidity Match LLC N/A 188
---------
London Precious Metals
Clearing Limited 30.00 189
---------
MENA Infrastructure
Fund (GP) Ltd 33.33 178
---------
Novo Star Limited 33.99 179
---------
Quantexa Ltd 10.99 146
---------
Services Epargne Entreprise 14.18 180
---------
0,
Simon Group LLC N/A 190
---------
sino AG 24.77 181
---------
The London Gold Market
Fixing Limited 25.00 159
---------
The Saudi British
Bank 30.99 182
---------
Trade Information
Network 16.67 192
---------
Trinkaus Europa Immobilien-Fonds
Nr. 7 Frankfurt Mertonviertel 0,
KG N/A 38
---------
1,
Vizolution Limited 17.95 183
---------
We Trade Innovation
Designated Activity 1,
Company 8.52 184
---------
Footnotes for Note 37
Description of Shares
0 Where an entity is governed by
voting rights, HSBC consolidates
when it holds - directly or indirectly
- the necessary voting rights
to pass resolutions by the governing
body. In all other cases, the
assessment of control is more
complex and requires judgement
of other factors, including having
exposure to variability of returns,
power to direct relevant activities,
and whether power is held as
an agent or principal. HSBC's
consolidation policy is described
in Note 1.2(a).
1 Management has determined that
these undertakings are excluded
from consolidation in the Group
accounts as these entities do
not meet the definition of subsidiaries
in accordance with IFRS. HSBC's
consolidation policy is described
in Note 1.2(a).
2 Directly held by HSBC Holdings
plc
3 Preference Shares
4 Actions
5 Redeemable Preference Shares
6 GmbH Anteil
7 Limited and Unlimited Liability
Shares
8 Non-Participating Voting Shares
9 Parts
10 Registered Capital Shares
11 Russian Limited Liability Company
Shares
12 Stückaktien
Registered offices
13 c/o The Corporation Trust Company
1209 Orange Street, Wilmington,
Delaware, United States of America,
19801
14 Paseo de la Reforma 347 Col.
Cuauhtemoc, Mexico, 06500
15 1 Centenary Square, Birmingham,
United Kingdom, B1 1HQ
16 8 Canada Square, London, United
Kingdom, E14 5HQ
17 Hill House 1 Little New Street,
London, United Kingdom, EC4A
3TR
18 5 Donegal Square South, Northern
Ireland, Belfast, United Kingdom,
BT1 5JP
19 1909 Avenida Presidente Juscelino
Kubitschek, 19deg andar, Torre
Norte, São Paulo Corporate
Towers, São Paulo, Brazil,
04551-903
20 Arnold House St Julians Avenue,
St Peter Port, Guernsey, GY1
3NF
21 37 Front Street, Hamilton, Bermuda,
HM 11
22 HSBC Main Building 1 Queen's
Road Central, Hong Kong
23 First Floor, Xinhua Bookstore
Xindong Road (SE of roundabout),
Miyun District, Beijing, China
24 Deloitte LLP, 1 New Street Square,
London, EC4A 3HQ, United Kingdom
25 95 Washington Street Buffalo,
New York, United States of America,
14203
26 Corporation Service Company 251
Little Falls Drive, Wilmington,
Delaware, United States of America,
19808
27 Solidere - Rue Saad Zaghloul
Immeuble - 170 Marfaa, P.O. Box
17 5476 Mar Michael, Beyrouth,
Lebanon, 11042040
28 No 1, Bei Huan East Road Dazu
County, Chongqing, China
29 No 107 Ping Du Avenue (E), Sanhe
Town, Fengdu County, Chongqing,
China
30 No. 3, 5, 7, Haitang Erzhi Road
Changyuan, Rongchang, Chongqing,
China, 402460
31 Bederstrasse 49, Zurich, Switzerland,
CH-8002
32 First & Second Floor, No.3 Nanshan
Road, Pulandian , Dalian, Liaoning,
China
33 CT Corporation System 225 Hillsborough
Street, Raleigh, North Carolina,
United States Of America, 27603
34 38 avenue Kléber, Paris,
France, 75116
35 MMG Tower, 23 floor Ave. Paseo
del Mar Urbanizacion Costa del
Este, Panama
36 No. 1 1211 Yanjiang Zhong Road,
Yongan, Fujian, China
37 83 Des Voeux Road Central, Hong
Kong
38 Königsallee 21/23, Düsseldorf,
Germany, 40212
39 No.44 Xin Ping Road Central,
Encheng, Enping, Guangdong, China,
529400
40 Room 1701-010 Heung Kong Building,
37 Jin Long Rd, Nansha District,
Guangzhou, China
41 34/F and 36/F, Hang Seng Bank
Tower 1000 Lujiazui Ring Road,
Pilot Free Trade Zone, Shanghai,
Shanghai, China, 200120
42 Claude Debussylaan 10 Office
Suite 20, 1082MD, Amsterdam,
Netherlands
43 Commerce House, Wickhams Cay
1, P.O. Box 3140, Road Town,
Tortola, British Virgin Islands,
VG1110
44 1 Queen's Road Central, Hong
Kong
45 The Corporation Trust Company
of Nevada 311 S. Division Street,
Carson City, Nevada, United States
of America, 89703
46 Corporation Service Company 2711
Centerville Road, Suite 400,
Wilmington, Delaware, United
States of America, 19808
47 HSBC House Esplanade, St. Helier,
Jersey, JE4 8UB
48 10th Floor South Tower, Bangunan
HSBC, No. 2, Leboh Ampang, Kuala
Lumpur, Malaysia, 50100
49 13th Floor, South Tower 2 Leboh
Ampang, Kuala Lumpur, Malaysia,
50100
50 10 Marina Boulevard #48-01 Marina
Bay Financial Centre, Singapore,
018983
51 52/60 M G Road Fort, Mumbai,
India, 400 001
52 16 Boulevard d'Avranches, Luxembourg,
Luxembourg, L-1160
53 557 Bouchard Level 20, Ciudad
de Buenos Aires, Capital federal,
Argentina, C1106ABG
54 3rd Floor Merchantile Bank Chamber
16, Veer Nariman Road, Fort,
Mumbai, India, 400001
55 Immeuble Cœur Défense
110 esplanade du Général
de Gaulle, Courbevoie, France,
92400
56 Level 36 Tower 1 International
Towers Sydney, 100 Barangaroo
Avenue, Sydney, New South Wales,
Australia, 2000
57 Isidora Goyenechea 2800 23rd
floor, Las Condes, Santiago,
Chile, 7550647
58 HSBC Building Shanghai ifc, 8
Century Avenue, Pudong, Shanghai,
China, 200120
59 6th floor HSBC Centre 18, Cybercity,
Ebene, Mauritius, 72201
60 2 Paveletskaya square building
2, Moscow, Russian Federation,
115054
61 13F-14F, 333 Keelung Road, Sec.1,
Taipei, 110, Taiwan
62 25 de Mayo 471, Montevideo, Uruguay,
11000
63 The Metropolitan 235 Dong Khoi
Street, District 1, Ho Chi Minh
City, Viet Nam
64 Esentepe mah. Büyükdere
Caddesi No.128, Istanbul, Turkey,
34394
65 66 Teryan street, Yerevan, Armenia,
0009
66 885 West Georgia Street 3rd Floor,
Vancouver, British Columbia,
Canada, V6C 3E9
67 306 Corniche El Nil, P.O. Box
124, Maadi, Egypt, 11728
68 116 Archbishop Street, Valletta,
Malta
69 Level 1, Building No. 8, Gate
Village Dubai International Financial
Centre, United Arab Emirates,
P.O. Box 30444
70 Majer Consulting, Office 54/44,
Building A1, Residence Ryad Anfa,
Boulevard Omar El Khayam, Casa
Finance City (CFC), Casablanca,
Morocco
71 Al Khuwair Office PO Box 1727
PC111 CPO Seeb, Muscat, Oman
72 1800 Tysons Boulevard Suite 50,
Tysons, Virginia, United States
of America, 22102
73 66 Wellington Street West, Suite
5300, Toronto, Ontario, Canada,
M5K 1E6
74 P.O. Box 1109, Strathvale House,
Ground floor, 90 North Church
Street, George Town, Grand Cayman,
Cayman Islands, KY1-1102
75 HSBC House Esplanade, St. Helier,
Jersey, JE1 1HS
76 c/o Rogers Capital St. Louis
Business Centre, Cnr Desroches
& St Louis Streets, Port Louis,
Mauritius
77 49 avenue J.F. Kennedy, Luxembourg,
Luxembourg,
1855
78 4-17/F, Office Tower 2 TaiKoo
Hui, No. 381 Tian He Road, Tian
He District, Guangzhou, Guangdong,
China
79 Suite 1005, 10th Floor, Wisma
Hamzah Kwong, Hing No. 1, Leboh
Ampang, Kuala Lumpur, Malaysia,
50100
80 HSBC, Filinvest One Bldg Northgate
Cyberzone, Filinvest Corporate
City, Alabang, Muntinlupa City,
Philippines, 1781
81 HSBC House Plot No.8 Survey No.64
(Part), Hightec City Layout Madhapur,
Hyderabad, India, 500081
82 439, Sri Jayawardenapura Mawatha
Welikada, Rajagiriya, Colombo,
Sri Lanka
83 Smart Village 28th Km Cairo-
Alexandria Desert Road Building,
Cairo, Egypt
84 Suite 300 3381 Steeles Avenue
East, Toronto, Ontario, Canada,
M2H 3S7
85 Centre Ville 1341 Building -
4th Floor Patriarche Howayek
Street (facing Beirut Souks),
PO Box Riad El Solh, Lebanon,
9597
86 3rd Floor, HSBC Bank Middle East
Limited Building, Al Souq Road,
P.O Box 4604, Dubai, United Arab
Emirates
87 World Trade Center Montevideo
Avenida Luis Alberto de Herrera
1248, Torre 1, Piso 15, Oficina
1502, Montevideo, Uruguay, CP
11300
88 Room 655, Building A, No. 888,
Huan Hu West Two Road, Lin Gang
New Area of Shanghai (Pilot)
Free Trade Zone, China, Shanghai,
Shanghai, China
89 HSBC House Esplanade, St. Helier,
Jersey, JE4 8WP
90 HSBC Building 11-1, Nihonbashi
3-chome, Chuo-ku, Tokyo, Japan,
103-0027
91 80 Mill Street, Qormi, Malta,
QRM 3101
92 Herrengasse 1-3, Wien, Austria,
1010
93 26 Gartenstrasse, Zurich, Switzerland,
8002
94 24th Fl. 97-99, Sec.2, Tunhwa
S. Rd., Taipei, Taiwan, R.O.C.,
Taiwan
95 452 Fifth Avenue, New York, United
States of America, NY10018
96 Bouchard 557, Piso 18deg, Cdad.
Autónoma de Buenos Aires,
Argentina, 1106
97 Mareva House 4 George Street,
Nassau, Bahamas
98 70 York Street, Toronto, Ontario,
Canada, M5J 1S9
99 Breite Str. 29/31, Düsseldorf,
Germany, 40213
100 18th Floor, Tower 1, HSBC Centre
1 Sham Mong Road, Kowloon, Hong
Kong
101 Level 32, HSBC Main Building
1 Queen's Road Central, Hong
Kong SAR, Hong Kong
102 7/F HSBC Centre 3058 Fifth Ave
West, Bonifacio Global City,
Taguig City, Philippines
103 HSBC Building Minet El Hosn,
Riad el Solh, Beirut 1107-2080,
Lebanon, P.O. Box 11-1380
104 300 Delaware Avenue Suite 1401,
Wilmington, Delaware, United
States Of America, 19801
105 Woodbourne Hall, Road Town, Tortola,
British Virgin Islands, P.O.
Box 916
106 Craigmuir Chambers, PO Box 71,
Road Town, Tortola, British Virgin
Islands
107 9-11 Floors, NESCO IT Park Building
No. 3 Western Express Highway,
Goregaon (East), Mumbai, India,
400063
108 3, Aboul Feda Street Zamalek,
Cairo, Egypt
109 300-885 West Georgia Street,
Vancouver, British Columbia,
Canada, V6C 3E9
110 21 Farncombe Road Worthing, United
Kingdom, BN11 2BW
111 Plot No.312-878 Mezzanine Floor,
Bldg. of Sheikh Hamdan Bin Rashid,
Dubai Creek, Dubai, United Arab
Emira
112 Level 1, Building No. 8, Gate
Village Dubai International Financial
Centre, PO Box 30444, United
Arab Emirates
113 Unit 101 Level 1, Gate Village
Building No. 8 Dubai International
Financial Centre (DIFC), Dubai,
United Arab Emirates, PO Box
506553
114 Office No.16 Owned by HSBC Bank
Middle East Limited, Dubai Branch,
Bur Dubai, Burj Khalifa, Dubai,
United Arab Emirates
115 885 West Georgia Street Suite
300, Vancouver, British Columbia,
Canada, V6C 3E9
116 HSBC Tower, Level 21, 188 Quay
Street, Auckland, New Zealand,
1010
117 21-23 Yorckstraße, Düsseldorf,
Nordrhein-Westfalen, Germany,
40476
118 The Corporation Trust Incorporated,
2405 York Road, Suite 201, Lutherville
Timonium, Maryland, United Sta
119 HSBC House Esplanade, St. Helier,
Jersey, JE1 1GT
120 Quai des Bergues 9-17, Geneva,
Switzerland, 1201
121 1 Grand Canal Square, Grand Canal
Harbour, Dublin 2, Ireland, D02
P820
122 Esentepe mah. Büyükdere
Caddesi No.128, Istanbul, Turkey,
34394
123 Quai des Bergues 9-17, Geneva,
Switzerland, 1201
124 HSBC House Esplanade, St Helier,
Jersey, JE1 1GT
125 52/60 M G Road, Fort, Mumbai,
India, 400 001
126 Block 27 A&B, Qianhai Enterprise
Dream Park No. 63 Qianwan Yi
Road, Shenzhen-Hong Kong Cooperation
Zone, Shenzhen, China, 518052
127 Unit 1 GF The Commerical Complex
Madrigal Avenue, Ayala Alabang
Village, Muntinlupa City, Philippines,
17
128 1 Mutual Place 107 Rivonia Road,
Sandton, Sandton, Gauteng, South
Africa, 2196
129 13F 333 Keelung Road, Sec.1,
Taipei, Taiwan, 110
130 Hansaallee 3, Düsseldorf,
Germany, 40549
131 Kapelanka 42A, Krakow, Poland,
30-347
132 MB&H Corporate Services Ltd Mareva
House, 4 George Street, Nassau,
Bahamas
133 C T Corporation System 820 Bear
Tavern Road, West Trenton, New
Jersey, United States Of America,
08628
134 L22, Office Tower 2, Taikoo Hui,
381 Tianhe Road, Tianhe District,
Guangzhou, Guangdong, China
135 HSBC Centre River Side, West
Avenue, 25B Raheja woods, Kalyaninagar,
Pune, India, 411006
136 Level 19, HSBC Building, Shanghai
ifc 8 Century Avenue Pudong,
Shanghai, China
137 Yorckstraße 21 - 23, Duesseldorf,
Germany, 40476
138 P.O. Box 309 Ugland House, Grand
Cayman, Cayman Islands, KY1-1104
139 No. 56 Yu Rong Street, Macheng,
China, 438300
140 No. 205 Lie Shan Road Suizhou,
Hubei, China
141 Building 3, Yin Zuo Di Jing Wan
Tianmen New City, Tianmen, Hubei
Province, China
142 RM101, 102 & 106 Sunshine Fairview,
Sunshine Garden, Pedestrian Walkway,
Pingjiang, China
143 Kings Meadow Chester Business
Park, Chester, United Kingdom,
CH99 9FB
144 World Trade Center 1, Floor 8-9
Jalan Jenderal Sudirman Kavling
29 - 31, Jakarta, Indonesia,
12920
145 5th Floor, World Trade Center
1, Jl. Jend. Sudirman Kav. 29-31,
Jakarta, Indonesia, 12920
146 75 Park Lane, Croydon, Surrey,
United Kingdom, CR9 1XS
147 Unit B02 20/F No. 168 Yin Cheng
Zhong Road, Pilot Free Trade
Zone, Shanghai, China, 200120
148 No.198-2 Chengshan Avenue (E),
Rongcheng, China, 264300
149 Room 1303-13062 Marine Center
Main Tower, 59 Linhai Rd, Nanshan
District, Shenzhen, China
150 Woodbourne Hall, Road Town, Tortola,
British Virgin Islands, P.O.
Box 3162
151 43 rue de Paris, Saint Denis,
France, 97400
152 RM 2112, HSBC Building, Shanghai
ifc No. 8 Century Road, Pudong,
Shanghai, China, 200120
153 Esentepe mah. Büyükdere
Caddesi No.128, Istanbul, Turkey,
34394
154 11 Dr. Roy's Drive PO Box 694GT,
Grand Cayman, Cayman Islands,
KY1-1107
155 Lot 6.05, Level 6, KPMG Tower
8 First Avenue, Bandar Utama,
Petaling Jaya, Selangor Darul
Ehsan, Malaysia
156 18/F Unit 2101, 2113, 2113A,
2115 and 2116 of 21/F, HSBC Building,
8 Century Avenue, China (Shanghai)
Pilot Free Trade Zone, Shanghai,
China, 200120
157 3 More London Riverside, London,
United Kingdom, SE1 2AQ
158 c/o MUFG Fund Services (Bermuda)
Limited The Belvedere Building,
69 Pitts Bay Road, Pembroke,
Bermuda, HM
159 c/o Hackwood Secretaries Limited
One Silk Street, London, United
Kingdom, EC2Y 8HQ
160 All Saints Triangle Caledonian
road, London, United Kingdom,
N19UT
161 No.188, Yin Cheng Zhong Road
China (Shanghai), Pilot Free
Trade Zone, Shanghai, China
162 49/F The Lee Gardens, 33 Hysan
Avenue, Hong Kong
163 13-15 York Buildings, London,
United Kingdom, WC2N 6JU
164 First Floor The Bower, 207 Old
Street, England, United Kingdom,
EC1V 9NR
165 Unit No. 208, 2nd Floor, Kanchenjunga
Building 18, Barakhamba Road,
New Delhi, India, 110001
166 65 Gresham Street 6th Floor,
London, United Kingdom, EC2V
7NQ
167 PO 4978, Kigali, Rwanda
168 Plot LR No. 487 Dagoretti / Ruthimitu,
P.O. Box 14362, Nairobi, Kenya,
00800
169 Plot No. 89-90 Mbezi Industrial
Area Box 347, Dar es Salaam City,
Tanzania, United Republic of
Tanzania
170 3 avenue de l'Opera, Paris, France,
75001
171 37 avenue Henri Lafleur, Nouméa,
New Caledonia, BP K3 98849
172 Room 1303, 106 Feng Ze Dong Road,
Nansha District, Guangzhou, Guangdong,
China
173 Flat 209, Hedge Fund Centre of
Qianhai Shenzhen-Hong Kong Fund
Town No. 128 Guiwan Five Road,
Qianhai Shenzhen-Hong Kong Cooperation
Zone, Shenzhen, China
174 17F, HSBC Building, Shanghai
ifc 8 Century Avenue, Pudong,
Shanghai, China
175 HSBC Building 7267 Olaya - Al
Murrooj, Riyadh, Saudi Arabia,
12283 - 2255
176 C T Corporation System 1200 South
Pine Island Road Plantation,
Florida, United States of America,
33324
177 c/o Trident Trust Company Trident
Chambers, PO Box 146, Tortola,
British Virgin Islands
178 Office 705, Level 8, Tower 2,
Al Fattan Currency House, DIFC,
P.O.Box 506553, Dubai, UAE
179 Jayla Place Wickhams Cay I, PO
Box 3190, Road Town, British
Virgin Islands
180 32 rue du Champ de Tir, Nantes,
France, 44300
181 Ernst-Schneider-Platz 1, Duesseldorf,
Germany, 40212
182 Al Amir Abdulaziz Ibn Mossaad
Ibn Jalawi Street, Riyadh, Saudi
Arabia
183 Office Block A, Bay Studios Business
Park, Fabian Way, Swansea, Wales,
United Kingdom, SA1 8QB
184 10 Earlsfort Terrace, Dublin,
Ireland, D02 T380
185 c/o Walkers Corporate Services
Limited, Walker House, 87 Mary
Street, George Town, Grand Cayman,
KY1 - 90
186 Oak House Hirzel Street, St Peter
Port, Guernsey, GY1 2NP
187 9/F Amtel Bldg, 148 des Voeux
Rd Central, Central, Hong Kong
188 100 Town Square Place, Suite
201, Jersey City, NJ 07310, United
States of America
189 1-2 Royal Exchange Buildings,
Royal Exchange, London, United
Kingdom, EC3V 3LF
190 25 W 25th St. New York, NY 10001,
United States of America
191 50 Raffles Place, #32-01 Singapore
Land Tower, 048623, Singapore
192 3 More London Riverside, London,
United Kingdom, SE1 2AQ
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